REGISTRATION
NO. 333-137957
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE
AMENDMENT No. 1
to
FORM
SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933
INDEX
OIL AND GAS, INC.
(Name
of
small business issuer in its charter)
Nevada
|
|
1311
|
|
20-0815369
|
(State or jurisdiction of incorporation or organization)
|
|
(Primary Standard Industrial Classification Code Number)
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
|
|
10000
Memorial Drive, Suite 440
Houston,
Texas 77024
(713)
683-0800
(Address
and telephone number of principal executive offices)
10000
Memorial Drive, Suite 440
Houston,
Texas 77024
(713)
683-0800
(Address
of principal place of business or intended
principal
place of business)
Lyndon
West, Chief Executive Officer
10000
Memorial Drive, Suite 440
Houston,
Texas 77024
(713)
683-0800
(Name,
address and telephone number of agent for service)
Copies
to:
Richard
A. Friedman, Esq.
Sichenzia
Ross Friedman Ference LLP
1065
Avenue of the Americas
New
York,
New York 10018
(212)
930-9700
(212)
930-9725 (fax)
APPROXIMATE
DATE OF PROPOSED SALE TO PUBLIC: From time to time after this Registration
Statement becomes effective.
If
any of
the securities being registered on this Form are to be offered on a delayed
or
continuous basis pursuant to Rule 415 under the Securities Act of 1933 check
the
following box:
x
If
this
Form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.
o
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
o
If
this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
o
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box.
o
Title
of each class of securities
to
be registered
|
|
Amount
to be Registered
(1)
|
|
|
Proposed
Maximum Offering Price Per Security (2)
|
|
|
Proposed
Maximum Aggregate Offering Price
|
|
|
Amount
of Registration Fee
|
|
Common
Stock, $.001 par value per share
|
|
|
10,047,608
|
(3)
|
|
$
|
0.70
|
|
|
$
|
7,040,325.60
|
|
|
$
|
216.14
|
|
Common
Stock, $.001 par value per share
|
|
|
7,024,530
|
(4)
|
|
$
|
0.70
|
|
|
$
|
4,917,171
|
|
|
$
|
150.96
|
|
Common
Stock, $.001 par value per share
|
|
|
22,713,419
|
(5)
|
|
$
|
0.70
|
|
|
$
|
15,899,393.30
|
|
|
$
|
488.11
|
|
Common
Stock, $.001 par value per share
|
|
|
901,421
|
(6)
|
|
$
|
0.70
|
|
|
$
|
630,994.70
|
|
|
$
|
19.37
|
|
Total
|
|
|
40,686,978
|
|
|
|
|
|
|
$
|
28,487,884.60
|
|
|
$
|
874.58
|
*
|
*
Previously paid as part of the Company’s filing of the Registration Statement on
Form SB-2 with the SEC on October 11, 2006.
(1)
Includes shares of our common stock, par value $0.001 per share, which may
be
offered pursuant to this registration statement. In addition to the shares
set
forth in the table, the amount to be registered includes an indeterminate number
of shares issuable upon exercise of the warrants; as such number may be adjusted
as a result of stock splits, stock dividends and similar transactions in
accordance with Rule 416.
(2)
Estimated solely for purposes of calculating the registration fee in accordance
with Rule 457(c) and Rule 457(g) under the Securities Act of 1933, using
the
average of the high and low prices as reported on the Over The Counter Bulletin
Board on October 17, 2007, which was $0.70 per share.
(3)
Represents shares of common stock issued in connection with the private
placements completed on August 29 and October 4, 2006 at a price per unit
of
$5,000, each unit consisting of 5,000 shares of common stock.
(4)
Represents shares of common stock issued in connection with the private equity
offering completed in January of 2006 at a price per share of
$0.60.
(5)
Represents (i) 22,409,626 shares of common stock issued in connection with
the
acquisition of Index Oil & Gas Ltd. (“Index Ltd.”) on January 20, 2006,
pursuant to the Acquisition and Share Exchange Agreements (the “Acquisition
Agreements”) entered into on equal date; and (ii) 303,793 shares of common stock
issued to several officers and directors of the Company as bonus stock
awards.
(6)
Represents (i) 762,766 shares of common stock underlying warrants exercisable
at
the price of $0.14 per share, and (ii) 138,655 shares of common stock underlying
warrants exercisable at the price of $0.07 per share, issued to the stockholders
of Index Ltd. in connection with the Acquisition Agreements dated January
20,
2006.
The
registrant hereby amends this Registration Statement on such date or dates
as
may be necessary to delay its effective date until the registrant shall file
a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
EXPLANATORY
NOTE
THIS
FILING DOES NOT INVOLVE THE REGISTRATION OF ANY NEW SHARES OF COMMON STOCK.
RATHER, THIS FILING UPDATES THE REGISTRATION OF THE COMMON STOCK ORIGINALLY
REGISTERED ON FORM SB-2 (FILE NO. 333-137957 DECLARED EFFECTIVE ON FEBRUARY
9,
2007.
The
information in this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell
these securities and is not soliciting an offer to buy these securities in
any
state where the offer or sale is not permitted.
PRELIMINARY
PROSPECTUS, SUBJECT TO COMPLETION, OCTOBER 26, 2007
INDEX
OIL AND GAS INC.
40,686,978
Shares of
Common
Stock
This
prospectus relates to the public offering of up to 40,686,978 shares of our
common stock, par value $.001 per share, which may be sold from time to time
by
the selling stockholders of Index Oil and Gas Inc., named in this prospectus.
The selling stockholders may sell common stock from time to time in the
principal market on which the stock is traded at the prevailing market price
or
in negotiated transactions. We cannot assure you that the selling stockholders
will sell all or any portion of the shares offered in this
prospectus.
The
total
number of shares sold herewith consists of the following shares to be issued
to
the selling stockholders: (i) 901,421 shares issuable upon the exercise of
warrants, and (ii) 39,785,557 shares that have been issued. We are not selling
any shares of common stock in this offering and therefore will not receive
any
proceeds from this offering. We will, however, receive proceeds from the
exercise, if any, of warrants to purchase 901,421 shares of common stock.
All
costs associated with this registration will be borne by us.
Our
common stock is currently traded on the Over-The-Counter Bulletin Board under
the symbol ("IXOG.OB"). The last reported sales price per share of our common
stock as reported by the Over-The-Counter Bulletin Board on October 22,
2007, was $0.67.
The
Securities offered hereby involve a high degree of risk.
See
"Risk Factors" beginning on page 9.
We
may amend or supplement this prospectus from time to time by filing amendments
or supplements as required. You should read the entire prospectus and any
amendments or supplements carefully before you make your investment
decision.
The
date of this prospectus is October 26, 2007.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this prospectus
is
truthful or complete. Any representation to the contrary is a criminal
offense.
TABLE
OF CONTENTS
|
Page
|
Prospectus
Summary
|
6
|
Risk
Factors
|
8
|
Use
of Proceeds
|
18
|
Forward-Looking
Statements
|
18
|
Selling
Stockholders
|
20
|
Plan
of Distribution
|
29
|
Market
for Common Equity and Related Stockholder Matters
|
31
|
Description
of Business
|
32
|
Management’s
Discussion and Analysis or Plan of Operation
|
38
|
Description
of Property
|
51
|
Legal
Proceedings
|
54
|
Management
|
55
|
Executive
Compensation
|
56
|
Certain
Relationships and Related Transactions
|
59
|
Security
Ownership of Certain Beneficial Owners and Management
|
60
|
Description
of Securities
|
61
|
Indemnification
for Securities Act Liabilities
|
64
|
Legal
Matters
|
64
|
Experts
|
64
|
Changes
in Accountants
|
64
|
Additional
Information
|
65
|
Other
Expenses of Issuance and Distribution
|
II-1
|
Recent
Sales of Unregistered Securities
|
II-1
|
Consolidated
Financial Statements
|
F-1
|
You
may
only rely on the information contained in this prospectus or that we have
referred you to. We have not authorized anyone to provide you with different
information. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the common stock
offered by this prospectus. This prospectus does not constitute an offer to
sell
or a solicitation of an offer to buy any common stock in any circumstances
in
which such offer or solicitation is unlawful. Neither the delivery of this
prospectus nor any sale made in connection with this prospectus shall, under
any
circumstances, create any implication that there has been no change in our
affairs since the date of this prospectus or that the information contained
by
reference to this prospectus is correct as of any time after its
date.
The
following summary highlights selected information contained in this prospectus.
This summary does not contain all the information you should consider before
investing in the securities. Before making an investment decision, you should
read the entire prospectus carefully, including the "RISK FACTORS" section,
the
financial statements and the notes to the financial statements. As used
throughout this prospectus, the terms "Index", "Company", "we," "us," or "our"
refer to Index Oil and Gas, Inc.
Overview
Index
Oil
and Gas, Inc. is an independent oil and gas company engaged in the acquisition,
exploration, appraisal, development and production of oil and gas properties
located in North America. The Company includes a United Kingdom company,
which
provides management services and United States operating subsidiaries, which
are
engaged in oil and gas activities, primarily in Kansas and the Gulf Coast
of
Texas and Louisiana. The Company has increased our proved reserves and
production principally through property acquisitions in conjunction with
an
active drilling program. The Company does not currently operate any of its
properties and sells its current oil production to domestic crude oil
purchasers.
The
following are key elements of our strategy:
·
we intend to focus
our short and medium term efforts on known petroleum basins within the U.S.
and
initially which are proximal to our current ongoing projects in the onshore
part
of the Gulf of Mexico basin;
·
our short to mid
term objective is to develop our oil and gas reserves to a point where the
cash
flow will contribute not only to our overhead and later, to contribute to
its
capital requirements for investing in new and additional projects. We believe
we
can achieve this objective by utilizing a risk managed approach of investing
in
a portfolio of drilling opportunities. By combining a number of key metrics,
our
management is able to select and invest in the very best prospects on offer.
We
have adjusted our business strategy to include more high-impact wells that
can
deliver, if successful, much higher value, volume, and follow-on drilling
that
has the potential to deliver exponential growth. Index also protects itself
and
its investors by limiting any single prospect investment to a small percentage
of the overall funding that the company has at its disposal.
Index’s
current focus is directed towards:
|
•
|
Efficiently
influencing the management of ongoing projects;
|
|
•
|
Identifying,
characterizing, and capturing appropriate gas and oil opportunities;
and
|
|
•
|
Efficiently
using its business assets to raise additional capital as
needed.
|
This
current stage of the development of the Company includes new alliances.
Furthermore, the Company has built a strong portfolio of prospects during
2007
fiscal year for drilling in 2008 fiscal year, which include potential high
impact wells. In summary, the Company’s strategy is to increase shareholder
value by profitably increasing its reserves, production, cash flow and earnings
through a risk and equity balanced program of exploration and production
drilling. The Company will also consider acquisitions provided they can meet
the
Company’s metrics and they can augment its growth strategy and
objectives.
Our
estimated total proved oil and gas reserves, at March 31 2007, less production
to June 30, 2007, were approximately 111.757 Mboe, consisting of 22.979 thousand
barrels of oil (MBbls) and 532.670 million cubic feet (MMcf) of natural gas.
At
March 31, 2007 approximately 99% of our proved reserves were classified as
proved developed and proved behind pipe. We focus on maintaining a portfolio
of
long-lived, lower risk reserves along with shorter lived, higher margin
reserves. We believe that this balanced reserve mix can provide a diversified
cash flow foundation to fund our development and exploration drilling
program.
Our
financial results depend upon many factors, particularly the price of oil and
gas and our ability to market our production. Commodity prices are affected
by
changes in market demands, which are impacted by overall economic activity,
weather, pipeline capacity constraints, inventory storage levels, basis
differentials and other factors. As a result, we cannot accurately predict
future oil and gas prices, and therefore, we cannot determine what effect
increases or decreases will have on our capital program, production volumes
and
future revenues. In addition to production volumes and commodity prices, finding
and developing sufficient amounts of oil and gas reserves at economical costs
are critical to our long-term success.
Like
all
oil and natural gas exploration and production companies, we face the challenge
of natural production declines. As initial reservoir pressures are depleted,
oil
and natural gas production from a given well naturally decreases. Thus, an
oil
and natural gas exploration and production company depletes part of its asset
base with each unit of oil or natural gas it produces. We attempt to overcome
this natural decline by drilling and acquiring more reserves than we produce.
Our future growth will depend on our ability to continue to add reserves
in
excess of production. We will maintain our focus on costs to add reserves
through drilling and acquisitions as well as the costs necessary to produce
our
reserves. Our ability to add reserves through drilling is dependent on our
capital resources and can be limited by many factors, including the ability
to
timely obtain drilling permits and regulatory approvals.
Our
corporate offices are located
at
10000
Memorial Drive, Suite
440
,
Houston,
Texas 77024
and our telephone
number is (713)
683-0800.
Common
stock outstanding before the offering
|
65,803,698
shares.
|
Common
stock offered by selling stockholders
|
Up
to 40,686,978 shares.
The
maximum number of shares to be issued to the selling stockholders,
901,421, represents 1.35% of our current outstanding stock.
|
Common
stock to be outstanding after the offering
|
Up
to 66,705,119 shares.
|
Use
of proceeds
|
We
will not receive any proceeds from the sale of the common stock.
See "Use
of Proceeds" for a complete description.
|
Risk
Factors
|
The
purchase of our common stock involves a
high
degree of risk. You should carefully review and consider "Risk
Factors"
beginning on page 5.
|
Over-The-Counter
Bulletin Board Symbol
|
IXOG.OB
|
Forward-Looking
Statements
|
This
prospectus contains forward-looking statements that address, among
other
things, our strategy to develop our business, projected capital
expenditures, liquidity, and our development of additional revenue
sources. The forward-looking statements are based on our current
expectations and are subject to risks, uncertainties and assumptions.
We
base these forward-looking statements on information currently
available
to us, and we assume no obligation to update them. Our actual results
may
differ materially from the results anticipated in these forward-looking
statements, due to various factors.
|
The
above
information regarding common stock to be outstanding after the offering is
based
on 65,803,698 shares of common stock outstanding as of October 1, 2007 and
assumes the subsequent exercise of warrants by our selling
stockholders.
RISK
FACTORS
You
should carefully consider the risks described below as well as other information
provided to you in this document, including information in the section of this
document entitled “Information Regarding Forward Looking Statements.” The risks
and uncertainties described below are not the only ones facing the Company.
Additional risks and uncertainties not presently known to the Company or that
the Company currently believes are immaterial may also impair the Company’s
business operations. If any of the following risks actually occur, the Company’s
business, financial condition or results of operations could be materially
adversely affected, the value of the Company common stock could decline, and
you
may lose all or part of your investment.
Risks
Related To Index’s Financial Results
Index
is at an early stage of development and has a limited operating
history.
Index
was
formed in 2003 operating as a private company, Index Ltd, formed under the
laws
of the United Kingdom and through which entity operations were conducted
prior
to the revere merger which occurred in 2006. As of the date of this Prospectus,
Index has a limited operating history upon which you can base an evaluation
of
its business and prospects. As a start-up company in the early stage of
development, there are substantial risks, uncertainties, expenses and
difficulties Index is subject to. You should consider an investment in Index
in
light of these risks, uncertainties, expenses and difficulties. To address
these
risks and uncertainties, Index must do the following:
|
§
|
Successfully
execute its business strategy;
|
|
§
|
Continue
to develop its oil exploration and production
assets;
|
|
§
|
Respond
to competitive developments; and
|
|
§
|
Attract,
integrate, retain and motivate qualified
personnel.
|
Index
may
be unable to accomplish one or more of these objectives, which could cause
its
business to suffer. In addition, accomplishing one or more of these objectives
might be very expensive, which could harm its financial results. As a result,
there can be no assurance that Index will be successful in its oil and gas
activities. Index’s future performance will depend upon its management and their
ability to locate and negotiate additional oil and gas opportunities in which
it
is solely involved or participate in as a project partner. There can be no
assurance that it will be successful in its efforts. Its inability to locate
additional opportunities, successfully execute its business strategy, hire
additional management and other personnel, or respond to competitive
developments, could have a material adverse effect on its results of operations.
There can be no assurance that its operations will be
profitable.
Index
has incurred significant losses since inception and anticipates that it will
continue to incur losses for the foreseeable future.
As
of
June 30, 2007, Index had incurred a financial loss after taxation of
approximately $436,837 for Q1 of the 2008 fiscal year. Index plans to
significantly increase its corporate expenses and general overhead. Management
believes that its business proposition will be appealing to the oil exploration
and development community. There is no assurance, however, that Index will
be
able to successfully achieve an increase in production and reserves at its
existing properties or future acquisitions, so as to operate in a profitable
manner. If the business of oil and gas well exploration and development slows,
and commodity prices notably decline, its margins and profitability will
suffer.
Index is unable to predict whether its operating results will be
profitable.
Management
believes that long-term profitability and growth will depend on its ability
to:
|
·
|
Develop
the reputation of Index as a successful oil and gas exploration and
production company;
|
|
·
|
Successfully
identify and exploit appropriate
opportunities;
|
|
·
|
Develop
viable strategic alliances; and
|
|
·
|
Maintain
sufficient volume of successful new oil and gas
opportunities.
|
Index
will need to raise substantial additional capital to fund its operations,
and
its failure to obtain funding when needed may force it to delay, reduce or
eliminate its operations, or cause its business to fail in its
entirety.
Index’s
operations have consumed a substantial amount of cash since inception. Index
expects to continue to spend substantial amounts to:
|
·
|
identify
and exploit oil and gas
opportunities;
|
|
·
|
maintain
and increase the company’s human resource including full time and
consultant resources;
|
|
·
|
evaluate
drilling opportunities; and
|
|
·
|
evaluate
future projects and areas for long term
development.
|
Index
expects that its cash requirement for operations (Capex) will increase
significantly over the next several years. Index will be required to raise
additional capital to meet anticipated needs. Index’s future funding
requirements will depend on many factors, including, but not limited
to:
|
·
|
success
of ongoing operations;
|
|
·
|
forward
commodity prices; and
|
|
·
|
operating
costs (including human resource
costs).
|
To
date,
Index’s sources of cash have been primarily limited to the sale of equity
securities. Index cannot be certain that additional funding will be available
on
acceptable terms, or at all. To the extent that Index raises additional funds
by
issuing equity securities, its stockholders may experience significant dilution.
Any debt financing, if available, may involve restrictive covenants that
impact
Index’s ability to conduct its business. If Index is unable to raise additional
capital, when required, or on acceptable terms, it may have to significantly
delay, scale back or discontinue its operations, or cause its business to
fail
in its entirety.
Index
may be unable to effectively maintain its oil and gas exploration
business.
Timely,
effective and successful oil exploration and production is essential to
maintaining Index’s reputation as a developing oil exploration company. Lack of
opportunities or success may significantly affect Index’s viability. The
principal components of Index’s operating costs include salaries paid to
corporate staff, costs of retention of qualified independent engineers and
geologists, annual system maintenance and rental costs, insurance,
transportation costs and substantial equipment and machinery costs. Because
the
majority of these expenses are fixed, a reduction in the number of successful
oil exploration projects, failures in discovery of new opportunities or
termination of ongoing projects will result in lower revenues and margins.
Prior
success in exploration or production of oil wells does not guarantee future
success in similar ventures; thus, its revenues could decline and its ability
to
effectively engage in oil recovery business would be harmed.
Fluctuations
in Index’s operating results and announcements and developments concerning its
business affect its stock price.
Index’s
quarterly operating results, the number of stockholders desiring to sell
their
shares, changes in general economic conditions and the financial markets,
the
execution of new contracts and the completion of existing agreements and
other
developments affecting it, could cause the market price of its common stock
to
fluctuate substantially.
Risks
Related to Index’s Business
Index
may be unable to renew or maintain its contracts with independent purchasers,
which would harm its business and financial results.
Upon
expiration of its independent purchasers’ contracts, Index is subject to the
risk that the oil and natural gas purchasers will cease buying Index’s oil and
gas production output. It is not always possible to immediately obtain
replacement oil and gas purchasers as the industry is extremely competitive.
If
these contracts are not renewed, it could result in a significant negative
impact on Index’s business.
Management
believes that long-term profitability and growth will depend on its ability
to
develop the reputation of Index as a successful oil and gas exploration and
production company.
Index
may
be subject to liability claims. There are currently many known hazards
associated with the exploration, discovery and delivery of natural gas and
oil.
Other significant hazards may be discovered in the future. To protect against
possible liability, Index and its purchasers maintain liability insurance with
coverage that they believe is consistent with industry practice and appropriate
in light of the risks attendant to its business. However, if Index and its
purchasers are unable to maintain insurance in the future at an acceptable
cost
or at all, or if its insurance does not fully cover it and a successful claim
was made against Index and/or its purchasers, Index could be exposed to
liability. Any claim made against Index not fully covered by insurance could
be
costly to defend against, result in a substantial damage award against Index
and
divert the attention of management from Index’s operations, which could have an
adverse effect on its financial performance.
Loss
of key executives and failure to attract qualified managers, technologists,
independent engineers and geologists could limit Index’s growth and negatively
impact its operations.
Index
depends upon its management team to a substantial extent. In particular,
Index
depends upon Mr. Lyndon West, its Chief Executive Officer, Mr. Daniel
Murphy, its Chairman of the Board of Directors, and Mr. Andrew Boetius, its
Chief Financial Officer, for their skills, experience, and knowledge of the
company and industry contacts. Currently, Index has employment or non executive
director agreements with all of its directors who are: Lyndon West, Daniel
Murphy, David Jenkins, Michael Scrutton and Andrew Boetius. The loss of any
of
these executives, or other members of Index’s management team, could have a
material adverse effect on its business, results of operations or financial
condition.
As
Index
grows, it may increasingly require field managers with experience in its
industry and skilled engineers, geologists and technologists to operate its
diagnostic, seismic and 3D equipment. It is impossible to predict the
availability of qualified managers, technologists, skilled engineers and
geologists or the compensation levels that will be required to hire them.
In
particular, there is a very high demand for qualified technologists who are
particularly necessary to operate systems similar to the ones that Index
operates Index may not be able to hire and retain a sufficient number of
technologists, engineers and geologists and it may be required to pay bonuses
and higher independent contractor rates to its technologists, engineers and
geologists which would increase its expenses. The loss of the services of
any
member of its senior management or Index’s inability to hire qualified managers,
technologists, skilled engineers and geologists at economically reasonable
compensation levels could adversely affect Index’s ability to operate and grow
its business.
Complying
with federal and state regulations is an expensive and time-consuming process,
and any failure to comply could result in substantial
penalties.
Index’s
operations are directly or indirectly subject to extensive and continually
changing regulation affecting the oil and natural gas industry. Many departments
and agencies, both federal and state, are authorized by statute to issue, and
have issued, rules and regulations binding on the oil and natural gas
industry and its individual participants. The failure to comply with such
rules and regulations can result in substantial penalties. The regulatory
burden on the oil and natural gas industry increases its cost of doing business
and, consequently, affects its profitability. Index does not believe that we
are
affected in a significantly different manner by these regulations than are
its
competitors.
If
Index’s operations are found to be in violation of any of the laws and
regulations to which it is subject, it may be subject to the applicable penalty
associated with the violation, including civil and criminal penalties, damages,
fines and the curtailment of its operations. Any penalties, damages, fines
or
curtailment of Index’s operations, individually or in the aggregate, could
adversely affect its ability to operate its business and its financial results.
The risk of Index being found in violation of these laws and regulations is
increased by the fact that many of them have not been fully interpreted by
the
regulatory authorities or the courts, and their provisions are open to a variety
of interpretations. Any action against Index for violation of these laws or
regulations, even if it successfully defends against it, could cause Index
to
incur significant legal expenses and divert management’s attention from the
operation of its business.
Index
may experience competition from other oil and gas exploration and production
companies and this competition could adversely affect Index’s revenues and its
business.
The
market for oil and gas recovery projects is generally highly competitive.
Index’s ability to compete depends on many factors, many of which are outside of
its control. These factors include: timing and market acceptance, introduction
of competitive technologies, price and purchaser’s interest in acquiring Index’s
oil and natural gas output.
Many
existing competitors, as well as potential new
competitors, have longer operating histories, greater name recognition,
substantial track records, and significantly greater financial, technical and
technological resources than Index. This may allow them to devote greater
resources to the development and promotion of their oil and gas exploration
and
production projects. Many of these competitors offer a wider range of oil and
gas opportunities not available to Index and may attract business partners
consequently resulting in a decrease of Index’s business opportunities. These
competitors may also engage in more extensive research and development, adopt
more aggressive strategies and make more attractive offers to existing and
potential purchasers, and partners. Furthermore, competitors may develop
technology and oil and gas exploration strategies that are equal or superior
to
Index’s and achieve greater market recognition. In addition, current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties to better address the
needs
of our target market. As a result, it is possible that new competitors may
emerge and rapidly acquire significant market share.
Other
very large companies that are primarily focused on offering competitive products
include Exxon/Mobil, Shell and Yukos and numerous other large oil and gas
recovery companies.
There
can
be no assurance that Index will be able to compete successfully against its
current or future competitors or that competition will not have a material
adverse effect on Index’s business, results of operations and financial
condition.
If
Index is unable to protect its intellectual property effectively, it may be
unable to prevent third parties from using its technologies and methods, which
would impair its competitive advantage.
Index
does not believe that its operations or products infringe on the intellectual
property rights of others. However, there can be no assurance that others will
not assert infringement or trade secret claims against Index with respect to
its
current or future technologies or that any such assertion will not require
it to
enter into a license agreement or royalty arrangement with the party asserting
the claim. Responding to and defending any such claims may distract the
attention of Index’s management and have an adverse effect on its business,
financial condition and results of operations.
Others
may claim in the future that Index has infringed their past, current or future
technologies. Index expects that participants in its markets increasingly will
be subject to infringement claims as the number of competitors grows. Any claim
like this, whether meritorious or not, could be time-consuming, and result
in
costly litigation and possibly result in agreements covering intellectual
property secrets and technologies. These agreements might not be available
on
acceptable terms or at all. As a result, any claim like this could harm Index’s
business.
Index
regards the protection of its copyrights, service marks, trademarks, and trade
secrets as critical to its success. Index relies on a combination of patent,
copyright, trademark, service mark and trade secret laws and contractual
restrictions to protect its proprietary rights in products and services. When
applicable, it will enter into confidentiality and invention assignment
agreements with employees and contractors, and nondisclosure agreements with
parties it conducts business with in order to limit access to and disclosure
of
its proprietary information. These contractual arrangements and the other steps
taken to protect its intellectual property may not prevent misappropriation
of
its technology or deter independent third-party development of similar
technologies. Index intends to pursue the registration of trademarks and service
marks in the U.S. and internationally. Effective trademark, service mark,
copyright and trade secret protection may not be available in every country
in
which its services are made available.
Index
will need to increase the size of its organization, and may experience
difficulties in managing growth.
Index
is
a small company with minimal employees as of June 30, 2007. Index expects
to
experience a period of significant expansion in headcount, facilities,
infrastructure and overhead and anticipates that further expansion will be
required to address potential growth and market opportunities. Future growth
will impose significant added responsibilities on members of management,
including the need to identify, recruit, maintain and integrate additional
independent contractors and managers. Index’s future financial performance and
its ability to compete effectively will depend, in part, on its ability to
manage any future growth effectively.
Oil
and natural gas prices are volatile, and low prices could have a material
adverse impact on our business.
Our
revenues, profitability and future growth and the carrying value of our
properties depend substantially on prevailing oil and gas prices. Prices also
affect the amount of cash flow available for capital expenditures and our
ability to borrow and raise additional capital. The amount we will be able
to
borrow under any senior revolving credit facility will be subject to periodic
redetermination based in part on changing expectations of future prices. Lower
prices may also reduce the amount of oil and gas that we can economically
produce and have an adverse effect on the value of our properties. Prices for
oil and gas have increased significantly and been more volatile over the past
twelve months. Historically, the markets for oil and gas have been volatile,
and
they are likely to continue to be volatile in the future. Among the factors
that
can cause volatility are:
|
•
|
|
the
domestic and foreign supply of oil and gas;
|
|
•
|
|
the
ability of members of the Organization of Petroleum Exporting Countries,
or OPEC, and other producing countries to agree upon and maintain
oil
prices and production levels;
|
|
•
|
|
political
instability, armed conflict or terrorist attacks, whether or not
in oil or
gas producing regions;
|
|
•
|
|
the
level of consumer product demand;
|
|
•
|
|
the
growth of consumer product demand in emerging markets, such as
China;
|
|
•
|
|
labor
unrest in oil and gas producing regions;
|
|
•
|
|
weather
conditions, including hurricanes and other natural
disasters;
|
|
•
|
|
the
price and availability of alternative fuels;
|
|
•
|
|
the
price of foreign imports;
|
|
•
|
|
worldwide
economic conditions; and
|
|
•
|
|
the
availability of liquid natural gas
imports.
|
These
external factors and the volatile nature of the energy markets make it difficult
to estimate future prices of oil and gas and our ability to raise
capital.
Index’s
profit margins may be adversely affected by fluctuations in the selling price
and production cost of
gasoline.
Oil
prices are significantly influenced by the supply of and demand for gasoline.
Index’s results of operations may be materially harmed if the demand for or the
price of gasoline decreases. Conversely, a prolonged increase in the price
of or
demand for gasoline could lead the U.S. government to take actions that maybe
adverse to us, such easing the import of foreign oil and gas into the
U.S.
Transportation
delays, including as a result of disruptions to infrastructure, could adversely
affect Index’s operations.
Index’s
business will depend on the availability of a distribution infrastructure.
Any
disruptions in this infrastructure network, whether caused by earthquakes,
storms, other natural disasters or human error or malfeasance, could materially
impact our business. Therefore, any unexpected delay in transportation of
Index’s produced oil and gas could result in significant disruption to Index’s
operations. Index relies upon others to maintain the production of its wells
and
distribution of oil and gas, and any failure on their part to maintain the
wells
and corresponding production could impede the delivery of Index’s oil and gas,
impose additional costs on it or otherwise cause its results of operations
or
financial condition to suffer.
Index’s
business may be influenced by seasonal
fluctuations.
Assets
we acquire may prove to be worth less than we paid because of uncertainties
in
evaluating recoverable reserves and potential
liabilities.
Our
initial growth is due to acquisitions of properties and undeveloped leaseholds.
We expect acquisitions will also contribute to our future growth. Successful
acquisitions require an assessment of a number of factors, including estimates
of recoverable reserves, exploration potential, future oil and gas prices,
operating and capital costs and potential environmental and other liabilities.
Such assessments are inexact and their accuracy is inherently uncertain.
In
connection with our assessments, we perform a review of the acquired properties
which we believe is generally consistent with industry practices. However,
such
a review will not reveal all existing or potential problems. In addition,
our
review may not permit us to become sufficiently familiar with the properties
to
fully assess their deficiencies and capabilities. We do not inspect every
well.
Even when we inspect a well, we do not always discover structural, subsurface
and environmental problems that may exist or arise. We are generally not
entitled to contractual indemnification for preclosing liabilities, including
environmental liabilities. Normally, we acquire interests in properties on
an
“as is” basis with limited remedies for breaches of representations and
warranties.
As
a
result of these factors, we may not be able to acquire oil and gas properties
that contain economically recoverable reserves or be able to complete such
acquisitions on acceptable terms.
Estimates
of oil and gas reserves are uncertain and any material inaccuracies in these
reserve estimates will materially affect the quantities and the value of our
reserves.
This
Preliminary Prospectus contains estimates of our proved oil and gas reserves.
These estimates are based upon various assumptions, including assumptions
required by the SEC relating to oil and gas prices, drilling and operating
expenses, capital expenditures, taxes and availability of funds. The process
of
estimating oil and gas reserves is complex. This process requires significant
decisions and assumptions in the evaluation of available geological,
geophysical, engineering and economic data for each
reservoir.
Actual
future production, oil and gas prices, revenues, taxes, development
expenditures, operating expenses and quantities of recoverable oil and gas
reserves will vary from those estimated. Any significant variance could
materially affect the estimated quantities and the value of our reserves. Our
properties may also be susceptible to hydrocarbon drainage from production
by
other operators on adjacent properties. In addition, we may adjust estimates
of
proved reserves to reflect production history, results of exploration and
development, prevailing oil and gas prices and other factors, many of which
are
beyond our control.
Recovery
of undeveloped reserves requires significant capital expenditures and successful
drilling operations. The reserve data assumes that we will make capital
expenditures to develop our reserves. Although we have prepared estimates of
these oil and gas reserves and the costs associated with development of these
reserves in accordance with SEC regulations, we cannot assure you that the
estimated costs or estimated reserves are accurate, that development will occur
as scheduled or that the actual results will be as estimated.
Our
exploration and development drilling efforts and the operation of our wells
may
not be profitable or achieve our targeted returns.
We
require significant amounts of undeveloped leasehold acreage in order to further
our development efforts. Exploration, development, drilling and production
activities are subject to many risks, including the risk that commercially
productive reservoirs will not be discovered. We invest in property, including
undeveloped leasehold acreage, which we believe will result in projects that
will add value over time. However, we cannot guarantee that all of our prospects
will result in viable projects or that we will not abandon our initial
investments. Additionally, we cannot guarantee that the leasehold acreage we
acquire will be profitably developed, that new wells drilled by us will be
productive or that we will recover all or any portion of our investment in
such
leasehold acreage or wells. Drilling for oil and gas may involve unprofitable
efforts, not only from dry wells but also from wells that are productive but
do
not produce sufficient net reserves to return a profit after deducting operating
and other costs. In addition, wells that are profitable may not achieve our
targeted rate of return. Our ability to achieve our target results are dependent
upon the current and future market prices for oil and gas, costs associated
with
producing oil and gas and our ability to add reserves at an acceptable cost.
We
rely to a significant extent on 3D seismic data and other advanced technologies
in identifying leasehold acreage prospects and in conducting our exploration
activities. The 3D seismic data and other technologies we use do not allow
us to
know conclusively prior to acquisition of leasehold acreage or drilling a well
whether oil or gas is present or may be produced economically. The use of 3D
seismic data and other technologies also requires greater pre-drilling
expenditures than traditional drilling strategies.
In
addition, we may not be successful in implementing our business strategy of
controlling and reducing our drilling and production costs in order to improve
our overall return. The cost of drilling, completing and operating a well is
often uncertain and cost factors can adversely affect the economics of a
project. We cannot predict the cost of drilling, and we may be forced to limit,
delay or cancel drilling operations as a result of a variety of factors,
including:
|
•
|
|
unexpected
drilling conditions;
|
|
•
|
|
pressure
or irregularities in formations;
|
|
•
|
|
equipment
failures or accidents;
|
|
•
|
|
adverse
weather conditions, including hurricanes or other natural
disasters;
|
|
•
|
|
compliance
with governmental requirements; and
|
|
•
|
|
shortages
or delays in the availability of drilling rigs and the delivery of
equipment.
|
The
unavailability or high cost of drilling rigs, equipment, supplies, personnel
and
oil field services could adversely affect our ability to execute our exploration
and development plans on a timely basis and within our
budget.
Our
industry is cyclical and, from time to time, there is a shortage of drilling
rigs, equipment, supplies or qualified personnel. During these periods, the
costs and delivery times of rigs, equipment and supplies are substantially
greater. In addition, the demand for, and wage rates of, qualified drilling
rig
crews rise as the number of active rigs in service increases. As a result of
increasing levels of exploration and production in response to strong prices
of
oil and natural gas, the demand for oilfield services has risen, and the costs
of these services are increasing, while the quality of these services may
suffer. If the unavailability or high cost of drilling rigs, equipment, supplies
or qualified personnel were particularly severe in Kansas, Texas and Louisiana,
we could be materially and adversely affected because our operations and
properties are concentrated in those areas.
The
marketability of our oil and gas production depends on services and facilities
that we typically do not own or control. The failure or inaccessibility of
any
such services or facilities could result in a curtailment of production and
revenues.
The
marketability of our production depends in part upon the availability, proximity
and capacity of gathering systems, pipelines and processing facilities. Pursuant
to interruptible or short term transportation agreements, we generally deliver
gas through gathering systems and pipelines that we do not own. Under the
interruptible transportation agreements, the transportation of our gas may
be
interrupted due to capacity constraints on the applicable system, for
maintenance or repair of the system, or for other reasons as dictated by the
particular agreements. If any of the pipelines or other facilities becomes
unavailable, we would be required to find a suitable alternative to transport
and process the gas, which could increase our costs and reduce the revenues
we
might obtain from the sale of the gas.
We
are dependent on the skill, ability and decisions of third party
operators.
We
do not
operate any of our properties. The success of the drilling, development and
production of the oil and gas properties are dependent upon the decisions of
such third-party operators and their diligence to comply with various laws,
rules and regulations affecting such properties. The failure of any third-party
operator to make decisions, perform their services, discharge their obligations,
deal with regulatory agencies, and comply with laws, rules and regulations,
including environmental laws and regulations in a proper manner with respect
to
properties in which we have an interest could result in material adverse
consequences to our interest in such properties, including substantial penalties
and compliance costs. Such adverse consequences could result in substantial
liabilities to us or reduce the value of our properties, which could negatively
affect our results of operations.
Our
oil and gas activities are subject to various risks which are beyond our
control.
Our
operations are subject to many risks and hazards incident to exploring and
drilling for, producing, transporting, marketing and selling oil and gas.
Although we may take precautionary measures, many of these risks and hazards
are
beyond our control and unavoidable under the circumstances. Many of these risks
or hazards could materially and adversely affect our revenues and expenses,
the
ability of certain of our wells to produce oil and gas in commercial quantities,
the rate of production and the economics of the development of, and our
investment in the prospects in which we have or will acquire an interest. Any
of
these risks and hazards could materially and adversely affect our financial
condition, results of operations and cash flows. Such risks and hazards
include:
|
•
|
|
human
error, accidents, labor force and other factors beyond our control
that
may cause personal injuries or death to persons and destruction or
damage
to equipment and facilities;
|
|
•
|
|
blowouts,
fires, hurricanes, pollution and equipment failures that may result
in
damage to or destruction of wells, producing formations, production
facilities and equipment;
|
|
•
|
|
unavailability
of materials and equipment;
|
|
•
|
|
engineering
and construction delays;
|
|
•
|
|
unanticipated
transportation costs and delays;
|
|
•
|
|
unfavorable
weather conditions;
|
|
•
|
|
hazards
resulting from unusual or unexpected geological or environmental
conditions;
|
|
•
|
|
environmental
regulations and requirements;
|
|
•
|
|
accidental
leakage of toxic or hazardous materials, such as petroleum liquids
or
drilling fluids, into the environment;
|
|
•
|
|
changes
in laws and regulations, including laws and regulations applicable
to oil
and gas activities or markets for the oil and gas
produced;
|
|
•
|
|
fluctuations
in supply and demand for oil and gas causing variations of the prices
we
receive for our oil and gas production; and
|
|
•
|
|
the
internal and political decisions of OPEC and oil and natural gas
producing
nations and their impact upon oil and gas
prices.
|
As
a
result of these risks, expenditures, quantities and rates of production,
revenues and cash operating costs may be materially adversely affected and
may
differ materially from those anticipated by us.
Governmental
and environmental regulations could adversely affect our
business.
Our
business is subject to federal, state and local laws and regulations on
taxation, the exploration for and development, production and marketing of
oil
and gas and safety matters. Many laws and regulations require drilling permits
and govern the spacing of wells, rates of production, prevention of waste,
unitization and pooling of properties and other matters. These laws and
regulations have increased the costs of planning, designing, drilling,
installing, operating and abandoning our oil and gas wells and other facilities.
In addition, these laws and regulations, and any others that are passed by
the
jurisdictions where we have production, could limit the total number of wells
drilled or the allowable production from successful wells, which could limit
our
revenues.
Our
operations are also subject to complex environmental laws and regulations
adopted by the various jurisdictions in which we have or expect to have oil
and
gas operations. We could incur liability to governments or third parties for
any
unlawful discharge of oil, gas or other pollutants into the air, soil or water,
including responsibility for remedial costs.
We
could
potentially discharge these materials into the environment in any of the
following ways:
|
•
|
|
from
a well or drilling equipment at a drill site;
|
|
•
|
|
from
gathering systems, pipelines, transportation facilities and storage
tanks;
|
|
•
|
|
damage
to oil and gas wells resulting from accidents during normal operations;
and
|
|
•
|
|
blowouts,
hurricanes, cratering and
explosions.
|
Because
the requirements imposed by laws and regulations are frequently changed, we
cannot assure you that laws and regulations enacted in the future, including
changes to existing laws and regulations, will not adversely affect our
business. In addition, because we acquire interests in properties that may
have
been operated in the past by others and are currently operated by others, we
may
be liable for environmental damage caused by those operators.
We
cannot be certain that the insurance coverage maintained by us will be adequate
to cover all losses that may be sustained in connection with all oil and gas
activities.
We
maintain general and excess liability policies, which we consider to be
reasonable and consistent with industry standards. These policies generally
cover:
|
•
|
|
personal
injury;
|
|
•
|
|
bodily
injury;
|
|
•
|
|
third
party property damage;
|
|
•
|
|
medical
expenses;
|
|
•
|
|
legal
defense costs;
|
|
•
|
|
pollution
in some cases;
|
|
•
|
|
well
blowouts in some cases; and
|
|
•
|
|
workers
compensation.
|
There
can
be no assurance that this insurance coverage will be sufficient to cover every
claim made against us in the future. A loss in connection with our oil and
natural gas properties could have a materially adverse effect on our financial
position and results of operation to the extent that the insurance coverage
provided under our policies cover only a portion of any such loss.
Title
to the properties in which we have an interest may be impaired by title
defects.
Our
operators generally obtain title opinions on significant properties that we
have
working interests in. However, there is no assurance that we will not suffer
a
monetary loss from title defects or failure. Generally, under the terms of
the
operating agreements affecting our properties, any monetary loss is to be borne
by all parties to any such agreement in proportion to their interests in such
property. If there are any title defects or defects in assignment of leasehold
rights in properties in which we hold an interest, we will suffer a financial
loss
.
We
are subject to compliance with securities law, which exposes us to potential
liabilities, including potential rescission rights
.
We
have
periodically offered and sold our common stock to investors pursuant to certain
exemptions from the registration requirements of the Securities Act of 1933,
as
well as those of various state securities laws. The basis for relying on such
exemptions is factual; that is, the applicability of such exemptions depends
upon our conduct and that of those persons contacting prospective investors
and
making the offering. We have not received a legal opinion to the effect that
any
of our prior offerings were exempt from registration under any federal or state
law. Instead, we have relied upon the operative facts as the basis for such
exemptions, including information provided by investors themselves.
If
any
prior offering did not qualify for such exemption, an investor would have
the
right to rescind its purchase of the securities if it so desired. It is possible
that if an investor should seek rescission, such investor would succeed.
A
similar situation prevails under state law in those states where the securities
may be offered without registration in reliance on the partial preemption
from
the registration or qualification provisions of such state statutes under
the
National Securities Markets Improvement Act of 1996. If investors were
successful in seeking rescission, we would face severe financial demands
that
could adversely affect our business and operations. Additionally, if we did
not
in fact qualify for the exemptions upon which it has relied, we may become
subject to significant fines and penalties imposed by the SEC and state
securities agencies.
The
following risks relate principally to the Company’s Common Stock and its market
value
There
is a limited market for our common stock which may make it more difficult
for
you to dispose of your stock.
Our
common stock has been quoted on the OTC Bulletin Board under the symbol
"IXOG.OB" since December 16, 2005. There is a limited trading market for
our
common stock. Furthermore, the trading in our common stock maybe highly
volatile, as for example, approximately more than one-third of the trading
days
during July of 2007 saw trading in our stock of less than 100,000 shares
per
day. During that same period, the smallest number of shares trade in one
day was
3,800 and the largest number of shares traded in one day was 582,400.
Accordingly, there can be no assurance as to the liquidity of any markets
that
may develop for our common stock, the ability of holders of our Common Stock
to
sell our Common Stock, or the prices at which holders may be able to sell
our
Common Stock.
The
trading price of our Common Stock may be highly volatile and could be subject
to
fluctuations in response to a number of factors beyond our control. Some
of
these factors are:
•
|
our
results of operations and the performance of our
competitors;
|
•
|
the
public’s reaction to our press releases, our other public announcements
and our filings with the Securities and Exchange Commission, or
SEC;
|
•
|
changes
in earnings estimates or recommendations by research analysts who
follow,
or may follow, us or other companies in our industry;
|
•
|
changes
in general economic conditions;
|
|
changes
in market prices for oil and gas;
|
•
|
actions
of our historical equity investors, including sales of common stock
by our
directors and executive officers;
|
•
|
actions
by institutional investors trading in our stock;
|
•
|
disruption
of our operations;
|
•
|
any
major change in our management team;
|
•
|
other
developments affecting us, our industry or our competitors;
and
|
•
|
U.S.
and international economic, legal and regulatory factors unrelated
to our
performance.
|
In
recent
years the stock market has experienced significant price and volume
fluctuations. These fluctuations may be unrelated to the operating performance
of particular companies. These broad market fluctuations may cause declines
in
the market price of our common stock. The price of our Common Stock could
fluctuate based upon factors that have little or nothing to do with our company
or its performance, and those fluctuations could materially reduce our Common
Stock price.
Our
Common
Stock
is subject to the "penny stock" rules of the
SEC
and the trading market in our securities is limited, which makes transactions
in
our stock cumbersome and may reduce the value of an investment in our
stock.
The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes
the
definition of a "penny stock," for the purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions.
For
any transaction involving a penny stock, unless exempt, the rules
require:
|
·
|
that
a broker or dealer approve a person's account for transactions
in penny
stocks; and
|
|
·
|
the
broker or dealer receive from the investor a written agreement
to the
transaction, setting forth the identity and quantity of the penny
stock to
be purchased.
|
In
order
to approve a person's account for transactions in penny stocks, the broker
or
dealer must:
|
·
|
obtain
financial information and investment experience objectives of the
person;
and
|
|
·
|
make
a reasonable determination that the transactions in penny stocks
are
suitable for that person and the person has sufficient knowledge
and
experience in financial matters to be capable of evaluating the risks
of
transactions in penny stocks.
|
The
broker or dealer must also deliver, prior to any transaction in a penny stock,
a
disclosure schedule prepared by the Commission relating to the penny stock
market, which, in highlight form:
|
·
|
sets
forth the basis on which the broker or dealer made the suitability
determination; and
|
|
·
|
that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
|
Generally,
brokers may be less willing to execute transactions in securities subject to
the
"penny stock" rules. This may make it more difficult for investors to dispose
of
our common stock and cause a decline in the market value of our
stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both
the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account
and
information on the limited market in penny stocks.
The
requirements of being a public company, including compliance with the reporting
requirements of the exchange act and the requirements of the Sarbanes Oxley
act,
strains our resources, increases our costs and may distract management, and we
may be unable to comply with these requirements in a timely or cost-effective
manner.
As
a
public company, we need to comply with laws, regulations and requirements,
including certain corporate governance provisions of the Sarbanes-Oxley Act
of
2002 and related regulations of the SEC and requirements of OTCBB. Complying
with these statutes, regulations and requirements occupies a significant
amount
of the time of our board of directors and management. We are or may be required
to:
•
|
institute
a comprehensive compliance function;
|
•
|
establish
internal policies, such as those relating to disclosure controls
and
procedures and insider trading;
|
•
|
design,
establish, evaluate and maintain a system of internal controls
over
financial reporting in compliance with the requirements of
Section 404 of the Sarbanes-Oxley Act and the related rules and
regulations of the SEC and the Public Company Accounting Oversight
Board;
|
•
|
prepare
and distribute periodic reports in compliance with our obligations
under
the federal securities laws;
|
•
|
involve
and retain outside counsel and accountants in the above activities;
and
|
•
|
establish
an investor relations
function.
|
In
addition, rules adopted by the SEC pursuant to
Section 404 of the Sarbanes-Oxley Act of 2002 will require annual
assessment of our internal control over financial reporting, and attestation
of
the assessment by our independent registered public accountants.. Under the
current SEC regulations, we will be required to include a management report
on
internal controls over financial reporting in our Form 10-KSB annual report
for
the year ended March 31, 2008, and we will be required to include an auditor’s
report on internal controls over financial reporting for the year ended March
31, 2009. As the standards that must be met for management to assess
the internal control over financial reporting as effective are new and complex,
when applicable to us, will require significant documentation, testing and
possible remediation to meet the detailed standards, and we may encounter
problems or delays in completing activities necessary to make an assessment
of
our internal control over financial reporting.
In
the
future, when these compliance standards are applicable to us, if we are unable
to accomplish these objectives or achieve required compliance in a timely
and
effective fashion, our ability to comply with our financial reporting
requirements and other rules that apply to reporting companies could be
impaired, and we may be subject to sanctions or investigation by regulatory
authorities such as the SEC or Nasdaq. In addition, failure to comply with
Section 404 or a report of a material weakness may cause investors to lose
confidence in us and may have a material adverse effect on our stock
price.
The
Company does not expect to pay dividends in the future. Any return on investment
may be limited to the value of the Company’s stock.
The
Company does not anticipate paying cash dividends on its stock in the
foreseeable future. The payment of dividends on the Company’s stock will depend
on its earnings, financial condition and other business and economic factors
affecting the Company at such time as the board of directors may consider
relevant. If the Company does not pay dividends, its stock may be less valuable
because a return on your investment will only occur if the Company’s stock price
appreciates.
A
sale of a substantial number of shares of the Company’s common stock may cause
the price of its common stock to decline.
If
the
Company’s stockholders sell substantial amounts of the Company’s common stock in
the public market, including shares issued upon the exercise of outstanding
options or warrants, the market price of its common stock could fall. These
sales also may make it more difficult for the Company to sell equity or
equity-related securities in the future at a time and price that the Company
deems reasonable or appropriate. Stockholders who have been issued shares in
the
Acquisition will be able to sell their shares pursuant to Rule 144 under the
Securities Act of 1933, beginning one year after the stockholders acquired
their
shares.
The
exercise of our outstanding warrants and options may depress our stock
price
We
had
901,421 warrants and 5,077,526 options to purchase shares of our common stock
outstanding, at June 30, 2007. The exercise of warrants and/or options by
a
substantial number of holders within a relatively short period of time could
have the effect of depressing the market price of our common stock and could
impair our ability to raise capital through the sale of additional equity
securities..
We
may need additional capital that could dilute the ownership interest of
investors.
We
require substantial working capital to fund our business. If we raise additional
funds through the issuance of equity, equity-related or convertible debt
securities, these securities may have rights, preferences or privileges senior
to those of the rights of holders of our common stock and they may experience
additional dilution. We cannot predict whether additional financing will
be
available to us on favorable terms when required, or at all. Since our
inception, we have experienced negative cash flow from operations and expect
to
experience significant negative cash flow from operations in the future.
The
issuance of additional common stock by our management may have the effect
of
further diluting the proportionate equity interest and voting power of holders
of our common stock, including investors in this offering.
This
prospectus relates to shares of our common stock that may be offered and
sold
from time to time by the selling stockholders. We will not receive any proceeds
from the sale of shares of common stock in this offering. We will, however,
receive proceeds from the exercise, if any, of warrants to purchase 901,421
shares of common stock.
FORWARD-LOOKING
STATEMENTS
Some
of
the statements contained in this Registration Statement that are not historical
facts are "forward-looking statements" which can be identified by the use of
terminology such as "estimates," "projects," "plans," "believes," "expects,"
"anticipates," "intends," or the negative or other variations, or by discussions
of strategy that involve risks and uncertainties. We urge you to be cautious
of
the forward-looking statements, that such statements, which are contained in
this Registration Statement, reflect our current beliefs with respect to future
events and involve known and unknown risks, uncertainties and other factors
affecting our operations, market growth, services, products and licenses. No
assurances can be given regarding the achievement of future results, as actual
results may differ materially as a result of the risks we face, and actual
events may differ from the assumptions underlying the statements that have
been
made regarding anticipated events. Factors that may cause actual results, our
performance or achievements, or industry results, to differ materially from
those contemplated by such forward-looking statements include without
limitation:
|
•
|
|
our
ability to attract and retain management;
|
|
|
|
|
|
•
|
|
our
growth strategies;
|
|
|
|
•
|
|
anticipated
trends in our business;
|
|
|
|
•
|
|
our
future results of operations;
|
|
|
|
•
|
|
our
ability to make or integrate acquisitions;
|
|
|
|
•
|
|
our
liquidity and ability to finance our exploration, acquisition and
development activities;
|
|
|
|
•
|
|
our
ability to successfully and economically explore for and develop
oil and
gas resources;
|
|
|
|
•
|
|
market
conditions in the oil and gas industry;
|
|
|
|
•
|
|
the
timing, cost and procedure for proposed acquisitions;
|
|
|
|
•
|
|
the
impact of government regulation;
|
|
|
|
•
|
|
estimates
regarding future net revenues from oil and natural gas reserves and
the
present value thereof;
|
|
|
|
•
|
|
planned
capital expenditures (including the amount and nature
thereof);
|
|
|
|
•
|
|
increases
in oil and gas production;
|
|
|
|
•
|
|
the
number of wells we anticipate drilling in the future;
|
|
|
|
•
|
|
estimates,
plans and projections relating to acquired properties;
|
|
|
|
•
|
|
the
number of potential drilling locations;
|
|
|
|
•
|
|
our
financial position, business strategy and other plans and objectives
for
future operations;
|
|
•
|
|
the
possibility that our acquisitions may involve unexpected
costs;
|
|
|
|
•
|
|
the
volatility in commodity prices for oil and gas;
|
|
|
|
•
|
|
the
accuracy of internally estimated proved reserves;
|
|
|
|
•
|
|
the
presence or recoverability of estimated oil and gas
reserves;
|
|
|
|
•
|
|
the
ability to replace oil and gas reserves;
|
|
|
|
•
|
|
the
availability and costs of drilling rigs and other oilfield
services;
|
|
|
|
•
|
|
environmental
risks;
|
|
|
|
•
|
|
exploration
and development risks;
|
|
|
|
•
|
|
competition;
|
|
|
|
•
|
|
the
inability to realize expected value from acquisitions;
|
|
|
|
•
|
|
the
ability of our management team to execute its plans to meet its
goals;
|
|
•
|
|
general
economic conditions, whether internationally, nationally or in the
regional and local market areas in which we are doing business, that
may
be less favorable than expected; and
|
|
|
|
•
|
|
other
economic, competitive, governmental, legislative, regulatory, geopolitical
and technological factors that may negatively impact our businesses,
operations and pricing.
|
All
written and oral forward-looking statements made in connection with this Form
10-K that are attributable to us or persons acting on our behalf are expressly
qualified in their entirety by these cautionary statements. Given the
uncertainties that surround such statements, you are cautioned not to place
undue reliance on such forward-looking statements.
SELLING
STOCKHOLDERS
The
table
below sets forth information concerning the resale of the shares of common
stock
by the selling stockholders. We will not receive any proceeds from the resale
of
the common stock by the selling stockholders. We will receive proceeds from
the
exercise of the warrants. Except to the extent indicated below, all the shares
registered below are assumed to be sold by the selling stockholders, and none
of
the selling stockholders will continue to own any shares of our common
stock.
The
following table also sets forth the name of each person who is offering the
resale of shares of common stock by this prospectus, the number of shares
of
common stock beneficially owned by each person, the number of shares of common
stock that may be sold in this offering and the number of shares of common
stock
each person will own after the offering, assuming they sell all of the shares
offered. With the exception of Lyndon West, Andrew Boetius, Daniel Murphy,
David
Jenkins and Michael Scrutton, none of the selling stockholders have held
any
position or office or had any other material relationship with us or any
of our
predecessors or affiliates within the past three years. Except to the extent
indicated otherwise, all of the selling stockholders have advised us that
they
are not broker-dealers or affiliates of broker-dealers and they believe they
are
not required to be broker-dealers.
|
Shares
of Common Stock Owned Prior to the Offering
|
Percentage
of Ownership Before the Offering
|
Number
of Shares Being Offered
|
Shares
of Common Stock Owned After the Offering
|
Percentage
of Ownership After the Offering
|
|
|
|
|
|
|
|
GROUP
A
|
|
|
|
|
|
1.
ANTONIO JAUME SUREDA
|
24400
|
|
24400
|
0
|
0
|
2.
BERNARD FIOL CARDONA
|
11800
|
|
11800
|
0
|
0
|
3.
GABRIEL LLABRES MATEU
|
0
|
|
0
|
0
|
0
|
4.
JUAN RAMON GARCIA GARCIA
|
0
|
|
0
|
0
|
0
|
5.
JUAN RAMON GARCIA RAMIS
|
0
|
|
0
|
0
|
0
|
6.
MIGUEL AMENGUAL POMAR
|
58333
|
|
58333
|
0
|
0
|
7.
RICARDO ALONSO
|
0
|
|
0
|
0
|
0
|
8.
SALVADOR MAIMO
|
40000
|
|
40000
|
0
|
0
|
9.
CLAU DE ROBI
|
0
|
|
0
|
0
|
0
|
10.
DANEL TRADING
|
165000
|
|
165000
|
0
|
0
|
11.
DELOTT GROUP CORP. (I)
|
293750
|
|
293750
|
0
|
0
|
12.
GEORGES CONSTANTIN
|
165600
|
|
165600
|
0
|
0
|
13.
NICOLAS HOFFMANN
|
27600
|
|
27600
|
0
|
0
|
14.
PUREPOWER CORP (II)
|
175000
|
|
175000
|
0
|
0
|
15.
UNIGRUP SA (III)
|
686540
|
|
686540
|
0
|
0
|
16.
WUXI CORPORATION A.V.V (IV)
|
0
|
|
0
|
0
|
0
|
17.
COMERCIAL TITOYA RIVERS (V)
|
270,833
|
|
270,833
|
0
|
0
|
18.
ANDBANK (VI)
|
730000
|
|
730000
|
0
|
0
|
19.
BLENTON MANAGEMENT (VII)
|
848,000
|
|
848,000
|
0
|
0
|
20.
ALBERTO PEREZ SOLANO
|
0
|
|
0
|
0
|
0
|
21.
ALEJANDRO CORBACHO SANCHEZ-IBARGUEN
|
12000
|
|
12000
|
0
|
0
|
22.
ALFREDO GARCIA RAYA
|
12000
|
|
12000
|
0
|
0
|
23.
ALFREDO ROSA PEINADO
|
0
|
|
0
|
0
|
0
|
24.
ANA TERESA PORRAS NARVAEZ
|
0
|
|
0
|
0
|
0
|
25.
ANGEL ALAIZ BARRAGAN
|
20000
|
|
20000
|
0
|
0
|
26.
ANGELA MACIAS MAYA
|
20000
|
|
20000
|
0
|
0
|
27.
ANTONIO AGUILAR PALOMO
|
0
|
|
0
|
0
|
0
|
28.
ANTONIO ARIZA GARCIA
|
40000
|
|
40000
|
0
|
0
|
29.
ANTONIO AVILA ANDUJAR
|
6000
|
|
6000
|
0
|
0
|
30.
ANTONIO CALO LOPEZ
|
15000
|
|
15000
|
0
|
0
|
31.
ANTONIO MACIAS DURAN
|
36000
|
|
36000
|
0
|
0
|
32.
ANTONIO MARTINEZ MELINI
|
18000
|
|
18000
|
0
|
0
|
33.
ANTONIO TORRES ROJAS
|
0
|
|
0
|
0
|
0
|
34.
CARLOS CORREDOR TOLEDO
|
6000
|
|
6000
|
0
|
0
|
35.
CARLOS DE ANTA ALVAREZ
|
12000
|
|
12000
|
0
|
0
|
36.
CARLOS VALENZUELA CLAROS
|
12000
|
|
12000
|
0
|
0
|
37.
CARMEN MARTINEZ TALLO
|
0
|
|
0
|
0
|
0
|
38.
CAYETANA DEL PINO MALDONADO
|
6000
|
|
6000
|
0
|
0
|
39.
CAYETANO GARCIA DE LA BORBOLLA
|
10000
|
|
10000
|
0
|
0
|
40.
CLEMENTE MACIAS TERRON
|
26000
|
|
26000
|
0
|
0
|
41.
CRISTINA MESEGUER CALERO (INCI)
|
30000
|
|
30000
|
0
|
0
|
42.
CRISTOBAL JAVIER LUQUE GOMARIN
|
0
|
|
0
|
0
|
0
|
43.
DANIEL LUQUE FERNANDEZ
|
0
|
|
0
|
0
|
0
|
44.
DAVID GARCIA TERNERO
|
9000
|
|
9000
|
0
|
0
|
45.
EDUARDO PISA MARTIN ENRIQUE GRANADOS
|
12000
|
|
12000
|
0
|
0
|
46.
ELADIO GARCIA BORBOLLA
|
10000
|
|
10000
|
0
|
0
|
47.
ELOISA DIAZ MUNOZ
|
8000
|
|
8000
|
0
|
0
|
48.
EMILIO ORDINA VEGA
|
24000
|
|
24000
|
0
|
0
|
49.
ENRIQUE AVILES GOMEZ
|
0
|
|
0
|
0
|
0
|
50.
ESTEBAN LOPEZ MARTIN
|
0
|
|
0
|
0
|
0
|
51.
FERNANDO MACIAS MAYA
|
400000
|
|
400000
|
0
|
0
|
52.
FRANCISCO GONZALEZ ARREBOLA
|
30000
|
|
30000
|
0
|
0
|
53.
FRANCISCO ESPASANDIN BUSTELO
|
12000
|
|
12000
|
0
|
0
|
54.
FRANCISCO JAVIER PEREZ RODRIGUEZ
|
0
|
|
0
|
0
|
0
|
55.
FRANCISCO MUNOZ CARDERO
|
12000
|
|
12000
|
0
|
0
|
56.
FRANCISCO OJEDA DOMINGUEZ
|
6000
|
|
6000
|
0
|
0
|
57.
FRANCISCO PAEZ PEREZ
|
30000
|
|
30000
|
0
|
0
|
58.
GONZALO PASCA LOZANO
|
12000
|
|
12000
|
0
|
0
|
59.
GREGORIO CASTANO MORUETA
|
54000
|
|
54000
|
0
|
0
|
60.
HERMOGENES GARCIA GONZALEZ
|
30000
|
|
30000
|
0
|
0
|
61.
IGNACIO CONTRERAS MORA
|
24000
|
|
24000
|
0
|
0
|
62.
IGNACIO CORREDERA GARCIA
|
0
|
|
0
|
0
|
0
|
63.
IGNACIO MARTIN VELASCO
|
24000
|
|
24000
|
0
|
0
|
64.
IGNACIO PEMAN DOMECQ
|
8000
|
|
8000
|
0
|
0
|
65.
IGNACIO SANCHIS ROBINA
|
0
|
|
0
|
0
|
0
|
66.
ISABEL VALLE MOYANO
|
0
|
|
0
|
0
|
0
|
67.
ISMAEL GAMEZ VELA
|
12000
|
|
12000
|
0
|
0
|
68.
JAVIER LASARTE ALVAREZ
|
0
|
|
0
|
0
|
0
|
69.
JAVIER LEON ALDAMA
|
0
|
|
0
|
0
|
0
|
70.
JAVIER MARTINEZ PEREZ
|
12000
|
|
12000
|
0
|
0
|
71.
JAVIER TORRALBO LEON
|
0
|
|
0
|
0
|
0
|
72.
JERONIMO PAEZ PEREZ
|
12000
|
|
12000
|
0
|
0
|
73.
JESUS JOSE DIAZ VILLARD
|
12000
|
|
12000
|
0
|
0
|
74.
JOSE ANTONIO MARTINEZ GOMEZ
|
12000
|
|
12000
|
0
|
0
|
75.
JOSE ANTONIO PAEZ PEREZ
|
12000
|
|
12000
|
0
|
0
|
76.
JOSE CARRETO MEJIAS
|
24406
|
|
24406
|
0
|
0
|
77.
JOSE EDUARDO NAVARRO MOLINA
|
6000
|
|
6000
|
0
|
0
|
78.
JOSE JAVIER ROMAN MARTIN
|
18000
|
|
18000
|
0
|
0
|
79.
JOSE JOAQUIN CASADO ROBLES
|
6000
|
|
6000
|
0
|
0
|
80.
JOSE LUIS GARCIA GONZALEZ
|
30000
|
|
30000
|
0
|
0
|
81.
JOSE LUIS GARCIA LOPEZ
|
12000
|
|
12000
|
0
|
0
|
82.
JOSE LUIS MENDOZA BARBA
|
6000
|
|
6000
|
0
|
0
|
83.
JOSE MANUEL PELAEZ IZQUIERDO
|
12000
|
|
12000
|
0
|
0
|
84.
JOSE MARIA CARMONA MANGA
|
12000
|
|
12000
|
0
|
0
|
85.
JOSE MARIA GARZON MERGELINA
|
0
|
|
0
|
0
|
0
|
86.
JOSE MARIA MARTINEZ JORDAN
|
0
|
|
0
|
0
|
0
|
87.
JOSE MARIA SUAREZ MAYA
|
6000
|
|
6000
|
0
|
0
|
88.
JOSE MORA RUIZ
|
0
|
|
0
|
0
|
0
|
89.
JOSE RAMON SANCHEZ DIAZ
|
20000
|
|
20000
|
0
|
0
|
90.
JOSE SANCHEZ MARCHENA
|
6000
|
|
6000
|
0
|
0
|
91.
JUAN ANTONIO MURUBE LEON
|
12000
|
|
12000
|
0
|
0
|
92.
JUAN JOSE MADINABEITIA LUQUE
|
18000
|
|
18000
|
0
|
0
|
93.
JUAN MANUEL AMADOR AGEA
|
12000
|
|
12000
|
0
|
0
|
94.
JUAN MANUEL CARMONA MANGA
|
12000
|
|
12000
|
0
|
0
|
95.
JUAN MIGUEL VARO MARTINEZ
|
6000
|
|
6000
|
0
|
0
|
96.
JULIA PENA GALEOTE
|
0
|
|
0
|
|
|
97.
LEAL Y MARTIN ECONOMISTAS (VIII)
|
0
|
|
0
|
0
|
0
|
98.
LEONARDO PENA GALEOTE
|
12000
|
|
12000
|
0
|
0
|
99.
LUCIANA LUENGO PARDAL
|
55000
|
|
55000
|
0
|
0
|
100.
LUIS ALVAREZ ARIZA
|
16000
|
|
16000
|
0
|
0
|
101.
LUIS AMATE CANSINO
|
0
|
|
0
|
0
|
0
|
102.
LUIS CORTES MENDEZ
|
24000
|
|
24000
|
0
|
0
|
103.
LUIS NUNEZ MUNOZ
|
12000
|
|
12000
|
0
|
0
|
104.
MARIA ASCENCION FERNANDEZ MORGAZ
|
20000
|
|
20000
|
0
|
0
|
105.
MANUEL GARCIA BORBOLLA
|
10000
|
|
10000
|
0
|
0
|
106.
MANUEL ALAIZ BARRAGAN
|
12000
|
|
12000
|
0
|
0
|
107.
MANUEL ALEJANDRO RODRIGUEZ CAMPINS
|
0
|
|
0
|
0
|
0
|
108.
MANUEL ANGEL RODRIGUEZ THORICES FLORES
|
12000
|
|
12000
|
0
|
0
|
109.
MANUEL FERNANDEZ PIEDRA CORTES
|
12000
|
|
12000
|
0
|
0
|
110.
MANUEL GALLARDO DE LA ROSA
|
12000
|
|
12000
|
0
|
0
|
111.
MANUEL GALLARDO TERCERO
|
0
|
|
0
|
0
|
0
|
112.
MANUEL GONZALEZ RIVERO
|
0
|
|
0
|
0
|
0
|
113.
MANUEL JOSE SERRANO DOMINGUEZ
|
12000
|
|
12000
|
0
|
0
|
114.
MANUEL MARTIN NARANJO
|
50000
|
|
50000
|
0
|
0
|
115.
MANUEL RAMIREZ NIETO
|
12000
|
|
12000
|
0
|
0
|
116.
MARCO ANTONIO CEBOLLA ARTEAGA
|
12000
|
|
12000
|
0
|
0
|
117.
MARIA AMELIA LOPEZ MELERO
|
20000
|
|
20000
|
0
|
0
|
118.
MARIA ANGELES DE LA TORRE DIAZ
|
12000
|
|
12000
|
0
|
0
|
119.
MARIA DEL CAMINO GONZALEZ MARTINEZ
|
6000
|
|
6000
|
0
|
0
|
120.
MARIA DEL CARMEN SANCHEZ PEREZ
|
10000
|
|
10000
|
0
|
0
|
121.
MARIA ELITANIA PICON GARROTE
|
20000
|
|
20000
|
0
|
0
|
122.
MARIA JOSE MACIAS MAYA
|
20000
|
|
20000
|
0
|
0
|
123.
MARIA LUISA PEREZ SEGURA
|
0
|
|
0
|
0
|
0
|
124.
MARIA PAZ PEREZ REINA
|
6000
|
|
6000
|
0
|
0
|
125.
MARIA VICTORIA ARIZA LUQUE
|
12000
|
|
12000
|
0
|
0
|
126.
MARIANO LASARTE LOPEZ
|
0
|
|
0
|
0
|
0
|
127.
MARIANO MAURI ARGUDO
|
6000
|
|
6000
|
0
|
0
|
128.
MARVEL ECONOMISTAS,S.L. (IX)
|
30000
|
|
30000
|
0
|
0
|
129.
MATILDE PALACIOS CAMPOS
|
20000
|
|
20000
|
0
|
0
|
130.
MAURICIO WAMBA DE LOS SANTOS
|
12000
|
|
12000
|
0
|
0
|
131.
MENDOZA Y RIOS 25,S.L. (X)
|
20000
|
|
20000
|
0
|
0
|
132.
MERCEDES PRADA MELLADO
|
0
|
|
0
|
0
|
0
|
133.
MIGUEL ANGEL DEL REGUERO DEL VALLE
|
6000
|
|
6000
|
0
|
0
|
134.
MONTSERRAT TRININO QUERALT
|
6000
|
|
6000
|
0
|
0
|
135.
PABLO TRUJILLO HERNANDEZ
|
8000
|
|
8000
|
0
|
0
|
136.
PAULA GARZON MURILLO
|
24000
|
|
24000
|
0
|
0
|
137.
PEDRO ANGEL PANIAGUA DOMINGUEZ
|
12000
|
|
12000
|
0
|
0
|
138.
PEDRO LUIS ROMAN SEVILLANO
|
24000
|
|
24000
|
0
|
0
|
139.
PEDRO MAURI ARGUDO
|
0
|
|
0
|
0
|
0
|
140.
PILAR BECERRA RUBIO
|
0
|
|
0
|
0
|
0
|
141.
PILAR GARCIA ALVAREZ DE PEREA
|
0
|
|
0
|
0
|
0
|
142.
PILAR LEON GARCIA
|
0
|
|
0
|
0
|
0
|
143.
RAFAEL GONZALEZ BUENDIA
|
0
|
|
0
|
0
|
0
|
144.
RAFAEL LOPEZ DAMAS
|
180000
|
|
180000
|
0
|
0
|
145.
RAFAEL MARTINEZ AGUILAR
|
28000
|
|
28000
|
0
|
0
|
146.
RAFAEL UCEDA VILLAMOR
|
0
|
|
0
|
0
|
0
|
147.
REMEDIOS PEREZ ALVAREZ
|
12000
|
|
12000
|
0
|
0
|
148.
RICARDO FERNANDEZ DAVILA
|
12000
|
|
12000
|
0
|
0
|
149.
RICARDO GOMEZ RIVAS
|
6000
|
|
6000
|
0
|
0
|
150.
ROCIO CABELLO DE LOS COBOS
|
6000
|
|
6000
|
0
|
0
|
151.
ROCIO GARRIDO DIAZ
|
12000
|
|
12000
|
0
|
0
|
152.
ROCIO VILLALBA RODRIGUEZ
|
0
|
|
0
|
0
|
0
|
153.
RODOLFO LOZANO LOZANO
|
36000
|
|
36000
|
0
|
0
|
154.
ROSARIO BENITEZ ARTHOUS
|
10000
|
|
10000
|
0
|
0
|
155.
ROSARIO PAEZ PEREZ
|
12000
|
|
12000
|
0
|
0
|
156.
SONIA BELTRAN GARCIA
|
6000
|
|
6000
|
0
|
0
|
157.
SONIA JIMENEZ RUIZ
|
36000
|
|
36000
|
0
|
0
|
158.
TERESA FROIS LOPEZ
|
0
|
|
0
|
0
|
0
|
159.
TOMAS POLO SANCHEZ
|
6000
|
|
6000
|
0
|
0
|
160.
VICENTE RODRIGUEZ DE LA ROSA
|
0
|
|
0
|
0
|
0
|
161.
EDUARDO GUZMAN SALAS
|
19665
|
|
19665
|
0
|
0
|
162.
MAGDALENA SOCIAS
|
23700
|
|
23700
|
0
|
0
|
163.
JAVIER RUIZ SANCHO
|
21633
|
|
21633
|
0
|
0
|
164.
LAURA RUIZ SANCHO
|
12000
|
|
12000
|
0
|
0
|
165.
DAVID MORALES POL
|
23600
|
|
23600
|
0
|
0
|
166.
FERNANDO DE GUZMAN
|
23600
|
|
23600
|
0
|
0
|
167.
AGROPECUARIA EL ALCAIDE (XLII)
|
30000
|
|
30000
|
0
|
0
|
168.
MULBERRY ASESORES S.L. (XI)
|
0
|
|
0
|
0
|
0
|
169.
ALBERT GIL PEREZ
|
24000
|
|
24000
|
0
|
0
|
170.
JORDI GIL GARCIA
|
24000
|
|
24000
|
0
|
0
|
171.
MARIA ROSA PEREZ RUIZ
|
24000
|
|
24000
|
0
|
0
|
172.
JOSEPH JULIA
|
0
|
|
0
|
0
|
0
|
173.
JOSEP RIBERA SERRA
|
59000
|
|
59000
|
0
|
0
|
174.
FERNANDO RAMIREZ
|
200000
|
|
200000
|
0
|
0
|
175.
ANAMIT GMAMARYAN
|
80000
|
|
80000
|
0
|
0
|
176.
JOSE LUIS FERNANDEZ AMER
|
85000
|
|
85000
|
0
|
0
|
177.
CARMEN FERNANDEZ AMER
|
0
|
|
0
|
0
|
0
|
178.
ENRIQUE VIDAL
|
59000
|
|
59000
|
0
|
0
|
179.
ROSA MARIA ROIG VILATA
|
0
|
|
0
|
0
|
0
|
180.
JOSE TUENEU
|
97916
|
|
97916
|
0
|
0
|
181.
IVAN BIANCO
|
17500
|
|
17500
|
0
|
0
|
182.
WALTER VITARELLI
|
8000
|
|
8000
|
0
|
0
|
183.
MAURIZIO GUGLIELMO
|
0
|
|
0
|
0
|
0
|
184.
CARLOS FERNANDEZ AMER
|
47389
|
|
47389
|
0
|
0
|
185.
GERLACH & CO (XII)
|
452265
|
|
452265
|
0
|
0
|
GROUP
B
|
|
|
|
|
|
186.
Lyndon West
|
4,319,087
|
|
4,319,087
|
0
|
0
|
187.
Andrew Boetius
|
1,257,969
|
|
1,257,969
|
0
|
0
|
188.
Daniel Murphy
|
438,053
|
|
438,053
|
0
|
0
|
189.
Michael Scrutton
|
2,485,729
|
|
2,485,729
|
0
|
0
|
190.
David Jenkins
|
1,103,116
|
|
1,103,116
|
0
|
0
|
191.
Douglas Wordsworth
|
3,829,433
|
|
3,829,433
|
0
|
0
|
192.
Ian Cross
|
954,384
|
|
954,384
|
0
|
0
|
193.
Robert Pile
|
259,590
|
|
259,590
|
0
|
0
|
|
239,547
|
|
239,547
|
0
|
0
|
195.
Michael Page
|
310,126
|
|
310,126
|
0
|
0
|
196.
Rod Salter
|
172,997
|
|
172,997
|
0
|
0
|
197.
Richard Fowler
|
917,634
|
|
917,634
|
0
|
0
|
198.
Robert Lambert
|
1,006,853
|
|
1,006,853
|
0
|
0
|
199.
Michael Perry
|
714,214
|
|
714,214
|
0
|
0
|
200.
Remington Ltd. (XIII)
|
857,064
|
|
857,064
|
0
|
0
|
201.
Michael Moore
|
614,225
|
|
614,225
|
0
|
0
|
202.
Sequoyah Index Ltd. (XIV)
|
2,447,647
|
|
2,447,647
|
0
|
0
|
203.
Brian Simmonds
|
287,348
|
|
287,348
|
0
|
0
|
204.
Carl Reinhardt
|
975,475
|
|
975,475
|
0
|
0
|
205.
Anthony Evans
|
285,685
|
|
285,685
|
0
|
0
|
206.
ICON Corporate Finance Limited (XV)
|
138,664
|
|
138,664
|
0
|
0
|
GROUP
C
|
|
|
|
0
|
0
|
207.
Alaiz Barragan, Angel
|
25,600
|
|
25,600
|
0
|
0
|
208.
Almendros, Justo Luis
|
0
|
|
0
|
0
|
0
|
209.
Amogin S.L. (XVI)
|
37,500
|
|
37,500
|
0
|
0
|
210.
Amores Cervera, Julio
|
30,000
|
|
30,000
|
0
|
0
|
211.
Anta Alvarez, Carlos
|
19,200
|
|
19,200
|
0
|
0
|
212.
Anta Inversiones y Asesoramiento S.A. (XVII)
|
0
|
|
0
|
0
|
0
|
213.
Aponte Unzuaga, Fernando
|
7,680
|
|
7,680
|
0
|
0
|
214.
Ariza Luque, Ma Victoria
|
7,680
|
|
7,680
|
0
|
0
|
215.
Arnau Pozo, Sandra
|
19,500
|
|
19,500
|
0
|
0
|
216.
Aserfisur S.L. (XVIII)
|
230,400
|
|
230,400
|
0
|
0
|
217.
Baella Isanta, Guillermo
|
75,000
|
|
75,000
|
0
|
0
|
218.
Ballart Sans, Daniel
|
62,500
|
|
62,500
|
0
|
0
|
219.
Beltran Ruiz, Enrique
|
50,000
|
|
50,000
|
0
|
0
|
220.
Benvenuty Cowley, Miranda
|
0
|
|
0
|
0
|
0
|
221.
Berdusan, German
|
37,500
|
|
37,500
|
0
|
0
|
222.
Buitoni, Andrea
|
25,000
|
|
25,000
|
0
|
0
|
223.
Cami Fernandez, Gabriel
|
12,500
|
|
12,500
|
0
|
0
|
224.
Carretero, Jose Luis
|
23,040
|
|
23,040
|
0
|
0
|
225.
Casajuana Minas, Pere
|
87,500
|
|
87,500
|
0
|
0
|
226.
Chillida Santisteban, Miguel
|
12,500
|
|
12,500
|
0
|
0
|
227.
Contreras Mora, Ignacio
|
42,240
|
|
42,240
|
0
|
0
|
228.
Coppa, Stefano
|
149,000
|
|
149,000
|
0
|
0
|
229.
Corbacho Sanchez, Alejandro
|
12,800
|
|
12,800
|
0
|
0
|
230.
Cordero de Nevares S.L. (XIX)
|
0
|
|
0
|
0
|
0
|
231.
Cortes Mendez, Luis
|
57,600
|
|
57,600
|
0
|
0
|
232.
Costantin, George
|
300,000
|
|
300,000
|
0
|
0
|
233.
Cuadrada, Antonio
|
123,000
|
|
123,000
|
0
|
0
|
234.
De La Oliva, Macarena
|
25,088
|
|
25,088
|
0
|
0
|
235.
Del Reguero Del Valle, Miguel Angel
|
53,760
|
|
53,760
|
0
|
0
|
236.
Diaz Gavino, Maria Amparo
|
115,200
|
|
115,200
|
0
|
0
|
237.
Diez Perez, Javier
|
9,000
|
|
9,000
|
0
|
0
|
238.
Enriquez, Borja
|
25,600
|
|
25,600
|
0
|
0
|
239.
Evans, Anthony M.
|
10,000
|
|
10,000
|
0
|
0
|
240.
Falconwood Limited (XX)
|
190,000
|
|
190,000
|
0
|
0
|
241.
Fasciano, Giovanni
|
311,000
|
|
311,000
|
0
|
0
|
242.
Fernandez Del Moral, FCO Javier
|
7,500
|
|
7,500
|
0
|
0
|
243.
Francesco Bassi, Pier
|
26,000
|
|
26,000
|
0
|
0
|
244.
Gabrielli Pena, Alfredo
|
6,000
|
|
6,000
|
0
|
0
|
245.
Galba Anstalt (XXI)
|
100,000
|
|
100,000
|
0
|
0
|
246.
Gambassi, Carlo
|
80,000
|
|
80,000
|
0
|
0
|
247.
Garcia Alonso, Miguel Angel
|
88,750
|
|
88,750
|
0
|
0
|
248.
Garcia Gonzalez, Jose Luis
|
12,800
|
|
12,800
|
0
|
0
|
249.
Garcia Lopez, Jose Luis
|
7,680
|
|
7,680
|
0
|
0
|
250.
Garzon Mergellna, Luis
|
38,400
|
|
38,400
|
0
|
0
|
251.
Giannoni, Raffaele
|
155,000
|
|
155,000
|
0
|
0
|
252.
Gonzalez Andreo, Miquel
|
30,000
|
|
30,000
|
0
|
0
|
253.
Gonzalez Jimenez, Juan
|
15,000
|
|
15,000
|
0
|
0
|
254.
Gonzalez Rodriguez, Ricardo Benigno
|
15,360
|
|
15,360
|
0
|
0
|
255.
Grup of Value Inc. (XXII)
|
100,000
|
|
100,000
|
0
|
0
|
256.
Heritage Bank & Trust SA (XXIII)
|
200,000
|
|
200,000
|
0
|
0
|
257.
Herrero Torrecillas, Jose Antonio
|
31,000
|
|
31,000
|
0
|
0
|
258.
Hoffmann, Nicolas
|
30,000
|
|
30,000
|
0
|
0
|
259.
Iniciativas JMD (XXIV)
|
30,000
|
|
30,000
|
0
|
0
|
260.
Inversiones Nolpopocayan S.A. (XXV)
|
100,000
|
|
100,000
|
0
|
0
|
261.
Jimenez Ruiz, Sonia
|
19,200
|
|
19,200
|
0
|
0
|
262.
Lagares Valle, Antonio
|
12,800
|
|
12,800
|
0
|
0
|
263.
Lopez Damas, Rafael
|
30,720
|
|
30,720
|
0
|
0
|
264.
Luque Fernandez, Daniel
|
10,240
|
|
10,240
|
0
|
0
|
265.
Macias Maya, Fernando
|
256,000
|
|
256,000
|
0
|
0
|
266.
Maria Bruni, Alberto
|
50,000
|
|
50,000
|
0
|
0
|
267.
Marquez Burillo, Jesus E.
|
10,000
|
|
10,000
|
0
|
0
|
268.
Martin Velasco, Ignacio
|
19,200
|
|
19,200
|
0
|
0
|
269.
Martinez Sierra, Juana
|
81,250
|
|
81,250
|
0
|
0
|
270.
Maso Blasco, Carmen
|
37,500
|
|
37,500
|
0
|
0
|
271.
Meani, Deigo
|
13,000
|
|
13,000
|
0
|
0
|
272.
Medran Montero, Julian
|
101,000
|
|
101,000
|
0
|
0
|
273.
Meseguer Calero, Cristina
|
15,360
|
|
15,360
|
0
|
0
|
274.
Michavila Jover, Ruben
|
138,000
|
|
138,000
|
0
|
0
|
275.
Michavila Subirana, Evaristo
|
25,000
|
|
25,000
|
0
|
0
|
276.
Monsalve Villar, Eduardo
|
12,800
|
|
12,800
|
0
|
0
|
277.
Morciano Arizti, Jesus
|
12,800
|
|
12,800
|
0
|
0
|
278.
Moreno Horcajada, Ana Maria
|
7,500
|
|
7,500
|
0
|
0
|
279.
Mourant & Co. Trustees Limited as Trustee of A/C
1546994 (XXVI)
|
100,000
|
|
100,000
|
0
|
0
|
280.
Muriedas Benitez, Enrique
|
12,800
|
|
12,800
|
0
|
0
|
281.
Mutualidad de Prevision Social de la Policia
(XXVII)
|
200,000
|
|
200,000
|
0
|
0
|
282.
Novillo Barbero, Carmelo
|
12,300
|
|
12,300
|
0
|
0
|
283.
Ortega Ruiz, Oliva
|
0
|
|
0
|
0
|
0
|
284.
Pallares Clausell, Sergio
|
12,500
|
|
12,500
|
0
|
0
|
|
37,500
|
|
37,500
|
0
|
0
|
286.
Perez Almagro, Miguel
|
22,500
|
|
22,500
|
0
|
0
|
287.
Perez Solaz, Vicente
|
37,500
|
|
37,500
|
0
|
0
|
288.
Petronio, Elisabetta
|
140,000
|
|
140,000
|
0
|
0
|
289.
Poggiolino Inc. (XXVIII)
|
150,000
|
|
150,000
|
0
|
0
|
290.
Pure Power Corp. (XXIX)
|
199,000
|
|
199,000
|
0
|
0
|
291.
Quintas Quevedo, Dario
|
26,250
|
|
26,250
|
0
|
0
|
292.
Reguero Del Valle, Julia
|
42,240
|
|
42,240
|
0
|
0
|
293.
Rodriguez Torres, Ivan
|
15,360
|
|
15,360
|
0
|
0
|
294.
Rumeu, Pablo
|
0
|
|
0
|
0
|
0
|
295.
Samso Queralto, Eduardo
|
128,000
|
|
128,000
|
0
|
0
|
296.
Sanchez Piqueras, Albert
|
15,000
|
|
15,000
|
0
|
0
|
297.
Sanmames Torrecillas, Carlos
|
15,000
|
|
15,000
|
0
|
0
|
298.
Sanz Cueco, Pedro
|
25,000
|
|
25,000
|
0
|
0
|
299.
Sarabia Vives, Carlos
|
10,000
|
|
10,000
|
0
|
0
|
300.
SG Private Banking (Suisse) S.A.
|
287,730
|
|
287,730
|
0
|
0
|
301.
Soteras Calabuig, Santiago
|
37,500
|
|
37,500
|
0
|
0
|
302.
Sternbach, Otto
|
100,000
|
|
100,000
|
0
|
0
|
303.
Torralbo Leon, Javier
|
15,360
|
|
15,360
|
0
|
0
|
304.
Uceda Villamor, Rafael
|
5,120
|
|
5,120
|
0
|
0
|
305.
Unigrup S.A. (XXXI)
|
865,000
|
|
865,000
|
0
|
0
|
306.
Vives Arnabat, Josep
|
30,000
|
|
30,000
|
0
|
0
|
307.
Wallflower A.V.V. (XXXII)
|
100,000
|
|
100,000
|
0
|
0
|
308.
Alpine Capital (Cayman) Master Fund, LP
(XXXIII)
|
200,000
|
|
200,000
|
0
|
0
|
309.
Amogin S.L. (XXXIV)
|
10,000
|
|
10,000
|
0
|
0
|
3
10. Arduino, Pier Giorgio
|
150,000
|
|
150,000
|
0
|
0
|
311.
Arroyo Gonzalez, Ricardo
|
5,400
|
|
5,400
|
0
|
0
|
312.
Armengol, Nicole
|
30,000
|
|
30,000
|
0
|
0
|
313.
Basodi Inmobiliaria S.L. (XXXV)
|
75,000
|
|
75,000
|
0
|
0
|
314.
Blenton Management S.A. (XLIII)
|
500,000
|
|
500,000
|
0
|
0
|
315.
Borras Blanco, Teresa
|
11,250
|
|
11,250
|
0
|
0
|
316.
Cami Fernandez, Gabriel
|
12,000
|
|
12,000
|
0
|
0
|
317.
Cardona Santos, Joan
|
12,500
|
|
12,500
|
0
|
0
|
318.
Castaneda Fernandez, Inigo
|
5,400
|
|
5,400
|
0
|
0
|
319.
Castaneda Fernandez, Rodrigo
|
5,400
|
|
5,400
|
0
|
0
|
320.
Credit Agricole (Suisse) S.A. (XXXVI)
|
100,000
|
|
100,000
|
0
|
0
|
321.
Ferrero Malow, Marcos
|
25,000
|
|
25,000
|
0
|
0
|
322.
Gonzalez Andreo, Miquel
|
10,000
|
|
10,000
|
0
|
0
|
323.
Hibernia Holdings S.A. (XXXVII)
|
200,000
|
|
200,000
|
0
|
0
|
324.
Jimenez Gutierrez, Ana Dorlores
|
9,000
|
|
9,000
|
0
|
0
|
325.
Lara Guajardo, Luis
|
15,000
|
|
15,000
|
0
|
0
|
326.
Mateu Gonzalez, Albert
|
15,000
|
|
15,000
|
0
|
0
|
327.
Maya, Jordi
|
125,000
|
|
125,000
|
0
|
0
|
328.
Monge Diez, Aurora
|
18,000
|
|
18,000
|
0
|
0
|
329.
Mouriz Martinez, Aurelio Jose
|
25,000
|
|
25,000
|
0
|
0
|
330.
Obregon Limited (XXXVIII)
|
1,000,000
|
|
1,000,000
|
0
|
0
|
331.
Olive Bermejo, Ivan
|
16,000
|
|
16,000
|
0
|
0
|
332.
Palma Lopera, David
|
6,250
|
|
6,250
|
0
|
0
|
333.
Radio Blanca, S.A (XXXIX)
|
0
|
|
0
|
0
|
0
|
334.
Ramirez Vazquez, Victor
|
19,000
|
|
19,000
|
0
|
0
|
335.
Rodriguez Aguilera, Diego
|
37,500
|
|
37,500
|
0
|
0
|
336.
Ruiz Robles, Francisco
|
25,000
|
|
25,000
|
0
|
0
|
337.
Ruiz Sanchez, Miguel Angel
|
7,500
|
|
7,500
|
0
|
0
|
338.
Sanchez Blanco, Maria Asumpta
|
25,000
|
|
25,000
|
0
|
0
|
339.
Seneviratne, Asanga
|
0
|
|
0
|
0
|
0
|
340.
Sequoyah Index Limited (XL)
|
100,000
|
|
100,000
|
0
|
0
|
341.
Soriano Borras, Xavier
|
7,500
|
|
7,500
|
0
|
0
|
342.
Vallejo Montes, Ramon
|
400,000
|
|
400,000
|
0
|
0
|
343.
Weisshorn Ltd. (XLI)
|
100,000
|
|
100,000
|
0
|
0
|
*
Less
than one percent.
**
Number of shares includes shares to be issued based on a good faith estimate
of
the number of shares issuable upon exercise of warrants.
***
Pursuant to Agreements entered into with the Company the Shareholders are
restricted in their ability to sell their shares of Common Stock as
follows: As of July 20, 2007 each Index shareholder is permitted to
sell 25% of their holding of common shares in Index acquired in exchange
for
their Index ordinary shares, pursuant to that certain Share Exchange Agreement
dated January 10, 2007. After January 20, 2008 each Index
shareholder will be able to dispose of all of their common shares in Index
acquired in exchange for their Index ordinary shares, pursuant to that certain
Share Exchange Agreement dated as of January 20, 2006 free of any restrictions
imposed by Index, but subject to such restrictions as shall apply under US
Securities Laws, as described below. The aforementioned restrictions
are not applicable to any of the shares of Common Stock underlying the warrants
held, if any, by each of the respective officers/directors.
(i)
These
columns represent the aggregate maximum number and percentage of shares that
the
selling stockholders can own at one time (and therefore, offer for resale at
any
one time).
(ii)
The
number and percentage of shares beneficially owned is determined in accordance
with Rule 13d-3 of the Securities Exchange Act of 1934, and the information
is
not necessarily indicative of beneficial ownership for any other purpose.
Under
such rule, beneficial ownership includes any shares as to which the selling
stockholders has sole or shared voting power or investment power and also
any
shares, which the selling stockholders has the right to acquire within 60
days.
The actual number of shares of common stock issuable upon the exercise of
the
warrants is subject to adjustment. The percentage of shares owned by each
selling stockholder is based on 65,803,698 shares issued and outstanding
as of
October 1, 2007.
(iii)
Assumes that all securities registered will be sold.
(iv)
and
(vi) Number of shares consists entirely of shares of common stock of the
Company.
(v)
Number of shares includes (i) shares issued to the selling stockholders in
connection with the acquisition by the Company of Index Oil and Gas Limited
on
January 20, 2006, and (ii) shares issuable upon exercise of the warrants issued
to the indicated selling stockholders.
(1)
-
(185) Shares being registered solely represent shares of common stock issued
by
the Company to each respective shareholder. All of these selling stockholders
have advised us that they are not broker-dealers or affiliates of broker-dealer
and that they believe they are not required to be a broker-dealer.
(186)
Shares being registered represent (i) 4,052,707 shares issued in connection
with
the Acquisition of Index Ltd. on January 20, 2006, and (ii) 266,380 shares
issuable upon the exercise of the Common Stock Purchase Warrants exercisable
at
$0.14 per share. The selling stockholder has advised us that he is not a
broker-dealer or affiliate of a broker-dealer and that he believes he is not
required to be a broker-dealer.
(187)
Shares being registered represent (i) 1,133,481 shares issued in connection
with
the Acquisition of Index Ltd. on January 20, 2006, and (ii) 124,488 shares
issuable upon the exercise of the Common Stock Purchase Warrants exercisable
at
$0.14 per share. The selling stockholder has advised us that he is not a
broker-dealer or affiliate of a broker-dealer and that he believes he is not
required to be a broker-dealer.
(188)
Shares being registered represent (i) 371,391 shares issued in connection
with
the Acquisition of Index Ltd. on January 20, 2006, and (ii) 66,662 shares
issued
upon the exercise of the Common Stock Purchase Warrants exercisable at $0.14
per
share. The selling stockholder has advised us that he is not a broker-dealer
or
affiliate of a broker-dealer and that he believes he is not required to be
a
broker-dealer.
(189)
Shares being registered represent (i) 2,419,538 shares issued in connection
with
the Acquisition of Index Ltd. on January 20, 2006, and (ii) 33,095 shares
issuable upon the exercise of the Common Stock Purchase Warrants exercisable
at
$0.14 per share. The selling stockholder has advised us that he is not a
broker-dealer or affiliate of a broker-dealer and that he believes he is not
required to be a broker-dealer.
(190)
Shares being registered represent (i) 976,774 shares issued in connection with
the Acquisition of Index Ltd. on January 20, 2006, and (ii) 12,539 shares
issuable upon the exercise of the Common Stock Purchase Warrants exercisable
at
$0.14 per share. The selling stockholder has advised us that he is not a
broker-dealer or affiliate of a broker-dealer and that he believes he is not
required to be a broker-dealer.
(191)
Shares being registered represent (i) 3,787,307 shares issued pursuant to the
Company’s Acquisition of Index Ltd. on January 20, 2006, and (ii) 42,126 shares
issuable upon the exercise of the Common Stock Purchase Warrants exercisable
at
$0.14 per share. The selling stockholder has advised us that he is not a
broker-dealer or affiliate of a broker-dealer and that he believes he is not
required to be a broker-dealer.
(192)
Shares being registered represent (i) 853,334 shares issued pursuant to the
Company’s Acquisition of Index Ltd. on January 20, 2006, and (ii) 11,050 shares
issuable upon the exercise of the Common Stock Purchase Warrants exercisable
at
$0.14 per share. The selling stockholder has advised us that he is not a
broker-dealer or affiliate of a broker-dealer and that he believes he is
not
required to be a broker-dealer.
(193)
Shares being registered represent (i) 256,731 shares issued pursuant to the
Company’s Acquisition of Index Ltd. on January 20, 2006, and (ii) 2,859 shares
issuable upon the exercise of the Common Stock Purchase Warrants exercisable
at
$0.14 per share. The selling stockholder has advised us that he is not a
broker-dealer or affiliate of a broker-dealer and that he believes he is not
required to be a broker-dealer.
(194)
Shares being registered solely represent shares of common stock issued by the
Company to the respective shareholder. The selling stockholder has advised
us that he is not a broker-dealer or affiliate of a broker-dealer and that
he
believes he is not required to be a broker-dealer.
(195)
Shares being registered represent (i) 301,555 shares issued pursuant to the
Company’s Acquisition of Index Ltd. on January 20, 2006, and (ii) 8,571 shares
issuable upon the exercise of the Common Stock Purchase Warrants exercisable
at
$0.14 per share. The selling stockholder has advised us that he is not a
broker-dealer or affiliate of a broker-dealer and that he believes he is not
required to be a broker-dealer.
(196)
Shares being registered solely represent shares of common stock issued by the
Company to each respective shareholder. The selling stockholder has advised
us
that he is not a broker-dealer or affiliate of a broker-dealer and that he
believes he is not required to be a broker-dealer.
(197)
Shares being registered represent (i) 907,538 shares issued pursuant to the
Company’s Acquisition of Index Ltd. on January 20, 2006, and (ii) 10,096 shares
issuable upon the exercise of the Common Stock Purchase Warrants exercisable
at
$0.14 per share. The selling stockholder has advised us that he is not a
broker-dealer or affiliate of a broker-dealer and that he believes he is not
required to be a broker-dealer.
(198)
Shares being registered represent (i) 951,548 shares issued pursuant to the
Company’s Acquisition of Index Ltd. on January 20, 2006, and (ii) 55,305 shares
issuable upon the exercise of the Common Stock Purchase Warrants exercisable
at
$0.14 per share. The selling stockholder has advised us that he is not a
broker-dealer or affiliate of a broker-dealer and that he believes he is not
required to be a broker-dealer.
(199)
Shares being registered solely represent shares of common stock issued by the
Company to the respective shareholder. The selling stockholder has advised
us that he is not a broker-dealer or affiliate of a broker-dealer and that
he
believes he is not required to be a broker-dealer.
(200)
Shares being registered represent (i) 714,214 shares issued pursuant to the
Company’s Acquisition of Index Ltd. on January 20, 2006, and (ii) 142,850 shares
issuable upon the exercise of the Common Stock Purchase Warrants exercisable
at
$0.14 per share. The selling stockholder has advised us that he is not a
broker-dealer or affiliate of a broker-dealer and that he believes he is not
required to be a broker-dealer.
(201)
Shares being registered solely represent shares of common stock issued by the
Company to the respective shareholder. The selling stockholder has advised
us that he is not a broker-dealer or affiliate of a broker-dealer and that
he
believes he is not required to be a broker-dealer.
(202)
Shares being registered represent (i) 2,269,656 shares issued pursuant to
the
Company’s Acquisition of Index Ltd. on January 20, 2006, and (ii) 124,593 shares
issued and 53,398 shares issuable upon the exercise of the Common Stock Purchase
Warrants exercisable at $0.14 per share. Total beneficial ownership before
the
offering also includes 100,000 shares of common stock sold by the Company
to the
selling shareholder as described in #340 of Group C of the selling shareholders
table. The selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required to be
a
broker-dealer.
(203-205)
Shares being registered solely represent shares of common stock issued by the
Company to each respective shareholder. These selling stockholders have advised
us that they are not broker-dealers or affiliates of broker-dealer and that
they
believe they are not required to be a broker-dealer.
(206)
Shares being registered represent 138,664 shares issuable upon the exercise
of
the Common Stock Purchase Warrants exercisable at $0.07 per share. The selling
stockholder has advised us that it is not a broker-dealer or affiliate of a
broker-dealer and that it believes it is not required to be a
broker-dealer.
(207)
-
(343) Shares being registered solely represent shares of common stock issued
by
the Company to each respective shareholder. Including as indicated below for
the
specifically referenced stockholders, these selling stockholders have advised
us
that they are not broker-dealers or affiliates of broker-dealers and that they
believe they are not required to be a broker-dealer.
(I)
|
Maria Carla Polidura in her capacity as the managing director of
Delott
Group Corp., has the voting and investment power over the shares
listed.
The selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
(II)
|
Arie
Van Roon in his capacity as the managing director of Purepower Corp.,
has
the voting and investment power over the shares listed. The selling
stockholder has advised us that it is not a broker-dealer or affiliate
of
a broker-dealer and that it believes it is not required to be a
broker-dealer.
|
(III)
|
Luis
Alfono Mercader in his capacity as the managing administrator of
Unigrup
S.A. has the voting and investment power over the shares listed.
The
selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
(IV)
|
Jose
Maria Olle Curiel in his capacity as the managing director of Wuxi
Corporation A.V.V. has the voting and investment power over the shares
listed. The selling stockholder has advised us that it is not a
broker-dealer or affiliate of a broker-dealer and that it believes
it is
not required to be a broker-dealer.
|
(V)
|
Jose
Maria Bosh in his capacity as the managing director of Comercial
Titoya
Rivers, has the voting and investment power over the shares listed.
The
selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
(VI)
|
Jordi
Martret Redrado in his capacity as the managing director of Andbanc,
has
the voting and investment power over the shares listed. The selling
stockholder has advised us that it is not a broker-dealer or affiliate
of
a broker-dealer and that it believes it is not required to be a
broker-dealer.
|
(VII)
& (XLIII)
|
Jean
Louis Tsimaratos in his capacity as the managing director of Blenton
Management., has the voting and investment power over the shares
listed.
The selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
(VIII)
|
Leal
Y Martin in his capacity as the manager of Leal Y Martin Economistas,
has
the voting and investment power over the shares listed. The selling
stockholder has advised us that it is not a broker-dealer or affiliate
of
a broker-dealer and that it believes it is not required to be a
broker-dealer.
|
(IX)
|
Pablo
Martin Velasco in his capacity as the managing director of Marvel
Economistas, S.L., has the voting and investment power over the shares
listed. The selling stockholder has advised us that it is not a
broker-dealer or affiliate of a broker-dealer and that it believes
it is
not required to be a broker-dealer.
|
(X)
|
Baldomero
Hidalgo Sanchez in his capacity as the managing member of Mendoza
Y Rios
25, S.L., has the voting and investment power over the shares listed.
The
selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
(XI)
|
Rafael
Mora Arellano I in his capacity as the managing member of Mulberry
Asesores S.L., has the voting and investment power over the shares
listed.
The selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
(XII)
|
Antonia
Lazaro, Juan Jose Ceballos, Juan Piza Mayol, Lucas Pou Nissert, Jose
Llambias, Francisca Salva, Botana Balear, Melchor ALorda, Berand
Foil Pol
and Bernard Foil Cardona, I i n his their capacity as the managing
director of shareholders of Gerlach & Co. in aggregate total the
beneficial ownership over the shares listed for Gerlach & Co. ,
and ha ve s the voting and investment power over the shares listed.
The selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
(XIII)
|
Michael
Perry I i n his capacity as the managing member of Re m nn ington
Ltd.,
has the voting and investment power over the shares listed. The selling
stockholder has advised us that it is not a broker-dealer or affiliate
of
a broker-dealer and that it believes it is not required to be a
broker-dealer.
|
(XIV)
& (XL)
|
David
Edward Preston, Mark Ellis Gill, Clive Kingbon Damsell, Anthony Cristian
Pickford and Angus Graham Bodman in their joint capacity as directors
Anson Ltd. and Cabot ltd. Anson Limited in its their capacity as
the two
directors capacity as the director of Sequoyah Index Ltd., ha ve
s the
voting and investment power over the shares listed. The selling
stockholder has advised us that it is not a broker-dealer or affiliate
of
a broker-dealer and that it believes it is not required to be a
broker-dealer.
|
(XV)
|
Alan
Bristow I i n his capacity as the managing member director of ICON
Corporate Finance Limited, has the voting and investment power over
the
shares listed. The selling stockholder has advised us that it is
not a
broker-dealer or affiliate of a broker-dealer and that it believes
it is
not required to be a broker-dealer.
|
(XVI)
|
Miguel
Gonzalez Andreo in his capacity as the managing administrator of
Amogin
S.L., has the voting and investment power over the shares listed.
The
selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
(XVII)
|
Angel
Garcia Cordero in his capacity as the managing member of Cordero
De
Nevares SL which is the managing member of Anta Inversiones y
Asesoramiento S.A., has the voting and investment power over the
shares
listed. The selling stockholder has advised us that it is not a
broker-dealer or affiliate of a broker-dealer and that it believes
it is
not required to be a broker-dealer.
|
(XVIII)
|
Pedro
Mauri Argudo in his capacity as the administrator of Aserfisur S.L.,
has
the voting and investment power over the shares listed. The selling
stockholder has advised us that it is not a broker-dealer or affiliate
of
a broker-dealer and that it believes it is not required to be a
broker-dealer.
|
(XIX)
|
Adela
Gallego Molinero in her capacity as the managing member of Cordero
de
Nevares S.L., has the voting and investment power over the shares
listed.
The selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
(XX)
|
Rodney
Whiston-Bew in his capacity as the director of Coria Limited, who
is the
sole director of Falconwood Limited, has the voting and investment
power
over the shares listed. The selling stockholder has advised us that
it is
not a broker-dealer or affiliate of a broker-dealer and that it believes
it is not required to be a broker-dealer.
|
(XXI)
|
Walter
Baumgartner and David Florey, co managing directors of Galba Anstalt,
have
the voting and investment power over the shares listed. The selling
stockholder has advised us that it is not a broker-dealer or affiliate
of
a broker-dealer and that it believes it is not required to be a
broker-dealer.
|
(XXII)
|
Ian
Olaf Sipkes in his capacity as the managing director of Grup of Value
Inc., has the voting and investment power over the shares listed.
The
selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
(XXIII)
|
Alvaro
Vila and Dominique Aebi in their capacity as the co-managing directors
of
Heritage bank & Trust SA, have the voting and investment power over
the shares listed. The selling stockholder has advised us that it
is not a
broker-dealer or affiliate of a broker-dealer and that it believes
it is
not required to be a broker-dealer.
|
(XXIV)
|
Joan
Sanchez in his capacity as the general manager of Iniciativas JMD,
has the
voting and investment power over the shares listed. The selling
stockholder has advised us that it is not a broker-dealer or affiliate
of
a broker-dealer and that it believes it is not required to be a
broker-dealer.
|
(XXV)
|
Juan
Enrique Junca in his capacity as the president of Inversiones Nolpopocayan
S.A., has the voting and investment power over the shares listed.
The
selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
(XXVI)
|
C.
S. Hornby and B. Kempster in their capacity as the administrators
of
Mourant & Co. Trustees Limited, have the voting and investment power
over the shares listed. The selling stockholder has advised us that
it is
not a broker-dealer or affiliate of a broker-dealer and that it believes
it is not required to be a broker-dealer.
|
(XXVII)
|
Jose
Sombrero Gomez in his capacity as the president of Mutualidad de
Prevision
Social de la Policia, has the voting and investment power over the
shares
listed. The selling stockholder has advised us that it is not a
broker-dealer or affiliate of a broker-dealer and that it believes
it is
not required to be a broker-dealer.
|
(XXVIII)
|
Nicolas
Hoffmann in his capacity as the managing director of Poggiolino Inc.,
has
the voting and investment power over the shares listed. The selling
stockholder has advised us that it is not a broker-dealer or affiliate
of
a broker-dealer and that it believes it is not required to be a
broker-dealer.
|
(XXIX)
|
Arie
Van Roon in his capacity as the managing director of Purepower Corp.,
has
the voting and investment power over the shares listed. The selling
stockholder has advised us that it is not a broker-dealer or affiliate
of
a broker-dealer and that it believes it is not required to be a
broker-dealer.
|
(XXX)
|
Jurg
Jaechi in his capacity as the managing director of SG Private Banking
(Suisse) S.A., has the voting and investment power over the shares
listed.
The selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
(XXXI)
|
Luis
Alfono Mercader in his capacity as the managing member of Unigrup
S.A. has
the voting and investment power over the shares listed. The selling
stockholder has advised us that it is not a broker-dealer or affiliate
of
a broker-dealer and that it believes it is not required to be a
broker-dealer.
|
(XXXII)
|
Michael
F. Dias in his capacity as the director of AWNA Co (Aruba) N.V. which
is
the managing director of Wallflower A.V.V., has the voting and investment
power over the shares listed. The selling stockholder has advised
us that
it is not a broker-dealer or affiliate of a broker-dealer and that
it
believes it is not required to be a broker-dealer.
|
(XXXIII)
|
Chet
Ranawah in his capacity as the president of Alpine Capital (Cayman)
Master
Fund, LP, has the voting and investment power over the shares listed.
The
selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
(XXXIV)
|
Miguel
Gonzalez Andreo in his capacity as the managing administrator of
Amogin
S.L., has the voting and investment power over the shares listed.
The
selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
(XXXV)
|
Jose
Luis Balbas Gonzalez in his capacity as the managing member of Basodi
Inmobiliaria S.L., has the voting and investment power over the shares
listed. The selling stockholder has advised us that it is not a
broker-dealer or affiliate of a broker-dealer and that it believes
it is
not required to be a broker-dealer.
|
(XXXVI)
|
Rey
J. P. and J. Chobillon in their capacity as the co-managing directors
of
Credit Agricole (Suisse) S.A., have the voting and investment power
over
the shares listed. The selling stockholder has advised us that it
is not a
broker-dealer or affiliate of a broker-dealer and that it believes
it is
not required to be a broker-dealer.
|
(XXXVII)
|
Enrique
Alfonson Bonora in his capacity as the managing member of Hibernia
Holdings S.A., has the voting and investment power over the shares
listed.
The selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
(XXXVIII)
|
Mr.
Pierre Briand in his capacity as the director of Gallatin Directors
Ltd,
which is the sole and managing director of Obregon Limited, has the
voting
and investment power over the shares listed. The selling stockholder
has
advised us that it is not a broker-dealer or affiliate of a broker-dealer
and that it believes it is not required to be a
broker-dealer.
|
|
Blah
Herrero Fernandez in his capacity as the managing member of Radio
Blanca,
S.A., has the voting and investment power over the shares listed.
The
selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
(XLI)
|
Jordi
Ignacio Ferrero i s the managing director of Weisshorn
Ltd., has the voting and investment power over the shares listed.
The
selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
(XLII)
|
Francisco
Hidalgo Alcalde in his capacity as the managing member of Agropecuaria
El
Alcaide, has the voting and investment power over the shares listed.
The
selling stockholder has advised us that it is not a broker-dealer
or
affiliate of a broker-dealer and that it believes it is not required
to be
a broker-dealer.
|
The
following is a description of the selling shareholders relationship to us and
how each the selling shareholder acquired the shares to be sold in this
offering:
Group
A
On
January 20, 2006, we entered into a Subscription Agreement (the "Subscription
Agreement #2"), with several accredited investors (collectively the "Purchasers
#2"), pursuant to which the Company agreed to issue and sell to the Purchasers
#2 in a private placement 8,533,333 shares of Common Stock (“Shares #2) for an
aggregate amount of $5,120,000, at a price of $0.60 per share.
The
Company committed to register the Shares #2 by filing a registration statement
with the SEC within six months of the closing of the offering and/or granting
piggy-back registration rights to Purchasers #2 in a subsequently filed
registration statement.
Group
B
On
January 20, 2006, the Company issued an aggregate of 22,615,552 shares of
common
stock of the Company and 1,092,676 warrants, of which 901,421 are currently
outstanding, to subscribe for Common Stock of the Company to these selling
stockholders as consideration for the acquisition of Index Ltd.’s outstanding
equity stock and warrants held by the selling stockholders who were former
Index
Ltd.’s stockholders. As part of the Acquisition, an additional 759,448 shares
of
Common Stock were reserved for issuance by the Company, of which 303,793
shares
have been awarded as bonus stock awards as of the date of this Registration
Statement.
Group
C
Financing
Agreement (closing #1)
On
August
29, 2006 (the “Closing Date”), Index Oil and Gas Inc. (the “Company”) closed on
a private placement offering (the “Offering”) in which it sold an aggregate of
1,419.58 units (the "Units") of its securities at a price of $5,000 per Unit,
each Unit consisting of 5000 shares of common stock, $0.001 par value (the
“Common Stock”), of the Company for aggregate gross proceeds of
$7,097,898.
Financing
Agreement (closing #2)
On
October 4, 2006 (the “Closing Date #2”), we effected a second closing of the
Offering in which we sold an additional 693.54 Units of for aggregate gross
proceeds of $3,467,700, and we subsequently sold another 80 Units on October
5,
2006, for total aggregate gross proceeds of the Offering of $3,867,700. All
of
the Units were sold pursuant to Subscription Agreements entered into by and
between the Company and the purchasers named on the signature page thereto
(the
“Purchasers #2”). The net combined proceeds of the Offering are expected to be
used as working capital and for general corporate purposes of the Company.
The
Company sold Units to Purchasers #2 pursuant to the same terms and conditions
as
set forth above in section entitled “Financing Agreement (closing
#1).”
The
Purchasers agreed not to sell the Common Stock included in the Units for a
period of six months from the date of their purchase, unless permitted earlier
by the Company. Notwithstanding the foregoing, the Purchasers further agreed
to
be bound by any lock-up period required by state regulatory agencies or any
other governmental regulation. The shares of Common Stock included in the Units
will be restricted securities under Securities Act of 1933, as amended (the
"Act"), and applicable state securities laws and, therefore, may only be
transferred pursuant to the registration requirements of federal and state
securities laws or pursuant to an exemption from such registration requirements.
The Common Stock shares will bear a restrictive legend stating these resale
restrictions.
The
Company has agreed to file a registration statement on Form SB-2 (the
“Registration Statement”) to effect the registration of the Units of Common
Stock. We have agreed to use our reasonable best efforts to cause the
registration statement to be filed with the Securities and Exchange Commission
(the “SEC”) as soon as possible but no later then 60 days after the Closing
Date. We further agreed to have the Registration Statement be declared effective
by the SEC no later than 180 days after the Closing Date. If we fail to file
a
Registration Statement with the SEC or have the Registration Statement declared
effective on or before the time frame described, the holders will be entitled
to
the liquidated damages from the Company in an amount equal to 2% of the
aggregate subscription amounts per month for each month that we are delinquent
in filing or effectiveness of the Registration Statement, subject to an overall
limit of up to 15 months of partial liquidated damages.
International
Capital Partners SA (“ICP”) acted as the placement agent for the Offering. The
Company paid the following fees in connection with the Offering (i) a commission
equal to $1,096,560, paid to ICP representing approximately 10% of the Offering
proceeds; (ii) approximately $50,000 in legal fees; and (iii) approximately
$20,000 in administrative and miscellaneous fees. ICP had no obligation to
buy
any Unites of Common Stock from us. In addition, we agreed to indemnify the
ICP
and other persons against specific liabilities under the Act.
Issuances
to groups A and C
The
issuances to groups A and C were exempt from registration under Regulation
S
promulgated under the Act. The following procedures were followed in each
offering to group A and group C shareholders: (1) The offers and sales to groups
A and C shareholders were made in offshore transactions. In addition,
International Capital Partners SA (“ICP”) acted as the placement agent for the
offering to group C shareholders, and the Company paid the fees described above
to ICP in consideration of such. The offers and sales to group A shareholders
were done through the selling efforts conducted by the Company, its affiliates
and/or persons acting on behalf of any of the foregoing; (2) None of these
purchasers who received shares under Regulation S are U.S. persons as defined
in
Rule 902(k) of Regulation S, and no directed selling efforts were conducted
in
the U.S. by the Company, any distributor, any of their respective affiliates,
or
any person acting on behalf of any of the foregoing, in accordance with Rule
903(c); (3) Such purchasers acknowledged that the securities purchased must
come
to rest outside the U.S; (4) Furthermore, the Company is subject to Category
3
of Rule 903 of Regulation S and accordingly it implemented the offering
restrictions required by Category 3 of Rule 903 by including a legend on all
offering materials and documents which stated that the shares have not been
registered under the Act and may not be offered or sold in the United States
or
to U.S. persons unless the shares are registered under the Act, if an exemption
from registration requirements of the Act is available; and (5) The offering
materials and documents also contained a statement that hedging transactions
involving the shares may not be conducted unless in compliance with the
Securities Act of 1933.
Issuance
to group B
The
issuance to group B was exempt from registration under Section 4(2) of, and/or
Regulation D promulgated under, the Act. The offering and sale were made to
a
limited number of persons, all of whom were accredited investors, business
associates of Index Oil and Gas, Inc. or executive officers of Index Oil and
Gas
Inc., and transfer was restricted by Index Oil and Gas, Inc. in accordance
with
the requirements of the Securities Act of 1933. In addition to representations
by the above-referenced persons, we have made independent determinations that
all of the above-referenced persons were accredited or sophisticated investors,
and that they were capable of analyzing the merits and risks of their
investment, and that they understood the speculative nature of their investment.
Furthermore, all of the above-referenced persons were provided with access
to
our Securities and Exchange Commission filings. In addition, an appropriate
restrictive legend was placed on all of the Company’s certificates issued to
Group B shareholders.
The
selling stockholders and any of their respective pledgees, donees, assignees
and
other successors-in-interest may, from time to time, sell any or all of their
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be
at
fixed or negotiated prices. The selling stockholders may use any one or more
of
the following methods when selling shares:
•
ordinary brokerage transactions and transactions in which the broker-dealer
solicits the purchaser;
•
block
trades in which the broker-dealer will attempt to sell the shares as agent
but
may position and resell a portion of the block as principal
•
facilitate the transaction;
•
purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;
•
an
exchange distribution in accordance with the rules of the applicable
exchange;
•
privately-negotiated transactions;
•
broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share;
•
through
the writing of options on the shares;
•
a
combination of any such methods of sale; and
•
any
other method permitted pursuant to applicable law.
The
selling stockholders may also sell shares under Rule 144 of the Securities
Act,
if available, rather than under this prospectus. The selling stockholders shall
have the sole and absolute discretion not to accept any purchase offer or make
any sale of shares if it deems the purchase price to be unsatisfactory at any
particular time.
The
selling stockholders or their respective pledgees, donees, transferees or other
successors in interest, may also sell the shares directly to market makers
acting as principals and/or broker-dealers acting as agents for themselves
or
their customers. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders and/or
the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and
at
their own risk. It is possible that a selling stockholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then existing market
price. We cannot assure that all or any of the shares offered in this prospectus
will be issued to, or sold by, the selling stockholders. The selling
stockholders and any brokers, dealers or agents, upon effecting the sale of
any
of the shares offered in this prospectus, may be deemed to be "underwriters"
as
that term is defined under the Securities Exchange Act of 1933, as amended,
the
Securities Exchange Act of 1934, as amended, and the rules and regulations
of
such acts. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities
Act.
We
are
required to pay all fees and expenses incident to the registration of the
shares, including fees and disbursements of counsel to the selling stockholders,
but excluding brokerage commissions or underwriter discounts.
The
selling stockholders, alternatively, may sell all or any part of the shares
offered in this prospectus through an underwriter. The selling stockholders
have
not entered into any agreement with a prospective underwriter and there is
no
assurance that any such agreement will be entered into.
The
selling stockholders may pledge their shares to their brokers under the margin
provisions of customer agreements. If a selling stockholder defaults on a margin
loan, the broker may, from time to time, offer and sell the pledged shares.
The
selling stockholders and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
under
such Act, including, without limitation, Regulation M. These provisions may
restrict certain activities of, and limit the timing of purchases and sales
of
any of the shares by, the selling stockholders or any other such person. In
the
event that any of the selling stockholders are deemed an affiliated purchaser
or
distribution participant within the meaning of Regulation M, then the selling
stockholders will not be permitted to engage in short sales of common stock.
Furthermore, under Regulation M, persons engaged in a distribution of securities
are prohibited from simultaneously engaging in market making and certain other
activities with respect to such securities for a specified period of time prior
to the commencement of such distributions, subject to specified exceptions
or
exemptions. In addition, if a short sale is deemed to be a stabilizing activity,
then the selling stockholders will not be permitted to engage in a short sale
of
our common stock. All of these limitations may affect the marketability of
the
shares.
If
a
selling stockholder notifies us that it has a material arrangement with a
broker-dealer for the resale of the common stock, then we would be required
to
amend the registration statement of which this prospectus is a part, and file
a
prospectus supplement to describe the agreements between the selling stockholder
and the broker-dealer.
Market
Information
The
following sets forth the range of the closing bid prices for the Company's
Common Stock for the period starting December 16, 2005 through October 26,
2007.
Such prices represent inter-dealer quotations, do not represent actual
transactions, and do not include retail mark-ups, markdowns or commissions.
Such
prices were determined from information provided by a majority of the market
makers for the Company's Common Stock.
2006
Fiscal Year
|
|
High
Close
|
|
|
Low
Close
|
|
Third
Quarter, 2006
|
|
|
-
|
|
|
|
-
|
|
Fourth
Quarter, 2006
|
|
$
|
1.66
|
|
|
$
|
0.97
|
|
|
|
|
|
|
|
|
|
|
2007
Fiscal Year
|
|
|
|
|
|
|
|
|
First
Quarter, 2007
|
|
$
|
1.65
|
|
|
$
|
1.32
|
|
Second
Quarter, 2007
|
|
$
|
1.
54
|
|
|
$
|
1.15
|
|
Third
Quarter, 2007
|
|
$
|
1.70
|
|
|
$
|
1.36
|
|
Fourth
Quarter, 2007
|
|
$
|
1.65
|
|
|
$
|
1.18
|
|
|
|
|
|
|
|
|
|
|
2008
Fiscal Year
|
|
|
|
|
|
|
|
|
First
Quarter, 2008
|
|
$
|
1.50
|
|
|
$
|
0.78
|
|
Second
Quarter, 2008
|
|
$
|
1.07
|
|
|
$
|
0.70
|
|
Third
Quarter, 2008(1)
|
|
$
|
0.84
|
|
|
$
|
0.65
|
|
(1)
For
the period September 30, 2007 through October 26, 2007.
The
shares quoted are subject to the provisions of Section 15(g) and Rule 15g-9
of
the Securities Exchange Act of 1934, as amended (the Exchange Act"), commonly
referred to as the "penny stock" rule. Section 15(g) sets forth certain
requirements for transactions in penny stocks and Rule 15(g)9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange
Act.
The
Commission generally defines penny stock to be any equity security that has
a
market price less than $5.00 per share, subject to certain exceptions. Rule
3a51-1 provides that any equity security is considered to be a penny stock
unless that security is: registered and traded on a national securities exchange
meeting specified criteria set by the Commission; authorized for quotation
on
The NASDAQ Stock Market; issued by a registered investment company; excluded
from the definition on the basis of price (at least $5.00 per share) or the
registrant's net tangible assets; or exempted from the definition by the
Commission. Trading in the shares is subject to additional sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors, generally persons with assets
in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse.
For
transactions covered by these rules, broker-dealers must make a special
suitability determination for the purchase of such securities and must have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of
a
risk disclosure document relating to the penny stock market. A broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, and current quotations for the securities. Finally,
the monthly statements must be sent disclosing recent price information for
the
penny stocks held in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of broker dealers
to
trade and/or maintain a market in the company’s common stock and may affect the
ability of stockholders to sell their shares.
Holders
As
of
October 17, 2007, the approximate number of stockholders of record of the
Common
Stock of the Company was 325.
Dividends
We
have
not declared any dividends to date. We have no present intention of paying
any
cash dividends on our common stock in the foreseeable future, as we intend
to
use earnings, if any, to generate growth. The payment by us of dividends, if
any, in the future, rests within the discretion of our Board of Directors and
will depend, among other things, upon our earnings, our capital requirements
and
our financial condition, as well as other relevant factors. There are no
material restrictions in our certificate of incorporation or bylaws that
restrict us from declaring dividends.
DESCRIPTION
OF BUSINESS
Overview
Index
Oil
and Gas Inc. (“Index”, “Index, Inc.,” “the Company”, “we”, “us” or “our”) is an
independent oil and gas company engaged in the acquisition, exploration,
appraisal, development, production and disposition phases of oil and gas
properties located in North America. Index was originally incorporated under
the
name Thai One On, Inc. (“Thai”) on March 3, 2004 under the laws of the State of
Nevada.
In
November 2005, Thai entered into a Letter of Intent agreement (the “Letter of
Intent”) with Index Oil and Gas Ltd. (“Index Ltd.” or “Index Limited”) for the
proposed acquisition of all of the outstanding shares of the Index Ltd.’s equity
stock by Index. Subsequently, Thai changed its name from Thai One On Inc.
to
Index Oil and Gas Inc.
On
January 20, 2006, in connection with the Letter of Intent, the stockholders
of
Index Ltd. entered into Acquisition and Share Exchange Agreements with the
Company (the “Agreements”). As a result of the Acquisition, there was a change
in control of the public entity.
Index
is
the parent company with four group subsidiaries: Index Ltd. comprises a United
Kingdom holding company, which provides management services and United States
operating subsidiaries; Index Oil & Gas (USA), LLC, an operating company;
Index Investments North America Inc. (“Index Investments”) and Index Offshore
LLC (“Index Offshore”), a wholly owned subsidiary of Index Investments and also
an operating company. Index, Inc., through its subsidiaries, is engaged in
the
exploration for and development, production and sale of oil and natural gas.
The
Company does not currently operate any of its properties and sells its oil
and
gas production to domestic purchasers.
In
addition, the Company completed a private placement on January 20, 2006 for
8,533,333 shares of its common stock, $0.001 par value per share at a price
of
$0.60 per share for aggregate gross proceeds of $5,120,000, received by the
Company, in order to raise capital for investment in select oil and gas projects
identified by the Company and for operating and working capital
purposes.
On
August
29, 2006, the Company completed a private placement for 7,097,898 shares
of its
Common Stock at a price of $1.00 per share for aggregate gross proceeds of
approximately $7.1 million.
On
October 4, 2006, the Company completed a private placement for 3,867,700
shares
of its Common Stock at a price of $1.00 per share for aggregate proceeds
of
approximately $3.9 million.
The
net
proceeds of these latter two placements have been and will be applied to
the
expansion of the Company’s operations in the United States as the Company hopes
to fund additional Phase 2 and 3 Growth Strategies consisting of drilling
generated by successful new ventures, as well as, potential success in existing
ventures such as the Supple Jack Creek (formerly West 1) and New Taiton,
both
higher potential prospects.
Exploration
Business Strategy, Recent Developments and Business
Operations
The
Company has expanded its activities in North America, beginning in Kansas,
and
expanded into Texas and Louisiana. A key strategy is to continue to seek
growth
at an accelerated pace. The Company uses industry best practices in prospect
characterization that focuses on analogs, available data, risk, uncertainty,
volume, costs, and value. By combining a number of key metrics, the Company's
management is able to select and invest in what it believes to be the very
best
prospects on offer. The Company has adjusted its business strategy to include
more high-impact wells that can deliver, if successful, much higher value,
volume, and follow-on drilling that has the potential to deliver exponential
growth. The Company also protects itself and its investors by limiting any
single prospect investment to a small percentage of the overall funding that
the
Company has at its disposal.
Three
Phases of the Start-Up Business Model
The
Company’s business start-up model consisted of three successive stages. The
first phase of the business plan, or Phase I, has been completed and resulted
in
the initial startup of Index Ltd.’s business operations in the U.S. and the
establishment of early stage operations and cashflow. The second phase of
the
business plan, or Phase II, commenced in 2005 and focused on establishing
a
reserve and production base which Management believes is capable of supporting
expansion into the future. Phase III commenced in fiscal year 2007 and resulted
in entry into several larger potential prospects with risk-appropriate working
interests as part of a balanced portfolio approach. The Company has essentially
completed Phases I and II of its start-up business model. Through its recent
and
future private placement equity fund raisings, the Company will now continue
with its Phase III projects. Going forward, the Company will simply refer
to its
business model as one that allows the company to grow exponentially by investing
in those projects that can deliver significant growth.
Phase
I
The
Company’s initial project in Kansas comprised of areas called Seward North,
Globe and Seward Townsite (“Seward”) was initiated by Index Ltd. in 2003 as
a start-up project aimed at a low risk, low cost, and low equity or working
interest (“WI”) oil exploration. This project was selected by the Company’s
management (“Management”) to act upon its core business concept and to establish
initial operations and business relationships.
The
Company’s Seward project consists of a 5% working interest in leases covering
currently approximately 4,533 acres which are located in Stafford County,
Kansas. Management believes that the acquisition and processing of new 3D
seismic data has enabled Seward project participants including the Company
to
identify undrilled structural highs in a proven petroleum province. The Company
currently has 19 producing wells in Stafford county including the recently
drilled and producing Hay Witt Unit 1-11 and Hayden 1-14 wells. A workover
was
also performed on the Witt 1-14 well, significantly increasing production
with a
low cost investment. The Hull-Witt Unit 1-11 was a dry hole.
The
Seward project has been a catalyst to providing the Company with an additional
opportunity to expand into the nearby Katy area in Barton County, Kansas.
Towards the end of the 2006 fiscal year we acquired a 5% working interest
in an
exploration project in Barton County, Kansas. The 5% working interest was
reduced to 3.25% after a cross-assignment resulting in the Company having
the
same net acreage in the Area of Mutual Interest (“AMI”) of approximately 6,555
acres. To support the exploration drilling of this project, the operator
acquired approximately 17.25 square miles of new 3 Dimensional (“3D”) seismic
data in Barton County. This data was used to evaluate and identify drilling
locations. Wells that have been drilled in the Seward project target primarily
the Lansing and Arbuckle formations at depths of approximately 3,500 to 3,800
feet. Three wells have been drilled on the Barton leases. Rogers Unit 1-1
and
Schartz 1-18 were successful and have been brought on production. Pan-John
Unit
1-11 was a dry hole.
Both
the
Stafford and Barton County producing wells are located on a regional structural
feature known as the Central Kansas Uplift. Since the early 1900’s, several
billion barrels of oil have been produced from the Central Kansas Uplift,
primarily from carbonate reservoirs of the Pennsylvanian period including
the
Lansing Group through to the Arbuckle Group of Cambro-Ordovician
period.
Phase
II
The
Company has made progress with its onshore Phase 2 drilling program in Louisiana
and Texas and announced in August 2006 that the Walker 1 discovery well drilled
in Louisiana began producing. Initial gross production of the well, in which
Index has a 12.5% working interest, was approximately 200 barrels of oil
per day
with associated gross gas production of approximately 175 thousand cubic
feet
per day. Walker 1 is the first productive well from the Company's Phase 2
Portfolio.
The
remaining wells in the current Phases 2 program are in South Texas. Vieman
1, a
production well in Brazoria County, was spudded in October 2006 with a goal
of
converting Proved Undeveloped reserves to Proved Developed reserves. Index
built
its working interest from an original 12.5% to a final 19.5% prior to spudding.
In December 2006, Index announced that the deviated well had been drilled
to a
total depth of 10,383 feet true vertical depth or 11,340 feet measured depth.
Electric logs indicated two potential pay zones below 10,000 feet true vertical
depth totaling approximately 15 feet of net gas bearing reservoir. The well
took
longer than anticipated to drill due to unplanned sidetrack operations and
pressure control requirements in the lower of the two pay sections, and has
incurred costs significantly in excess of pre-drill estimate. Vieman 1 came
on
production in February 2007, as part of an initial extended flow test and
after
completion of this flow test has recently come back on production following
further completion operations.
The
three-well Taffy drilling program was announced in December 2006. Originally
planned as a two-well program, a third well was added prior to drilling.
The
Company originally agreed to a 7.5% working interest in the two Taffy wells.
The
Company increased its working interest to 12.5% in Taffy 1, renamed Hawkins
1,
and to 30% in Taffy 2, renamed Dark 1. The Company took a 30% working interest
in a third Taffy well named Ruse 1. The three wells targeted relatively shallow
Miocene gas reservoirs between 5,000 and 7,000 feet in Matagorda
County.
In
January 2007, the Company announced the Hawkins 1 commercial discovery. A
completion test confirmed gas flow at a measured rate of approximately 1.04
million cubic feet per day through a choke of 9/64th inch with a flowing
tubing
pressure of 1,850 pounds per square inch. The well is scheduled to begin
production into the local pipeline grid in mid calendar year
2007.
Ruse
1
and Dark 1 were dry holes and have been plugged and
abandoned.
Not
to be
confused with the company’s three phases of its business model, the Company
announced on May 2, 2006 and July 12, 2006, respectively, that it had entered
into two Phases, I and II, of an exploration agreement with ADC Petroleum,
L.P
(“ADC”) to reprocess seismic data and develop prospects to drill in up to three
areas in Texas and one area in Mississippi and Alabama. This project is capable
of delivering projects having Business Model Phase 2 and potentially Phase
3
growth characteristics. The first drillable prospect generated as a result
of
these agreements is an exploration well in the Fern Lake area of Nacogdoches
County
Phase
III Business Model and Strategy
With
business model Phases 1 and 2 essentially complete, going forward, the Company
has adopted a more aggressive strategy that will build upon Phase 3. The
following are key elements of our evolved strategy: :
·
Index intends to
focus its short and medium term efforts on known petroleum basins within
the
U.S. and initially which are proximal to its current ongoing projects in
the
onshore part of the Gulf of Mexico basin;
·
Index’s short to
mid term objective is to develop its oil and gas reserves to a point where
the
cash flow will contribute not only to the Company’s overhead and later, to
contribute to its capital requirements for investing in new and additional
projects. Index believes that it can achieve its objective by utilizing a
risk
managed approach of investing in a portfolio of drilling opportunities. By
combining a number of key metrics, Management is able to select and invest
in
the very best prospects on offer. Index has adjusted its business strategy
to
include more high-impact wells that can deliver, if successful, much higher
value, volume, and follow-on drilling that has the potential to deliver
exponential growth. Index also protects itself and its investors by limiting
any
single prospect investment to a small percentage of the overall funding that
the
company has at its disposal.
Index’s
current focus is directed towards:
|
•
|
Efficiently
influencing the management of ongoing projects;
|
|
•
|
Identifying,
characterizing, and capturing appropriate gas and oil opportunities;
and
|
|
•
|
Efficiently
using its business assets to raise additional capital as
needed.
|
This
current stage of the development of the Company includes new alliances.
Furthermore, the Company has built a strong portfolio of prospects during
2007
fiscal year for drilling in 2008 fiscal year, which include potential high
impact wells. In summary, the Company’s strategy is to increase shareholder
value by profitably increasing its reserves, production, cash flow and earnings
through a risk and equity balanced program of exploration and production
drilling. The Company will also consider acquisitions provided they can meet
the
Company’s metrics and they can augment its growth strategy and
objectives.
Recent
Projects
In
September 2006, the Company signed an agreement to participate in the New
Taiton
Project in Wharton County. The first well Ilse 1 spudded on December 1,
2006. It targets stacked Wilcox sands on trend with large nearby gas fields
producing gas from the same Wilcox reservoirs. The prospect is defined by
modern
3D seismic data. The Company has a 10% working interest before payout and
an 8%
working interest after payout in the New Taiton Project.
The
Ilse
1 well has been drilled to total depth of 17,000 feet and logged. Analysis
of
the logs revealed two zones of interest in the Wilcox C and Wilcox A,
respectively. The lowest zone, the Wilcox C, has been perforated and stimulated
by a “frac” process. Gas flow from the formation to surface has not been
achieved. The preliminary decision is that this interval will not be productive
and will not have any proved reserves.
A
decision making process is currently
underway by the joint venture participants of the New Taiton Project and
individually by the Company as to whether to perform work to attempt to achieve
gas flows from the upper zone of interest, the Wilcox A. As part of this
decision making process, joint venture participants are awaiting a formal
analysis and recommendation from the operator. The path forward is not currently
clear with the options ranging from all of the participants testing the Wilcox
A
to none of the participants testing the Wilcox A. Should the latter option
be
chosen, the next step would likely lead to a plug and abandonment of this
well.
In
December 2006, the Company announced that it signed an exploration agreement
to
participate at 15% working interest in the Supple Jack Creek Project, formerly
referred to as West, targeting the high-potential Edwards Limestone in Lavaca
County, Texas. The proposed total depth of the first well is approximately
15,000 feet. The Company announced in January 2007 that it had increased
its
working interest in the Supple Jack Creek project to 20%. The well is planned
to
spud in 2007. If the first well in the Supple Jack Creek lease area is
successful in finding commercial gas, it will pave the way for follow-on
drilling activity in the leased area defined in the exploration agreement.
The
prospect is adjacent to fields producing from the Edwards Limestone. Combined
cumulative gas production from these fields exceeds 400 billion cubic feet.
.
In
February 2007, the Company announced the signing of a letter of intent to
participate in the first exploration well in the Shadyside prospect, located
in
St. Mary Parish, Louisiana. Participation and Operating agreements were signed
effective March 2007. The Company will have an initial 15% working interest
in
the first exploration well, reduced to a 13.5% working interest, after payout.
The first well will be drilled during the second half of 2007 with a planned
depth of approximately 16,500 feet. The Shadyside prospect is near the Garden
City field that has produced from the same age reservoirs as Shadyside
has.
On
July
17 the Company announced that drilling had begun on the Shadyside 1
well.
In
March
2007, the Company announced a commitment to drill two wells in south Texas.
The
wells are located in Victoria and Goliad Counties, respectively, and targeted
shallow Frio reservoirs. Both wells were successful. The Serrano well, renamed
Friedrich Gas Unit 1, in Victoria County, found 13 feet of net gas pay. The
Friedrich well commenced producing in May 2007 with initial average daily
production at 275 MCF of gas (46 BOE) per day.
The
Habanero well, renamed Schroeder Gas Unit 1, in Goliad County, found 10 feet
of
net gas pay. The Schroeder Gas Unit 1, is a discovery in the Frio sandstone
in
Goliad County, Texas. First production started on 31 August at an initial
rate
of 300 mcfpd (thousand cubic feet per day) on a 7/64`` choke. Index has a
37.5%
Working Interest (''WI``) and 28.125% Net Revenue Interest (''NRI``) in the
well
and corresponding 80 acre gas unit. In all respects, these two wells
represent a return to Phase 2 but expose the Company to a new source for
prospect generation
Subsequent
Events
Index
announced in April 2007 that it has signed a Participation Agreement to explore
for gas in the West Wharton prospect. This could consist of up to four
exploration wells within the area of mutual interest in Wharton County, Texas.
Index has a 12.5% working interest in the project that will reduce to 9.375%
after payout. On August 16 2007 the Company announced that drilling has begun
on
the Outlar 1 well in the prospect area. The spud took place on August 12,
2007.
Outlar 1 had a planned total depth of approximately 12,000 feet and targets
gas
in the Cook Mountain formation. The well is located near the town of
Wharton.
Index
announced in May 2007 that it had signed a participation agreement for
exploration of the Fern Lake prospect in Nacogdoches County, Texas. George
Cason
1 is the name of the first well planned for the Fern Lake prospect as well
as
the first well resulting from the ADC Agreements. On June 28, 2007 it was
announced that the well spudded on June 22, 2007. It was reported that the
well
targeted gas in the Lower Cretaceous Travis Peak sandstone with a predicted
top
at 9,734 feet measured depth. As described in Index's announcement of
participation on May 18, 2007, shallower secondary objectives were targeted
with
the Rodessa, James Lime and Pettet intervals and having predicted tops at
8,198,
8,750, and 9,332 feet measured depth, respectively.
On
July
17, 2007 the Company announced that it has signed a Purchase and Sale Agreement
to acquire a 5% working interest and 3.5% Net Revenue Interest (``NRI'')
in the
Alligator Bayou exploration prospect located beneath onshore portions of
Brazoria and Matagorda Counties, Texas (``Alligator
Bayou''). Alligator Bayou is the largest prospect the Company
has signed to date, with potential impact greatly exceeding all previous
prospects. The prospect covers up to several thousand acres. The first well
is
planned to spud early in 2008. On July 26, 2007 the Company announced that
the well had reached a total depth of 11,147 feet on July 14, 2007. Following
logging operations to obtain down hole data, a decision was made to complete
and
test two intervals.
On
September 18, 2007 the Company announced that initial test results for the
George Cason Gas Unit 1 well which achieved a maximum flow rate of 1.168
million
cubic feet of gas per day. It is anticipated that Cason will be put on
production and begin flowing into the local pipeline grid in October 2007.
Index
has a 24% working interest before payout and 18% working interest after payout.
The Fern Lake Area of Mutual Interest, in which Cason was drilled, covers
908
gross and 538 net acres.
On
October 11, 2007 the Company issued an update on its operations in Kansas
reporting that Index had recently signed 14 well AFE's (Authorizations for
Expenditure) for low-risk oil prospects in Stafford and Barton counties,
Kansas.
The first well, Fischer #2-3, has now spudded. A rate of two wells per month
is
anticipated. The final number of wells to be drilled in the program is dependent
upon oil price and results of the early wells to be drilled.
On
October 16, 2007 the Company announced that initial test results for the
Outlar
1 well achieved test flow rates of approximately 1.6 million cubic feet of
gas
per day (mmcfpd) and 77 barrels of condensate per day (bcpd) using a 7/64ths
choke. It is anticipated that Outlar 1 will start production and begin
flowing into the local pipeline grid during the 4
th
quarter
2007.
On October
24, 2007 the Company announced that Drilling has begun on the Ducroz 1 well
in
the Cow Trap Prospect located in Brazoria Country, Texas. The well spud took
place on October 15, 2007.
Ducroz
1 targets gas in stacked Miocene objectives at depths ranging from 4,900
feet to
6,400 feet. The well has a planned total depth of approximately 6,800
feet. Ducroz 1 is to be drilled into a gas-bearing four-way dip structure
defined by 2D seismic and offset well data. Two down-dip wells drilled into
the
same structure have produced 24.4 billion cubic feet (“BCF”) of gas from stacked
Miocene reservoirs (13.1 BCF and 11.3 BCF, respectively). This
equates to approximately 4.1 million barrels of oil equivalent. The Cow Trap
structure has Proved Undeveloped Reserves (``PUDs'') estimated by a third
party
at 4.1 BCF gross, equating to 0.213 BCF at Index's net revenue interest of
5.25%.
Industry
Overview
Over
the
past few years, oil and gas prices have been high; however, over the last
couple
of years, the cost of services has increased to offset most of the gain from
high product prices. In general, very large companies have focused on onshore
plays in which they have a significant acreage position and technological
supremacy. Smaller companies have searched for niche plays that have been
overlooked. Index has tried to capitalize by using smaller company intelligence
to select those prospects that rank highly against Index’s current portfolio.
Because exploration has developed offshore, the onshore is lagging in
exploitation of the latest offshore ideas. Index hopes to capitalize on this
oversight.
Business
Strategy - Maintain Risk Managed Approach
The
Company has adjusted its business strategy to include more high-impact wells
that can deliver, if successful, much higher value, volume, and follow-on
potential that has the potential to deliver exponential growth. The Company
also
protects itself and its investors by limiting any single prospect investment
to
a small percentage of the overall funding that the company has at its
disposal.
Competitive
Conditions in the Business
Index
is
a small independent oil and gas exploration and production company that
represents much less than 1% of the oil and gas industry. It faces competition
from other oil and gas companies in all aspects of its business, including
acquisition of producing properties and oil and gas leases, and obtaining
goods,
services and labor. Many of its competitors have substantially greater
financial and other resources. Factors that affect Index’s ability to
acquire properties include available funds, available information about the
property and its standards established for minimum projected return on
investment. Many of these companies explore for, produce and market oil
and natural gas, carry on refining operations and market the resultant products
on a worldwide basis. The primary areas in which we encounter substantial
competition are in locating and acquiring desirable leasehold acreage for
our
drilling operations, locating and acquiring attractive producing oil and
natural
gas properties, and obtaining purchasers and transporters of the oil and
natural
gas we produce. There is also competition between producers of oil and natural
gas and other industries producing alternative energy and fuel. Furthermore,
competitive conditions may be substantially affected by various forms of
energy
legislation and/or regulation considered from time to time by the government
of
the United States; however, it is not possible to predict the nature of any
such
legislation or regulation that may ultimately be adopted or its effects upon
our
future operations. Such laws and regulations may, however, substantially
increase the costs of exploring for, developing or producing natural gas
and oil
and may prevent or delay the commencement or continuation of a given operation.
The effect of these risks cannot be accurately predicted.
Customers
Index
sells its crude oil and natural gas production to independent purchasers.
Title to the produced quantities transfers to the purchaser at the time the
purchaser collects or receives the quantities. Prices for such production
are defined in sales contracts and are readily determinable based on certain
publicly available indices. The purchasers of such production have
historically made payment for crude oil and natural gas purchases within
thirty-five days of the end of each production month. We periodically
review the difference between the dates of production and the dates we collect
payment for such production to ensure that receivables from those purchasers
are
collectible. All transportation costs are accounted for as costs that are
offset
against oil and natural gas sales revenue. In the 2007 fiscal year ended
March
31, 2007, approximately 47% and 53% of revenues from the Company’s share of oil
production were sold to two independent crude oil purchasers, together with
low
levels of gas sales, and for the 2006 fiscal year ended March 31, 2006,
approximately 91% of oil sales were sold to a single independent crude oil
purchaser. The Company does not believe the loss of any one of its purchasers
would materially affect its ability to sell the oil and gas it produces.
The
Company believes that other purchasers are available in its areas of
operations.
Seasonality
of Business
Weather
conditions affect the demand for, and prices of, oil and natural gas and can
also delay drilling activities, disrupting our overall business plans. Demand
for natural gas is typically higher in the fourth and first quarters resulting
in higher natural gas prices. Conversely, oil is in greater demand in the summer
months. Due to these seasonal fluctuations, results of operations for individual
quarterly periods may not be indicative of results, which may be realized on
an
annual basis.
Operational
Risks
Oil
and
gas exploration and development involves a high degree of risk, which even
a
combination of experience, knowledge and careful evaluation may not be able
to
overcome. There is no assurance that the Company will discover or acquire
additional oil and gas in commercial quantities. Oil and gas operations also
involve the risk that well fires, blowouts, equipment failure, human error
and
other circumstances that may cause accidental leakage of toxic or hazardous
materials, such as petroleum liquids or drilling fluids into the environment,
or
cause significant injury to persons or property may occur. In such event,
substantial liabilities to third parties or governmental entities may be
incurred, the payment of which could substantially reduce available cash
and
possibly result in loss of oil and gas properties. Such hazards may also
cause
damage to or destruction of wells, producing formations, production facilities
and pipeline or other processing facilities. The Company is not aware of
any of
these instances that have occurred to date that need to be accrued for. As
is
common in the oil and gas industry, the Company will not be insured fully
against all risks associated with its business either because such insurance
is
not available or because premium costs are considered prohibitive. A loss
not
fully covered by insurance could have a materially adverse effect on its
financial position and results of operations. For further discussion on
risks
see the section entitled “
Risk Factors”
set forth
above.
Governmental
Regulation
Domestic
exploration for, and production and sale of, oil and gas are extensively
regulated at both the federal and state levels. Legislation affecting the oil
and gas industry is under constant review for amendment or expansion, frequently
increasing the regulatory burden. Also, numerous departments and agencies,
both
federal and state, are authorized by statute to issue, and have issued, rules
and regulations binding on the oil and gas industry that often are costly to
comply with and that carry substantial penalties for failure to comply. In
addition, production operations are affected by changing tax and other laws
relating to the petroleum industry, constantly changing administrative
regulations and possible interruptions or termination by government
authorities.
State
regulatory authorities have established rules and regulations requiring permits
for drilling operations, drilling bonds and reports concerning operations.
Most
states in which we operate also have statutes and regulations governing a number
of environmental and conservation matters, including the unitization or pooling
of oil and gas properties and establishment of maximum rates of production
from
oil and gas wells. Many states also restrict production to the market demand
for
oil and gas. Such statutes and regulations may limit the rate at which oil
and
gas could otherwise be produced from our properties.
Thus,
the
Company’s operations are subject to extensive and continually changing
regulation affecting the oil and natural gas industry. Many departments and
agencies, both federal and state, are authorized by statute to issue, and have
issued, rules and regulations binding on the oil and natural gas industry
and its individual participants. The failure to comply with such rules and
regulations can result in substantial penalties. The regulatory burden on the
oil and natural gas industry increases its cost of doing business and,
consequently, affects its profitability. The Company does not believe that
we
are affected in a significantly different manner by these regulations than
are
its competitors.
Transportation
and Sale of Natural Gas
Even
though Index initially focused on crude oil production, management believes
that
natural gas sales could contribute a substantial part to its total sales.
The
interstate transportation and sale for resale of natural gas is subject to
federal regulation, including transportation rates and various other matters,
by
the Federal Energy Regulatory Commission (“FERC”). Federal wellhead price
controls on all domestic natural gas were terminated on January 1, 1992 and
none of Index’s natural gas sales prices are currently subject to FERC
regulation. Index cannot predict the impact of future government regulation
on
any natural gas operations.
Regulation
of Production
The
production of crude oil and natural gas is subject to regulation under a wide
range of state and federal statutes, rules, orders and regulations. State and
federal statutes and regulations require permits for drilling operations,
drilling bonds, and reports concerning operations. Texas, Louisiana and Kansas,
the states in which Index owns properties, have regulations governing
conservation matters, including provisions for the unitization or pooling of
oil
and natural gas properties, the establishment of maximum rates of production
from oil and natural gas wells, the spacing of wells, and the plugging and
abandonment of wells and removal of related production equipment. Texas,
Louisiana and Kansas also restrict production to the market demand for crude
oil
and natural gas. These regulations can limit the amount of oil and natural
gas
Index can produce from its wells, limit the number of wells, or limit the
locations at which it can conduct drilling operations. Moreover, each state
generally imposes a production or severance tax with respect to production
and
sale of crude oil, natural gas and gas liquids within its
jurisdiction.
Environmental
Regulations
Index’s
operations are subject to numerous stringent and complex laws and regulations
at
the federal, state and local levels governing the discharge of materials into
the environment or otherwise relating to human health and environmental
protection. These laws and regulations may, among other things, require
acquisition of a permit before drilling or development commences, restrict
the
types, quantities and concentrations of various materials that can be released
into the environment in connection with development and production activities,
and limit or prohibit construction or drilling activities in certain
ecologically sensitive and other protected areas. Failure to comply with
these laws and regulations or to obtain or comply with permits may result in
the
assessment of administrative, civil and criminal penalties, imposition of
remedial requirements and the imposition of injunctions to force future
compliance. Index’s business and prospects could be adversely affected to the
extent laws are enacted or other governmental action is taken that prohibits
or
restricts its development and production activities or imposes environmental
protection requirements that result in increased costs to it or the oil and
natural gas industry in general.
Oil
and
natural gas exploration and production activities on federal lands are subject
to the National Environmental Policy Act, or NEPA. NEPA requires federal
agencies, including the Department of Interior and various other federal, state,
and local environmental, zoning, health and safety agencies, to evaluate major
agency actions having the potential to significantly impact the environment
human, animal and plant health, and affect our operations and costs. In recent
years, environmental regulations have taken a cradle to grave approach to waste
management, regulating and creating liabilities for the waste at its inception
to final disposition. Our oil and gas exploration, development and production
operations are subject to numerous environmental programs, some of which include
solid and hazardous waste management, water protection, air emission controls
and situs controls affecting wetlands, coastal operations and
antiquities.
In
the
course of evaluations, an agency will have an “Environmental Assessment (EA)
prepared that assesses the potential direct, indirect and cumulative impacts
of
a proposed project and, if necessary, will prepare a more detailed Environmental
Impact Statement (“EIS”) that may be made available for public review and
comment. All of our current exploration and production activities, as well
as
proposed exploration and development plans, on federal lands require
governmental permits that are subject to the requirements of NEPA. This process
has the potential to delay the development of oil and natural gas
projects.
In
addition, environmental programs typically regulate the permitting, construction
and operations of a facility. Many factors, including public perception, can
materially impact the ability to secure an environmental construction or
operation permit. Once operational, enforcement measures can include significant
civil penalties for regulatory violations regardless of intent. Under
appropriate circumstances, an administrative agency can request a cease and
desist order to terminate operations.
Index
conducts its development and production activities to comply with all applicable
environmental regulations, permits and lease conditions, and it monitors
subcontractors for environment compliance. While Index believes its operations
conform to those conditions, it remains at risk for inadvertent noncompliance,
conditions beyond its control and undetected conditions resulting from
activities by prior owners or operators of properties in which it owns
interests. Pursuant to industry customs, a project’s operator obtains
insurance policy coverage for the each of the participant’s in a particular
project at a level of coverage that is commensurate with the potential
loss.
Occupational
Safety Regulations
Index
is
subject to various federal and state laws and regulations intended to promote
occupational health and safety. Although all of its wells are drilled by
independent subcontractors under its “footage” or “day rate” drilling contracts,
Index has adopted environmental and safety policies and procedures designed
to
protect the safety of its own supervisory staff and to monitor all subcontracted
operations for compliance with applicable regulatory requirements and lease
conditions, including environmental and safety compliance. This program includes
regular field inspections of its drill sites and producing wells by members
of
its operations staff or consultants and internal assessments of its compliance
procedures. Index considers the cost of compliance a manageable and necessary
part of our business.
Federal,
State or Native American Leases
Index’s
operations on federal, state or Native American oil and gas leases are subject
to numerous restrictions, including nondiscrimination statutes. Such operations
must be conducted pursuant to certain on-site security regulations and other
permits and authorizations issued by the Bureau of Land Management, Minerals
Management Service and other agencies.
Waste
Handling
The
Resource Conservation and Recovery Act, or RCRA, and comparable state statutes,
affect oil and natural gas exploration and production activities by imposing
regulations on the generation, transportation, treatment, storage, disposal
and
cleanup of “hazardous wastes” and on the disposal of non-hazardous wastes. Under
the auspices of the Environmental Protection Agency, or EPA, the individual
states administer some or all of the provisions of RCRA, sometimes in
conjunction with their own, more stringent requirements. Drilling fluids,
produced waters, and most of the other wastes associated with the exploration,
development, and production of crude oil, natural gas, or geothermal energy
constitute “solid wastes”, which are regulated under the less stringent
non-hazardous waste provisions, but there is no guarantee that the EPA or the
individual states will not adopt more stringent requirements for the handling
of
non-hazardous wastes or categorize some non-hazardous wastes as hazardous for
future regulation. Indeed, legislation has been proposed from time to time
in
Congress to re-categorize certain oil and natural gas exploration and production
wastes as “hazardous wastes”.
We
believe that we are currently in substantial compliance with the requirements
of
RCRA and related state and local laws and regulations, and that we hold all
necessary and up-to-date permits, registrations and other authorizations to
the
extent that our operations require them under such laws.
We
are
also subject to federal and state Hazard Communications and Community Right
to
Know statutes and regulations. These regulations govern record keeping and
reporting of the use and release of hazardous substances. We believe we are
in
compliance with these requirements in all material respects.
We
may be
required in the future to make substantial outlays to comply with environmental
laws and regulations. The additional changes in operating procedures and
expenditures required to comply with future laws dealing with the protection
of
the environment cannot be predicted.
Employees
As
of
October 17, 2007, Index Ltd. had full time employment agreements with the
following executive directors of the Company pursuant to which they provide
services to the Company: Mr. Andy Boetius, CFO, Mr. Lyndon West, CEO, and
Mr.
Dan Murphy, Chairman. In addition, the Company had employment letter agreements
with Mr. David Jenkins and Mr. Michael Scrutton, its 2 non-executive directors.
The Company also had one employee on its administrative
staff.
The
Company also contracts for the services of independent consultants involved
in
petroleum engineering, land, regulatory accounting, financial and other
disciplines as needed. None of the Company’s employees are represented by labor
unions or covered by any collective bargaining agreement. The Company believes
that its relations with its employees are satisfactory.
Forward-Looking
Statements
Some
of
the statements contained in this Registration Statement that are not historical
facts are "forward-looking statements" which can be identified by the use of
terminology such as "estimates," "projects," "plans," "believes," "expects,"
"anticipates," "intends," or the negative or other variations, or by discussions
of strategy that involve risks and uncertainties. We urge you to be cautious
of
the forward-looking statements, that such statements, which are contained in
this Registration Statement, reflect our current beliefs with respect to future
events and involve known and unknown risks, uncertainties and other factors
affecting our operations, market growth, services, products and licenses. No
assurances can be given regarding the achievement of future results, as actual
results may differ materially as a result of the risks we face, and actual
events may differ from the assumptions underlying the statements that have
been
made regarding anticipated events. Factors that may cause actual results, our
performance or achievements, or industry results, to differ materially from
those contemplated by such forward-looking statements include without
limitation:
|
•
|
|
our
ability to attract and retain management;
|
|
|
|
|
|
•
|
|
our
growth strategies;
|
|
|
|
•
|
|
anticipated
trends in our business;
|
|
|
|
•
|
|
our
future results of operations;
|
|
|
|
•
|
|
our
ability to make or integrate acquisitions;
|
|
|
|
•
|
|
our
liquidity and ability to finance our exploration, acquisition and
development activities;
|
|
|
|
•
|
|
our
ability to successfully and economically explore for and develop
oil and
gas resources;
|
|
|
|
•
|
|
market
conditions in the oil and gas industry;
|
|
|
|
•
|
|
the
timing, cost and procedure for proposed acquisitions;
|
|
|
|
•
|
|
the
impact of government regulation;
|
|
|
|
•
|
|
estimates
regarding future net revenues from oil and natural gas reserves
and the
present value thereof;
|
|
|
|
•
|
|
planned
capital expenditures (including the amount and nature
thereof);
|
|
|
|
•
|
|
increases
in oil and gas production;
|
|
|
|
•
|
|
the
number of wells we anticipate drilling in the future;
|
|
|
|
•
|
|
estimates,
plans and projections relating to acquired properties;
|
|
|
|
•
|
|
the
number of potential drilling locations;
|
|
|
|
•
|
|
our
financial position, business strategy and other plans and objectives
for
future operations;
|
|
•
|
|
the
possibility that our acquisitions may involve unexpected
costs;
|
|
|
|
•
|
|
the
volatility in commodity prices for oil and gas;
|
|
|
|
•
|
|
the
accuracy of internally estimated proved reserves;
|
|
|
|
•
|
|
the
presence or recoverability of estimated oil and gas
reserves;
|
|
|
|
•
|
|
the
ability to replace oil and gas reserves;
|
|
|
|
•
|
|
the
availability and costs of drilling rigs and other oilfield
services;
|
|
|
|
•
|
|
environmental
risks;
|
|
|
|
•
|
|
exploration
and development risks;
|
|
|
|
•
|
|
Competition;
|
|
|
|
•
|
|
the
inability to realize expected value from acquisitions;
|
|
|
|
•
|
|
the
ability of our management team to execute its plans to meet its
goals;
|
|
|
|
•
|
|
general
economic conditions, whether internationally, nationally or in
the
regional and local market areas in which we are doing business,
that may
be less favorable than expected; and
|
|
|
|
•
|
|
other
economic, competitive, governmental, legislative, regulatory, geopolitical
and technological factors that may negatively impact our businesses,
operations and pricing.
|
All
written and oral forward-looking statements made in connection with this
Registration Statement that are attributable to us or persons acting on our
behalf are expressly qualified in their entirety by these cautionary statements.
Given the uncertainties that surround such statements, you are cautioned not
to
place undue reliance on such forward-looking statements.
Overview
Index
Oil
and Gas, Inc. is an independent oil and gas company engaged in the acquisition,
exploration, appraisal, development and production of oil and gas properties
located in North America. Our corporate structure includes a United Kingdom
company, which provides management services and United States operating
subsidiaries, which are engaged in oil and gas activities, primarily in Kansas
and the Gulf Coast of Texas and Louisiana. We have increased our proved reserves
and production principally through property acquisitions in conjunction with
an
active drilling program. We do not currently operate any of its properties
and
sells its current oil production to domestic crude oil
purchasers.
The
following are key elements of our strategy:
·
we intend to focus
our short and medium term efforts on known petroleum basins within the U.S.
and
initially which are proximal to our current ongoing projects in the onshore
part
of the Gulf of Mexico basin;
·
our short to mid
term objective is to develop our oil and gas reserves to a point where the
cash
flow will contribute not only to our overhead and later, to contribute to
its
capital requirements for investing in new and additional projects. We believe
we
can achieve this objective by utilizing a risk managed approach of investing
in
a portfolio of drilling opportunities. By combining a number of key metrics,
our
management is able to select and invest in the very best prospects on offer.
We
have adjusted our business strategy to include more high-impact wells that
can
deliver, if successful, much higher value, volume, and follow-on drilling
that
has the potential to deliver exponential growth. Index also protects itself
and
its investors by limiting any single prospect investment to a small percentage
of the overall funding that the company has at its disposal.
RESULTS
OF OPERATIONS
Three
Months Ended June 30, 2007 Compared to Three Months Ended June 30,
2006
We
had a
net loss of $436,837 for the three months ended June 30, 2007 compared to
a net
loss of $319,401 for the three months ended June 30, 2006, primarily resulting
from an increase in depletion costs related to increased production and
increased other general and administrative costs and other operating expenses
arising from increased public company costs, including salaries and benefits,
advisory costs and rent expense. This increased cost was offset by a decrease
in
stock compensation costs for historic grants, as a result of the passing
of
further vesting points, and an increase in interest income related to investment
of funds from historic fund raisings. The following table summarizes key
items
of comparison and their related increase (decrease) for the three months
ended June 30, 2007 and 2006.
|
|
Three
Months Ended June 30,
|
|
|
Increase/
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
Oil
sales
|
|
$
|
151,373
|
|
|
$
|
70,457
|
|
|
$
|
80,916
|
|
Production
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
operating
|
|
|
22,279
|
|
|
|
21,236
|
|
|
|
1,043
|
|
Taxes
other than income
|
|
|
11,970
|
|
|
|
2,680
|
|
|
|
9,290
|
|
General
and administrative:
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
473,053
|
|
|
|
217,668
|
|
|
|
255,385
|
|
Stock-based
compensation
|
|
|
96,823
|
|
|
|
170,331
|
|
|
|
(73,508
|
)
|
Depletion
— Full cost
|
|
|
72,648
|
|
|
|
21,385
|
|
|
|
51,263
|
|
Depreciation
— Other
|
|
|
753
|
|
|
|
163
|
|
|
|
590
|
|
Impairment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Interest
expense (income) and other
|
|
|
(89,316
|
)
|
|
|
(43,605
|
)
|
|
|
(45,711
|
)
|
Income
tax benefit (provision)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
(loss) income
|
|
$
|
(436,837
|
)
|
|
$
|
(319,401
|
)
|
|
$
|
(117,436
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production:
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
Gas — Mcf
|
|
|
8,800
|
|
|
|
-
|
|
|
|
8,800
|
|
Crude
Oil — Mbbl
|
|
|
1,354
|
|
|
|
1.123
|
|
|
|
0.231
|
|
Equivalent
— Mboe
|
|
|
2.821
|
|
|
|
1.123
|
|
|
|
1.698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
price per unit :
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
price per Mcf
|
|
$
|
7.27
|
|
|
$
|
-
|
|
|
$
|
7.27
|
|
Oil
price per Bbl
|
|
$
|
64.55
|
|
|
$
|
62.74
|
|
|
$
|
1.81
|
|
Equivalent
per Boe
|
|
$
|
53.66
|
|
|
$
|
62.74
|
|
|
$
|
(9.08
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
cost per Boe:
|
|
|
|
|
|
|
|
|
|
|
|
|
Production
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
operating
|
|
$
|
7.90
|
|
|
$
|
18.91
|
|
|
$
|
(11.01
|
)
|
Taxes
other than income
|
|
$
|
4.24
|
|
|
$
|
2.39
|
|
|
$
|
1.85
|
|
General
and administrative expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
$
|
167.69
|
|
|
$
|
193.83
|
|
|
$
|
(26.14
|
)
|
Stock-based
compensation
|
|
$
|
34.32
|
|
|
$
|
151.67
|
|
|
$
|
(117.35
|
)
|
Depletion
expense
|
|
$
|
25.75
|
|
|
$
|
19.04
|
|
|
$
|
6.71
|
|
For
the
three months ended June 30, 2007, oil and gas sales increased $80,916, from
the
same period in 2006, to $151,373. The increase for the three months ended
June
30, 2007 was primarily due to the increase in volumes of 1.7 MBoe from 1.1
MBoe
to 2.8 MBoe or approximately $91,000. The increase in volumes of 1.7 MBoe
is
primarily due to increased volumes from Walker of 1.0 MBoe and Vieman of
0.3
MBoe and the Friedrich of 0.8 MBOE offset by lower Kansas well production.
The
Walker, Vieman and Friedrich wells produced natural gas volumes of 2.232
MMcf,
1.810 MMcf and 4.757 MMcf, respectively. The Walker well also produced 0.7
Mbbl
with the remaining oil production primarily from the Kansas Seward County
wells
and a small amount from Vieman. Additionally, revenue decreased
approximately $10,000 due to a dip in commodity prices as our average price
per
barrel decreased $9.08, or 14.0%, in 2007 to $53.66 per Bbl from $62.74 per
Bbl
in 2006. This is due to a higher proportion of gas in the production volume
mix.
Lease
operating expenses increased $1,043 for the three months ended June 30, 2007
as
compared to the same period in 2006. The increase was primarily due to
production from the Walker, Vieman and Friedrich wells that have come on
production, together with four recent new wells that came on production in
our
Kansas properties. On a per unit basis, lease operating expenses decreased
almost 60% from $18.91 per Boe in 2006 to $7.90 per Bbl in 2007 due to an
increase in production volumes.
Taxes
other than income increased $9,290 for the three months ended June 30, 2007
as
compared to the same period in 2006 due to higher oil and gas revenues and
a
change in the mix and location of production and on a per unit basis increased
$1.85 per Boe to $4.24 per Boe. Production taxes are generally assessed as
a
percentage of gross oil and/or natural gas sales.
General
and administrative expense, excluding stock-based compensation for the three
months ended June 30, 2007 increased $255,386 to $473,053 compared to the
same
period in 2006 primarily due to increased management costs from the growth
in
operations of the Company. In addition there were increased costs of being
a
public company. Salaries, benefits and business expenses for employees/directors
increased approximately $141,000. SEC filing fees, investor relations costs
and
other professional fees increased approximately $90,000. Rent expense increased
approximately $20,000, which included costs for corporate
housing.
Stock-based
compensation expense was approximately $97,000 for the three months ended
June
30, 2007, compared to approximately $170,000 for stock-based compensation
in the
same period of 2006. This is primarily due to a larger stock-based award
in 2006
granted to all officers and directors, at the effective date of the reverse
merger with Index Ltd., which is now 75% vested, offset by a smaller award
of
stock to a new officer which also vested at 50% in 2007. During the
three months ended June 30, 2007 and 2006, the Company did not grant any
stock
options and warrants.
Depletion
expense increased $51,263 from the same period in 2006 to $72,648 for the
three
months ended June 30, 2007. This increase is primarily due to production
from
the Walker, Vieman and Friedrich wells, together with four recent new wells
on
our Kansas properties that came on production in fiscal 2007. Depletion for
oil
and gas properties is calculated using the unit of production method, which
essentially depletes the capitalized costs associated with the proved properties
based on the ratio of production volume for the current period to total
remaining proved reserve volumes for the evaluated properties. On a per unit
basis, depletion expense increased from $19.04 to $25.75 per
Bbl.
Interest
income and other increased $45,711 for the three months ended June 30, 2007
compared to the same period 2006. This increase is due to interest income
earned
on historic equity fund raisings.
There
was
no provision for income taxes for the fiscal three months ended 2007 and
2006
due to a 100% valuation allowance recorded for the three months ended June
30,
2007 and 2006, respectively on the total tax provision as the Company believed
that it is more likely than not that the asset will not be utilized during
the
next year.
LIQUIDITY
AND CAPITAL RESOURCES
In
the
three months ended June 30, 2007 and 2006 we used cash for operating purposes
and invested in oil and gas properties. In 2006 we repaid a bank loan. Operating
revenue fluctuations were substantially driven by commodity prices and changes
in our production volumes. Prices for oil and gas have historically been
subject
to seasonal influences characterized by peak demand and higher prices in
the
winter heating season for natural gas and summer travel for oil; however,
the
impact of other risks and uncertainties have influenced prices throughout
the
recent years. Working capital was substantially influenced by these variables.
Fluctuation in cash flow may result in an increase or decrease in our capital
and exploration expenditures. See Results of Operations for a review of the
impact of prices and volumes on sales. See below for additional discussion
and
analysis of cash flow.
|
|
Three
Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
Cash
flows (used in) provided by operating activities
|
|
$
|
(240,299
|
)
|
|
$
|
(408,765
|
)
|
Cash
flows used in investing activities
|
|
|
(1,316,932
|
)
|
|
|
(170,155
|
)
|
Cash
flows provided by (used in) financing activities
|
|
|
9,333
|
|
|
|
(51,797
|
)
|
Effect
of exchange rate changes
|
|
|
(3,934
|
)
|
|
|
8,539
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
$
|
(1,551,832
|
)
|
|
$
|
(622,178
|
)
|
Operating
Activities
Net
cash
outflow from operating activities during the three months ended June 30,
2007
was $(240,299) which was a decrease of $168,466 from $(408,765) net cash
outflow
during the three months ended June 30, 2006. This decrease was primarily
due to
phasing impacts in working capital items, offset by higher operating expenses
and taxes on our properties, as well as significantly higher general and
administrative expenses, related to public company expense with increased
costs
of SEC filing fees, investor relations costs and other professional fees,
as
well as, an increase in salaries, benefits and business expenses for
employees/directors. Revenues were higher due to increased production and
sales
volumes, offset by lower average commodity prices, due to an increased
proportion of gas volumes. Average equivalent prices decreased $9.08 from
$62.74
per Boe in the three months ended June 30, 2006 to $53.66 per Boe in the
three
months ended June 30, 2007. Production volumes increased 1.698 Mboe from
1.123
Mboe in the three months ended June 30, 2006 to 2.821 Mboe in the three months
ended June 30, 2007. We expect the remainder fiscal year 2008 production
to
increase, but we are unable to predict the future.
Investing
Activities
The
primary driver of cash used in investing activities was capital
spending.
Cash
used
in investing activities during the three months ended June 30, 2007 was
$1,316,932, which was an increase of $1,146,777 from $170,155 of cash used
in
investing activities during the fiscal year ended June 30, 2006. This increase
was due to increased exploration and development activity. The main approximate
expenditures in the three months to June 30, 2007 were on drilling operations
on
the George Cason well ($0.3m) and initial expenditures on the Shadyside and
Alligator Bayou projects ($0.5m combined). Aggregate expenditures on all
other
projects and wells were approximately $0.5m.
Financing
Activities
Net
cash
used by financing activities increased $61,130 during the three months ended
June 30, 2007 to $9,333 as compared to $(51,797) during the three months
ended
June 30, 2006. During the three months ended June 30, 2006, the Company repaid
its bank loan and has had no debt outstanding since at June 30, 2006. During
the
three months ended June 30, 2007, a director exercised a total of 66,662
warrants at a price of $0.14 for a total of $9,333 and a total of 66,662
shares
of common stock, $0.001 par value, were issued.
Management
believes that we may have the ability to finance through new debt or equity
offerings, if necessary, our capital requirements, including
acquisitions.
As
of
June 30, 2007 and 2006, our common stock is the only class of stock outstanding
and we have no outstanding long-term debt financing.
Based
on
our current cash resources and other current assets, management believes
we have
sufficient liquidity to fund operations for the next twelve months. We are
contemplating additional debt and/or equity financing transactions that,
if
successful, could fund expenditures for potential acquisitions and other
discretionary expansions of our business. We do not currently have any
commitments for such financing and there is no assurance that we will be
successful in obtaining such funds. If we cannot obtain additional financing,
we
will have to significantly curtail our acquisition plans and possibly our
operations.
Contractual
Obligations
We
have
no material long-term commitments associated with our capital expenditure
plans
or operating agreements. Consequently, we believe we have a significant degree
of flexibility to adjust the level of such expenditures as circumstances
warrant. Our level of capital expenditures will vary in future periods depending
on the success we experience in our acquisition, developmental and exploration
activities, oil and gas price conditions and other related economic factors
and
on success in future fundraising efforts. Currently no sources of liquidity
or
financing are provided by off-balance sheet arrangements or transactions
with
unconsolidated, limited-purpose entities.
Off-Balance
Sheet Arrangements
As
of
June 30, 2007, we did not have any off-balance sheet
arrangements.
Plan
of Operation for 2008
On
an
annual basis, we generally fund most of our capital and exploration activities,
including oil and gas property acquisitions, with cash generated from operations
and from equity financings. We have budgeted for capital expenditures relating
to the work program described in Note 1 of the Condensed Consolidated Financial
Statements.
Inflation
In
the
opinion of management, inflation has not had a material effect on the operations
of the Company.
Year
Ended March 31, 2007 Compared to Year Ended March 31,
2006
We
had a
net loss of $2,225,656 for the fiscal year ended March 31, 2007 compared
to a
net loss of $1,690,806 for the fiscal year ended March 31, 2006, primarily
resulting from increased costs of operating as a public company for an entire
fiscal year with additional director fees and travel costs and expenses,
investor relations, filing fees and other professional and consulting costs.
This is in addition to higher operating costs and depletion on increased
production offset by an increase in interest income on available cash from
additional fund raisings. The following table summarizes key items of comparison
and their related increase (decrease) for the fiscal years ended
March 31, 2007 and 2006.
|
|
Years
Ended March 31,
|
|
|
Increase
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
Oil
and gas sales
|
|
$
|
457,046
|
|
|
$
|
191,114
|
|
|
$
|
265,932
|
|
Production
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
operating
|
|
|
80,186
|
|
|
|
33,859
|
|
|
|
46,327
|
|
Taxes
other than income
|
|
|
34,549
|
|
|
|
8,094
|
|
|
|
26,455
|
|
General
and administrative:
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
1,848,142
|
|
|
|
702,278
|
|
|
|
1,145,864
|
|
Stock-based
compensation
|
|
|
875,092
|
|
|
|
1,043,823
|
|
|
|
(168,731
|
)
|
Depletion
— Full cost
|
|
|
188,351
|
|
|
|
65,311
|
|
|
|
123,040
|
|
Depreciation
— Other
|
|
|
1,028
|
|
|
|
6,260
|
|
|
|
(5,232
|
)
|
Impairment
|
|
|
-
|
|
|
|
10,000
|
|
|
|
(10,000
|
)
|
Interest
expense (income) and other
|
|
|
(344,646
|
)
|
|
|
12,295
|
|
|
|
(356,941
|
)
|
Income
tax benefit (provision)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
(loss)
|
|
$
|
(2,225,656
|
)
|
|
$
|
(1,690,806
|
)
|
|
$
|
(534,850
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production:
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
Gas — Mcf
|
|
|
8.490
|
|
|
|
-
|
|
|
|
8.490
|
|
Crude
Oil — Mbbl
|
|
|
6.660
|
|
|
|
3.420
|
|
|
|
3.240
|
|
Equivalent
— Mboe
|
|
|
8.075
|
|
|
|
3.420
|
|
|
|
4.655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
price per unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
price per Mcf
|
|
$
|
6.61
|
|
|
$
|
-
|
|
|
$
|
6.61
|
|
Oil
price per Bbl
|
|
$
|
60.20
|
|
|
$
|
55.89
|
|
|
$
|
4.31
|
|
Equivalent
per Boe
|
|
$
|
56.60
|
|
|
$
|
55.89
|
|
|
$
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
cost per Boe:
|
|
|
|
|
|
|
|
|
|
|
|
|
Production
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
operating
|
|
$
|
9.93
|
|
|
$
|
9.90
|
|
|
$
|
0.03
|
|
Taxes
other than income
|
|
$
|
4.28
|
|
|
$
|
2.37
|
|
|
$
|
1.91
|
|
General
and administrative expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
$
|
228.87
|
|
|
$
|
205.34
|
|
|
$
|
23.53
|
|
Stock-based
compensation
|
|
$
|
108.37
|
|
|
$
|
305.21
|
|
|
$
|
(196.84
|
)
|
Depletion
expense
|
|
$
|
23.32
|
|
|
$
|
19.10
|
|
|
$
|
4.22
|
|
For
the
year ended March 31, 2007, oil and gas sales increased $265,932, from the
same
period in 2006, to $457,046. The increase for the year was primarily due
to the
increase in production volumes of 4.655 MBoe from 3.42 MBoe to 8.075 MBoe
or
approximately $264,000. The increase in volumes of 4.655 MBoe is primarily
due
to increased volumes from Walker of 3.713 MBoe and Vieman of 0.841 MBoe.
The
Walker and Vieman wells produced natural gas volumes of 3.618 MMcf and 4.872
MMcf, respectively. The Walker well also produced 3.109 Mbbl with the remaining
oil production primarily from the Kansas Seward County wells and a small
amount
from Vieman. Additionally, revenue increased slightly by approximately $2,200
due to higher commodity prices as our average price per Boe increased by
$0.71,
or 1.0%, in fiscal 2007 to $56.60 per Bbl from $55.89 per Bbl in fiscal 2006.
This is based on weighted average gas volumes at a price of $6.61 and weighted
average volumes of oil volumes at an increased price per barrel of
$4.31.
Lease
operating expenses increased $46,327 for the year ended March 31, 2007 as
compared to the same period in 2006. The increase was primarily due to
production from the Walker and Vieman wells that came on production in fiscal
year 2007, together with four recent new wells that came on production in
our
Kansas properties. On a per unit basis, lease operating expenses remained
flat
from $9.90 per Boe in 2007 to $9.93 per Boe in 2006 due to an increase in
production volumes offset by industry-wide service costs associated with
the
overall increase in commodity prices.
Taxes
other than income increased $26,455 for the year ended March 31, 2007 as
compared to the same period in 2006 due to higher oil and gas revenues and
on a
per unit basis increased $1.91 per Boe to $4.28 per Boe. The primary increase
is
attributable to the Walker well located in Louisiana which came on production
in
fiscal 2007 and had $24,355 in production taxes for an increase of $6.56
per
Boe. Production taxes are generally assessed as a percentage of gross oil
and/or
natural gas sales.
General
and administrative expenses, excluding stock-based compensation
expense, for the twelve months ended March 31, 2007 increased $1,145,864 to
$1,848,142 compared to the same period in 2006 primarily due to a full year
of
costs related to being a public company with increased costs of SEC filing
fees,
investor relations costs and other professional fees of approximately $103,000,
as well as, an increase in salaries, benefits and business expenses for
employees/directors of approximately $936,000 including a bonus of approximately
$210,000 payable to various officers for the satisfaction of certain performance
measures during fiscal year 2007. Rent expense increased approximately $61,000
due to a full year of utilization and increased charges.
Stock-based
compensation expense, within general and administrative expenses, was
$875,092 for the year ended March 31, 2007 as compared to stock-based
compensation of $1,043,823 for the year ended March 31, 2006 for a net
decrease of $168,731 in fiscal 2007. This is primarily due to a larger
stock-based award in 2006 granted to all officers and directors, at the
effective date of the reverse merger with Index Ltd., which vested at 50%
in
that year, offset by a smaller award of stock to a new officer and director
in
fiscal 2007, which also vested at 50% in 2007. All stock compensation was
calculated at fair market value and other required inputs at the date of
the
grant in accordance with SFAS 123(R).
Depletion
expense increased $123,040 from the same period in 2006 to $188,351 for the
year
ended March 31, 2007. This increase is primarily due to production from the
Walker well and test production from the Vieman well, together with four
recent
new wells on our Kansas properties that came on production in fiscal 2007,
as
well as, the Witt 1 which was recompleted in fiscal 2007. Depletion for oil
and
gas properties is calculated using the unit of production method, which
essentially depletes the capitalized costs associated with the proved properties
based on the ratio of production volume for the current period to total
remaining reserve volume for the evaluated properties. On a per unit basis,
depletion expense increased 22% from $19.10 to $23.32 per
Boe.
Interest
income and other increased $356,941 for the year ended March 31, 2007
compared to the same period 2006. This increase is primarily due to amortization
of debt issue costs in 2006 of approximately $43,000 offset by interest income
through 2007 earned on $5.12 million received in a private placement equity
fund
raising in the fourth quarter of fiscal 2006 and two private placement equity
fund raisings in fiscal year 2007.
There
was
no provision for income taxes for the fiscal years ended 2007 and 2006 due
to a
valuation allowance of $2,358,427 and $912,038 recorded for the years ended
March 31, 2007 and 2006, respectively on the total tax provision as the Company
believed that it is more likely than not that the asset will not be utilized
during the next year.
Year
Ended March 31, 2006 Compared to Year Ended March 31,
2005
We
had a
net loss of $1,690,806 for the fiscal year ended March 31, 2006 compared to
a
net loss of $422,027 for the fiscal year ended March 31, 2005, primarily
resulting from approximately $1.0 million of compensation expense related to
the
issuance of options under the Employee Stock Option Plan at fair market value,
as per SFAS 123-R. The following table summarizes key items of comparison and
their related increase (decrease) for the fiscal years ended March 31,
2006 and 2005.
|
|
Years
Ended March 31,
|
|
|
Increase
|
|
|
|
2006
|
|
|
2005
|
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
Oil
and gas sales
|
|
$
|
191,114
|
|
|
$
|
88,176
|
|
|
$
|
102,938
|
|
Production
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
operating
|
|
|
33,859
|
|
|
|
19,897
|
|
|
|
13,962
|
|
Taxes
other than income
|
|
|
8,094
|
|
|
|
3,687
|
|
|
|
4,407
|
|
General
and administrative:
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
702,278
|
|
|
|
442,645
|
|
|
|
259,633
|
|
Stock-based
compensation
|
|
|
1,043,823
|
|
|
|
-
|
|
|
|
1,043,823
|
|
Depletion
— Full cost
|
|
|
65,311
|
|
|
|
36,155
|
|
|
|
29,156
|
|
Depreciation
— Other
|
|
|
6,260
|
|
|
|
2,140
|
|
|
|
4,120
|
|
Impairment
|
|
|
10,000
|
|
|
|
|
|
|
|
10,000
|
|
Interest
expense (income) and other
|
|
|
12,295
|
|
|
|
5,679
|
|
|
|
6,616
|
|
Income
tax benefit (provision)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
(loss)
|
|
$
|
(1,690,806
|
)
|
|
$
|
(422,027
|
)
|
|
$
|
(1,268,779
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production:
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
Gas — Mcf
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Crude
Oil — Mbbl
|
|
|
3.42
|
|
|
|
2.07
|
|
|
|
1.35
|
|
Equivalent
— Mboe
|
|
|
3.42
|
|
|
|
2.07
|
|
|
|
1.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
price per unit:
|
|
|
|
|
|
|
|
|
|
Gas
price per Mcf
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Oil
price per Bbl
|
|
$
|
55.89
|
|
|
$
|
42.64
|
|
|
$
|
13.25
|
|
Equivalent
per Boe
|
|
$
|
55.89
|
|
|
$
|
42.64
|
|
|
$
|
13.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
cost per Boe:
|
|
|
|
|
|
|
|
|
|
|
|
|
Production
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
operating
|
|
$
|
9.90
|
|
|
$
|
9.61
|
|
|
$
|
0.29
|
|
Taxes
other than income
|
|
$
|
2.37
|
|
|
$
|
1.78
|
|
|
$
|
0.59
|
|
General
and administrative expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
$
|
205.34
|
|
|
$
|
213.84
|
|
|
$
|
(8.50
|
)
|
Stock-based
compensation
|
|
$
|
305.21
|
|
|
$
|
-
|
|
|
$
|
305.21
|
|
Depletion
expense
|
|
$
|
19.10
|
|
|
$
|
17.47
|
|
|
$
|
1.63
|
|
For
the
year ended March 31, 2006, oil and gas sales increased $102,938, from the same
period in 2005, to $191,114. The increase for the year was primarily due to
the
increase in volumes of 1.35 MBbls from 2.07 MBbls to 3.42 MBbls or approximately
$58,000. Additionally, revenue increased approximately $45,000 due to higher
commodity prices as our average price per barrel increased $13.25, or 31.0%,
in
2006 to $55.89 per Bbl from $42.64 per Bbl in 2005. Continued lower natural
gas
storage levels, supply uncertainty due to global events and a weaker U.S. dollar
favorably impacted crude oil prices again in 2006.
Lease
operating expenses increased $13,962 for the year ended March 31, 2006 as
compared to the same period in 2005. The increase was primarily due to increased
production on our Kansas properties acquired in 2005. On a per unit basis,
lease
operating expenses increased only 3% from $9.61 per Bbl in 2006 to $9.90 per
Bbl
in 2005 due to an increase in production volumes offset by industry-wide service
costs associated with the overall increase in commodity prices.
Taxes
other than income increased $4,407 for the year ended March 31, 2006 as compared
to the same period in 2005 due to higher oil and gas revenues and on a per
unit
basis increased $0.59 per Bbl to $2.37 per Bbl. Production taxes are generally
assessed as a percentage of gross oil and/or natural gas sales.
General
and administrative expenses for the twelve months ended March 31, 2006 increased
$259,633 to $702,278 compared to the same period in 2005 primarily due to
transaction costs of $168,612 related to the reverse merger and increased
costs
of consulting, audit and professional fees, as well as, an increase in salaries
for employees/directors.
Stock-based
compensation expense was $1,043,823 for the year ended March 31, 2006 with
no stock-based compensation in 2005. During the year ended March 31, 2005,
the
Company granted an aggregate of stock options and warrants to certain directors
and stockholders. Since there was no public market for the Company’s stock and
operations were not comparable to a peer group during the years ended March
31,
2006 and 2005, the latest stock issuance price used in previous fundraising
was
used as the share market price. The exercise price and this fair market value
of
the stock options granted were $0.35 and $0.60, respectively. All options vested
50% on the date of the grant with the remaining amounts to vest 25% in each
of
the next two years. The expense was calculated based on the difference of the
fair market value at the date of the grant in accordance with SFAS
123(R).
Depletion
expense increased $29,156 from the same period in 2005 to $65,311 for the
year
ended March 31, 2006. Depletion for oil and gas properties is calculated
using the unit of production method, which essentially depletes the capitalized
costs associated with the evaluated properties based on the ratio of production
volume for the current period to total remaining reserve volume for the
evaluated properties. On a per unit basis, depletion expense increased 9%
from
$17.47 to $19.10 per Bbl.
Interest
expense and other increased $6,616 for the year ended March 31, 2006
compared to the same period 2005. This increase is primarily due to amortization
of debt issue costs offset by interest income earned on $5.12 million received
in a private placement equity fund raising in the fourth quarter of fiscal
2006.
There
was
no provision for income taxes for the fiscal years ended March 31, 2006 and
2005
due to a valuation allowance of $912,038 and $305,308 recorded for the years
ended March 31, 2006 and 2005, respectively on the total tax provision as the
Company believed that it is more likely than not that the asset will not be
utilized during the next year.
LIQUIDITY
AND CAPITAL RESOURCES
Our
primary sources of cash in fiscal 2007 were from financing and equity
transactions. Proceeds from private placement equity fund raisings were offset
by cash used in operating and investing activities for our properties. Operating
cash flow fluctuations were substantially driven by commodity prices and
changes
in our production volumes. Prices for oil and gas have historically been
subject
to seasonal influences characterized by peak demand and higher prices in
the
winter heating season for natural gas and summer travel for oil; however,
the
impact of other risks and uncertainties have influenced prices throughout
the
recent years. Working capital was substantially influenced by these variables.
Fluctuation in cash flow may result in an increase or decrease in our capital
and exploration expenditures. See Results of Operations for a review of the
impact of prices and volumes on sales. Cash flows provided by operating
activities were primarily used to fund exploration and development expenditures.
See below for additional discussion and analysis of cash
flow.
|
|
Year
Ended March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows used (in) operating activities
|
|
$
|
(1,041,751
|
)
|
|
$
|
(190,961
|
)
|
|
$
|
(337,040
|
)
|
Cash
flows used (in) investing activities
|
|
|
(4,098,743
|
)
|
|
|
(649,358
|
)
|
|
|
(66,140
|
)
|
Cash
flows provided by financing activities
|
|
|
9,740,729
|
|
|
|
6,351,191
|
|
|
|
161,805
|
|
Effect
of exchange rate changes
|
|
|
4,884
|
|
|
|
16,461
|
|
|
|
(5,984
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
$
|
4,605,119
|
|
|
$
|
5,527,333
|
|
|
$
|
(247,359
|
)
|
Operating
Activities
Net
cash
outflow from operating activities during fiscal year ended March 31, 2007 was
$1,041,751 which was an increase in use of cash of $850,790 from $190,961 net
cash outflow during the fiscal year ended March 31, 2006. This decrease was
primarily due to higher commodity prices and an increase in sales volumes offset
by increased general and administrative costs related to a full year of public
company expense with increased costs of SEC filing fees, investor relations
costs and other professional fees, as well as, an increase in salaries, benefits
and business expenses for employees/directors.
Net
cash
outflow from operating activities during fiscal year ended March 31, 2006 was
$(190,961) which was a decrease of $146,079 or 43% from $(337,040) net cash
outflow during the fiscal year ended March 31, 2005. This decrease was primarily
due to higher commodity prices and an increase in sales volumes offset by
transaction costs of $168,612 due to the reverse merger.
Investing
Activities
The
primary driver of cash used in investing activities was capital
spending.
Cash
used
in investing activities during the fiscal year ended March 31, 2007 was
$4,098,743, which was an increase of $3,449,385 from $649,358 of cash used
in
investing activities during the fiscal year ended March 31, 2006. This increase
was primarily due to increased exploration and development activity This
activity was primarily for the Walker well of approximately $296,000, the Ilse
well of approximately $1,217,000, the Vieman well of approximately $1,358,000,
the Supple Jack Creek (formerly West) well of $206,000, Friedrich 1 well of
$219,000 and Schroeder 1 well of $175,000 and the Taffy wells of
$520,000.
Cash
used
in investing activities during the fiscal year ended March 31, 2006 was
$649,358, which was an increase of $583,218 or 782% from $66,140 of cash used
in
investing activities during the fiscal year ended March 31, 2005. This increase
was primarily due to increased exploration and development
activity.
Financing
Activities.
Net cash provided by financing activities increased
$3,389,538 during the fiscal year ended March 31, 2007 to $9,740,729 as compared
to $6,351,191 during the fiscal year ended March 31, 2006. At March 31, 2007
and
2006, we had no long-term debt outstanding. Management believes that we may
have
the ability to finance through new debt or equity offerings, if necessary,
our
capital requirements, including acquisitions.
On
January 20, 2006 we sold in a private placement 8,533,333 shares of our common
stock at a per share price equal to $0.60. The gross proceeds were $5,120,000,
and will be used for general corporate purposes and working
capital.
On
September 9, 2006, the Company completed a private placement for 7,097,898
shares of $0.001 par value common stock of the Company at a price of $1.00
per
share for aggregate gross proceeds of approximately $7.1 million.
On
October 4, 2006, the Company completed a private placement for 3,867,700 shares
of $0.001 par value common stock of the Company at a price of $1.00 per share
for aggregate proceeds of approximately $3.9 million.
The
Company filed a Registration Statement with the SEC on Form SB-2 to register,
among other securities, the units of common stock sold in the private placement
offerings. The Company obtained effectiveness on February 9, 2007, within the
time frame prescribed by the private placement agreements.
As
of
March 31, 2007 and 2006, our common stock is the only class of stock outstanding
and we have no outstanding long-term debt financing.
Based
on
reserve reports prepared by Ancell Energy Consulting, Inc., an independent
oil
and gas reservoir engineering consulting firm, the following table presents
certain information as of March 31, 2007 and for our reserves and properties
all
located onshore in the United States. Shut-in wells currently not capable of
production are excluded from the producing well information.
In
Mboe:
|
|
Kansas
|
|
|
Louisiana
|
|
|
South
Texas
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved
Reserves at Year End
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed
|
|
|
14.4790
|
|
|
|
8.110
|
|
|
|
90.609
|
|
|
|
113.198
|
|
Undeveloped
|
|
|
1.380
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
15.859
|
|
|
|
8.110
|
|
|
|
90.609
|
|
|
|
114.578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Wells
(1)
|
|
|
21.0000
|
|
|
|
1.0000
|
|
|
|
4.0000
|
|
|
|
26.0000
|
|
Net
Wells
(1)
|
|
|
1.0150
|
|
|
|
0.1250
|
|
|
|
1.0700
|
|
|
|
2.2100
|
|
|
(1)
|
The
term net as used throughout this document refers to amounts that
include
only acreage or production that is owned by the Company and produced
to
its interest, less royalties and production due to others. Gross
Wells
represents the Operators working interest and Net Wells represents
our
working interest share of each
well.
|
The
oil
reserves shown include crude oil and condensate. Oil volumes are expressed
in
barrels (BBL); a barrel is equivalent to 42 United States gallons. Gas volumes
are expressed in thousands of standard cubic feet (Mcf) at the contract
temperature and pressure bases.
The
estimated reserves and future revenue shown in this report are for proved
developed producing, proved developed non-producing, proved behind pipe and
proved undeveloped reserves. In accordance with SEC guidelines our estimates
do
not include any probable or possible reserves, which may exist for these
properties. This report does not include any value, which could be attributed
to
interests in undeveloped acreage beyond those tracts for which undeveloped
reserves have been estimated.
This
table above is for properties located in Stafford and Barton Counties in Kansas,
Calcasieu Parish in Louisiana, and Brazoria, Victoria and Dewitt Counties in
Texas.
Based
on
our current cash resources and other current assets, management believes we
have
sufficient liquidity to fund operations for the next twelve months. We are
contemplating additional debt and / or equity financing transactions that,
if
successful, are expected to sufficiently fund expenditures for potential
acquisitions and other discretionary expansions of our business. We do not
currently have any commitments for such financing and there is no assurance
that
we will be successful in obtaining such funds. If we cannot obtain additional
financing, we will have to significantly curtail our acquisition plans and
possibly our operations.
Contractual
Obligations
We
have
no material long-term commitments associated with our capital expenditure plans
or operating agreements. Consequently, we believe we have a significant degree
of flexibility to adjust the level of such expenditures as circumstances
warrant. Our level of capital expenditures will vary in future periods depending
on the success we experience in our acquisition, developmental and exploration
activities, oil and gas price conditions and other related economic factors.
Currently no sources of liquidity or financing are provided by off-balance
sheet
arrangements or transactions with unconsolidated, limited-purpose
entities.
The
following table summarizes our contractual obligations and commitments by
payment periods (in thousands).
|
|
Payments
Due by Period
|
|
|
|
|
|
|
Less
than
|
|
|
|
|
|
|
|
|
More
than
|
|
Contractual
Obligations
|
|
Total
|
|
|
one
year
|
|
|
1-3
years
|
|
|
3-5
years
|
|
|
5
years
|
|
Operating
leases
(1)
|
|
$
|
19,800
|
|
|
$
|
19,800
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
contractual obligations
|
|
$
|
19,800
|
|
|
$
|
19,800
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
(1)
|
The
Company holds an
arrangement to rent its main office in Houston with rentals due on
a
month-to-month basis of $4,500 and an apartment in Houston (for use
by UK
Executives) for nine months of $1,700 per month (from April
2007).
|
Amounts
related to our asset retirement obligations are not included in the table above
given the uncertainty regarding the actual timing of such expenditures. Of
the
total ARO, $41,552 and $25,300 are classified as a long-term liability at March
31, 2007 and 2006, respectively. For each of the years ended March 31, 2007
and
2006, the Company recognized no accretion expense related to its ARO, due to
the
assumption of a full offset of salvage values.
Off-Balance
Sheet Arrangements
At
March 31, 2007 and March 31, 2006, we did not have any off-balance
sheet arrangements.
Plan
of Operation for 2007/8
On
an
annual basis, we generally fund most of our capital and exploration activities,
including oil and gas property acquisitions, with cash generated from operations
and from equity financings. We have budgeted for capital expenditures relating
to the work program described in the Section entitles “Description of
Business.”
Critical
Accounting Policies and Estimates
The
discussion and analysis of our financial condition and results of operations
are
based upon our consolidated financial statements, which have been prepared
in
accordance with accounting principles generally accepted in the United States
of
America. The preparation of our consolidated financial statements requires
us to
make estimates and assumptions that affect our reported results of operations
and the amount of reported assets, liabilities and proved oil and gas reserves.
Some accounting policies involve judgments and uncertainties to such an extent
that there is reasonable likelihood that materially different amounts could
have
been reported under different conditions, or if different assumptions had been
used. Actual results may differ from the estimates and assumptions used in
the
preparation of our consolidated financial statements. Described below are the
most significant policies we apply in preparing our consolidated financial
statements, some of which are subject to alternative treatments under accounting
principles generally accepted in the United States of America. We also describe
the most significant estimates and assumptions we make in applying these
policies. We discussed the development, selection and disclosure of each of
these with our audit committee. See Results of Operations above and the
Consolidated Financial Statements and Supplementary Data Note 1,
Organization and Summary of Significant Events and Accounting Policies
, for
a discussion of additional accounting policies and estimates made by
management.
Oil
and Gas Activities
Accounting
for oil and gas activities is subject to special, unique rules. Two generally
accepted methods of accounting for oil and gas activities are available —
successful efforts and full cost. The most significant differences between
these
two methods are the treatment of exploration costs and the manner in which
the
carrying value of oil and gas properties are amortized and evaluated for
impairment. The successful efforts method requires exploration costs to be
expensed as they are incurred while the full cost method provides for the
capitalization of these costs. Both methods generally provide for the periodic
amortization of capitalized costs based on proved reserve quantities. Impairment
of oil and gas properties under the successful efforts method is based on an
evaluation of the carrying value of individual oil and gas properties against
their estimated fair value, while impairment under the full cost method requires
an evaluation of the carrying value of oil and gas properties included in a
cost
center against the net present value of future cash flows from the related
proved reserves, using period-end prices and costs and a 10% discount
rate.
Full
Cost Method
We
use
the full cost method of accounting for our oil and gas activities. Under this
method, all costs incurred in the acquisition, exploration and development
of
oil and gas properties are capitalized into a cost center (the amortization
base). Such amounts include the cost of drilling and equipping productive wells,
dry hole costs, lease acquisition costs and delay rentals. Costs associated
with
production and general corporate activities are expensed in the period incurred.
The capitalized costs of our oil and gas properties, plus an estimate of our
future development and abandonment costs are amortized on a unit-of-production
method based on our estimate of total proved reserves. Our financial position
and results of operations would have been significantly different had we used
the successful efforts method of accounting for our oil and gas
activities.
Proved
Oil and Gas Reserves
Our
engineering estimates of proved oil and gas reserves directly impact financial
accounting estimates, including depreciation, depletion and amortization expense
and the full cost ceiling limitation. Proved oil and gas reserves are the
estimated quantities of oil and gas reserves that geological and engineering
data demonstrate with reasonable certainty to be recoverable in future years
from known reservoirs under period-end economic and operating conditions. The
process of estimating quantities of proved reserves is very complex, requiring
significant subjective decisions in the evaluation of all geological,
engineering and economic data for each reservoir. The data for a given reservoir
may change substantially over time as a result of numerous factors including
additional development activity, evolving production history and continual
reassessment of the viability of production under varying economic conditions.
Changes in oil and gas prices, operating costs and expected performance from
a
given reservoir also will result in revisions to the amount of our estimated
proved reserves.
Our
estimated proved reserves for the four years ended March 31, 2007 were prepared
by Ancell Energy Consulting, Inc., an independent oil and gas reservoir
engineering consulting firm. For more information regarding reserve estimation,
including historical reserve revisions, refers to the Consolidated Financial
Statements and Supplementary Data,
Supplemental Oil and Gas
Disclosure
.
Depreciation,
Depletion and Amortization
The
quantities of estimated proved oil and gas reserves are a significant component
of our calculation of depletion expense and revisions in such estimates may
alter the rate of future expense. Holding all other factors constant, if
reserves are revised upward, earnings would increase due to lower depletion
expense. Likewise, if reserves are revised downward, earnings would decrease
due
to higher depletion expense or due to a ceiling test write-down.
Full
Cost Ceiling Limitation
Under
the
full cost method, we are subject to quarterly calculations of a ceiling or
limitation on the amount of our oil and gas properties that can be capitalized
on our balance sheet. If the net capitalized costs of our oil and gas properties
exceed the cost center ceiling, we are subject to a ceiling test write-down
to
the extent of such excess. If required, it would reduce earnings and impact
stockholders’ equity in the period of occurrence and result in lower
amortization expense in future periods. The discounted present value of our
proved reserves is a major component of the ceiling calculation and represents
the component that requires the most subjective judgments. However, the
associated prices of oil and gas reserves that are included in the discounted
present value of the reserves do not require judgment. The ceiling calculation
dictates that prices and costs in effect as of the last day of the quarter
are
held constant. However, we may not be subject to a write-down if prices increase
subsequent to the end of a quarter in which a write-down might otherwise be
required. If oil and gas prices decline, even if for only a short period of
time, or if we have downward revisions to our estimated proved reserves, it
is
possible that write-downs of our oil and gas properties could occur in the
future.
Future
Development and Abandonment Costs
Future
development costs include costs incurred to obtain access to proved reserves
such as drilling costs and the installation of production equipment. Future
abandonment costs include costs to dismantle and relocate or dispose of our
production platforms, gathering systems and related structures and restoration
costs of land and seabed. Our operators develop estimates of these costs for
each of our properties based upon their geographic location, type of production
structure, well depth, currently available procedures and ongoing consultations
with construction and engineering consultants. Because these costs typically
extend many years into the future, estimating these future costs is difficult
and requires management to make judgments that are subject to future revisions
based upon numerous factors, including changing technology and the political
and
regulatory environment. We review our assumptions and estimates of future
development and future abandonment costs on an annual basis.
The
accounting for future abandonment costs changed on January 1, 2003 with the
adoption of SFAS No. 143,
Accounting for Asset Retirement
Obligations
. This new standard requires that a liability for the discounted
fair value of an asset retirement obligation be recorded in the period in which
it is incurred and the corresponding cost capitalized by increasing the carrying
amount of the related long-lived asset. The liability is accreted to its present
value each period, and the capitalized cost is depreciated over the useful
life
of the related asset. Holding all other factors constant, if our estimate of
future abandonment and development costs is revised upward, earnings would
decrease due to higher depreciation, depletion and amortization (DD&A)
expense. Likewise, if these estimates are revised downward, earnings would
increase due to lower DD&A expense. Of the total ARO, $41,552 and $25,300
are classified as a long-term liability at March 31, 2007 and 2006,
respectively. For each of the years ended March 31, 2007 and 2006, the Company
recognized no depreciation expense related to its ARO, due to the assumption
of
a full offset of salvage values.
Allocation
of Purchase Price in Business Combinations
As
part
of our business strategy, we actively pursue the acquisition of oil and gas
properties. The purchase price in an acquisition is allocated to the assets
acquired and liabilities assumed based on their relative fair values as of
the
acquisition date, which may occur many months after the announcement date.
Therefore, while the consideration to be paid may be fixed, the fair value
of
the assets acquired and liabilities assumed is subject to change during the
period between the announcement date and the acquisition date. Our most
significant estimates in our allocation typically relate to the value assigned
to future recoverable oil and gas reserves and unproved properties. As the
allocation of the purchase price is subject to significant estimates and
subjective judgments, the accuracy of this assessment is inherently
uncertain.
Effective
January 1, 2002, we adopted SFAS No. 142,
Goodwill and Other
Intangible Assets
, under which goodwill is no longer subject to
amortization. Rather, goodwill of each reporting unit is tested for impairment
on an annual basis, or more frequently if an event occurs or circumstances
change that would reduce the fair value of the reporting unit below its carrying
amount. In making this assessment, we rely on a number of factors including
operating results, economic projections and anticipated cash flows. As there
are
inherent uncertainties related to these factors and our judgment in applying
them to the analysis of goodwill impairment, there is risk that the carrying
value of our goodwill may be overstated. If it is overstated, such impairment
would reduce earnings during the period in which the impairment occurs and
would
result in a corresponding reduction to goodwill.
Revenue
Recognition
We
recognize revenue when crude oil and natural gas quantities are delivered to
or
collected by the respective purchaser. We sell our crude oil production to
two
independent purchasers and as of March 31, 2007, we did not have any natural
gas
sales. Title to the produced quantities transfers to the purchaser at the time
the purchaser collects or receives the quantities. Prices for such production
are defined in sales contracts and are readily determinable based on certain
publicly available indices. The purchasers of such production have historically
made payment for crude oil and natural gas purchases within thirty-five days
of
the end of each production month. We periodically review the difference between
the dates of production and the dates we collect payment for such production
to
ensure that receivables from those purchasers are collectible. All
transportation costs are accounted for as a reduction of oil and natural gas
sales revenue.
Recently
Issued Accounting Standards
Certain
Hybrid Instrument
s
. On February 16, 2006 the FASB
issued SFAS 155, “Accounting for Certain Hybrid Instruments,” which amends SFAS
133, “Accounting for Derivative Instruments and Hedging Activities,” and SFAS
140, “Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities.” SFAS 155 allows financial instruments that have
embedded derivatives to be accounted for as a whole (eliminating the need to
bifurcate the derivative from its host) if the holder elects to account for
the
whole instrument on a fair value basis. SFAS 155 also clarifies and amends
certain other provisions of SFAS 133 and SFAS 140. This statement is effective
for all financial instruments acquired or issued in fiscal years beginning
after
September 15, 2006. The Company does not expect its adoption of this new
standard to have a material impact on its financial position, results of
operations or cash flows as it currently does not have any hybrid instruments
outstanding at March 31, 2007.
Accounting
for Servicing of Financial Assets
. In March 2006, the FASB issued SFAS No.
156, “
Accounting for Servicing of Financial Assets—an amendment of FASB
Statement No. 140”(“
SFAS No. 156”), which amends FASB Statement No. 140,
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities,
with respect to the accounting for
separately recognized servicing assets and servicing liabilities.
This
Statement:
|
1.
|
Requires
an entity to recognize a servicing asset or servicing liability each
time
it undertakes an obligation to service a financial asset by entering
into
a servicing contract in any of the following
situations:
|
|
a.
|
A
transfer of the servicer’s financial assets that meets the requirements
for sale accounting
|
|
b.
|
A
transfer of the servicer’s financial assets to a qualifying
special-purpose entity in a guaranteed mortgage securitization in
which
the transferor retains all of the resulting securities and classifies
them
as either available-for-sale securities or trading securities in
accordance with FASB Statement No. 115,
Accounting for Certain
Investments in Debt and Equity
Securities
|
|
c.
|
An
acquisition or assumption of an obligation to service a financial
asset
that does not relate to financial assets of the servicer or its
consolidated affiliates.
|
|
2.
|
Requires
all separately recognized servicing assets and servicing liabilities
to be
initially measured at fair value, if
practicable.
|
|
3.
|
Permits
an entity to choose either of the following subsequent measurement
methods
for each class of separately recognized servicing assets and servicing
liabilities:
|
|
a.
|
Amortization
method
—Amortize servicing assets or servicing liabilities in
proportion to and over the period of estimated net servicing income
or net
servicing loss and assess servicing assets or servicing liabilities
for
impairment or increased obligation based on fair value at each reporting
date.
|
|
b.
|
Fair
value measurement method
—Measure servicing assets or servicing
liabilities at fair value at each reporting date and report changes
in
fair value in earnings in the period in which the changes
occur.
|
|
4.
|
At
its initial adoption, permits a one-time reclassification of
available-for-sale securities to trading securities by entities with
recognized servicing rights, without calling into question the treatment
of other available-for-sale securities under Statement 115, provided
that
the available-for-sale securities are identified in some manner as
offsetting the entity’s exposure to changes in fair value of servicing
assets or servicing liabilities that a servicer elects to subsequently
measure at fair value.
|
|
5.
|
Requires
separate presentation of servicing assets and servicing liabilities
subsequently measured at fair value in the statement of financial
position
and additional disclosures for all separately recognized servicing
assets
and servicing liabilities.
|
This
Statement requires that all separately recognized servicing assets and servicing
liabilities be initially measured at fair value, if practicable. The Board
concluded that fair value is the most relevant measurement attribute for the
initial recognition of all servicing assets and servicing liabilities, because
it represents the best measure of future cash flows. This Statement permits,
but
does not require, the subsequent measurement of servicing assets and servicing
liabilities at fair value. An entity that uses derivative instruments to
mitigate the risks inherent in servicing assets and servicing liabilities is
required to account for those derivative instruments at fair value. Under this
Statement, an entity can elect subsequent fair value measurement of its
servicing assets and servicing liabilities by class, thus simplifying its
accounting and providing for income statement recognition of the potential
offsetting changes in fair value of the servicing assets, servicing liabilities,
and related derivative instruments. An entity that elects to subsequently
measure servicing assets and servicing liabilities at fair value is expected
to
recognize declines in fair value of the servicing assets and servicing
liabilities more consistently than by reporting other-than-temporary
impairments.
The
Board
decided to require additional disclosures and separate presentation in the
statement of financial position of the carrying amounts of servicing assets
and
servicing liabilities that an entity elects to subsequently measure at fair
value to address concerns about comparability that may result from the use
of
elective measurement methods.
An
entity
should adopt this Statement as of the beginning of its first fiscal year that
begins after September 15, 2006. Earlier adoption is permitted as of the
beginning of an entity’s fiscal year, provided the entity has not yet issued
financial statements, including interim financial statements, for any period
of
that fiscal year. The effective date of this Statement is the date an entity
adopts the requirements of this Statement. The Company does not expect
adoption of this standard will have a material impact on its financial position,
operations or cash flows.
Income
Taxes.
In June 2006, the FASB issued FASB Interpretation No 48 (“FIN 48”),
“Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement
No. 109”, which clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with FASB 109.
The Interpretation prescribes a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax position taken
or expected to be taken in a tax return. The Interpretation also provides
guidance on derecognition, classification, interest and penalties, accounting
in
interim periods, disclosure and transition. The Interpretation is effective
for
fiscal years beginning after December 15, 2006. The Company has not yet
determined the impact on the Company’s consolidated financial position or
results of operations.
Fair
Value Measurements.
In September 2006, the FASB issued SFAS 157, “Fair
Value Measurements”, which defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles (“GAAP”), and
expands disclosures about fair value measurements. Prior to this Statement,
there were different definitions of fair value and limited guidance for applying
those definitions in GAAP. This Statement provides the definition to increase
consistency and comparability in fair value measurements and for expanded
disclosures about fair value measurements. The Statement emphasizes that fair
value is a market-based measurement, not an entity-specific measurement. The
Statement clarifies that market participant assumptions include assumptions
about risk, i.e. the risk inherent in a particular valuation technique used
to
measure fair value and/or the risk inherent in the inputs to the valuation
technique. The Statement expands disclosures about the use of fair vale to
measure assets and liabilities in interim and annual periods subsequent to
initial recognition. The disclosures focus on the inputs used to measure fair
value and for recurring fair value measurements using significant unobservable
inputs, the effect of the measurements on earnings for the period. The Statement
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. Earlier
application is encouraged, provided that the reporting entity has not yet issued
financial statements for that fiscal year, including the financial statements
for an interim period within that fiscal year. The Company does not expect
adoption of this standard will have a material impact on its financial position,
operations or cash flows
In
December 2006, the FASB issued FSP EITF 00-19-2, Accounting for Registration
Payment Arrangements ("FSP 00-19-2") which addresses accounting for registration
payment arrangements. FSP 00-19-2 specifies that the contingent obligation
to
make future payments or otherwise transfer consideration under a registration
payment arrangement, whether issued as a separate agreement or included as
a
provision of a financial instrument or other agreement, should be separately
recognized and measured in accordance with FASB Statement No. 5, Accounting
for
Contingencies. FSP 00-19-2 further clarifies that a financial instrument subject
to a registration payment arrangement should be accounted for in accordance
with
other applicable generally accepted accounting principles without regard to
the
contingent obligation to transfer consideration pursuant to the registration
payment arrangement. For registration payment arrangements and financial
instruments subject to those arrangements that were entered into prior to the
issuance of EITF 00-19-2, this guidance shall be effective for financial
statements issued for fiscal years beginning after December 15, 2006 and interim
periods within those fiscal years. The Company has not yet determined the impact
that the adoption of FSP 00-19-2 will have on its financial
statements.
The
Fair Value Option for Financial Assets and Financial Liabilities.
In
February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
Assets and Financial Liabilities—including an amendment of FASB Statement No.
115”, permitting entities to choose to measure many financial instruments and
certain other items at fair value. The objective is to improve financial
reporting by providing entities with the opportunity to mitigate volatility
in
reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting measurement. The statement
applies to all entities, including not-for profit organizations. Most of the
provisions of this Statement apply only to entities that elect the fair value
option. However, the amendment to FASB Statement No. 115, “Accounting for
Certain Investments in Debt and Equity Securities”, applies to all entities with
available-for-sale and trading securities. The Company does not expect adoption
of this standard will have a material impact on its financial position,
operations or cash flows
For
more
recently issued accounting standards, please see Note 3 "Summary of Significant
Accounting Policies" of the Notes to Consolidated Financial
Statements.
Principal
Executive Offices
We
hold
an arrangement to rent our main office comprising of approximately 300 square
feet which is located at 10,000 Memorial Drive, Suite 440, Houston, Texas
77024.
Lease payments at fiscal year ended March 31, 2007 were $4,500 per month
and are
due on a month-to-month basis.
We
believe that we have satisfactory title to the properties in which we own an
interest and used in our business, subject to liens for taxes not yet payable,
liens incident to minor encumbrances and easements and restrictions that do
not
materially detract from the value of these properties, our interests in these
properties, or the use of these properties in our business. We believe that
our
properties are adequate and suitable for us to conduct business in the future.
Oil
and Gas Reserves
The
March 31, 2007 proved reserve estimates presented in this document were
prepared by Ancell Energy Consulting, Inc. (“Ancell”). The estimates of
quantities of proved reserves below were made in accordance with the definitions
contained in SEC Regulation S-X, Rule 4-10(a). For additional
information regarding estimates of proved reserves, the preparation of such
estimates by Ancell and other information about our oil and gas reserves,
see
the Financial Statements and Supplementary Data,
Supplemental Oil and Gas
Information
. Our reserves are sensitive to commodity prices and their
effect on economic producing rates. Our estimated proved reserves are based
on
oil and gas spot market prices in effect for the periods presented in this
report on the last trading day of March 2007, 2006 and 2005, respectively.
There
are a number of uncertainties inherent in estimating quantities of proved
reserves, including many factors beyond our control, such as commodity pricing.
Therefore, the reserve information in this Annual Report represents only
estimates. Reservoir engineering is a subjective process of estimating
underground accumulations of oil and gas that cannot be measured in an exact
manner. The accuracy of any reserve estimate is a function of the quality
of
available data and of engineering and geological interpretation and judgment.
As
a result, estimates of different engineers may vary. In addition, results
of
drilling, testing and production subsequent to the date of an estimate may
justify revising the original estimate. Accordingly, initial reserve estimates
are often different from the quantities of oil and gas that are ultimately
recovered. The meaningfulness of such estimates depends primarily on the
accuracy of the assumptions upon which they were based. Except to the extent
we
acquire additional properties containing proved reserves or conduct successful
exploration and development activities or both, our proved reserves will
decline
as reserves are produced.
At
March 31, 2007, our estimated total proved oil and gas reserves were
approximately 114.578 Mboe, consisting of 24.333 thousand barrels of oil
(MBbls)
and 541.470 million cubic feet (Mmcf) of natural gas. Approximately 113.198
Mboe
or 99.0% of our proved reserves were classified as proved developed and proved
behind pipe. We focus on maintaining a portfolio of long-lived, lower risk
reserves along with shorter lived, higher margin reserves. We believe that
this
balanced reserve mix provides a diversified cash flow foundation to fund
our
development and exploration drilling program.
The
following table presents certain information as of March 31, 2007 and for our
reserves and properties all located onshore in the United States. Shut-in wells
currently not capable of production are excluded from the producing well
information.
|
|
|
|
|
|
|
|
|
South
|
|
|
|
|
In
Mboe:
|
|
|
Kansas
|
|
|
Louisiana
|
|
|
Texas
|
|
|
Total
|
|
Proved
Reserves at Year End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed
|
|
|
14.479
|
|
|
|
8.110
|
|
|
|
90.609
|
|
|
|
113.198
|
|
Undeveloped
|
|
|
1.380
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
15.859
|
|
|
|
8.110
|
|
|
|
90.609
|
|
|
|
114.578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Wells
(1)
|
|
|
21.0000
|
|
|
|
1.0000
|
|
|
|
4.0000
|
|
|
|
26.0000
|
|
Net
Wells
(1)
|
|
|
1.015
|
|
|
|
0.1250
|
|
|
|
1.070
|
|
|
|
2.210
|
|
|
(1)
|
The
term net as used throughout this document refers to amounts that
include
only acreage or production that is owned by the Company and produced
to
its interest, less royalties and production due to others. Gross
Wells
represents the Operators working interest and Net Wells represents
our
working interest share of each well included in the reserve
report.
|
The
oil
reserves shown include crude oil and condensate. Oil volumes are expressed
in
barrels (Bbl) or thousands barrels (MBbl); a barrel is equivalent to 42 United
States gallons. Gas volumes are expressed in thousands of standard cubic feet
(Mcf) at the contract temperature and pressure bases. The term Mboe which is
defined as thousand of barrels of equivalent oil is also used and is calculated
by converting gas volumes to oil volumes at the ratio of 6:1.
The
estimated reserves and future revenue shown in this report are for proved
developed producing, proved developed non-producing, proved behind pipe and
proved undeveloped reserves. In accordance with SEC guidelines, our estimates
do
not include any probable or possible reserves, which may exist for these
properties. This report does not include any value, which could be attributed
to
interests in undeveloped acreage beyond those tracts for which undeveloped
reserves have been estimated.
This
table above is for properties located in Stafford and Barton Counties in
Kansas,
Calcasieu Parish in Louisiana and Brazoria, Goliad, Matagorda and Victoria
Counties in Texas.
Future
gross revenue to Index interest is prior to deducting state production taxes
and
ad valorem taxes. Future net revenue is calculated after deducting these
taxes,
future capital costs, and operating expenses but before consideration of
federal
income taxes; future net revenue for those properties is calculated after
deducting net abandonment costs. In accordance with SEC guidelines, the future
net revenue has been discounted at an annual rate of 10 percent to determine
its
“present worth.” The present worth is shown to indicate the effect of time on
the value of money and should not be construed as being the fair market value
of
the properties.
Oil
prices used in this report are based on the March 31, 2007 oil price received
at
various points and averaged $58.19 per barrel. Gas prices used in this report
are based on a March 31, 2007 NYMEX spot market price and averaged of $6.71
per
MMBTU, adjusted by lease for energy content, transportation fees, and regional
price differentials. Oil and gas prices are held constant in accordance with
SEC
guidelines.
Lease
and
well operating costs are based on operating expense records of Index. For
non-operated properties, these costs include the per-well overhead expenses
allowed under joint operating agreements along with costs estimated to be
incurred at and below the district and field levels. As requested, lease and
well operating costs for the operated properties include only direct lease
and
field level costs. For all properties, headquarters general and administrative
overhead expenses of Index are not included. Lease and well operating costs
are
held constant in accordance with SEC guidelines. Capital costs are included
as
required for workovers, new development wells, and production
equipment.
Productive
Wells and Acreage
As
of
March 31, 2007, we had 22 gross productive wells (1.280 net productive
wells). Our oil (only) wells totaled 20 gross productive wells and 0.960
net productive oil wells and our mixed oil and gas wells totaled 2 gross
and
0.320 net mixed oil and gas productive wells. We had no gas only productive
wells. We reported in our press release dated June 11, 2007, containing our
operations summary for fiscal year ended March 31, 2007, that oil and gas
was
produced from a total of 23 wells. The difference in the reported number
of
productive wells is due to the fact that this Annual Report represents wells
and
reserves information in accordance with SEC guidelines, including the use
of a
reserve report prepared by Ancell Energy Consulting, an independent oil and
gas
reservoir engineering consulting firm.
Acreage
We
own
interest in developed and undeveloped oil and gas acreage in the locations
set
forth in the table below. These ownership interests generally take the form
of
working interests in oil and gas leases or licenses that have varying terms.
The
following table presents a summary of our acreage interests as of March 31,
2007:
|
|
Developed
Acreage
(1)
|
|
|
Undeveloped
Acreage
(1)
|
|
|
Total
Acreage
(1)
|
|
State
|
|
Gross
|
|
|
Net
|
|
|
Gross
|
|
|
Net
|
|
|
Gross
|
|
|
Net
|
|
Kansas
|
|
|
4,533.00
|
|
|
|
181.97
|
|
|
|
6,035.00
|
|
|
|
184.58
|
|
|
|
11,088.00
|
|
|
|
366.55
|
|
Louisiana
|
|
|
132.00
|
|
|
|
12.35
|
|
|
|
-
|
|
|
|
-
|
|
|
|
132.00
|
|
|
|
12.35
|
|
Texas
|
|
|
761.00
|
|
|
|
102.01
|
|
|
|
4,561.00
|
|
|
|
604.99
|
|
|
|
5322.00
|
|
|
|
707.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Acreage
|
|
|
5,426.00
|
|
|
|
296.33
|
|
|
|
10,596.00
|
|
|
|
789.57
|
|
|
|
16,542.00
|
|
|
|
1,085.90
|
|
(1)
|
|
The
term Gross Acres represents the Operators interest in acreage and
Net
Acreage represents acreage to our interest, less royalties and production
due to others for each well.
|
The
following is the expiration of the undeveloped acreage by year of
expiration:
|
2007
|
|
2008
|
|
2009
|
|
Thereafter
|
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
|
Undeveloped
Acreage
|
|
|
|
4,322.00
|
|
|
|
255.32
|
|
|
|
|
4,152.00
|
|
|
|
357.41
|
|
|
|
|
2,015.00
|
|
|
|
169.05
|
|
|
|
|
107.00
|
|
|
|
7.79
|
|
We
account for our oil and gas producing activities using the full cost method
of
accounting as prescribed by the SEC. Accordingly, all costs incurred in the
acquisition, exploration, and development of proved oil and gas properties,
including the costs of abandoned properties, dry holes, geophysical costs,
and
annual lease rentals are capitalized. All general corporate costs are expensed
as incurred. Sales or other dispositions of oil and gas properties are accounted
for as adjustments to capitalized costs, with no gain or loss recorded unless
the ratio of cost to proved reserves would significantly change. Depletion
of
evaluated oil and gas properties is computed on the units of production method
based on proved reserves. The net capitalized costs of evaluated oil and gas
properties are subject to a full cost ceiling test.
Capitalized
costs of our evaluated and unevaluated properties at March 31, 2007, 2006
and
2005 are summarized as follows:
|
|
March
31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Capitalized
costs:
|
|
|
|
|
|
|
|
|
|
Proved
and evaluated properties
|
|
$
|
3,254,211
|
|
|
$
|
722,056
|
|
|
$
|
334,080
|
|
Unproved
and unevaluated properties
|
|
|
1,927,776
|
|
|
|
356,729
|
|
|
|
76,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,181,987
|
|
|
|
1,078,785
|
|
|
|
410,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
accumulated depreciation and depletion
|
|
|
(315,937
|
)
|
|
|
(127,586
|
)
|
|
|
(62,275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,866,050
|
|
|
$
|
951,199
|
|
|
$
|
348,334
|
|
Production
Our
oil
and gas production volumes and average sales price for the twelve months ended
March 31, 2007, 2006 and 2005, respectively, are as follows:
|
|
Years
Ended March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Gas
production (Mcf)
|
|
|
8.490
|
|
|
|
-
|
|
|
|
-
|
|
Oil
production (MBbl)
|
|
|
6.660
|
|
|
|
3.42
|
|
|
|
2.07
|
|
Equivalent
production (Mboe)
|
|
|
8.075
|
|
|
|
3.42
|
|
|
|
2.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
price per unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
(per Mcf)
|
|
$
|
6.61
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Oil
(per Bbl)
|
|
$
|
60.20
|
|
|
$
|
55.89
|
|
|
$
|
42.64
|
|
Equivalent
(per boe)
|
|
$
|
56.60
|
|
|
$
|
55.89
|
|
|
$
|
42.64
|
|
The
Company has not entered into any derivative contracts for any purpose from
the
period of inception through March 31, 2007.
Drilling
Activity
The
table
below sets forth the results of our drilling activities for the periods
indicated:
|
|
Years
Ended March
31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
Gross
|
|
|
Net
|
|
|
Gross
|
|
|
Net
|
|
|
Gross
|
|
|
Net
|
|
Gross
Exploratory Wells:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Productive
(1)
|
|
|
5.00
|
|
|
|
0.2150
|
|
|
|
6.00
|
|
|
|
0.3750
|
|
|
|
5.00
|
|
|
|
0.2500
|
|
Dry
|
|
|
4.00
|
|
|
|
0.6825
|
|
|
|
1.00
|
|
|
|
0.0500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Exploratory
|
|
|
9.00
|
|
|
|
0.8975
|
|
|
|
7.00
|
|
|
|
0.4250
|
|
|
|
5.00
|
|
|
|
0.2500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Development Wells:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Productive
(1)
|
|
|
1.00
|
|
|
|
0.195
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Dry
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Development
|
|
|
1.00
|
|
|
|
0.195
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Gross Wells:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Productive
(1)
|
|
|
6.00
|
|
|
|
0.323
|
|
|
|
19.00
|
|
|
|
0.75
|
|
|
|
11.00
|
|
|
|
0.55
|
|
Dry
|
|
|
4.00
|
|
|
|
0.518
|
|
|
|
1.00
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10.00
|
|
|
|
0.841
|
|
|
|
11.00
|
|
|
|
0.55
|
|
|
|
8.00
|
|
|
|
.40
|
|
|
|
|
(1)
|
|
Although
a well may be classified as productive upon completion, future
production
may deem the well to be uneconomical, particularly exploratory
wells where
there is no production history. The terms used throughout this
document
are: Gross Wells represents the Operators working interest and
Net Wells
represents our working interest share of each
well.
|
We
reported in our press release dated June 11, 2007, containing our operations
summary for fiscal year ended March 31, 2007, that operationally we had drilled
and/or completed 13 wells. The difference in the reported number of drilled
wells is due to the fact that this Annual Report represents wells information
in
accordance with SEC guidelines.
Present
Activities
We
intend
to implement the capital expenditures program as detailed in the Management’s
Discussion and Analysis or Plan of Operation set forth above.
Delivery
Commitments
At
March
31, 2007, we had no delivery commitments with our purchasers.
LEGAL
PROCEEDINGS
From
time
to time we may be a defendant and plaintiff in various legal proceedings arising
in the normal course of our business. We are currently not a party to any
material pending legal proceedings or government actions, including any
bankruptcy, receivership, or similar proceedings. In addition, management is
not
aware of any known litigation or liabilities involving the operators of our
properties that could affect our operations. Should any liabilities incurred
in
the future, they will be accrued based on management’s best estimate of the
potential loss. As such, there is no adverse effect on our consolidated
financial position, results of operations or cash flow at this time.
Furthermore, Management of the Company does not believe that there are any
proceedings to which any director, officer, or affiliate of the Company, any
owner of record of the beneficially or more than five percent of the common
stock of the Company, or any associate of any such director, officer, affiliate
of the Company, or security holder is a party adverse to the Company or has
a
material interest adverse to the Company.
MANAGEMENT
Directors
and Executive Officers
Name
|
|
Age
|
|
Position
|
Director
Since
|
Lyndon
West (1)
|
|
|
47
|
|
Director
and Chief Executive Officer
|
January
2006
|
Andrew
Boetius (1)
|
|
|
43
|
|
Director
and Chief Financial Officer (acting Principal Accounting
Officer)
|
January
2006
|
Daniel
Murphy (1)
|
|
|
64
|
|
Chairman
and Secretary
|
January
2006
|
Michael
Scrutton (1)
|
|
|
61
|
|
Director
|
January
2006
|
David
Jenkins (1)
|
|
|
57
|
|
Director
|
January
2006
|
Background
of Executive Officers and Directors
The
following sets the biographical information about our executive officers
and
directors as provided to us each respective individual:
Mr.
Lyndon West,
who founded Index Ltd. in February of 2003, has been the
Chief Executive Officer of the Company since January 20, 2006. From October
of
1998 to December of 2003, Mr. West was employed at IHS Energy as New Venture
Services Practice Director, and prior thereto as a CEO of IHS Energy’s
International Division. In this position, he was responsible for the development
of business relations worldwide. Prior thereto, from June of 1987 to October
of
1998, Mr. West was employed at IEDS Limited, a company which he co founded,
as
the Managing Director. In this position, he was responsible for developing
business direction and strategy implementation for the company. IEDS Limited
was
subsequently acquired by IHS Energy in 1998. Mr. West has 25 years of experience
in the Oil and Gas Industry.
Mr.
Andrew Boetius,
a UK Chartered Management Accountant, has been the
Chief Financial Officer and a Director of the Company since January 20, 2006.
From September of 1988 to March of 2002, Mr. Boetius was employed at Amerada
Hess Limited (“Amerada”), a UK subsidiary of Amerada Hess Corporation. Mr.
Boetius has held a number of roles during his career with Amerada Hess
Corporation, both in its upstream and downstream businesses. In addition, from
February of 1999 to June 2002, he was the Finance Director for Amerada’s UK
Energy Marketing and Trading business. Mr. Boetius was a part of the management
team that divested this business to the TXU Group in March 2002. He remained
in
his role after the divesture to TXU Group through June of 2002. Subsequently
Mr.
Boetius performed an interim management role for a UK business in the Fortum
Group. Mr. Boetius joined Index Ltd. as a Director on its inception in February
of 2003. Prior to 1988, Mr. Boetius worked for the UK divisions of GEC
group.
Mr.
Daniel Murphy
has been the Chairman of the Company since January 20,
2006. From October 1996 to July, 2004, Mr. Murphy was employed at
Intrepid Energy (North Sea) Ltd. as Engineering and Production Director.
Prior thereto, from January 1994 to October, 1996, Mr. Murphy was
employed at C.C. Management Associates as the Managing
Director. From December 1996 to present date, Mr. Murphy has continuously
been a Non-Executive Director of Aker Kvaerner Offshore Partners Limited, a
United Kingdom registered company.
Mr.
David Jenkins
has been a Director of the Company since January 20,
2006. From December of 2002, to July of 2005, Mr. Jenkins was the President
of
Exploration Performance LLC (“Exploration Performance”), a Houston consulting
company specializing in design and implementation of complete, integrated global
exploration processes for oil and gas companies desiring to improve their
exploration performance or to expand their exploration business. Mr. Jenkins
areas of consultancy services included goal setting, strategy development,
project evaluation, portfolio risk analysis, budget optimization, project
implementation and post-audit analysis. Exploration Performance’s clients
included Marathon Oil Company, Norsk Hydro, Robertson Research International,
CNODC, IHS Energy and Fairfield Geophysical.
During
the same period, he also acted as the Technical Director of Index Ltd. Prior
to
December 2002, he was employed at Conoco Phillips Inc. (“Conoco”) for 28 years
in a number of senior management positions. Mr. Jenkins was instrumental
in
developing the integrated exploration processes, which resulted in Conoco
becoming an industry leader in terms of commercial success rate and the number
of significant oil field discoveries. In addition Mr. Jenkins was responsible
for the analysis that led to major discoveries in the Gulf of Paria and in
the
CUU Long basins in Vietnam. Mr. Jenkins has also participated in evaluation
of
projects for Conoco, which included the evaluation and ranking of over 50
basins
and 100+ oil exploration plays. Mr. Jenkins has 31 years of experience in
global
hydrocarbon exploration.
Dr.
Michael Scrutton
has been a Director of the Company since January 20,
2006. From 1969 to the end of 2002, Dr. Scrutton was employed by the Robertson
Research Group (“Robertson”), a leading British consulting company involved in
the upstream oil and gas business. During his tenure with Robertson, he became
a
director of the Robertson Research Holdings Ltd. and several of its subsidiary
companies. In his employment with Robertson, he has fulfilled a variety of
technical, management, planning and business development roles. From 1970 to
1986 he worked from Robertson's offices in Singapore, Indonesia and the United
States of America, returning to the head office in North Wales in 1986. Dr.
Scrutton is a geologist by training and during his 33 years of involvement
in
the upstream petroleum business, has gained experience in most of the world's
oil and gas provinces.
All
directors hold office until the next annual meeting of our stockholders and
until their successors have been duly elected and qualified. Our executive
officers are elected by, and serve at the designation and appointment of the
board of directors. Some of our directors and executive officers also serve
in
various capacities with our subsidiaries.
Family
Relationships
There
are
no family relationships among any of our directors and executive
officers.
Code
of Ethics
On
March
31, 2006 the Company’s Board of Directors adopted a formal Code of Ethics and
Business Conduct that applies to its Chief Executive Officer and Chief Financial
Officer, as well as to the directors, officers and employees of the Company.
A
copy of the Company’s Code of Ethics was filed as Exhibit 14.1 to its Annual
Report filed with the SEC on Form 10-KSB on April 10, 2006.
Section
16(a) Beneficial Ownership Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our directors and
executive officers and persons who beneficially own more than ten percent of
a
registered class of our equity securities to file with the SEC initial reports
of ownership and reports of change in ownership of common stock and other equity
securities of our Company. Officers, directors and greater than ten percent
stockholders are required by SEC regulations to furnish us with copies of all
Section 16(a) forms they file. To our knowledge, the following persons have
failed to file, on a timely basis, the identified reports required by Section
16(a) of the Exchange Act as of October 1, 2007:
Name
and Relationship
|
|
Number
of
late reports
|
|
|
Transactions
not timely reported
|
|
|
Known
failures to file a required form
|
|
Lyndon
West
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Andrew
Boetius
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Daniel
Murphy
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Michael
Scrutton
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
David
Jenkins
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
EXECUTIVE
COMPENSATION
The
following table sets forth information concerning the annual and long-term
compensation of our Chief Executive Officer and the other named executive
officers, for services rendered as executive officers as of March 31, 2007
and
March 31, 2006.
Summary
Compensation Table
Name
& Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
(5)
|
Stock
Awards($)
(5)
|
Option
Awards ($)
|
Non-Equity
Incentive Plan Compensation ($)
|
Change
in Pension Value and Non-Qualified Deferred Compensation Earnings
($)
|
All
Other Compensation ($) (1)
|
Total
($)
|
Lyndon
West
CEO
and Director (2)
|
2007
2006
|
118,501
(5)
90,909
|
73,553
---
|
--
|
--
(6)
741,292
|
--
|
--
|
--
12,526 (10)
|
192,054
|
Andrew
Boetius
CFO
and
Director(3)
|
2007
2006
|
114,415
(5)
90,909
|
68,649
|
--
|
--
(6)
741,292
|
--
|
--
|
--
12,526 (11)
|
189,064
|
John
Williams
Executive
Vice President Exploration and Production and
Director
(4)
|
2007
2006
|
125,000
(5)
|
56,250
(8)
|
60,000
(7)
|
135,767
(7)
|
--
|
--
|
8,952
(9)
|
385,969
|
|
|
|
|
|
|
|
|
|
|
Daniel
Murphy
Chairman
|
2007
2006
|
114,415
(5)
|
68,649
|
--
|
--
(6)
|
--
|
--
|
--
|
189,064
|
(1)
With
the exception of reimbursement of expenses incurred by our named executive
officers during the scope of their employment, none of the named executive
received any other compensation, perquisites or personal benefits in excess
of
$10,000.
(2)
Appointed as the Company’s CEO and a director in January of 2006.
(3)
Appointed as the Company’s CFO and a director in January of 2006.
(4)
On
August 13, 2007, Mr. John G. Williams informed us that he was resigning
from his
position as Executive Vice President Exploration and Production effective
as of
November 1, 2007, and that he was also resigning from his position as a
member
of our board of directors effective immediately. Pursuant to the terms
of Mr.
Williams’ Employment Agreement entered into with us, dated August 29, 2006,
which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed
with the
SEC on September 9, 2006, Mr. Williams complied with the terms of the Employment
Agreement by giving us proper notice of his resignation. Mr. Williams will
continue to serve as Executive Vice President Exploration and Production
until
November 1, 2007. Our Board of Directors has no immediate plans to appoint
a replacement director to fill the vacancy created.
(5)
From
April 1, 2006 to October 30, 2007, Mr. West, Mr. Boetius and Mr. Murphy
received
an annual salary of $98,070 each. Effective as of November 1, 2006, their
annual
salaries were increased to $147,105, $137,298 and $137,298, respectively.
The
amounts stated represent their aggregate salaries paid based on pro rata
portions of the applicable annual base salary amounts. The amount of salary
paid
to Mr. Williams represents (i) pro rata portion of his annual base salary
of
$150,000 for the period from August 1, 2006 (effective date of Mr. Williams’
employment agreement) to March 31, 2007, and (ii) 25,000 paid by the Company
to
Mr. Williams for services rendered as a consultant to the Company prior
to the
effective date of his full time employment agreement.
(6)
370,916 stock options out of the original grant by the Company of 1,482,584
stock options made on January 20, 2006 to each of Mr. West and Mr. Boetius
vested during the fiscal year ended March 31, 2007. 277,717 stock options
out of
the original grant by the Company of 1,110,870 stock options made on January
20,
2006 to Mr. Murphy vested during the fiscal year ended March 31,
2007.
(7)
Amounts represented as stock-based
compensation expense for the fiscal year ended March 31, 2007, for restricted
stock awards and stock options granted in 2007 under FAS 123 R as
discussed in Note 11, “Options and Warrants and Stock-Based Compensation”
of the Notes to Consolidated Financial Statements included elsewhere in
this
Annual Report. On March 20, 2007, Mr. Williams was awarded 500,000 stock
options, 250,000 of which vested on the date of grant. The remaining shares,
which were due to vest on the successive two year anniversaries of the
date of
the grant, will no longer vest due to Mr. Williams resignation from the
Company.
During 2007 fiscal
year, Mr. Williams was also awarded 50,000 restricted shares of the Company’s
common stock.
(8)
Represents the dollar value of Mr.
Williams’ bonus received for the fiscal year ended March 31, 2007, which
converted into 37,500 shares, at a price of $1.50 per share. Per the terms
of
Mr. Williams’ employment agreement, Mr. Williams was awarded 37,500 shares,
12,500 of which vested on March 31, 2007. The remaining shares, which were
due
to vest on the successive two year anniversaries of the date of the grant,
will
no longer vest due to Mr. Williams resignation from the
Company.
(9)
Represents pro rata portion for the 8 months of Mr. William’s employment with
the Company for the fiscal year ended March 31, 2007, of the annual contribution
by the Company to Mr. Williams’ medical health insurance in the amount of
$13,428. The Company further agreed to cover any cost increases to said
medical
health insurance policy.
(10)
The
Company granted 101,265 shares of Common Stock to Lyndon West as compensation
expense, effective as of January 20, 2006 valued at $12,526.
(11) The
Company granted 101,264 shares of Common Stock to Andrew Boetius as compensation
expense, effective as of January 20, 2006 valued at
$12,526.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The
following table sets forth information for the named executive officers and
directors regarding the number of shares subject to both exercisable and
unexercisable stock options, as well as the exercise prices and expiration
dates
thereof, as of March 31, 2007:
|
|
Option
Awards
|
|
|
Stock
Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#)
|
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
(#)
|
|
|
Equity Incentive
Plan Awards:
Market or Payout
Value
of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
($)
|
|
Lyndon
West
|
|
|
1,111,938
|
|
|
|
370,916
|
|
|
|
--
|
|
|
|
0.35
|
|
|
1/20/11
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew
Boetius
|
|
|
1,111,938
|
|
|
|
370,916
|
|
|
|
--
|
|
|
|
0.35
|
|
|
1/20/11
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel
Murphy
|
|
|
833,153
|
|
|
|
277,717
|
|
|
|
--
|
|
|
|
0.35
|
|
|
1/20/11
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
Williams
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
--
|
|
|
|
1.42
|
|
|
3/20/12
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
25,000
|
|
|
|
37,500
|
(1)
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Jenkins
|
|
|
226,032
|
|
|
|
75,344
|
|
|
|
--
|
|
|
|
0.35
|
|
|
1/20/11
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Scrutton
|
|
|
150,083
|
|
|
|
75,344
|
|
|
|
--
|
|
|
|
0.35
|
|
|
1/20/11
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
(1)
|
Represents
the dollar value of portions of Mr. Williams’ bonus received for the
fiscal year ended March 31, 2007, which in its entirety converted
into
37,500 shares, at a price of $1.50 per share, which have not vested
to
date. Per the terms of Mr. Williams’ employment contract, 37,500 shares
vest in three equal installments, of which 12,500 shares vested
on March
31, 2007, and the remainder shall vest on the successive two year
anniversaries of the date of the grant, subject to Mr. Williams’
continuous employment with the Company. Market value of the underlying
securities is based on the closing price, $1.50, of the Company’s common
stock on March 30, 2007, the last trading day of 2007 fiscal
year.
|
Directors
Compensation
Name
(a)
|
|
Fees Earned
or Paid in
Cash
($)
(b)
|
|
|
Stock
Awards
($)
(c)
|
|
|
Option
Awards
($)
(d)(1)
|
|
|
Non-Equity Incentive
Plan Compensation
($)
(e)
|
|
|
Change in Pension Value and
Nonqualified Deferred
Compensation Earnings
(f)
|
|
|
All Other
Compensation
($)
(g)
|
|
|
Total
($)
(h)
|
|
Lyndon
West
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Andrew
Boetius
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Daniel
Murphy
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
John
Williams
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
David
Jenkins
|
|
|
30,450
|
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,450
|
|
Michael
Scrutton
|
|
|
34,128
|
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
34,128
|
|
|
(1)
|
From
April 1, 2006 to October 30, 2007, Mr. Jenkins and Mr. Scrutton
received
compensation based on the pro rata portion of their annual salaries
of
$25,200 and $28,244, respectively. Effective as of November 1,
2006, their
annual salaries were increased to $37,800 and $42,366, respectively.
The
amounts stated represent their aggregate annual compensation paid
based on
pro rata of the applicable annual
salaries.
|
With
the
exception of Michael Scrutton and David Jenkins, we do not currently pay
our
directors for attending meetings of our Board of Directors, although we expect
to adopt a policy for compensating directors for attending meetings of our
Board
of Directors in the future. Our directors, who are also our officers, receive
compensation for the services rendered to us pursuant to their employment
agreements entered into with either our company or Index Ltd., our wholly
owned
subsidiary.
Employment
Agreements
Index
Ltd. had initially entered into employment and non-executive agreements,
with
the following five directors of Index Ltd. which became effective as of January
1, 2006. Subsequently, Mr. Jenkins’ non-executive agreement was assigned and
transferred from Index Ltd. to Index Oil. In connection with these agreements,
Mr. West, Mr. Boetius, Mr. Murphy and Mr. Scrutton serve as directors and/or
officers of Index Oil and will be compensated for the provision of services
to
Index Oil pursuant to the agreements entered into with Index Ltd, and Mr.
Jenkins serves as a non-executive director of Index Oil and will be compensated
for the provision of his services to Index Oil solely by Index Oil pursuant
to
his employment agreement as assigned by Index Ltd. The following are the
material terms of these agreements:
|
·
|
Mr.
West and Mr. Boetius. The agreements initially provided for Mr. West
and
Mr. Boetius to receive each an annual salary of $90,909 per year.
Effective as of April 1, 2007, Mr. West’s salary was increased to $167,700
and Mr. Boetius’ salary was increased to $156,520. Mr. West’s and Mr.
Boetius’ employment agreements provide for continuous employment without a
set date of termination. Index Ltd. may terminate Mr. West’s or Mr.
Boetius’ employment when Mr. West or Mr. Boetius respectively reach such
age as Index’s Board of Directors determines as the appropriate retirement
age for the senior employees of company. Mr. West and Mr. Boetius
may
terminate their employment with the company upon not less than 3
months
notice. Additionally, Index may terminate Mr. West’s and/or Mr. Boetius’
employment agreement upon not less than 6 months notice. Pursuant
to
Termination of Control protection, upon termination of Mr. West’s or Mr.
Boetius’ employment due to a change of control of Index, Mr. West and/or
Mr. Boetius are entitled to severance pay. The severance pay is equal
to
four times the amount of Mr. West’s or Mr. Boetius’ compensation package,
respectively, as defined in the
agreements;
|
|
·
|
A
full time Employment Agreement with Mr. Murphy. The agreement initially
provided for Mr. Murphy to receive an annual salary of $75,000 per
year,
which effective as of April 1, 2007, was increased to $156,520. Mr.
Murphy’s is employed continuously by Index Ltd. without a set date of
termination; however, his employment is terminated immediately upon
his
death or permanent disability. Index Ltd. may also terminate Mr.
Murphy’s
employment upon six months notice. Mr. Murphy may terminate his employment
upon 3 months notice to Index Ltd. Pursuant to his employment agreement
Index Ltd. provides Mr. Murphy with Directors Liability Insurance
and
contributes to his Private pension plan. Furthermore, the employment
agreement provides for a Termination of Control Protection which
entitles
Mr. Murphy to receive an amount equivalent to 4 times of annual
compensation amount; and
|
|
·
|
A
non executive director Service Agreement with Mr. Scrutton and Mr.
Jenkins, whose non-executive director Service Agreement was subsequently
assigned to Index Oil by Index Ltd. The Agreements initially provided
for
Mr. Jenkins to receive a salary of $1,050 per month which effective
as of
November 2006 was increased to $1,575 per month, and Mr. Scrutton
to
receive a salary of $1,091 per month, which effective as of November
2006
was increased to $1,765 per month. Mr. Jenkins’ and Mr. Scrutton’s
employment is terminated immediately upon their death or permanent
disability. Mr. Jenkins’ or Mr. Scrutton’s employment may also be
terminated by Index Oil or Index Ltd., as applicable, upon three
months
written notice. Mr. Jenkins and Mr. Scrutton may terminate their
employment upon 3 months written notice to the applicable entity.
Pursuant
to their employment agreements, as an alternative to serving notice,
Index
Oil or Index Ltd., as applicable, may, in its absolute discretion,
terminate their employment without prior notice and make a payment
in
compensation for loss of employment equal to the salaries which they
would
otherwise have received during their notice period. Furthermore,
the
employment agreements provide for a Termination of Control Protection
which entitles Mr. Jenkins and Mr. Scrutton to achieve vesting of
their
unvested stock options up to the date of
termination.
|
*
Certain
compensation amounts are based on salaries that are to be paid in British
Pounds. All 2007 British Pound denominated executive compensation amounts
were
translated into U.S. dollars at the 2007 fiscal year end based on March 30,
2007
exchange rate of U.S. $1.9614 = £1.
On
August
29, 2006, and effective as of August 1, 2006, Index Oil entered into a full
time
employment agreement, with Mr. John Williams, our former Executive Vice
President Exploration and Production and a member of our board of directors.
The
material terms of Mr. Williams’ employment agreement are:
The
following table sets forth the individual grants of stock options for each
of
the below named executive officers, in the year to March 31, 2007.
|
|
Individual Grants
|
Name
|
|
Number of Total Securities Underlying Options
|
|
% of Total Options Granted to Employees in Fiscal
Year
|
|
Exercise Price per Share
|
|
Expiration
Date
|
John
G. Williams
|
|
|
500,000
|
|
|
100
|
%
|
$
|
1.42
|
|
|
3/20/2012
|
2006
Incentive Stock Option Plan
On
March
14, 2006, and effective as of January 20, 2006, the Company adopted the 2006
Incentive Stock Option Plan (the “Plan”) providing for the issuance of up to
5,225,000 shares of Common Stock underlying the incentive stock options and
759,448 shares of Common Stock reserved for a specific performance bonus
award
program, to be awarded to the Company’s and/or its subsidiaries’ officers,
directors, employees and consultants. Pursuant to the Plan, (i) during the
2006
fiscal year the Company granted options to purchase an aggregate of 4,577,526
shares of the Company’s Common Stock exercisable at $0.35 per share to the newly
appointed directors and officers that held options to purchase ordinary shares
of Index Ltd. prior to the completion of the Acquisition, as well as to the
newly appointed directors and officers of the Company, and (ii) during the
2007
fiscal year, the Company granted options to purchase 500,000 shares of the
Company’s Common Stock exercisable at $1.42 per share to John Williams, a former
officer of the Company.
The
principal terms and conditions of the stock options granted under the Plan
are
that vesting of the options granted occurs in three stages (unless otherwise
agreed to by the board of directors): (1) 50% on the date of the grant; (2)
25%
on the first anniversary of the grant date; and (3) 25% on the second
anniversary of the grant date. The stock options granted under the Plan are
generally non transferable other than to a legal or beneficial holder of
the
options upon the option holder’s death. The rights to vested but unexercised
stock options cease to be effective: (1) 18 months after death of the stock
options holder; (2) 6 months after Change of Control of the Company; 12 months
after loss of office due to health related incapacity or redundancy; or (5)
12
months after the retirement of the options holder from a position with Index
Oil.
Of
the
options to purchase an aggregate of 5,077,526 shares of Common Stock that
were
granted under the Plan, the following stock options have been granted to
directors and/or officers of the Company:
Lyndon
West
|
1,482,584
options
|
Andrew
Boetius
|
1,482,584
options
|
Daniel
Murphy
|
1,110,871
options
|
John
Williams
|
500,000
options
|
David
Jenkins
|
200,112
options
|
Michael
Scrutton
|
301,375
options
|
Stock
Grants
Effective
as of January 20, 2006, the Company granted bonus awards, in the form of
shares
of common stock of the Company as follows: 101,265 to Mr. Lyndon West and
101,264 to each of Messrs. Andrew Boetius and David Jenkins, in consideration
of
Index Ltd. reaching certain performance objectives. On March 31, 2007, the
Company granted bonus awards, in the form of 37,500 shares of common stock
of
the Company to John Williams, a former officer of the Company, in consideration
of the Company reaching certain performance objectives.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The
following related party transactions occurred from January 1, 2006.
During
fiscal year ended March 31, 2006, 687,500 shares of common stock were issued
for
cash in the amount of $238,591. These shares also included warrants of 137,500
to purchase shares of common stock. Of these totals 126,000 shares and 25,200
warrants were issued to directors of Index Ltd. For more information please
see
“
Security Ownership of Certain Beneficial Owners and Management”
and
Notes 6 and 14 of the Notes to the Consolidated Financial
Statements.
During
the Company’s fiscal year ended March 31, 2007, Mr. John Williams, the Company’s
former Executive Vice President Exploration and Production and a director,
in
addition to his base salary, received a restricted bonus stock award of 50,000
shares of the Company’s Common Stock. Total compensation expense of $60,000 was
recorded on the award at the market price of $1.20 per share, the market
price
at the date of the grant.
Additionally,
Mr. Williams was awarded a performance bonus of 37,500 shares of restricted
common stock per the terms of his bonus program included in his employment
agreement. One-third of the shares vested at the date of the grant, March
31,
2007. The remaining shares, which were due to vest on the successive two
year
anniversaries of the date of the grant, will no longer vest due to Mr. Williams
resignation from the Company. The shares were valued at $1.50 per share of
the
date of the first vesting award or March 31, 2007 for total compensation
expense
of $18,750. Performance bonuses for other officers and directors were accrued
at
March 31, 2007 and totaled $210,851.
Management
believes that all of the above transactions were on terms at least as favorable
as could have been obtained from unrelated third parties.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth the number of and percent of the Company's common
stock beneficially owned by:
|
·
|
all
directors and nominees, naming them,
|
|
·
|
our
named executive officers,
|
|
·
|
our
directors and executive officers as a group, without naming them,
and
|
|
·
|
persons
or groups known by us to own beneficially 5% or more of our Common
Stock
or our Preferred Stock having voting
rights:
|
The
percentages in the table have been calculated on the basis of treating as
outstanding for a particular person, all shares of our capital stock outstanding
on October 26, 2007, and all shares of our common stock issuable to that
person
in the event of the exercise of outstanding options and other derivative
securities owned by that person which are exercisable within 60 days of October
1, 2007. Except as otherwise indicated, the persons listed below have sole
voting and investment power with respect to all shares of our capital stock
owned by them.
Name
and address of owner
|
Title
of Class
|
Capacity
with Company
|
Number
of Shares Beneficially Owned (1) (2)
|
Percentage
of Class
|
Lyndon
West
c/o
Index Oil & Gas Ltd.,
Lawrence
House, Lower Bristol Road,
Bath
BA2 9ET, United Kingdom.
|
Common
Stock
|
CEO
and Director
|
5,431,025
(4)
|
8.1%
|
Andrew
Boetius
c/o
Index Oil & Gas Ltd.,
Lawrence
House, Lower Bristol Road,
Bath
BA2 9ET, United Kingdom.
|
Common
Stock
|
Chief
Financial Officer and Director
|
2,369,907
(5)
|
3.5%
|
Daniel
Murphy
c/o
Index Oil & Gas Ltd.,
Lawrence
House, Lower Bristol Road,
Bath
BA2 9ET, United Kingdom.
|
Common
Stock
|
Chairman
of the Board and Secretary
|
1,271,206
(3)
|
1.9%
|
John
Williams
c/o
Index Oil and Gas Inc.
10,000
Memorial, Ste 440
Houston,
TX 77024
|
Common Stock
|
Director
|
312,500
(9)
|
*
|
Michael
Scrutton
c/o
Index Oil & Gas Ltd.,
Lawrence
House, Lower Bristol Road,
Bath
BA2 9ET, United Kingdom.
|
Common
Stock
|
Director
|
2,711,760
(7)
|
4.1%
|
David
Jenkins
c/o
Index Oil & Gas Ltd.,
10,000
Memorial, Ste 440
Houston,
TX 77024
|
Common
Stock
|
Director
|
1,253,200
(6)
|
1.9%
|
Douglas
Wordsworth
44
Heath Lane,
Little
Sutton, Ellesmere Port, Cheshire, UK CH66 NT.
|
Common
Stock
|
--
|
3,829,433
(8)
|
5.8%
|
All
Officers and
Directors
as a Group
(6
persons)
|
|
|
13,349,598
|
19.1%
|
*Less
then one percent.
(1)
This
column represents the total number of votes each named stockholder is entitled
to vote upon matters presented to the stockholders for a vote.
(2)
Applicable percentage ownership is based on 65,803,698 shares of Common
Stock
outstanding as of October 1, 2007, together with securities exercisable
or
convertible into shares of Common Stock within 60 days of May 31, 2007,
for each
stockholder. Beneficial ownership is determined in accordance with the
rules of
the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock that
are
currently exercisable or exercisable within 60 days of May 31, 2007, are
deemed
to be beneficially owned by the person holding such securities for the
purpose
of computing the percentage of ownership of such person, but are not treated
as
outstanding for the purpose of computing the percentage ownership of any
other
person.
(3)
Includes (i) warrants to purchase 66,662 shares of Common Stock of the
Company
exercisable at $0.14 per share and (ii) options to purchase 833,153 shares
of
Common Stock of the Company exercisable at $0.35 per share, which are presently
exercisable or exercisable within 60 days.
(4)
Includes (i) warrants to purchase 266,380 shares of Common Stock of the
Company
exercisable at $0.14 per share, and (ii) options to purchase 1,111,938
shares of
Common Stock of the Company exercisable at $0.35 per share, which are presently
exercisable or exercisable within 60 days.
(5)
Includes (i) warrants to purchase 124,488 shares of Common Stock of the
Company
exercisable at $0.14 per share, and (ii) options to purchase
1,111,938 shares of Common Stock of the Company exercisable at $0.35 per
share, which are presently exercisable or exercisable within 60
days.
(6)
Includes (i) warrants to purchase 12,539 shares of Common Stock of the
Company
exercisable at $0.14 per share, and (ii) options to purchase 150,082 shares
of
Common Stock of the Company exercisable at $0.35 per share, which are presently
exercisable or exercisable within 60 days.
(7)
Includes (i) warrants to purchase 33,095 shares of Common Stock of the
Company
exercisable at $0.14 per share and (ii) options to purchase 226,032 shares
of
Common Stock of the Company exercisable at $0.35 per share, which are presently
exercisable or exercisable within 60 days.
(8)
Includes warrants to purchase 42,126 shares of Common Stock of the Company
exercisable at $0.14 per share which are presently exercisable or exercisable
within 60 days.
(9)
Includes (i) options to purchase 250,000 shares of Common Stock of the
Company
exercisable at $1.42 per share, which are presently exercisable or exercisable
within 60 days, and (iii) 62,500 shares of Common Stock granted as executive
bonus compensation.
The
following table shows information with respect to each equity compensation
plan
under which the Company’s common stock is authorized for issuance as of March
31, 2007:
Plan
category
|
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
|
|
Weighted
average exercise price of outstanding options, warrants and
rights
|
|
Number
of securities remaining available for future issuance under equity
compensation plans
(excluding
securities reflected in column (a)
|
|
|
|
|
|
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
|
|
|
|
|
Equity
compensation plans approved
by
security holders
|
|
5,077,526
|
|
$0.46
|
|
147,474
|
|
|
|
|
|
|
|
Equity
compensation plans not
approved
by security holders
|
|
-0-
|
|
$
-0-
|
|
-0-
|
|
|
|
|
|
|
|
Total
|
|
5,077,526
|
|
$0.46
|
|
147,474
|
|
|
|
|
|
|
|
DESCRIPTION
OF SECURITIES
The
following description of our capital stock and provisions of our articles
of
incorporation and bylaws, each as amended, is only a summary. You should
also
refer to the copies of our articles of incorporation and its amendments which
are included as exhibits to our Current Reports on Form 8-K/A filed on March
15,
2006 and September 28, 2006, respectively, and bylaws which are included
as
exhibit to our Registration Statement filed on Form SB-2 with the SEC on
May 24,
2004. Our authorized capital stock consists entirely of 500,000,000 shares
of
common stock, $0.001 par value per share and 10,000,000 shares of “blank check”
preferred stock, $0.001 par value per share. As of October 26, 2007, there
were
65,803,698 shares of common stock and no shares of preferred stock issued
and
outstanding. Please see section entitled “Risk Factors” beginning on page 9
and in particular, the risk factors set forth with respect to our Common
Stock.
Dividend
Policy
Our
proposed operations are capital intensive and we need working capital.
Therefore, we will be required to reinvest any future earnings in our
operations. Our Board of Directors has no present intention of declaring
any
cash dividends, as we expect to re-invest all profits in the business for
additional working capital for continuity and growth. The future declaration
and
payment of dividends will be determined by our Board of Directors after
considering the conditions then existing, including our earnings, financial
condition, capital requirements, and other factors.
Common
Stock
We
are
authorized to issue 500,000,000 shares of common stock of which 65,803,698
shares were issued and outstanding as of October 26, 2007. Holders of our
common
stock are entitled to one vote for each share held on all matters submitted
to a
vote of our stockholders. Holders of our common stock are entitled to receive
dividends ratably, if any, as may be declared by the board of directors out
of
legally available funds, subject to any preferential dividend rights of any
outstanding preferred stock. Upon our liquidation, dissolution or winding
up,
the holders of our common stock are entitled to receive ratably our net assets
available after the payment of all debts and other liabilities and subject
to
the prior rights of any outstanding preferred stock. Holders of our common
stock
have no preemptive, subscription, redemption or conversion rights. The
outstanding shares of common stock are fully paid and nonassessable. The
rights,
preferences and privileges of holders of our common stock are subject to,
and
may be adversely affected by, the rights of holders of shares of any series
of
preferred stock which we may designate and issue in the future without further
stockholder approval.
Preferred
Stock
We
are
authorized to issue 10,000,000 shares of “blank check” preferred stock of which
no shares were issued and outstanding as of October 26, 2007.
Warrants
The
following tables summarize the changes in warrants outstanding and exercised
and
the related exercise prices for the shares of the Company's common stock issued
as follows:
|
|
Number
of Shares
|
|
|
Weighted
Average Exercise Price Per Share
|
|
Outstanding
and Exercisable March 31, 2005
(48,535
of Index Ltd.)
|
|
|
138,655
|
|
|
$
|
0.07
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Canceled
or expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding
and Exercisable at September 30, 2005
|
|
|
138,655
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
Outstanding
and Exercisable March 31, 2006
(382,548
of Index Ltd.)
|
|
|
1,092,676
|
|
|
$
|
0.13
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exchanged
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Canceled
or expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding
and Exercisable at September 30, 2007
|
|
|
901,421
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
Exercise
Prices
|
|
|
Number
Outstanding
|
|
|
Weighted
Average Remaining Contractual Life (Years)
|
|
|
Weighted
Average Exercise Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average Exercise Price
|
|
$
|
0.07
|
|
|
|
138,655
|
|
|
|
3.00
|
|
|
$
|
0.07
|
|
|
|
138,655
|
|
|
$
|
0.07
|
|
$
|
0.14
|
|
|
|
143,037
|
|
|
|
3.00
|
|
|
$
|
0.14
|
|
|
|
143,037
|
|
|
$
|
0.14
|
|
$
|
0.14
|
|
|
|
253,961
|
|
|
|
3.00
|
|
|
$
|
0.14
|
|
|
|
253,961
|
|
|
$
|
0.14
|
|
$
|
0.14
|
|
|
|
339,033
|
|
|
|
3.00
|
|
|
$
|
0.14
|
|
|
|
339,033
|
|
|
$
|
0.14
|
|
$
|
0.14
|
|
|
|
26,735
|
|
|
|
3.00
|
|
|
$
|
0.14
|
|
|
|
26,735
|
|
|
$
|
0.14
|
|
|
|
|
|
|
901,421
|
|
|
|
3.00
|
|
|
$
|
0.13
|
|
|
|
901,421
|
|
|
$
|
0.13
|
|
Continental
Stock Transfer & Trust Company, located at 17 Battery Place, New York, NY
10004, is the transfer agent for the Company.
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our
Bylaws, as amended, provide to the fullest extent permitted by Nevada law that
our directors or officers shall not be personally liable to us or our
shareholders for damages for breach of such director's or officer's fiduciary
duty. The effect of this provision of our Articles of Incorporation, as amended,
is to eliminate our rights and our shareholders (through shareholders'
derivative suits on behalf of our company) to recover damages against a director
or officer for breach of the fiduciary duty of care as a director or officer
(including breaches resulting from negligent or grossly negligent behavior),
except under certain situations defined by statute. We believe that the
indemnification provisions in our Articles of Incorporation, as amended, are
necessary to attract and retain qualified persons as directors and
officers.
Section
78.7502 of the Nevada Revised Statutes provides that a corporation may indemnify
a director, officer, employee or agent made a party to an action by reason
of
that fact that he or she was a director, officer employee or agent of the
corporation or was serving at the request of the corporation against expenses
actually and reasonably incurred by him or her in connection with such action
if
he or she acted in good faith and in a manner he or she reasonably believed
to
be in, or not opposed to, the best interests of the corporation and with respect
to any criminal action, had no reasonable cause to believe his or her conduct
was unlawful.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
LEGAL
MATTERS
The
validity of our common stock offered hereby will be passed upon by Sichenzia
Ross Friedman Ference LLP, New York, New York.
EXPERTS
The
consolidated balance sheet of Index Oil and Gas, Inc. and its subsidiaries
for the fiscal year ended March 31, 2007, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows
for
each of the two fiscal years ended March 31, 2007 and 2006, respectively,
appearing in this prospectus and registration statement have been audited
by
RBSM, LLP, independent registered public accounting firm, as set forth on
their
report thereon appearing elsewhere in this prospectus, and are included in
reliance upon such report given upon the authority of such firm as experts
in
accounting and auditing.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
.
On
May
12, 2006, Index Oil and Gas Inc. (the "Company") dismissed Esther Yap &
Co. as its independent accountants. The Company's Board of Directors approved
the decision to change independent accountants.
Except
for a “Going Concern” disclaimer issued by the Company’s accountants in
connection with the audit of the Company’s financial statements for each of the
two prior fiscal years ended December 31, 2005 and 2004, respectively, the
reports of Esther Yap & Co. on the financial statements for the past two
fiscal years contained no adverse opinion or disclaimer of opinion and were
not
qualified or modified as to uncertainty, audit scope or accounting
principles.
During
the Company’s two most recent fiscal years and through May 11, 2006, there have
been no disagreements with Esther Yap & Co. on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope
or
procedure, which disagreements if not resolved to the satisfaction of Esther
Yap
& Co. would have caused them to make reference thereto in their report on
the financial statements for such years.
During
the two most recent fiscal years the former accountant did not advise the
Company with respect to items listed in Regulation S-B Item
304(a)(1)(iv)(B)).
The
Company engaged RBSM, LLP as its new independent accountants as of May 12,
2006.
During the two most recent fiscal years and through March 31, 2007, the Company
had not consulted with Russell Bedford Stefanou Mirchandani LLP regarding
either
(i) the application of accounting principles to a specified transaction,
either
completed or proposed; or the type of audit opinion that might be rendered
on
the Company's financial statements, and neither a written report was provided
to
the Company nor oral advice was provided that Russell Bedford Stefanou
Mirchandani LLP concluded was an important factor considered by the Company
in
reaching a decision as to the accounting, auditing or financial reporting
issue;
or (ii) any matter that was either the subject of a disagreement, as that
term
is defined in Item 304(a)(1)(iv) of Regulation S-B and the related instructions
to Item 304 of Regulation S-B.
WHERE
YOU CAN FIND MORE INFORMATION
Index
Oil
and Gas, Inc., is subject to the informational requirements of the Securities
Exchange Act of 1934, and in accordance therewith files reports and other
information with the Securities and Exchange Commission. Furthermore, we
filed
with the SEC a registration statement on Form SB-2 under the Securities Act
for
the common stock to be sold in this offering. This prospectus does not contain
all of the information in the registration statement and the exhibits and
schedules that were filed with the registration statement. For further
information with respect to the common stock and us, we refer you to the
registration statement and the exhibits and schedules that were filed with
the
registration statement. Statements made in this prospectus regarding the
contents of any contract, agreement or other document that is filed as an
exhibit to the registration statement are not necessarily complete, and we
refer
you to the full text of the contract or other document filed as an exhibit
to
the registration statement. A copy of the registration statement and the
exhibits and schedules that were filed with the registration statement may
be
inspected without charge at the public reference facilities maintained by
the
SEC at 100 F Street, N.E., Washington, D.C. 20549, and at the SEC's regional
offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
Woolworth Building and 233 Broadway New York, New York. Copies of all or
any
part of the registration statement may be obtained from the SEC upon payment
of
the prescribed fee. Information regarding the operation of the public reference
rooms may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains
a
web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC.
The
address of the site is http://www.sec.gov.
INDEX
OIL AND GAS INC.
|
|
|
|
|
|
|
|
Page
|
|
Condensed
Consolidated financial statements (unaudited)
|
|
|
|
|
Condensed
Consolidated balance sheets at June 30, 2007 and June 30,
2006
|
|
|
F-2
|
|
Condensed
Consolidated statements of losses for the three and six months
ended June
30, 2007 and 2006
|
|
|
F-3
|
|
Condensed
Consolidated statement of cash flows for the six months ended June
30,
2007 and 2006
|
|
|
F-4
|
|
Notes
to Condensed Consolidated Financial Statements
|
|
|
F-5
- F-18
|
|
|
|
Page
|
|
Reports
of Independent Registered Certified Public Accounting Firm
|
|
|
F-19
|
|
Consolidated
Balance Sheets at March 31, 2007 and 2006
|
|
|
F-20
|
|
Consolidated
Statements of Losses for the Years Ended March 31, 2007 and
2006
|
|
|
F-21
|
|
Consolidated
Statements of Changes in Stockholders’ Equity for the Years Ended
March 31, 2007 and 2006
|
|
|
F-22
|
|
Consolidated
Statements of Cash Flows for the Years Ended March 31, 2007 and
2006
|
|
|
F-23
|
|
Notes
to the Consolidated Financial Statements
|
|
|
F-23
- F-46
|
|
Supplemental
Oil and Gas Information (Unaudited)
|
|
|
F-47
|
|
INDEX
OIL AND GAS, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
June
30,2007
(unaudited)
|
|
|
March
31, 2007
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash
and cash equivalents (Note 2)
|
|
$
|
8,589,293
|
|
|
$
|
10,141,125
|
|
Trade
receivables (Note 2)
|
|
|
100,652
|
|
|
|
80,342
|
|
Other
receivables
|
|
|
10,202
|
|
|
|
6,688
|
|
Other
current assets
|
|
|
48,290
|
|
|
|
72,936
|
|
Total
Current Assets
|
|
|
8,748,437
|
|
|
|
10,301,091
|
|
|
|
|
|
|
|
|
|
|
Oil
& Gas Properties, full cost, net of accumulated depletion (Notes
2, 3,
6, 12 and 13)
|
|
|
6,110,334
|
|
|
|
4,866,050
|
|
Property
and Equipment, net of accumulated depreciation (Notes 2 and
3)
|
|
|
11,740
|
|
|
|
12,493
|
|
Total
Oil & Properties and Property and Equipment
|
|
|
6,122,074
|
|
|
|
4,878,543
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
14,870,511
|
|
|
$
|
15,179,634
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
840,129
|
|
|
$
|
814,449
|
|
Bank
loan (Notes 5 and 11)
|
|
|
-
|
|
|
|
-
|
|
Other
current liability (Note 11)
|
|
|
-
|
|
|
|
-
|
|
Total
Current Liabilities
|
|
|
840,129
|
|
|
|
814,449
|
|
|
|
|
|
|
|
|
|
|
Long-Term
Liabilities:
|
|
|
|
|
|
|
|
|
Asset
Retirement Obligation (Notes 2 and 6)
|
|
|
41,552
|
|
|
|
41,552
|
|
Total
Liabilities
|
|
|
881,681
|
|
|
|
856,001
|
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies (Note 7)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Stockholders
Equity: (Notes 5, 7, 8, and 9)
|
|
|
|
|
|
|
|
|
Common
stock, par value $0.001, 500 million shares authorized , 65,803,698
and
65,737,036 issued and outstanding at June 30, 2007 and March 31,
2007,
respectively (see Note 8)
|
|
|
65,804
|
|
|
|
65,737
|
|
Additional
paid in capital
|
|
|
19,149,824
|
|
|
|
19,043,734
|
|
Accumulated
deficit
|
|
|
(5,238,075
|
)
|
|
|
(4,801,237
|
)
|
Other
comprehensive income (Notes 2 and 4)
|
|
|
11,278
|
|
|
|
15,399
|
|
Total
Stockholders' Equity
|
|
|
13,988,831
|
|
|
|
14,323,633
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
|
14,870,511
|
|
|
$
|
15,179,634
|
|
See
accompanying notes to unaudited condensed consolidated financial
statements
INDEX
OIL AND GAS, INC.
CONDENSED
CONSOLIDATED STATEMENT OF LOSSES
(unaudited)
|
|
For
the Three Months Ended
|
|
|
|
June
30, 2007
|
|
|
June
30, 2006
|
|
Revenue:
(Note 12)
|
|
|
|
|
|
|
Oil
sales
|
|
$
|
151,373
|
|
|
$
|
70,457
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
Operating
costs
|
|
|
34,249
|
|
|
|
23,916
|
|
Depreciation
and amortization (Notes 2 and 3)
|
|
|
73,401
|
|
|
|
21,548
|
|
General
and administrative expenses (Note 2)
|
|
|
569,876
|
|
|
|
387,999
|
|
Total
Operating Expenses
|
|
|
677,526
|
|
|
|
433,463
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
|
(526,153
|
)
|
|
|
(363,006
|
)
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense):
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
89,316
|
|
|
|
43,605
|
|
Total
Other Income (Expense)
|
|
|
89,316
|
|
|
|
43,605
|
|
|
|
|
|
|
|
|
|
|
Loss
before Income Taxes
|
|
|
(436,837
|
)
|
|
|
(319,401
|
)
|
|
|
|
|
|
|
|
|
|
Income
Taxes Benefit
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(436,837
|
)
|
|
$
|
(319,401
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share (Note 10):
|
|
|
|
|
|
|
|
|
Basic
and assuming dilution
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
Weighted
average shares outstanding (Note 10):
|
|
|
|
|
|
|
|
|
Basic
and assuming dilution
|
|
|
65,739,234
|
|
|
|
54,544,345
|
|
See
accompanying notes to unaudited condensed consolidated financial
statements
INDEX
OIL AND GAS, INC.
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
|
|
For
the Three Months Ended
|
|
|
|
June
30, 2007
|
|
|
June
30, 2006
|
|
Cash
Flows From Operating Activities:
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(436,837
|
)
|
|
$
|
(319,401
|
)
|
Adjustments
to reconcile net loss to net cash (Used In) operating
activities:
|
|
|
|
|
|
|
|
|
Non
cash stock based compensation cost
|
|
|
96,823
|
|
|
|
170,331
|
|
Depreciation
and amortization
|
|
|
73,400
|
|
|
|
21,548
|
|
(Increase)
decrease in receivables
|
|
|
993
|
|
|
|
(27,160
|
)
|
Increase
(decrease) in accounts payable and accrued expenses
|
|
|
25,322
|
|
|
|
(254,083
|
)
|
Net
Cash (Used In) Operating Activities
|
|
|
(240,299
|
)
|
|
|
(408,765
|
)
|
|
|
|
|
|
|
|
|
|
Cash
Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
Payments
for oil and gas properties and property and equipment
|
|
|
(1,316,932
|
)
|
|
|
(170,155
|
)
|
Net
Cash (Used In) Investing Activities
|
|
|
(1,316,932
|
)
|
|
|
(170,155
|
)
|
|
|
|
|
|
|
|
|
|
Cash
Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds
from exercise of warrants
|
|
|
9,333
|
|
|
|
-
|
|
Repayment
of bank term debt
|
|
|
-
|
|
|
|
(51,797
|
)
|
Net
Cash Provided by (Used In) Financing Activities
|
|
|
9,333
|
|
|
|
(51,797
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents
|
|
|
(3,934
|
)
|
|
|
8,539
|
|
|
|
|
|
|
|
|
|
|
Net
(Decrease) in Cash and Cash Equivalents
|
|
|
(1,551,832
|
)
|
|
|
(622,178
|
)
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
$
|
10,141,125
|
|
|
$
|
5,536,006
|
|
Cash
and cash equivalents at the end of period
|
|
$
|
8,589,293
|
|
|
$
|
4,913,828
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash
(received) during the period for interest
|
|
$
|
(89,316
|
)
|
|
$
|
(43,605
|
)
|
Cash
paid during the period for taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash
Financing and Investing Transactions:
|
|
|
|
|
|
|
|
|
Non
cash stock based compensation cost
|
|
$
|
96,823
|
|
|
$
|
170,331
|
|
See
accompanying notes to unaudited condensed consolidated financial
statements
INDEX
OIL AND GAS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2007
(unaudited)
NOTE
1 - ORGANIZATION AND OPERATIONS OF THE COMPANY
Organization
Index
Oil
and Gas, Inc. (“Index Inc.”, “the Company”) is the parent company with four
group subsidiaries: Index Oil & Gas Ltd. comprises a United Kingdom holding
company, which provides management services to the Company, and United
States
operating subsidiaries; Index Oil & Gas (USA) LLC (“Index USA”), an
operating company; Index Investments North America Inc. (“Index Investments”);
and Index Offshore LLC (“Index Offshore”), a wholly owned subsidiary of Index
Investments and also an operating company. Index Inc., through its subsidiaries,
is engaged in exploration, appraisal, development, production and sale
of oil
and natural gas. The Company does not currently operate any of its properties
and sells its oil and gas production to domestic purchasers.
Operations
The
Company’s initial exploration project is located in Kansas, and is a very low
risk, low cost, low working interest, and limited upside project and which
is
not expected to be a significant contributor to future
growth. Seven wells were drilled in Kansas during the fiscal
year 2007. Five wells were successful and became oil
producers. They are Witt 1-14 (carry-in from Fiscal Year 2006),
Rogers Unit 1-1, Schartz 1-18, Hay Witt Unit 1-11, and Hayden
1-14. Two wells were unsuccessful. They are Pan-John
Unit 1-11 and Hull-Witt Unit 1-11. Our working interest (“(WI”) in the Kansas
wells is either 5% for wells drilled in Stafford County or 3.25% for wells
drilled in Barton County and the net revenue interest (“NRI”) is either 4.155%
or 2.64%, respectively.
The
Company has made progress with its onshore drilling program in Texas and
Louisiana with the Walker 1 discovery well (WI 12.5%, NRI 9.36%) drilled
in
Louisiana in Fiscal Year 2006 and which began producing in August 2006
and its
interest in Vieman 1 (19.5% WI, 14.56%) in Brazoria County Texas which
began
production in February 2007. The Hawkins 1 well (WI 12.5%, NRI
10.01%), also in Texas, but in Matagorda County, is now estimated to begin
production into the local pipeline grid during the third quarter of calendar
year 2007. The Ruse and Dark wells, also in Matagorda County, were
dry holes.
The
Company also drilled two successful wells in south Texas. The Serrano well,
renamed Friedrich Gas Unit 1 (WI 37.5%, NRI 28.125%) , in Victoria County,
found
13 feet of net gas pay and produced with average gross daily production
in May
and June 2007 of approximately 280 MCF (47 BOE). The Habanero well, renamed
Schroeder Gas Unit 1 (WI 37.5%, NRI 28.125%), in Goliad County, found 10
feet of
net gas pay with initial daily production expected at 197 MCF of gas (33
BOE)
per day. The Schroeder Gas Unit 1 is awaiting hook-up to the local
pipeline grid, currently estimated for third quarter of calendar year
2007.
The
Ilse
1 well (WI 10% Before Project Payout and WI 8% After Project Payout, NRI
6%),
the first well to be drilled in the New Taiton Project in Wharton County,
Texas,
has been drilled to total depth of approximately 17,000 feet and logged.
Analysis of the logs revealed two zones of interest in the Wilcox C and
Wilcox
A, respectively. The lowest zone, the Wilcox C, has been perforated and
stimulated by a “frac” process. Gas flow from the formation to surface has not
been achieved. The preliminary decision is that this interval will not
be
productive and will not have any proved reserves. The well is
currently suspended, while a decision making process is currently underway
within the joint venture as to whether to perform work to attempt to achieve
gas
flows from the upper zone of interest, the Wilcox A. As part of this
decision making process, joint venture participants are awaiting a formal
analysis and recommendation from the operator. Since July 26, 2007,
the Company, as a joint interest owner, has been served with two Texas
Property
Code Notices of Intent to File Lien Against Property with regard to
materials/equipment sold and/or leased and amounts owed to third parties
by the
operator of the Ilse property. The gross amount of the claims is
$92,930, with our 10% working interest share being $9,293. The
Company, along with other joint interest participants, is in the data gathering
stage and is assessing the implications and magnitude of these Notices
and the
potential financial impact to the Company. The Company was billed for
these services by the operator on their June 2007 operating statement and
these
costs have been accrued in our condensed consolidated financial statements
as
costs related to the Ilse well. It is the Company’s position that no
other contingency accrual is currently required.
Capital
costs associated with the Ilse 1 well have been held outside the full cost
pool,
because a determination as to whether the well has found proved reserves
has not
been completed. At the future point when a determination is made, the costs
associated with Ilse 1 will be included in the full cost pool. To the extent
that Ilse 1 does not find any proved reserves, ignoring all other unrelated
factors, this will lead to higher unit depletion charges in future periods
and
makes it highly likely Index will suffer a ceiling test impairment charge.
Index
is carrying approximately $1.2mm of costs at June 30, 2007 related to the
Ilse 1
well.
The
George Cason 1 well (18% WI, NRI 13.77%), drilled on the Fern Lake prospect
in
Nacogdoches County, Texas, spudded on June 22, 2007 and reached a total
depth of
11,147 feet on July 14, 2007. Following logging operations to obtain down
hole
data, a decision was made to complete and test two intervals. The
first flow test is planned to occur in August 2007. This is the first
well resulting from the agreements executed with Advanced Drilling Concepts
Petroleum, L.P to reprocess seismic data and develop prospects to drill
in up to
four areas in Texas, Mississippi, and Alabama.
In
December 2006, the Company announced that it has signed an exploration
agreement
to participate at 15% WI, subsequently increased to 20%, in
the Supple Jack Creek lease area (formerly described as West). The
first well, as yet unnamed, will target gas in the Edwards Limestone in
Lavaca
County, Texas. The proposed total depth of the first well is approximately
14,700 feet. The company announced in January 23, 2007 that it had increased
its
WI in the first well to 20% (NRI 14.71%). The well is planned to spud during
the
second half of calendar year 2007.
In
April
2007, the Company signed agreements to participate in the Shadyside prospect,
located in St. Mary Parish, Louisiana. Index has an initial 15% WI in the
prospect, which will reduce to 13.5% after prospect payout. The
Shadyside 1 well (NRI 9.52%) has a planned total depth of
approximately 16,500 feet and commenced drilling in July 2007.
In
June
2007, the Company announced that it had entered into Participation and
Joint
Operating Agreements for the drilling of the Cow Trap project ("Cow Trap")
to be
located in Brazoria County, Texas. The Cow Trap well, named Ducroz 1 (WI
7.5%,
NRI 5.25%), targets gas in stacked Miocene objectives at depths ranging
from
4,900 feet to 6,400 feet. The well has a planned total depth of approximately
6,800 feet. Ducroz 1 is to be drilled into a gas-bearing four-way dip structure
defined by 2D seismic and offset well data. Two down-dip wells drilled
into the
same structure have produced 24.4 BCF of gas from stacked Miocene reservoirs
(13.1 BCF and 11.3 BCF, respectively). This equates to approximately 4.1
million
barrels of oil equivalent gross. The Cow Trap structure has Proved Undeveloped
Reserves ("PUDs") estimated by a third party at 4.1 BCF gross, equating
to 0.213
BCF at Index's NRI. Ducroz 1 is expected to be spudded during the second
half of
2007.
The
Company announced in April 2007 that it has signed a Participation Agreement
to
explore for gas in the West Wharton prospect. This project could consist
of up
to four exploration wells within the area of mutual interest in Wharton
County,
Texas. Index has a 12.5% working interest in the project that will reduce
to
9.38% after prospect payout. The first well, Outlar 1 (NRI 6.99%), is planned
to
spud during the third calendar quarter of 2007 and has a planned total
depth of
around 12,000 feet.
In
July
2007 the Company announced that it has signed a Purchase and Sale Agreement
to
acquire a 5% WI and 3.5% NRI in the Alligator Bayou exploration prospect
located
beneath onshore portions of Brazoria and Matagorda Counties, Texas. The
prospect
covers up to several thousand acres. The first well is planned to spud
in late
calendar year 2007 or early 2008.
INDEX
OIL AND GAS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2007
(unaudited)
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles
of Consolidation/Basis of Presentation
The
unaudited condensed consolidated financial statements as of June 30, 2007
and
March 31, 2007 and for the three months ended June 30, 2007 and 2006 include
the
accounts of the Company and its wholly owned subsidiaries, Index USA, Index
Investments, Index Offshore, Index Inc. and Index Limited, after eliminating
all
significant intercompany accounts and transactions. Results of operations
are
included from the date of incorporation. For the reverse merger between the
Company and Index Ltd. at January 20, 2006 the stockholder’s equity section and
earnings per share in the Condensed Consolidated balance sheet at June 30,
2006
were restated to reflect the exchange of shares using a conversion ratio
of
approximately 2.857 shares of the Company to 1 share of Index
Ltd. Certain reclassifications of prior year balances have been made
to conform such amounts to corresponding 2007 classifications. These
reclassifications have no impact on net income.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts
of
assets and liabilities and disclosure of contingent assets and liabilities
at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Certain accounting policies involve
judgments and uncertainties to such an extent that there is reasonable
likelihood that materially different amounts could have been reported under
different conditions, or if different assumptions had been used. We evaluate
our
estimates and assumptions on a regular basis. We base our estimates on
historical experience and various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates and assumptions used in preparation of our financial statements.
The
most significant estimates with regard to these financial statements relate
to
the provision for income taxes, dismantlement and abandonment costs, estimates
to certain oil and gas revenues and expenses and estimates of proved oil and
natural gas reserve quantities used to calculate depletion, depreciation and
impairment of proved oil and natural gas properties and equipment.
INDEX
OIL AND GAS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2007
(unaudited)
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Interim
Financial Statements
The
accompanying unaudited condensed consolidated financial statements have been
prepared without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission (“SEC”). Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America (“GAAP”) have been
condensed or omitted, although we believe that the disclosures contained
herein
are adequate to make the information presented not misleading. In the opinion
of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
interim periods are not necessarily indicative of the results that may be
expected for the entire year. These unaudited condensed consolidated financial
statements included herein should be read in conjunction with the Financial
Statements and Notes included in the Company’s Annual Report on Form 10-KSB for
the year ended March 31, 2007.
Cash
and Cash Equivalents, and Concentrations of Credit Risk
Cash
and
cash equivalents represent cash in banks. The Company considers any highly
liquid debt instruments purchased with a maturity date of three months or
less
to be cash equivalents. The Company’s accounts receivable are concentrated among
entities engaged in the energy industry, within the United States. Financial
instruments and related items, which potentially subject the Company to
concentrations of credit risk, consist primarily of cash, cash equivalents
and
related party receivables. The Company places its cash and temporary cash
investments with credit quality institutions. At times, such investments
may be
in excess of the FDIC insurance limit. Allowance for doubtful accounts was
$0 at
June 30, 2007 and March 31, 2007.
Oil
and Gas Properties
The
Company follows the full cost method of accounting for oil and gas properties.
Accordingly, all costs associated with acquisition, exploration, and development
of properties within a relatively large geopolitical cost center are capitalized
when incurred and are amortized as mineral reserves in the cost center are
produced, subject to a limitation that the capitalized costs not exceed the
value of those reserves. In some cases, however, certain significant costs,
such
as those associated with offshore U.S. operations, are deferred separately
without amortization until the specific property to which they relate is
found
to be either productive or nonproductive, at which time those deferred costs
and
any reserves attributable to the property are included in the computation
of
amortization in the cost center. All costs incurred in oil and gas producing
activities are regarded as integral to the acquisition, discovery, and
development of whatever reserves ultimately result from the efforts as a
whole,
and are thus associated with the Company’s reserves. The Company capitalizes
internal costs directly identified with performing or managing acquisition,
exploration and development activities. The Company has not capitalized any
internal costs or interest at June 30, 2007 and 2006. Unevaluated costs are
excluded from the full cost pool and are periodically evaluated for impairment
rather than amortized. Upon evaluation, costs associated with productive
properties are transferred to the full cost pool and amortized. Gains or
losses
on the sale of oil and natural gas properties are generally included in the
full
cost pool unless the entire pool is sold.
Capitalized
costs and estimated future development costs are amortized on a
unit-of-production method based on proved reserves associated with the
applicable cost center. The Company has assessed the impairment for oil and
natural gas properties for the full cost pool at June 30, 2007 and will assess
quarterly thereafter using a ceiling test to determine if impairment is
necessary. Specifically, the net unamortized costs for each full cost pool
less
related deferred income taxes should not exceed the following: (a) the present
value, discounted at 10%, of future net cash flows from estimated production
of
proved oil and gas reserves plus (b) all costs being excluded from the
amortization base plus (c) the lower of cost or estimated fair value of unproved
properties included in the amortization base less (d) the income tax effects
related to differences between the book and tax basis of the properties
involved. The present value of future net revenues should be based on current
prices, with consideration of price changes only to the extent provided by
contractual arrangements, as of the latest balance sheet presented. The full
cost ceiling test must take into account the prices of qualifying cash flow
hedges in calculating the current price of the quantities of the future
production of oil and gas reserves covered by the hedges as of the balance
sheet
date. In addition, the use of the hedge-adjusted price should be consistently
applied in all reporting periods and the effects of using cash flow hedges
in
calculating the ceiling test, the portion of future oil and gas production
being
hedged, and the dollar amount that would have been charged to income had
the
effects of the cash flow hedges not been considered in calculating the ceiling
limitation should be disclosed. Any excess is charged to expense during the
period that the excess occurs. The Company did not have any hedging activities
during the three months ended June 30, 2007 and 2006. Application of the
ceiling
test is required for quarterly reporting purposes, and any write-downs cannot
be
reinstated even if the cost ceiling subsequently increases by year-end. No
ceiling test write-down was recorded for the three months ended June 30,
2007
and 2006. Sales of proved and unproved properties are accounted for as
adjustments of capitalized costs with no gain or loss recognized, unless
such
adjustments would significantly alter the relationship between capitalized
costs
and proved reserves of oil and gas, in which case the gain or loss is recognized
in income.
Abandonment of properties is accounted for as
adjustments of capitalized costs with no loss recognized.
Other
Property, Plant and Equipment
Other
property, plant and equipment primarily includes computer equipment, which
is
recorded at cost and depreciated on a straight-line basis useful lives of
five
years. Repair and maintenance costs are charged to expense as incurred while
acquisitions are capitalized as additions to the related assets in the period
incurred. Gains or losses from the disposal of property,
INDEX
OIL AND GAS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2007
(unaudited)
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
plant
and
equipment are recorded in the period incurred. The net book value of the
property, plant and equipment that is retired or sold is charged to accumulated
depreciation and amortization, and the difference is recognized as a gain or
loss in the results of operations in the period the retirement or sale
transpires.
Segment
Information
The
Company has one reportable segment, oil and natural gas exploration and
production, as determined in accordance with SFAS No. 131, “Disclosure
About Segments of an Enterprise and Related Information”.
Foreign
Currency Translation
The
Company translates the foreign currency financial statements in accordance
with
the requirements of Statement of Financial Accounting Standards No. 52, “Foreign
Currency Translation.” Assets and liabilities of non-U.S. subsidiaries whose
functional currency is not the U.S. dollar are translated into U.S. dollars
at
fiscal year-end exchange rates. Revenue and expense items are translated
at
average exchange rates prevailing during the fiscal year. Translation
adjustments are included in Accumulated other comprehensive gain /(loss)
in the
equity section of the balance sheet, with a total of $11,278 and $15,399
at June
30, and March 31, 2007, respectively, and foreign currency transaction
gains/(losses) are included in the statement of operations
Stock
Based Compensation
On
January 1, 2006, the Company adopted SFAS No. 123 (revised 2004)
“Share-Based Payments” (“SFAS-123R”). This statement applies to all awards
granted, modified, repurchased or cancelled after January 1, 2006 and to
the unvested portion of all awards granted prior to that date. The Company
adopted this statement using the modified version of the prospective application
(modified prospective application). Under the modified prospective application,
compensation cost for the portion of awards for which the employee’s requisite
service has not been rendered that are outstanding as of January 1, 2006
must be recognized as the requisite service is rendered on or after that
date.
The compensation cost for that portion of awards shall be based on the original
fair market value of those awards on the date of grant as calculated for
recognition under SFAS 123. The compensation cost for these earlier awards
shall
be attributed to periods beginning on or after January 1, 2006 using the
attribution method that was used under SFAS 123. The impact of adoption of
SFAS-123R decreased income from operations and income before income taxes
and
net income by $170,331 for the three months ended June 30, 2006 and there
was no
impact on the Condensed Consolidated Statement of Cash Flows. The effect
on net
income per share for basic and diluted is $0.01. See Note 9 of the notes
to the
Condensed Consolidated Financial Statements for additional
disclosure.
Correction
of Errors
The
Company adopted SFAS 154, “Accounting Changes and Error Corrections—a
replacement of APB Opinion No. 20 and FASB Statement No. 3 (“SFAS 154”)” in
April 1, 2007, in which it changed the requirements for the accounting for
and
the reporting of a change in accounting principle. The Company requires that
a
new accounting principle be applied to the balances of assets and liabilities
as
of the beginning of the earliest period for which retrospective application
is
practicable and that a corresponding adjustment is made to the opening balance
of retained earnings (or other appropriate components of equity or net assets
in
the balance sheet) for that period rather than being reported in the statement
of operations. When it is impracticable to determine the cumulative effect
of
applying a change in accounting principle to all prior periods, The Company
applies the new accounting principle as if it were adopted prospectively
from
the earliest date practicable. The Company will also revise previously issued
financial statements to reflect the correction of an error, should one occur,
and limit the application to the direct effects of the change. Indirect effects
of a change in accounting principle will be recognized in the period of the
accounting change. The Company will continue to account for a change in
accounting estimate in accordance with APB 20. The adoption of this
pronouncement had no impact to the Company’s consolidated financial position or
results of operations.
INDEX
OIL AND GAS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2007
(unaudited)
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Certain
Hybrid Instruments
. On February 16, 2006 the FASB issued SFAS 155,
“Accounting for Certain Hybrid Instruments,” which amends SFAS 133, “Accounting
for Derivative Instruments and Hedging Activities,” and SFAS 140, “Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities.” SFAS 155 allows financial instruments that have embedded
derivatives to be accounted for as a whole (eliminating the need to bifurcate
the derivative from its host) if the holder elects to account for the whole
instrument on a fair value basis. SFAS 155 also clarifies and amends certain
other provisions of SFAS 133 and SFAS 140. This statement is effective for
all
financial instruments acquired or issued in fiscal years beginning after
September 15, 2006. The Company adopted this new standard, effective April
1, 2007, with no impact on its financial position, results of operations
or cash
flows as it currently does not have any hybrid instruments outstanding at
June
30, 2007 and March 31, 2007, respectively.
Accounting
for Servicing of Financial Assets
. In March 2006, the FASB issued SFAS No.
156, “
Accounting for Servicing of Financial Assets—an amendment of FASB
Statement No. 140”(“
SFAS No. 156”), which amends FASB Statement No. 140,
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities,
with respect to the accounting for
separately recognized servicing assets and servicing liabilities. This Statement
requires that all separately recognized servicing assets and servicing
liabilities be initially measured at fair value, if practicable. The Board
concluded that fair value is the most relevant measurement attribute for
the
initial recognition of all servicing assets and servicing liabilities, because
it represents the best measure of future cash flows. This Statement permits,
but
does not require, the subsequent measurement of servicing assets and servicing
liabilities at fair value. An entity that uses derivative instruments to
mitigate the risks inherent in servicing assets and servicing liabilities
is
required to account for those derivative instruments at fair value. Under
this
Statement, an entity can elect subsequent fair value measurement of its
servicing assets and servicing liabilities by class, thus simplifying its
accounting and providing for income statement recognition of the potential
offsetting changes in fair value of the servicing assets, servicing liabilities,
and related derivative instruments. An entity that elects to subsequently
measure servicing assets and servicing liabilities at fair value is expected
to
recognize declines in fair value of the servicing assets and servicing
liabilities more consistently than by reporting other-than-temporary
impairments. The Company adopted this new standard effective April 1,
2007, with no impact the Company’s Condensed Consolidated financial position or
results of operations As the Company does not have an derivative or hedging
instruments.
Income
Taxes.
In June 2006, the FASB issued FASB Interpretation No 48 (“FIN 48”),
“Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement
No. 109”, which clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with FASB 109.
The Interpretation prescribes a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax position
taken
or expected to be taken in a tax return. The Interpretation also provides
guidance on derecognition, classification, interest and penalties, accounting
in
interim periods, disclosure and transition. The Company adopted the new standard
effective April 1, 2007 with no material impact on the Company’s consolidated
financial position or results of operations.
In
December 2006, the FASB issued FSP EITF 00-19-2, Accounting for Registration
Payment Arrangements ("FSP 00-19-2") which addresses accounting for registration
payment arrangements. FSP 00-19-2 specifies that the contingent obligation
to
make future payments or otherwise transfer consideration under a registration
payment arrangement, whether issued as a separate agreement or included as
a
provision of a financial instrument or other agreement, should be separately
recognized and measured in accordance with FASB Statement No. 5, Accounting
for
Contingencies. FSP 00-19-2 further clarifies that a financial instrument
subject
to a registration payment arrangement should be accounted for in accordance
with
other applicable generally accepted accounting principles without regard
to the
contingent obligation to transfer consideration pursuant to the registration
payment arrangement. For registration payment arrangements and financial
instruments subject to those arrangements that were entered into prior to
the
issuance of EITF 00-19-2, this guidance shall be effective for financial
statements issued for fiscal years beginning after December 15, 2006 and
interim
periods within those fiscal years. The Company adopted the new pronouncement
effective April 1, 2007 with no impact Company’s consolidated financial position
or results of operations.
New
Accounting Pronouncements Not Yet Adopted
Fair
Value Measurements.
In September 2006, the FASB issued SFAS 157, “Fair
Value Measurements”, which defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles (“GAAP”), and
expands disclosures about fair value measurements. Prior to this Statement,
there were different definitions of fair value and limited guidance for applying
those definitions in GAAP. This Statement provides the definition to increase
consistency and comparability in fair value measurements and for expanded
disclosures about fair value measurements. The Statement emphasizes that
fair
value is a market-based measurement, not an entity-specific measurement.
The
Statement clarifies that market participant assumptions include assumptions
about risk, i.e. the risk inherent in a particular valuation technique used
to
measure fair value and/or the risk inherent in the inputs to the valuation
technique. The Statement expands disclosures about the use of fair vale to
measure assets and liabilities in interim and annual periods subsequent to
initial recognition. The disclosures focus on the inputs used to measure
fair
value and for recurring fair value measurements using significant unobservable
inputs, the effect of the measurements on earnings for the period. The Statement
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. Earlier
application is encouraged, provided that the reporting entity has not yet
issued
financial statements for that fiscal year, including the financial statements
for an interim period within that fiscal year. The Company does not expect
adoption of this standard will have a material impact on its financial position,
operations or cash flows.
The
Fair Value Option for Financial Assets and Financial Liabilities.
In
February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
Assets and Financial Liabilities—including an amendment of FASB Statement No.
115”, permitting entities to choose to measure many financial instruments and
certain other items at fair value. The objective is to improve financial
reporting by providing entities with the opportunity to mitigate volatility
in
reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting measurement. The statement
applies to all entities, including not-for profit organizations. Most of
the
provisions of this Statement apply only to entities that elect the fair value
option. However, the amendment to FASB Statement No. 115, “Accounting for
Certain Investments in Debt and Equity Securities”, applies to all entities with
available-for-sale and trading securities. The Company does not expect adoption
of this standard will have a material impact on its financial position,
operations or cash flows
NOTE
3 - PROPERTY, PLANT AND EQUIPMENT, PROPERTY ACQUISITIONS AND DISPOSITIONS AND
CAPITALIZED INTEREST
Oil
and Gas Properties
Major
classes of oil and gas properties under the full cost method of accounting
at
June 30, 2007 and March 31, 2007 consist of the following:
|
|
June
30, 2007
|
|
|
March
31, 2007
|
|
Proved
properties
|
|
$
|
3,781,782
|
|
|
$
|
3,254,211
|
|
Unevaluated
and unproved properties
|
|
|
2,717,136
|
|
|
|
1,927,776
|
|
Gross
oil and gas properties-onshore
|
|
|
6,498,918
|
|
|
|
5,181,987
|
|
Less: accumulated
depletion
|
|
|
(388,584
|
)
|
|
|
(315,937
|
)
|
Net
oil and gas properties-onshore
|
|
$
|
6,110,334
|
|
|
$
|
4,866,050
|
|
Included
in the Company's oil and gas properties are asset retirement obligations
of
$41,552 as of June 30, 2007 and March 31, 2007, respectively.
Depletion
expense was $72,684 and $21,385 or $25.75 and $19.04 per barrel of production
for the three months ended June 30, 2007 and 2006,
respectively.
At
June
30, 2007 and March 31, 2007, the Company excluded the following capitalized
costs from depletion, depreciation and amortization:
|
|
June
30, 2007
|
|
|
March
31, 2007
|
|
Not
subject to depletion-onshore:
|
|
|
|
|
|
|
Exploration
costs
|
|
$
|
2,150,683
|
|
|
$
|
1,669,478
|
|
Cost
of undeveloped acreage
|
|
|
566,452
|
|
|
|
258,298
|
|
Total
not subject to depletion
|
|
$
|
2,717,136
|
|
|
$
|
1,927,776
|
|
It
is
anticipated that the cost of undeveloped acreage of $0.6 million and exploration
costs of $2.2 million will be included in depreciation, depletion and
amortization when the related projects are planned and drilled and completed.
Included in exploration cost and undeveloped acreage costs at June 30, 2007
are
approximately: $1.2 million related to the Ilse 1 well that has been drilled,
but not tested or completed (see Note 1), $0.3 million related to undeveloped
leasehold for the Supple Jack Creek project area, $0.3 million related to the
ADC exploration agreements, $0.4 million related to the George Cason well,
$1.0
million related to the West Wharton prospect and $0.2 million related to the
Shadyside well.
INDEX
OIL AND GAS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2007
(unaudited)
NOTE
3 - PROPERTY, PLANT AND EQUIPMENT, PROPERTY ACQUISITIONS AND DISPOSITIONS AND
CAPITALIZED INTEREST (continued)
Acquisitions
and Dispositions
In
the 3
months to June 30, 2007 the Company acquired the following oil and gas
property
interests, under agreements to participate in:
The
Shadyside prospect, located in St. Mary Parish, Louisiana. Index has an
initial
15% WI in the prospect, which will reduce to 13.5% after prospect
payout. The Shadyside 1 well (NRI 9.52%) has a planned total depth of
approximately 16,500 feet and commenced drilling in July 2007.
The
Cow
Trap project ("Cow Trap") to be located in Brazoria County, Texas. The
Cow Trap
well, named Ducroz 1 (WI 7.5%, NRI 5.25%), targets gas in stacked Miocene
objectives at depths ranging from 4,900 feet to 6,400 feet. The well has
a
planned total depth of approximately 6,800 feet. Ducroz 1 is to be drilled
into
a gas-bearing four-way dip structure defined by 2D seismic and offset well
data.
Two down-dip wells drilled into the same structure have produced 24.4 BCF
of gas
from stacked Miocene reservoirs (13.1 BCF and 11.3 BCF, respectively).
This
equates to approximately 4.1 million barrels of oil equivalent gross. The
Cow
Trap structure has Proved Undeveloped Reserves ("PUDs") estimated by a
third
party at 4.1 BCF gross, equating to 0.213 BCF at Index's NRI. Ducroz 1
is
expected to be spudded during the second half of 2007.
The
West
Wharton prospect. This project could consist of up to four exploration
wells
within the area of mutual interest in Wharton County, Texas. Index has
a 12.5%
working interest in the project that will reduce to 9.38% after prospect
payout.
The first well, Outlar 1 (NRI 6.99%), is planned to spud during the third
calendar quarter of 2007 and has a planned total depth of around 12,000
feet.
Subsequent
to June 30, 2007, the Company announced that it has signed a Purchase and
Sale
Agreement to acquire a 5% working interest and 3.5% Net Revenue Interest
("NRI")
in the Alligator Bayou exploration prospect located beneath onshore portions
of
Brazoria and Matagorda Counties, Texas ("Alligator Bayou"). Alligator
Bayou is the largest prospect the Company has signed to date and covers
up to
several thousand acres. The first well is planned to spud in approximately
six
to nine months.
Other
Property and Equipment
Property
and equipment are stated at cost. When retired or otherwise disposed, the
related carrying value and accumulated depreciation are removed from the
respective accounts and the net difference less any amount realized from
disposition, is reflected in earnings. For financial statement purposes,
property and equipment are depreciated using the straight-line method over
their
estimated useful lives of the assets. Maintenance, repairs, and minor renewals
are charged against earnings when incurred. Additions and major renewals
are
capitalized. Major assets at June 30, 2007 and March 31, 2007 were as
follows:
|
|
June
30, 2007
|
|
|
March
31, 2007
|
|
Computer
costs, including foreign translation adjustment
|
|
$
|
24,060
|
|
|
$
|
23,858
|
|
Less:
accumulated depreciation
|
|
|
(12,320
|
)
|
|
|
(11,365
|
)
|
Total
other property and equipment
|
|
$
|
11,740
|
|
|
$
|
12,493
|
|
Depreciation
expenses from continuing operations amounted to $753 and $163 for the three
months ended June 30, 2007 and 2006, respectively. There was no interest
capitalized in property, plant and equipment at June 30, 2007 and
2006.
NOTE
4 - COMPREHESIVE LOSS
For
the
three months ended June 30, 2007 and 2006, comprehensive income (loss) consisted
of the amounts listed below.
|
|
For
the Three Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
Net
loss
|
|
$
|
(436,837
|
)
|
|
$
|
(319,401
|
)
|
Foreign
currency translation gain / (loss)
|
|
|
(4,121
|
)
|
|
|
1,876
|
|
Comprehensive
Loss
|
|
$
|
(440,958
|
)
|
|
$
|
(317,525
|
)
|
INDEX
OIL AND GAS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2007
(unaudited)
NOTE
5 - NOTES PAYABLE
Index
Ltd. had incurred debt and raised capital through a series of rounds of
fundraising from inception through June 30, 2006. The entire Index Ltd.
convertible debt stockholder funding has been converted to common stock at
par
and additional paid in capital. After all conversion of stock, notes payable
at
June 30, 2007 and March 31, 2007 were $0.There was no debt issue cost incurred
during the three months ended June 30, 2007 and 2006 and no debt issue
amortization expense in the three months ended June 30, 2007 and
2006. There was no unamortized debt issue cost at June 30, 2007 and
March 31, 2007. There were no outstanding bank loans at June 30, 2007 and
March
31, 2007. A bank loan was repaid during the three months ended June 30,
2006.
NOTE
6 - ASSET RETIREMENT OBLIGATION
Activity
related to the Company’s Asset Retirement Obligation (“ARO”) during the three
months ended June 30, 2007 is as follows:
|
|
For
the Three Months Ended June 30, 2007
|
|
ARO
as of beginning of period
|
|
$
|
41,552
|
|
Liabilities
incurred during period
|
|
|
-
|
|
Liabilities
settled during period
|
|
|
-
|
|
Accretion
expense
|
|
|
-
|
|
Balance
of ARO as of end of period
|
|
$
|
41,552
|
|
Of
the
total ARO, $41,552 is classified as a long-term liability at June 30, 2007.
For
each of the three months ended June 30, 2007 and 2006, the Company recognized
no
accretion expense related to its ARO, due to the assumption of a full offset
of
salvage values.
INDEX
OIL AND GAS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2007
(unaudited)
NOTE
7 - COMMITMENTS AND CONTINGENCIES
The
Company has various commitments to oil and gas exploration and production
capital expenditures with ongoing expenditures on the Kansas properties,
and
expenditures and commitments relating to wells in Texas and Louisiana arising
out of the normal course of business.
Lease
Commitments
The
Company does not have any capital lease commitments. The Company rents its
main
operating office in Houston on a month-to-month basis for which payments
began
in November 2005. The Company also has a nine month lease, committed to in
April
2007, related to corporate housing for UK based officers while periodically
working at the corporate office.
Consulting
Agreements
The
Company has held consulting agreements with outside contractors, certain
of whom
are also Company stockholders. The Agreements are generally for a fixed term
from inception and renewable from time to time unless either the Company
or
Consultant terminates such engagement by written notice.
Stockholder
Matters
There
were no stockholder matters during the quarter ended June 30,
2007.
Litigation
The
Company is subject to various legal proceedings and claims, which arise in
the
ordinary course of its business. Although occasional adverse decisions or
settlements may occur, the Company believes that the final disposition of
such
matters will not have material adverse effect on its financial position,
results
of operations or liquidity. Consequently, the Company has not recorded any
reserve for legal matters.
Since
July 26, 2007, the Company, as a joint interest owner, has been served with
two
Texas Property Code Notices of Intent to File Lien Against Property with
regard
to materials/equipment sold and/or leased and amounts owed to third parties
by
the operator of the Ilse 1 property. The gross amount of the claims
is $92,930 with our 10% working interest share before project payout being
$9,293. The Company, along with other joint interest participants, is
in the data gathering stage and is assessing the implications and magnitude
of
these Notices and the potential financial impact to the Company. The
Company was billed for these services by the operator on their June 2007
operating statement and these costs have been accrued in our condensed
consolidated financial statements as costs related to the Ilse
well. It is the Company’s position that no other contingency accrual
is currently required.
INDEX
OIL AND GAS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2007
(unaudited)
NOTE
8 - CAPITAL STOCK
During
the quarter ended June 30, 2007:
Balance
at March 31, 2007
|
|
|
65,737,036
|
|
Issuance
of stock upon exercise of warrants
|
|
|
66,662
|
|
Total
|
|
|
65,803,698
|
|
In
June
2007, a total of 66,662 warrants were exercised at a price of $0.14 for a
total
of $9,333 and a total of 66,662 shares of common stock, $0.001 par value,
were
issued to a director.
NOTE
9 - OPTIONS AND WARRANTS AND STOCK-BASED
COMPENSATION
The
Board
of Directors of Index Inc. agreed to the adoption of the 2006 Incentive Stock
Option Plan (the “Stock Option Plan”) and approved it on March 14, 2006,
effective as of January 20, 2006, providing for the issuance of up to 5,225,000
shares of Common Stock of Index Inc. to officers, directors, employees and
consultants of Index Inc. and/or its subsidiaries. Pursuant to the Stock
Option
Plan, Index Inc. has allowed for the issuance of options to purchase 5,077,526
shares of Common Stock. Total compensation expense recorded for the issuance
of
these options in the first quarter of fiscal 2008 was
$96,823.
The
principal terms and conditions of the share options granted under the Stock
Option Plan are that vesting of the options granted occurs in three stages:
(1)
50% on grant; (2) 25% one year after grant; and (3) 25% two years after grant.
Furthermore, the share options granted under the Share Option Plan are generally
non-transferable other than to a legal or beneficial holder of the options
upon
the option holder’s death. The rights to vested but unexercised options cease to
be effective: (1) 18 months after death of the stock options holder; (2)
6
months after Change of Control of Index Inc.; (3) 12 months after loss
of
office due to health related incapacity or redundancy;
or (4) 12 months after the retirement of the options holder from a position
with
Index Inc. All options have a 5 year expiring term.
INDEX
OIL AND GAS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2007
(unaudited)
NOTE
9 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION
(continued)
The
remaining compensation expense associated with total unvested awards as of
June
30, 2007 was approximately $253,000, and will be recognized over the remaining
weighted average vesting period. $96,823 and $170,331 was recorded as
compensation expense for the three months ended June 30, 2007 and 2006,
respectively.
Effective
January 1, 2006, the Company began accounting for stock-based compensation
under SFAS-123R, whereby the Company records compensation expense based on
the
fair value of awards described below. The Company did not issue any stock
options during the three months ended June 30, 2007 and 2006 and therefore
had
no compensation expense for these periods for new option
issuances.
Stock
Options
The
following tables summarize the changes in options outstanding and exercised
and
the related exercise prices for the shares of the Company's common stock
issued
to certain directors and stockholders at June 30, 2007:
|
|
Number
of Shares
|
|
|
Weighted
Average Exercise Price Per Share
|
|
Outstanding
at March 31, 2007
|
|
|
5,077,526
|
|
|
$
|
0.46
|
|
Granted
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Canceled
or expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding
at June 30, 2007
|
|
|
5,077,526
|
|
|
$
|
0.46
|
|
The
Company has assumed an annual forfeiture rate of 0 % for the awards granted
based on the Company’s history for this type of award to various employee
groups. Compensation expense is recognized ratably over the requisite service
period and immediately for retirement-eligible employees.
Options
Outstanding
|
|
|
Options
Exercisable
|
|
Exercise
Price
|
|
|
Number
Outstanding
|
|
|
Weighted
Average Remaining Contractual Life (Years)
|
|
|
Weighted
Average Exercise Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average Exercise Price
|
|
$
|
0.35
|
|
|
|
4,577,526
|
|
|
|
3.56
|
|
|
$
|
0.35
|
|
|
|
3,433,145
|
|
|
$
|
0.35
|
|
$
|
1.42
|
|
|
|
500,000
|
|
|
|
4.72
|
|
|
$
|
1.42
|
|
|
|
250,000
|
|
|
$
|
1.42
|
|
|
|
|
|
|
5,077,526
|
|
|
|
|
|
|
$
|
0.46
|
|
|
|
3,683,145
|
|
|
$
|
0.42
|
|
INDEX
OIL AND GAS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2007
unaudited)
NOTE
9 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION
(continued)
Warrants
The
following tables summarize the changes in warrants outstanding and exercised
and
the related exercise prices for the shares of the Company's common stock
issued
as follows:
|
|
Number
of Shares
|
|
|
Weighted
Average Exercise Price Per Share
|
|
Outstanding
and Exercisable March 31, 2007
|
|
|
968,083
|
|
|
$
|
0.13
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exchanged
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(66,662
|
)
|
|
|
(0.14
|
)
|
Canceled
or expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding
and Exercisable at June 30, 2007
|
|
|
901,421
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
Exercise
Prices
|
|
|
Number
Outstanding
|
|
|
Weighted
Average Remaining Contractual Life (Years)
|
|
|
Weighted
Average Exercise Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average Exercise Price
|
|
$
|
0.07
|
|
|
|
138,655
|
|
|
|
3.25
|
|
|
$
|
0.07
|
|
|
|
138,655
|
|
|
$
|
0.07
|
|
$
|
0.14
|
|
|
|
143,037
|
|
|
|
3.25
|
|
|
$
|
0.14
|
|
|
|
143,037
|
|
|
$
|
0.14
|
|
$
|
0.14
|
|
|
|
253,961
|
|
|
|
3.25
|
|
|
$
|
0.14
|
|
|
|
253,961
|
|
|
$
|
0.14
|
|
$
|
0.14
|
|
|
|
339,033
|
|
|
|
3.25
|
|
|
$
|
0.14
|
|
|
|
339,033
|
|
|
$
|
0.14
|
|
$
|
0.14
|
|
|
|
26,735
|
|
|
|
3.25
|
|
|
$
|
0.14
|
|
|
|
26,735
|
|
|
$
|
0.14
|
|
|
|
|
|
|
901,421
|
|
|
|
3.25
|
|
|
$
|
0.13
|
|
|
|
901,421
|
|
|
$
|
0.13
|
|
In
June
2007, a total of 66,662 warrants were exercised at a price of $0.14 for a
total
of $9,333 and a total of 66,662 shares of common stock, $0.001 par value,
were
issued to a director.
INDEX
OIL AND GAS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2007
(unaudited)
NOTE
10 - EARNINGS PER SHARE
Basic
earnings per share is computed by dividing income available to common
stockholders by the weighted average number of shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
contracts to issue common stock and related stock options were exercised
at the
end of the period. For the periods ended June 30, 2007 and 2006, excluded
from
diluted earnings per share are 901,421 and 1,092,676, respectively of warrants
to acquire common stock. As of both June 30, 2007 and 2006, there are 4,577,526
of options to acquire the Company’s common stock that were excluded from the
computation of diluted earnings per share, and which excluded 500,000 of
out of
the money options at June 30, 2007. As of March 31, 2007, 25,000 shares yet
to
vest under a performance bonus award have been excluded from the computation
of
diluted earnings per share.
The
following is a calculation of basic and diluted weighted average shares and/or
options and warrants outstanding:
|
|
For
The Three Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
Shares—basic
|
|
|
65,739,234
|
|
|
|
54,544,345
|
|
Dilution
effect of stock option and awards at end of period
|
|
|
-
|
|
|
|
-
|
|
Shares—diluted
|
|
|
65,739,234
|
|
|
|
54,544,345
|
|
Stock
awards and shares excluded from diluted earnings per share due
to
anti-dilutive effect
|
|
|
5,503,947
|
|
|
|
5,670,202
|
|
NOTE
11 - RELATED PARTY TRANSACTIONS
During
the three months ended June 30, 2006, the Company repaid various directors
$1,007 for the refund of payroll taxes.
During
the three months ended June 30, 2006, the Company repaid a bank loan Lyndon
West
and Michael Scrutton, jointly and severally, guaranteed this bank
loan.
NOTE
12 - OPERATING SEGMENTS
The
Company has one reportable segment, oil and natural gas exploration and
production, as determined in accordance with SFAS No. 131, “Disclosure
About Segments of an Enterprise and Related Information.” See below for
information by geographic location.
Geographic
Area Information
During
the three months ended June 30, 2007 and as of June 30, 2007, the Company
owned
oil and natural gas interests in three main geographic areas in the United
States. Geographic revenue and oil and gas property information below is
based
on physical location of the assets at the end of each
period.
|
|
June
30, 2007
|
|
|
|
Total Oil & Gas
Revenue
|
|
|
Total Oil
and Gas Assets (1)
|
|
Kansas
|
|
$
|
40,974
|
|
|
$
|
787,431
|
|
Louisiana
|
|
|
66,727
|
|
|
|
452,313
|
|
Texas
|
|
|
43,672
|
|
|
|
5,346,722
|
|
Total
|
|
$
|
151,373
|
|
|
$
|
6,586,466
|
|
(1)
|
Total
oil and gas property assets at June 30, 2007 are reported gross.
Under the
full cost method of accounting for oil and gas properties, depreciation,
depletion and amortization and impairment is not allocated to
properties.
|
INDEX
OIL AND GAS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2007
(unaudited)
NOTE
13 - SUBSEQUENT EVENTS
In
July
2007, the Company announced that it has signed a Purchase and Sale Agreement
to
acquire a 5% working interest and 3.5% Net Revenue Interest ("NRI") in the
Alligator Bayou exploration prospect. located beneath onshore portions of
Brazoria and Matagorda Counties, Texas.
The
Shadyside 1 well commenced drilling in July 2007.
Since
July 26, 2007, the Company, as a joint interest owner, has been served with
two
Texas Property Code Notices of Intent to File Lien Against Property with
regard
to materials/equipment sold and/or leased and amounts owed to third parties
by
the operator of our Ilse 1 property. See Notes 1 and 7 for more
information.
On
August
13, 2007, Mr. John G. Williams informed the Company that he was resigning
from
his position as Executive Vice President Exploration and Production effective
as
of November 1, 2007, and that he was also resigning from his position as
a
member of the board of directors of the Company effective immediately. Pursuant
to the terms of Mr. Williams’ Employment Agreement entered into with the
Company, dated August 29, 2006 (the “Agreement”), which was filed as Exhibit
10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September
9, 2006, Mr. Williams complied with the terms of the Agreement by giving
the
Company proper notice of his resignation. Mr. Williams will continue to serve
as
Executive Vice President Exploration and Production until November 1,
2007. The Company’s Board of Directors has no immediate plans to appoint a
replacement director to fill the vacancy created.
RBSM
LLP
CERTIFIED
PUBLIC ACCOUNTANTS
REPORT
OF
INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM
Board
of
Directors
Index
Oil
and Gas, Inc.
Houston,
USA
We
have
audited the accompanying consolidated balance sheets of Index Oil and Gas,
Inc.
(and subsidiaries) (the “Company”) as of March 31, 2007 and 2006 and the related
consolidated statements of losses, stockholders’ equity, and cash flows for each
of the two years in the period ended March 31, 2007. These financial statements
are the responsibility of the company’s management. Our responsibility is to
express an opinion on the financial statements based upon our
audits.
We
have
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining on a test basis, evidence supporting the amounts and disclosures
in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe our audits
provide a reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Index Oil and Gas, Inc. at March
31, 2007 and 2006 and the results of its operations and its cash flows for
each
of the two years in the period ended March 31, 2007, in conformity with
accounting principles generally accepted in the United States of
America.
|
|
|
New
York, New York
|
|
/s/ RBSM
LLP
|
June
13, 2007
|
RBSM
LLP
|
|
Certified
Public Accountants
|
INDEX
OIL AND GAS, INC.
CONSOLIDATED
BALANCE SHEETS
MARCH
31, 2007 AND 2006
|
|
2007
|
|
|
2006
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash
and cash equivalents (Note 3)
|
|
$
|
10,141,125
|
|
|
$
|
5,536,006
|
|
Trade
receivables (Note 4)
|
|
|
80,342
|
|
|
|
12,501
|
|
Other
receivables (Note 3)
|
|
|
6,688
|
|
|
|
6,254
|
|
Other
current assets (Note 3)
|
|
|
72,936
|
|
|
|
8,600
|
|
Total
Current Assets
|
|
|
10,301,091
|
|
|
|
5,563,361
|
|
|
|
|
|
|
|
|
|
|
Oil
& Gas Properties, full cost, net of accumulated depletion (Notes
3, 5,
7 and 15)
|
|
|
4,866,050
|
|
|
|
951,199
|
|
Property
and Equipment, net of accumulated depreciation (Note 3 and
5)
|
|
|
12,493
|
|
|
|
1,727
|
|
Total
Oil & Gas Properties and Property and Equipment
|
|
|
4,878,543
|
|
|
|
952,926
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
15,179,634
|
|
|
$
|
6,516,287
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses (Note 3)
|
|
$
|
814,449
|
|
|
$
|
555,452
|
|
Bank
loan (Note 6)
|
|
|
-
|
|
|
|
48,569
|
|
Other
current liability (Note 14 )
|
|
|
-
|
|
|
|
1,007
|
|
Total
Current Liabilities
|
|
|
814,449
|
|
|
|
605,028
|
|
|
|
|
|
|
|
|
|
|
Long-Term
Liabilities:
|
|
|
|
|
|
|
|
|
Asset
Retirement Obligation (Notes 3 and 7)
|
|
|
41,552
|
|
|
|
25,300
|
|
Total
Liabilities
|
|
|
856,001
|
|
|
|
630,328
|
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies (Note 9)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Stockholders
Equity: (Note 6 and 11)
|
|
|
|
|
|
|
|
|
Preferred
stock, par value $0.001, 10 million shares authorized, no shares
issued
and outstanding at March 31, 2007 and 2006 (see Note 10)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Common
stock, par value $0.001, 500 million shares authorized,
65,737,036
and 54,544,346 issued and outstanding at March 31, 2007 and 2006,
respectively (see Note 10)
|
|
|
65,737
|
|
|
|
54,544
|
|
Additional
paid in capital
|
|
|
19,043,734
|
|
|
|
8,387,306
|
|
Accumulated
deficit
|
|
|
(4,801,237
|
)
|
|
|
(2,575,581
|
)
|
Other
comprehensive income (Note 3)
|
|
|
15,399
|
|
|
|
19,690
|
|
Total
Stockholders’ Equity
|
|
|
14,323,633
|
|
|
|
5,885,959
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders’ Equity
|
|
$
|
15,179,634
|
|
|
$
|
6,516,287
|
|
See
accompanying notes to consolidated financial statements
INDEX
OIL AND GAS, INC.
CONSOLIDATED
STATEMENT OF LOSSES
FOR
THE YEARS ENDED MARCH 31, 2007 AND 2006
|
|
2007
|
|
|
2006
|
|
Revenue:
|
|
|
|
|
|
|
Oil
& gas sales
|
|
$
|
457,046
|
|
|
$
|
191,114
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
Operating
costs
|
|
|
114,735
|
|
|
|
41,953
|
|
Depreciation
and amortization (Note 5)
|
|
|
189,379
|
|
|
|
71,571
|
|
Impairment
|
|
|
-
|
|
|
|
10,000
|
|
General
and administrative expenses
|
|
|
2,723,235
|
|
|
|
1,746,101
|
|
Total
Operating Expenses
|
|
|
3,027,349
|
|
|
|
1,869,625
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
|
(2,570,303
|
)
|
|
|
(1,678,511
|
)
|
|
|
|
|
|
|
|
|
|
Other
Income (Expenses)
|
|
|
-
|
|
|
|
(43,234
|
)
|
Interest
income
|
|
|
344,646
|
|
|
|
30,939
|
|
Total
Other Income (Expense)
|
|
|
344,646
|
|
|
|
(12,295
|
)
|
|
|
|
|
|
|
|
|
|
Loss
before Income Taxes
|
|
|
(2,225,656
|
)
|
|
|
(1,690,806
|
)
|
|
|
|
|
|
|
|
|
|
Income
Taxes Benefit (Note 8)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(2,225,656
|
)
|
|
$
|
(1,690,806
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share (Note 12):
|
|
|
|
|
|
|
|
|
Basic
and assuming dilution
|
|
$
|
(0.03
|
)
|
|
$
|
(0.08
|
)
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
and assuming dilution
|
|
|
65,623,189
|
|
|
|
22,391,357
|
|
See
accompanying notes to consolidated financial statements
INDEX
OIL AND GAS, INC.
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY
FOR
THE YEARS ENDED MARCH 31, 2007 AND 2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid in Capital
|
|
|
(Accumulated
Deficit)
|
|
|
Other
Comprehensive Income/(Loss)
|
|
|
Total
Stockholders’ Equity
|
|
Balance
at March 31, 2005
|
|
|
12,303,674
|
|
|
$
|
12,304
|
|
|
$
|
944,140
|
|
|
$
|
(884,775
|
)
|
|
$
|
3,571
|
|
|
$
|
75,240
|
|
Issuance
of common stocks
|
|
|
9,596,735
|
|
|
|
9,597
|
|
|
|
1,176,449
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,186,046
|
|
Stock
issue costs
|
|
|
-
|
|
|
|
-
|
|
|
|
(23,219
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(23,219
|
)
|
Issuance
of common stock on conversion of stockholder loan
|
|
|
715,143
|
|
|
|
715
|
|
|
|
86,043
|
|
|
|
-
|
|
|
|
-
|
|
|
|
86,758
|
|
Shares
relating to Index Ltd cancelled in relation to reverse merger in
January
2006 (Note 2)
|
|
|
(22,615,552
|
)
|
|
|
(22,616
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(22,616
|
)
|
Shares
issued to Index Ltd shareholders relating to reverse merger in
January
2006 (Note 2)
|
|
|
22,615,552
|
|
|
|
22,616
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,616
|
|
Stock
compensation, net of tax of $0
|
|
|
-
|
|
|
|
-
|
|
|
|
1,043,823
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,043,823
|
|
Stock
compensation, net of tax of $0
|
|
|
303,793
|
|
|
|
303
|
|
|
|
37,274
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37,577
|
|
Shares
issued to Index Inc shareholders in relation to merger with Index
Ltd in
January 2006 (Note 2)
|
|
|
23,091,667
|
|
|
|
23,092
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
23,092
|
|
Issuance
of common stock on private offering
|
|
|
8,533,333
|
|
|
|
8,533
|
|
|
|
5,111,467
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,120,000
|
|
Issuance
of warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
11,329
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,329
|
|
Other
comprehensive income foreign currency
translation
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,119
|
|
|
|
16,119
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,690,806
|
)
|
|
|
-
|
|
|
|
(1,690,806
|
)
|
Balance
at March 31, 2006
|
|
|
54,544,345
|
|
|
$
|
54,544
|
|
|
$
|
8,387,306
|
|
|
$
|
(2,575,581
|
)
|
|
$
|
19,690
|
|
|
$
|
5,885,959
|
|
Issuance
of common stock on private offerings
|
|
|
10,965,598
|
|
|
|
10,966
|
|
|
|
10,954,632
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,965,598
|
|
Stock
issue costs
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,190,512
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,190,512
|
)
|
Stock
compensation, net of tax of $0
|
|
|
-
|
|
|
|
-
|
|
|
|
792,342
|
|
|
|
-
|
|
|
|
-
|
|
|
|
792,342
|
|
Issuance
of stock upon vesting of stock award
|
|
|
50,000
|
|
|
|
50
|
|
|
|
(50
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Issuance
of stock for services, net of tax of $0
|
|
|
40,000
|
|
|
|
40
|
|
|
|
63,960
|
|
|
|
-
|
|
|
|
-
|
|
|
|
64,000
|
|
Issuance
of stock upon exercise of warrants
|
|
|
124,593
|
|
|
|
125
|
|
|
|
17,318
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,443
|
|
Issuance
of stock for performance bonuses
|
|
|
12,500
|
|
|
|
12
|
|
|
|
18,738
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,750
|
|
Other
comprehensive income foreign currency
translation
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,291
|
)
|
|
|
(4,291
|
)
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,225,656
|
)
|
|
|
-
|
|
|
|
(2,225,656
|
)
|
Balance
at March 31, 2007
|
|
|
65,737,036
|
|
|
$
|
65,737
|
|
|
$
|
19,043,734
|
|
|
$
|
(4,801,237
|
)
|
|
$
|
15,399
|
|
|
$
|
14,323,633
|
|
See
accompanying notes to consolidated financial statements
INDEX
OIL AND GAS, INC.
CONSOLIDATED
STATEMENT OF CASH FLOWS
FOR
THE YEARS ENDED MARCH 31, 2007 AND 2006
|
|
2007
|
|
|
2006
|
|
Cash
Flows From Operating Activities:
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2,225,656
|
)
|
|
$
|
(1,690,806
|
)
|
Adjustments
to reconcile net loss to net cash (used in) operating
activities:
|
|
|
|
|
|
|
|
|
Organization
costs arising from acquisition
|
|
|
-
|
|
|
|
1,578
|
|
Non
cash stock based compensation cost
|
|
|
875,092
|
|
|
|
1,043,823
|
|
Amortization
of debt issue costs-current year
|
|
|
-
|
|
|
|
43,234
|
|
Non-cash
interest expense on warrant issuance on loan conversion
|
|
|
-
|
|
|
|
1,476
|
|
Depreciation
and amortization
|
|
|
189,379
|
|
|
|
71,571
|
|
Impairment
|
|
|
-
|
|
|
|
10,000
|
|
(Increase)
in receivables
|
|
|
(131,908
|
)
|
|
|
(14,104
|
)
|
Increase
in accounts payable and accrued expenses
|
|
|
251,342
|
|
|
|
342,267
|
|
Net
Cash (Used In) Operating Activities
|
|
|
(1,041,751
|
)
|
|
|
(190,961
|
)
|
|
|
|
|
|
|
|
|
|
Cash
Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
Cash
received in reverse merger
|
|
|
-
|
|
|
|
10,018
|
|
Payments
for property and equipment
|
|
|
(11,794
|
)
|
|
|
-
|
|
Payments
for oil and gas properties
|
|
|
(4,086,949
|
)
|
|
|
(659,376
|
)
|
Net
Cash (Used In) Investing Activities
|
|
|
(4,098,743
|
)
|
|
|
(649,358
|
)
|
|
|
|
|
|
|
|
|
|
Cash
Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of shares
|
|
|
10,983,039
|
|
|
|
5,681,229
|
|
Proceeds
from issue of warrants
|
|
|
-
|
|
|
|
8,377
|
|
Proceeds
from convertible notes payable
|
|
|
-
|
|
|
|
676,664
|
|
(Payments
for) Proceeds from bank term debt
|
|
|
(51,797
|
)
|
|
|
51,374
|
|
Payment
for share issue costs
|
|
|
(1,190,513
|
)
|
|
|
(23,219
|
)
|
Payment
for debt issue costs
|
|
|
-
|
|
|
|
(43,234
|
)
|
Net
Cash Provided by Financing Activities
|
|
|
9,740,729
|
|
|
|
6,351,191
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents
|
|
|
4,884
|
|
|
|
16,461
|
|
|
|
|
|
|
|
|
|
|
Net
Increase/(Decrease) in Cash And Cash Equivalents
|
|
|
4,605,119
|
|
|
|
5,527,333
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
$
|
5,536,006
|
|
|
$
|
8,673
|
|
Cash
and cash equivalents at the end of period
|
|
$
|
10,141,125
|
|
|
$
|
5,536,006
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash
paid (received) during the year for interest
|
|
$
|
(344,646
|
)
|
|
$
|
(32,415
|
)
|
Cash
paid during the year for taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash
Financing and Investing Transactions:
|
|
|
|
|
|
|
|
|
Conversion
of loan capital into share capital
|
|
$
|
-
|
|
|
$
|
750,630
|
|
Non-cash
stock based compensation cost
|
|
$
|
875,092
|
|
|
$
|
1,043,823
|
|
Non-cash
interest expense on warrant issuance on loan conversion
|
|
$
|
-
|
|
|
$
|
1,476
|
|
Acquisitions
:
|
|
|
|
|
|
|
|
|
Common
stock retained by Index Inc.
|
|
$
|
-
|
|
|
$
|
23,092
|
|
Assets
acquired
|
|
$
|
-
|
|
|
$
|
(23,500
|
)
|
Liabilities
acquired
|
|
$
|
-
|
|
|
$
|
1,986
|
|
Total
consideration paid
|
|
$
|
-
|
|
|
$
|
1,578
|
|
See
accompanying notes to consolidated financial statements
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
1 - ORGANIZATION AND OPERATIONS OF THE COMPANY
Organization
In
March
2004, a company named Thai One On, Inc. (“Thai”) was incorporated under the laws
of the State of Nevada. Thai subsequently acquired a wholly owned subsidiary,
Thai Pasta Enterprise Sdn. Bhd., a privately held Malaysian company (“Thai
Pasta”). In December of 2005, Thai changed its name from Thai One On Inc. to
Index Oil and Gas, Inc (the “Company” or “Index Inc.”).
On
January 20, 2006, the stockholders of Index Oil & Gas Ltd., a company formed
under the laws of United Kingdom (“Index Ltd.”), entered into Acquisition and
Share Exchange Agreements (“Acquisition Agreements”, the “Transaction” or
“Merger”) with the Company. Effective with the Acquisition Agreements, all
previously outstanding equity stock of Index Ltd. owned by Index Ltd.’s
stockholders was exchanged for an aggregate of 22,615,552 shares of the
Company’s common stock and all issued warrants to purchase shares of equity
stock in Index Ltd. were exchanged for 1,092,676 warrants to purchase shares
of
common stock of the Company.
Prior
to
the Merger, the Company’s year-end for accounting purposes was December 31,
2005. As a result of the Merger, there was a change in control of the public
entity. In accordance with Statement of Financial Accounting Standards
141,
Index Ltd. was deemed to be the acquiring entity. While the transaction
is
accounted for using the purchase method of accounting, in substance the
Merger
was a recapitalization of Index Ltd.’s capital structure. For accounting
purposes, the Company accounted for the transaction as a reverse acquisition
and
Index Inc. was the surviving entity. The total purchase price and carrying
value
of net assets acquired was $1,578. The Company did not recognize goodwill
or any
intangible assets in connection with the transaction.
Index,
Inc. is the parent company with four group subsidiaries: Index Ltd. comprises
a
United Kingdom holding company, which provides management services to the
Company, and United States operating subsidiaries; Index Oil & Gas (USA),
LLC, an operating company; Index Investments North America Inc. (“Index
Investments”) and Index Offshore LLC (“Index Offshore”), a wholly owned
subsidiary of Index Investments and also an operating company. Index Inc.,
through its subsidiaries, is engaged in the exploration for, development,
production and sale of oil and natural gas. The Company does not currently
operate any of its properties and sells its oil and gas production to domestic
purchasers.
During
the year ending March 31, 2007 the Company transferred the ordinary shares
of
Thai Pasta to a third party as part of a voluntary process to liquidate
the
entity and Thai Pasta ceased to be a subsidiary of the Company. This resulted
in
no impact to the financial position, results of operations or cash flows
of the
Company for the year ended March 31, 2007 as there was no value assigned
to the
assets, liabilities or equity of Thai Pasta following the reverse merger
transaction.
INDEX
OIL AND GAS, INC.
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
1 - ORGANIZATION AND OPERATIONS OF THE COMPANY (continued)
Funding
On
January 20, 2006, the Company completed a private placement for 8,533,333
shares
of the Company’s common stock at a price of $0.60 per share for aggregate
proceeds of approximately $5.1 million.
On
September 9, 2006, the Company announced the completion of a private placement
for 7,097,898 shares of $0.001 par value common stock of the Company at a
price
of $1.00 per share for aggregate gross proceeds of approximately $7.1
million.
On
October 11, 2006, the Company announced the completion of a private placement
for 3,867,700 shares of $0.001 par value common stock of the Company at a
price
of $1.00 per share for aggregate proceeds of approximately $3.9
million.
The
net
proceeds of these two placements will be applied to the expansion of the
Company’s operations in the United States per Phases 2 and 3 of the Company’s
Growth Strategies.
The
Company filed a registration statement on Form SB-2 (the “Registration
Statement”), which was declared effective on February 9, 2007, to register a
total of 43,510,952 shares of the Company’s common stock, including the shares
included in the units of common stock described above, of which 1,092,676
shares
are issuable upon the exercise of warrants.
Operations
The
Company has a three phased approach to its growth strategy. Phase 1, largely
completed, consists of exploration projects with very low risk, low cost,
low
working interest, and limited upside. Phase 2, largely completed, consists
of
projects with low risk, low to medium cost, low to medium working interests
commensurate with funding capability and risk. These projects have increased
upside. Phase 3, recently commenced, consists of projects with low to medium
risk, medium to high costs, and working interests commensurate with the funding
capability and risk.
PHASE
1
GROWTH STRATEGY: DRILLING PROGRAM IN KANSAS
On
August
21, 2006, the Company announced an update to its Kansas drilling program
that
consisted of up to eight-wells. On January 9, 2007, the Company announced
that
six of the eight wells had been drilled, three in Barton County and three
in
Stafford County. All well locations are supported by modern 3D seismic
data.
On
January 9, 2007, the company announced that in Barton County where the Company
has a 3.25% working interest, two of the wells drilled were completed as
oil
producers. Schartz 1-18 and Rogers Unit 1-1 wells began producing in October
2006 with gross daily oil production of seven barrels and eight barrels,
respectively. Pan John 1-11 was a dry hole. Panning 1-1 is unlikely to be
drilled.
In
Stafford County where the Company has a 5% working interest, two wells were
completed as oil producers. The Hay Witt 1-11 and the Hayden 1-14 wells began
producing in November 2006 and
INDEX
OIL AND GAS, INC.
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
1 - ORGANIZATION AND OPERATIONS OF THE COMPANY (continued)
December
2006, respectively, with a gross daily oil production of forty-two barrels
and
eight barrels, respectively. The Hull Witt 1-11 was a dry hole. No further
wells
were drilled.
PHASES
2
& 3 GROWTH STRATEGIES: DRILLING PROGRAMS IN TEXAS AND LOUISIANA
Phase
2
Growth Strategy
The
Company has made progress with its onshore Phase 2 drilling program and
announced on August 21, 2006 that the Walker 1 discovery well drilled in
Louisiana began producing on August 18, 2006. Initial gross production
of the
well, in which Index has a 12.5% working interest, was approximately 200
barrels
of oil per day with associated gross gas production of approximately 175
thousand cubic feet per day. Walker 1 is the first productive well from
the
Company's initial Phase 2 "Four Well Portfolio.”
The
remaining seven wells in the current Phases 2 and 3 eight-well program
are in
Texas. Vieman 1 in Brazoria County was spudded October 15, 2006. Index
built its
working interest from an original 12.5% WI to a final 19.5% prior to spudding.
On December 20, 2006, the Company announced that the deviated well had
been
drilled to a total depth of 10,383 feet true vertical depth, 11,340 feet
measured depth. Electric logs indicated two potential pay zones below 10,000
feet true vertical depth totaling approximately 15 feet of net gas bearing
reservoir. The well took longer than anticipated to drill due to unplanned
sidetrack operations and pressure control requirements in the lower of
the two
pay sections, and has incurred costs significantly in excess of pre-drill
estimate. Vieman 1 came on production in February 2007, as part of an initial,
extended flow test, and after the completion of this flow test has recently
come
back on production following further completion operations.
The
three-well Taffy drilling program was announced on December 5, 2006. Originally
planned as a two-well program, a third well was added prior to drilling.
The
Company originally agreed to a 7.5% working interest in the two Taffy wells.
The
Company increased its working interest to 12.5% in Taffy 1, renamed Hawkins
1,
and to 30% in Taffy 2, renamed Dark 1. The company took a 30% working interest
in a third Taffy well named Ruse 1. The three wells target relatively shallow
Miocene gas reservoirs between 5,000 and 7,000 feet in Matagorda
County.
On
January 25, 2007, the Company announced the Hawkins 1 commercial discovery.
A
completion test confirmed gas flow at a measured rate of approximately
1.04
million cubic feet per day through a choke of 9/64th inch with a flowing
tubing
pressure of 1,850 pounds per square inch. The well is scheduled to begin
production into the local pipeline grid during the second quarter of calendar
year 2007.
Ruse
1
was non-commercial and Dark 1 was a dry hole and both have been plugged
and
abandoned.
As
announced on May 2, 2006 and July 12, 2006, the Company entered into two
Phases,
I and II of an exploration agreement executed with ADC to reprocess seismic
data
and develop prospects to drill in four areas in Texas, Mississippi, and
Alabama.
This project is capable of delivering projects having Phase 2 and 3 growth
characteristics. The first drillable prospect generated as a result of
these
agreements that the Company has committed to drill is an exploration well
in the
Fern Lake area of Nacogdoches County.
INDEX
OIL AND GAS, INC.
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
1 - ORGANIZATION AND OPERATIONS OF THE COMPANY (continued)
Phase
3
Growth Strategy
On
September 10, 2006, the Company signed an agreement to participate in the
New
Taiton Project in Wharton County. The first well, Ilse 1, spudded on December
1,
2006. It targets stacked Wilcox sands on trend with large nearby gas fields
producing gas from the same Wilcox reservoirs. The prospect is defined
by modern
3D seismic data. If Ilse 1 proves successful, the Company may participate
in
further wells to develop the potential of the New Taiton Project. The Company
has a 10% working interest before payout and an 8% working interest after
payout
in the New Taiton Project.
The
Ilse
1 well has been drilled to total depth of 17,000 feet and logged. Analysis
of
the logs revealed two zones of interest in the Wilcox C and Wilcox A,
respectively. The lowest zone, the Wilcox C, has been perforated and stimulated
by a “frac” process. Gas flow from the formation to surface has not been
achieved. The preliminary decision is that this interval will not be productive
and will not have any proved reserves.
A
decision making process is currently underway within the joint venture
as to
whether to perform work to attempt to achieve gas flows from the upper
zone of
interest, the Wilcox A. As part of this decision making process, joint
venture
participants are awaiting a formal analysis and recommendation from the
operator.
Capital
costs associated with the Ilse 1 well have been held outside the full cost
pool,
because a determination as to whether the well has found proved reserves
has not
been completed. At the future point when a determination is made, the costs
associated with Ilse 1 will be included in the full cost pool. To the extent
that Ilse 1 does not find any proved reserves, ignoring all other unrelated
factors, this will lead to higher unit depletion charges in future periods
and
makes it highly likely Index will suffer a ceiling test impairment charge.
Index
is carrying approximately $1.3mm of costs at March 31, 2007 related to
the Ilse
1 well, and has also incurred further costs subsequent to fiscal year
end.
On
December 4, 2006, the Company announced that it has signed an exploration
agreement to participate at 15% working interest in the West 1 exploration
well
targeting the high-potential Edwards Limestone in Lavaca County, Texas.
The
proposed total depth of the well is approximately 14,700 feet. The company
announced on January 23, 2007 that it had increased its working interest
in the
West 1 well to 20%. The well is planned to spud during the remainder of
calendar
year 2007.
On
February 16, 2007, the Company announced the signing of a letter of intent
to
participate in the first exploration well in the Shadyside prospect, located
in
St. Mary Parish, Louisiana. Index will have an initial 15% working interest
in
the first exploration well, reduced to a 13.5% working interest, after
payout.
The first well will be drilled during the first half of calendar year 2007
with
a planned depth of approximately 16,500 feet.
On
March
5, 2007, the Company announced a commitment to drill two wells in south
Texas.
The wells are located in Victoria and Goliad Counties and target shallow
Frio
and Vicksburg reservoirs. Both wells were successful. The Serrano well,
renamed
Friedrich Gas Unit 1, in Victoria County, found 13 feet of net gas pay
with
daily production expected at 275 MCF of gas (46 Boe) per day. The Habanero
well,
renamed Schroeder Gas Unit 1, in Goliad County, found 10 feet of net gas
pay
with daily production expected at 197 MCF of gas (33 Boe) per day.
NOTE
2 - MERGER AND CORPORATE RESTRUCTURE
In
March
2004, a company named Thai One On, Inc. (“Thai”) was incorporated under the laws
of the State of Nevada. Thai then acquired a wholly-owned subsidiary, Thai
Pasta
Enterprise Sdn. Bhd., a privately-held Malaysian company (“Thai Pasta”), from an
officer and director of Thai. Thai Pasta commenced operations as a restaurant
operator in June 2004, but subsequently ceased operations in the fourth
quarter
of 2005 calendar year. Thai Pasta then sold a portion of its surplus assets,
leaving it with no significant assets. In November 2005, a Letter of Intent
agreement was entered into for the proposed acquisition (“the Letter of Intent”)
of all outstanding shares of Index Ltd.’s common stock by Thai. Subsequently,
Thai changed its name from Thai One On Inc. to Index
Inc.
INDEX
OIL AND GAS, INC.
NOTES
TO
CONSOLIDATED
FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
2 - MERGER AND CORPORATE RESTRUCTURE (continued)
At
December 31, 2005, Thai had 33,220,000 shares outstanding. In January 2006,
the
Company retired 10,128,333 shares of stock leaving 23,091,667 shares
outstanding.
On
January 20, 2006, the stockholders of Index Ltd. entered into Acquisition
and
Share Exchange Agreements (“Acquisition Agreements”, “the Transaction”, or
“Merger”) with the Company. The Company had a total of 75,000,000 authorized
shares with a par value of $0.001 per share and 33,220,000 shares issued
and
outstanding as of December 31, 2005.
The
Company’s year end for accounting purposes was December 31, 2005. As a result of
the Merger, there was a change in control of the public entity. In accordance
with Statement of Financial Accounting Standards 141, Index Ltd. was deemed
to
be the acquiring entity. While the transaction is accounted for using the
purchase method of accounting, in substance the Merger was a recapitalization
of
Index Ltd.’s capital structure.
For
accounting purposes, the Company accounted for the transaction as a reverse
acquisition and Index is the surviving entity. The total purchase price and
carrying value of net assets acquired was $ 1,578. The Company did not recognize
goodwill or any intangible assets in connection with the transaction. As
of the
date of the Agreement, Thai was an inactive corporation with no significant
assets and liabilities.
Effective
with the Acquisition Agreements, all previously outstanding common stock
owned
by Index Ltd.’s stockholders were exchanged for an aggregate of 22,615,552
shares of the Company’s common stock, $0.001 par value (“the Common Stock”) and
all issued warrants to purchase common shares of Index Ltd. were exchanged
for
1,092,676 warrants to purchase shares of Common Stock of the Company. As
part of
the Transaction, subsequent to the Transaction 10,128,333 shares of common
stock
held by the former directors and officers of the Company were retired and
subsequently canceled by the transfer agent for the Company. The effect of
the
Transaction was that 23,091,667 shares of Common Stock were retained (see
Note
9).
The
value
of the stock issued was the historical cost of the Company's net tangible
assets
of $1,578, which did not differ materially from their fair value. The total
consideration paid of $1,578 is summarized further below.
|
|
January
20, 2006
|
|
Common
stock retained by Index Inc.
|
|
$
|
23,092
|
|
Assets
acquired
|
|
|
(23,500
|
)
|
Liabilities
assumed
|
|
|
1,986
|
|
Total
consideration paid
|
|
$
|
1,578
|
|
In
accordance with Statement of Position 98-5 (“SOP 98-5”), the Company will
expense as organization costs the $1,578.
Concurrent
with the Transaction was a private placement totaling $5.12 million for
8,533,333 shares of the Common Stock of the Company at a price of $0.60 per
share.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A
summary
of the significant accounting policies applied in the preparation of the
accompanying consolidated financial statements follows:
Principles
of Consolidation
The
consolidated financial statements as of March 31, 2007 and 2006 and for the
years ended March 31, 2007 and 2006 include the accounts of the Company and
its
wholly owned subsidiaries after eliminating all significant intercompany
accounts and transactions. As described in Note 2, Merger and Corporate
Restructure these consolidated financial statements are presented as a
recapitalization of Index Ltd. For the reverse merger between the Company
and
Index Ltd. at January 20, 2006 the stockholder’s equity section and earnings per
share in the consolidated balance sheet at March 31, 2006 was restated to
reflect the exchange of shares using a conversion ratio of approximately
2.857
shares of the Company to 1 share of Index Ltd.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts
of
assets and liabilities and disclosure of contingent assets and liabilities
at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Certain accounting policies involve
judgments and uncertainties to such an extent that there is reasonable
likelihood that materially different amounts could have been reported under
different conditions, or if different assumptions had been used. We evaluate
our
estimates and assumptions on a regular basis. We base our estimates on
historical experience and various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates and assumptions used in preparation of our financial statements.
The
most significant estimates with regard to these financial statements relate
to
the provision for income taxes, dismantlement and abandonment costs, estimates
to certain oil and gas revenues and expenses and estimates of proved oil and
natural gas reserve quantities used to calculate depletion, depreciation and
impairment of proved oil and natural gas properties and equipment.
Correction
of Errors
The
Company adopted SFAS 154, “Accounting Changes and Error Corrections—a
replacement of APB Opinion No. 20 and FASB Statement No. 3 (“SFAS 154”)” in
April 1, 2007, in which it changed the requirements for the accounting for
and
the reporting of a change in accounting principle. The Company requires that
a
new accounting principle be applied to the balances of assets and liabilities
as
of the beginning of the earliest period for which retrospective application
is
practicable and that a corresponding adjustment is made to the opening balance
of retained earnings (or other appropriate components of equity or net assets
in
the balance sheet) for that period rather than being reported in the statement
of operations. When it is impracticable to determine the cumulative effect
of
applying a change in accounting principle to all prior periods, The Company
applies the new accounting principle as if it were adopted prospectively from
the earliest date practicable. The Company will also revise previously issued
financial statements to reflect the correction of an error, should one occur,
and limit the application to the direct effects of the change. Indirect effects
of a change in accounting principle will be recognized in the period of the
accounting change. The Company will continue to account for a change in
accounting estimate in accordance with APB 20. The adoption of this
pronouncement had no impact to the Company’s consolidated financial position or
results of operations.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash
and Cash Equivalents, and Concentrations of Credit Risk
Cash
and
cash equivalents represent cash in banks. The Company considers any highly
liquid debt instruments purchased with a maturity date of three months or less
to be cash equivalents. The Company’s accounts receivable are concentrated among
entities engaged in the energy industry, within the United States. Financial
instruments and related items, which potentially subject the Company to
concentrations of credit risk, consist primarily of cash, cash equivalents
and
related party receivables. The Company places its cash and temporary cash
investments with credit quality institutions. At times, such investments may
be
in excess of the FDIC insurance limit.
Accounting
for Bad Debts and Allowances
Bad
debts
and allowances are provided based on historical experience and management's
evaluation of outstanding accounts receivable. The management periodically
evaluates past due or delinquency of accounts receivable in evaluating its
allowance for doubtful accounts. There was no allowance for doubtful accounts
at
March 31, 2007 and 2006.
Other
Current Assets
Other
receivables at March 31, 2007 and 2006, of $6,688 and $6,254, respectively
consist primarily of value added tax recoverable in the United Kingdom by
the
Company. Other current assets of $72,936 and $8,600 at March 31, 2007 and
2006
consist of accrued interest income from cash in banks and prepaid
expenses.
Oil
and Gas Properties
The
Company follows the full cost method of accounting for oil and gas properties.
Accordingly, all costs associated with acquisition, exploration, and development
of properties within a relatively large geopolitical cost center are capitalized
when incurred and are amortized as mineral reserves in the cost center are
produced, subject to a limitation that the capitalized costs not exceed the
value of those reserves. In some cases, however, certain significant costs,
such
as those associated with offshore U.S. operations, are deferred separately
without amortization until the specific property to which they relate is
found
to be either productive or nonproductive, at which time those deferred costs
and
any reserves attributable to the property are included in the computation
of
amortization in the cost center. All costs incurred in oil and gas producing
activities are regarded as integral to the acquisition, discovery, and
development of whatever reserves ultimately result from the efforts as a
whole,
and are thus associated with the Company’s reserves. The Company capitalizes
internal costs directly identified with performing or managing acquisition,
exploration and development activities. The Company has not capitalized any
internal costs or interest at March 31, 2007 and 2006. Unevaluated costs
are
excluded from the full cost pool and are periodically evaluated for impairment
rather than amortized. Upon evaluation, costs associated with productive
properties are transferred to the full cost pool and amortized. Gains or
losses
on the sale of oil and natural gas properties are generally included in the
full
cost pool unless the entire pool is sold.
Capitalized
costs and estimated future development costs are amortized on a
unit-of-production method based on proved reserves associated with the
applicable cost center. The Company has assessed the impairment for oil and
natural gas properties for the full cost pool at March 31, 2007 and 2006
and
will assess quarterly thereafter using a ceiling test to determine if impairment
is necessary. Specifically, the net unamortized costs for each full cost
pool
less related deferred income taxes should not exceed the
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Oil
and Gas Properties (continued)
following:
(a) the present value, discounted at 10%, of future net cash flows from
estimated production of proved oil and gas reserves plus (b) all costs being
excluded from the amortization base plus (c) the lower of cost or estimated
fair
value of unproved properties included in the amortization base less (d) the
income tax effects related to differences between the book and tax basis of
the
properties involved. The present value of future net revenues should be based
on
current prices, with consideration of price changes only to the extent provided
by contractual arrangements, as of the latest balance sheet presented. The
full
cost ceiling test must take into account the prices of qualifying cash flow
hedges in calculating the current price of the quantities of the future
production of oil and gas reserves covered by the hedges as of the balance
sheet
date. In addition, the use of the hedge-adjusted price should be consistently
applied in all reporting periods and the effects of using cash flow hedges
in
calculating the ceiling test, the portion of future oil and gas production
being
hedged, and the dollar amount that would have been charged to income had the
effects of the cash flow hedges not been considered in calculating the ceiling
limitation should be disclosed. Any excess is charged to expense during the
period that the excess occurs. The Company did not have any hedging activities
during the three year period ended March 31, 2007. Application of the ceiling
test is required for quarterly reporting purposes, and any write-downs cannot
be
reinstated even if the cost ceiling subsequently increases by year-end. Sales
of
proved and unproved properties are accounted for as adjustments of capitalized
costs with no gain or loss recognized, unless such adjustments would
significantly alter the relationship between capitalized costs and proved
reserves of oil and gas, in which case the gain or loss is recognized in
income.
Abandonment of properties is accounted for as
adjustments of capitalized costs with no loss recognized.
Other
Property, Plant and Equipment
Other
property, plant and equipment primarily includes computer equipment, which
is
recorded at cost and depreciated on a straight-line basis over useful lives
of
five years. Repair and maintenance costs are charged to expense as incurred
while acquisitions are capitalized as additions to the related assets in the
period incurred. Gains or losses from the disposal of property, plant and
equipment are recorded in the period incurred. The net book value of the
property, plant and equipment that is retired or sold is charged to accumulated
depreciation and amortization, and the difference is recognized as a gain or
loss in the results of operations in the period the retirement or sale
transpires.
Comprehensive
Income
Statement
of Financial Accounting Standards No. 130 (“SFAS 130”), “Reporting Comprehensive
Income,” establishes standards for reporting and displaying of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS 130 requires
that all items that are required to be recognized under current accounting
standards as components
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Comprehensive
Income (continued)
of
comprehensive income be reported in a financial statement that is displayed
with
the same prominence as other financial statements. The Company reports foreign
currency translation adjustments within other comprehensive income in the
periods presented.
Net
Earnings (Losses) Per Common Share
The
Company computes earnings (losses) per share under Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (“SFAS 128”). Net earnings
(losses) per common share is computed by dividing net income (loss) by the
weighted average number of shares of common stock and dilutive common stock
equivalents outstanding during the year. Dilutive common stock equivalents
consist of shares issuable upon conversion of convertible notes payable and
the
exercise of the Company's stock options and warrants (calculated using the
treasury stock method). During the year ended March 31, 2007 and 2006, common
stock equivalents are not considered in the calculation of the weighted average
number of common shares outstanding because they would be anti-dilutive, thereby
decreasing the net loss per common share. For the reverse merger between the
Company and Index Ltd. at January 20, 2006, the stockholder’s equity section and
earnings per share in the consolidated balance sheet at March 31, 2006 was
restated (recapitalization) to reflect the exchange of shares using a conversion
ratio of approximately 2.857 shares of the Company to 1 share of Index
Ltd.
Revenue
Recognition
The
Company uses the sales method of accounting for the recognition of natural
gas
and oil revenues. The Company has an agreement with the operator of its
properties to sell, on its behalf, production from the properties for which
it
has working interest ownership. Since there is a ready market for natural gas,
crude oil and natural gas liquids (“NGLs”), production is sold at various
locations at which time title and risk of loss pass to the buyer. Revenue is
recorded when title passes based on the Company’s net interest or nominated
deliveries of production volumes. The Company records its share of revenues
based on sales volumes and contracted sales prices. The sales price for natural
gas, natural gas liquids and crude oil are adjusted for transportation cost
and
other related deductions. The transportation costs and other deductions are
based on contractual or historical data and do not require significant judgment.
Subsequently, these deductions and transportation costs are adjusted to reflect
actual charges based on third party documents once received by the Company.
Historically, these adjustments have been insignificant. In addition, natural
gas and crude oil volumes sold are not significantly different from the
Company’s share of production.
The
Company receives its share of revenue after all calculated royalties are paid
on
natural gas, crude oil and NGLs in accordance with the particular contractual
provisions of the lease, license or concession agreements and the laws and
regulations applicable to those agreements. Therefore, there is no Royalties
Payable on the Company’s Consolidated/Combined Balance Sheet.
Imbalances.
When actual natural gas sales volumes exceed delivered share of sales volumes,
an over-produced imbalance could occur. To the extent an over-produced imbalance
exceeds the remaining estimated proved natural gas reserves for a given
property, the Company would record a liability. At and during the years ended
March 31, 2007 and 2006, the Company had no imbalances.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Derivative
and Hedging
The
Company has also not entered into any derivative contracts for any purpose
from
the period of inception through March 31, 2007.
Foreign
Currency Translation
The
Company translates the foreign currency financial statements in accordance
with
the requirements of Statement of Financial Accounting Standards No. 52, “Foreign
Currency Translation.” Assets and liabilities of non-U.S. subsidiaries whose
functional currency is not the U.S. dollar are translated into U.S. dollars
at
fiscal year-end exchange rates. Revenue and expense items are translated
at
average exchange rates prevailing during the fiscal year. Translation
adjustments are included in Accumulated other comprehensive loss in the equity
section of the balance sheet totaled $(4,292) and $16,119 for the years ended
March 31, 2007 and 2006, respectively, and foreign currency transaction
(losses)/gains are included in the statement of operations
Income
Taxes
Deferred
income taxes are provided using the asset and liability method for financial
reporting purposes in accordance with the provisions of Statements of Financial
Standards No. 109, “Accounting for Income Taxes”. Under this method, deferred
tax assets and liabilities are recognized for temporary differences between
the
tax bases of assets and liabilities and their carrying values for financial
reporting purposes and for operating loss and tax credit carry forwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be removed or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the statements
of operations in the period that includes the enactment date. A valuation
allowance is established to reduce deferred tax assets if it is more likely
than
not that the related tax benefits will not be realized.
Segment
Information
Statement
of Financial Accounting Standards No. 131, “Disclosures about Segments of an
Enterprise and Related Information” (“SFAS 131”) establishes standards for
reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim financial reports issued to stockholders. SFAS 131 also establishes
standards for related disclosures about products and services and geographic
areas. Operating segments are identified as components of an enterprise about
which separate discrete financial information is available for evaluation by
the
chief operating decision maker, or decision-making group, in making decisions
how to allocate resources and assess performance. The information disclosed
herein materially represents all of the financial information related to the
Company’s principal operating segment.
Stock
Based Compensation
In
determining our accounting policies prior to January 1, 2006, the Company
chose
to apply the intrinsic value method pursuant to Accounting Standards Board
(“APB”) APB No. 25, “Stock Issued to Employees” (“APB No. 25”),
effective February 2003. Under APB No. 25, no compensation cost was
recognized when the exercise price for options granted equaled the fair value
of
the Company’s common stock on the date of the grant. Accordingly, the provisions
of SFAS No. 123, “Accounting for Stock-Based Compensation,” permitted the
continued use of the method prescribed by APB No. 25 but required
additional disclosure, including pro forma calculations of net income (loss)
per
share as if the fair value method of accounting prescribed by SFAS No. 123
had been applied. Although the Company applied the intrinsic method in
accounting for stock issued to employees, it did record compensation expense
for
the difference between the fair market value and the exercise price at the
date
of the grant using the Black Scholes valuation model. Therefore, there was
no
pro forma impact for the fiscal years ended March 31, 2006 as shown below.
See
Notes 10 and 13 for further discussion of these transactions.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
|
For
the year ended March 31, 2006
|
|
Net
loss, as reported
|
|
$
|
(1,690,806
|
)
|
Add:
Total stock based employee compensation expense as reported under
intrinsic value method, net of tax of $0
|
|
|
-
|
|
Deduct:
Total stock based employee compensation expense as reported under
fair
value based method, net of tax of $0
|
|
|
-
|
|
Net
loss , pro forma
|
|
$
|
(1,690,806
|
)
|
|
|
|
|
|
Basic
and fully diluted loss per share, as reported
|
|
$
|
(0.08
|
)
|
Basic
and fully diluted loss per share, pro forma
|
|
$
|
(0.08
|
)
|
In
December 2003, the FASB issued SFAS No.148, "Accounting for Stock-Based
Compensation-Transition and Disclosure-an amendment of SFAS 123." This statement
amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide
alternative methods of transition for a voluntary change to the fair value
based
method of accounting for stock-based employee compensation. In addition, this
statement amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial statements about
the
method of accounting for stock-based employee compensation and the effect of
the
method used on reported results.
In
December 16, 2004, the Financial Accounting Standards Board ("FASB") published
Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based
Payment ("SFAS 123-R"). SFAS 123-R requires that compensation cost related
to
share-based payment transactions be recognized in the financial statements.
Share-based payment transactions within the scope of SFAS 123-R include stock
warrants, restricted stock plans, performance-based awards, stock appreciation
rights, and employee share purchase plans. Prior to January 1 2006, the Company
accounted for its share-based payment transactions under the provisions of
APB
25, whereby compensation expense is recognized using the intrinsic value of
the
options at the date of the grant.
On
April
14, 2005, the SEC amended the effective date of the provisions of SFAS 123-R.
Accordingly, the Company adopted the revised standard on January 1, 2006. Since
there were no outstanding options at March 31, 2005 and the Company had no
stock
forfeitures since date of inception, there was no impact upon adoption of SFAS
123-R to the company’s financial position, results of operations or cash
flows.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Asset
Retirement Obligations
Our
financial statements reflect the provisions of Statement of Financial Accounting
Standards No. 143, Accounting for Asset Retirement Obligations. SFAS No.143
provides that, if the fair value for an asset retirement obligation can be
reasonably estimated, the liability should be recognized in the period when
it
is incurred. Oil and gas producing companies incur this liability upon acquiring
or drilling a well. Under the method prescribed by SFAS No.143, the retirement
obligation is recorded as a liability at its estimated present value at the
asset’s inception, with an offsetting increase to producing properties on the
balance sheet. Periodic accretion of discount of the estimated liability
is
recorded as an expense in the statement of operations. The Company’s asset
retirement obligations relate to the abandonment of oil producing wells.
The
Company has recognized an asset retirement liability of $41,552 and $25,300
at
March 31, 2007 and 2006, respectively. It is estimated that salvage values
of
well equipment will be equal, in aggregate, to the cost of plugging and
abandoning these wells at that point, and this estimate has been taken into
account in the calculation of accretion expense.
Long-Lived
Assets
The
Company has adopted Statement of Financial Accounting Standards No. 144 (SFAS
144). The Statement requires that long-lived assets and certain identifiable
intangibles held and used by the Company be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset
may not be recoverable. Events relating to recoverability may include
significant unfavorable changes in business conditions, recurring losses, or
a
forecasted inability to achieve break-even operating results over an extended
period. The Company evaluates the recoverability of long-lived assets based
upon
forecasted undiscounted cash flows. Should any impairment in value be indicated,
the carrying value of intangible assets will be adjusted, based on estimates
of
future discounted cash flows resulting from the use and ultimate disposition
of
the asset. SFAS No. 144 also requires assets to be disposed of be reported
at
the lower of the carrying amount or the fair value less costs to sell. In the
year to March 31, 2006, the Company recorded an impairment of $10,000 related
to
restaurant equipment acquired during the reverse merger with Index Inc. These
assets were deemed to be impaired as there is no future cash flow associated
with these assets.
Conditional
Asset Retirement Obligations
.
In
March
2005, the FASB issued FASB Interpretation (FIN) No. 47, “Accounting for
Conditional Asset Retirement Obligations, an interpretation of FASB Statement
No. 143,” which requires an entity to recognize a liability for the fair value
of a conditional asset retirement obligation when incurred if the liability's
fair value can be reasonably estimated. The Company is required to adopt the
provisions of FIN 47 no later than the first quarter of fiscal 2006. There
was
no impact to adoption of this Interpretation on its consolidated financial
position, results of operations or cash flows since it currently does not have
any conditional asset retirement obligations outstanding at March 31, 2007
and
2006.
Employers’
Defined Benefit Pension and Other Postretirement Plans.
In
September 2006, the FASB issued SFAS 158, “Employers’ Accounting for Defined
Benefit Pension and Other postretirement Plans”, which improves financial
reporting by requiring an employer to recognize the overfunded or underfunded
status of a defined benefit postretirement plan as an asset or liability
in its
statement of financial position and to recognize changes in that funded status
in the year in which the changes occur through comprehensive income of a
business entity or changes in unrestricted net asset of a net-for-profit
organization. This Statement also improves financial reporting by requiring
an
employer to measure the funded status of a plan as of the date of its year-end
statement of financial position with limited exceptions. The required date
of
adoption of the recognition and disclosure provisions of this Statement is
as of
the end of the fiscal year ending after December 15, 2006. The adoption of
this
statement did not impact the Company as the Company does not currently have
a
defined benefit pension plan.
New
Accounting Pronouncements Not Yet Adopted
Certain
Hybrid Instrument
s
. On February 16, 2006 the FASB
issued SFAS 155, “Accounting for Certain Hybrid Instruments,” which amends SFAS
133, “Accounting for Derivative Instruments and Hedging Activities,” and SFAS
140, “Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities.” SFAS 155 allows financial instruments that have
embedded derivatives to be accounted for as a whole (eliminating the need
to
bifurcate the derivative from its host) if the holder elects to account for
the
whole instrument on a fair value basis. SFAS 155 also clarifies and amends
certain other provisions of SFAS 133 and SFAS 140. This statement is effective
for all financial instruments acquired or issued in fiscal years beginning
after
September 15, 2006. The Company does not expect its adoption of this new
standard to have a material impact on its financial position, results of
operations or cash flows as it currently does not have any hybrid instruments
outstanding at March 31, 2007.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
New
Accounting Pronouncements Not Yet Adopted (continued)
Accounting
for Servicing of Financial Assets
. In March 2006, the FASB issued SFAS No.
156, “
Accounting for Servicing of Financial Assets—an amendment of FASB
Statement No. 140”(“
SFAS No. 156”), which amends FASB Statement No. 140,
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities,
with respect to the accounting for
separately recognized servicing assets and servicing
liabilities.
This
Statement:
|
1.
|
Requires
an entity to recognize a servicing asset or servicing liability
each time
it undertakes an obligation to service a financial asset by entering
into
a servicing contract in any of the following
situations:
|
|
a.
|
A
transfer of the servicer’s financial assets that meets the requirements
for sale accounting
|
|
b.
|
A
transfer of the servicer’s financial assets to a qualifying
special-purpose entity in a guaranteed mortgage securitization
in which
the transferor retains all of the resulting securities and classifies
them
as either available-for-sale securities or trading securities in
accordance with FASB Statement No. 115,
Accounting for Certain
Investments in Debt and Equity
Securities
|
|
c.
|
An
acquisition or assumption of an obligation to service a financial
asset
that does not relate to financial assets of the servicer or its
consolidated affiliates.
|
|
2.
|
Requires
all separately recognized servicing assets and servicing liabilities
to be
initially measured at fair value, if
practicable.
|
|
3.
|
Permits
an entity to choose either of the following subsequent measurement
methods
for each class of separately recognized servicing assets and servicing
liabilities:
|
|
a.
|
Amortization
method
—Amortize servicing assets or servicing liabilities in
proportion to and over the period of estimated net servicing income
or net
servicing loss and assess servicing assets or servicing liabilities
for
impairment or increased obligation based on fair value at each
reporting
date.
|
|
b.
|
Fair
value measurement method
—Measure servicing assets or servicing
liabilities at fair value at each reporting date and report changes
in
fair value in earnings in the period in which the changes
occur.
|
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Accounting
for Servicing of Financial Assets (continued).
|
4.
|
At
its initial adoption, permits a one-time reclassification of
available-for-sale securities to trading securities by entities with
recognized servicing rights, without calling into question the treatment
of other available-for-sale securities under Statement 115, provided
that
the available-for-sale securities are identified in some manner as
offsetting the entity’s exposure to changes in fair value of servicing
assets or servicing liabilities that a servicer elects to subsequently
measure at fair value.
|
|
5.
|
Requires
separate presentation of servicing assets and servicing liabilities
subsequently measured at fair value in the statement of financial
position
and additional disclosures for all separately recognized servicing
assets
and servicing liabilities.
|
This
Statement requires that all separately recognized servicing assets and servicing
liabilities be initially measured at fair value, if practicable. The Board
concluded that fair value is the most relevant measurement attribute for the
initial recognition of all servicing assets and servicing liabilities, because
it represents the best measure of future cash flows. This Statement permits,
but
does not require, the subsequent measurement of servicing assets and servicing
liabilities at fair value. An entity that uses derivative instruments to
mitigate the risks inherent in servicing assets and servicing liabilities is
required to account for those derivative instruments at fair value. Under this
Statement, an entity can elect subsequent fair value measurement of its
servicing assets and servicing liabilities by class, thus simplifying its
accounting and providing for income statement recognition of the potential
offsetting changes in fair value of the servicing assets, servicing liabilities,
and related derivative instruments. An entity that elects to subsequently
measure servicing assets and servicing liabilities at fair value is expected
to
recognize declines in fair value of the servicing assets and servicing
liabilities more consistently than by reporting other-than-temporary
impairments.
The
Board
decided to require additional disclosures and separate presentation in the
statement of financial position of the carrying amounts of servicing assets
and
servicing liabilities that an entity elects to subsequently measure at fair
value to address concerns about comparability that may result from the use
of
elective measurement methods.
An
entity
should adopt this Statement as of the beginning of its first fiscal year
that
begins after September 15, 2006. Earlier adoption is permitted as of the
beginning of an entity’s fiscal year, provided the entity has not yet issued
financial statements, including interim financial statements, for any period
of
that fiscal year. The effective date of this Statement is the date an entity
adopts the requirements of this Statement. The Company does not expect
adoption of this standard will have a material impact on its financial position,
operations or cash flows.
Income
Taxes.
In June 2006, the FASB issued FASB Interpretation No 48 (“FIN 48”),
“Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement
No. 109”, which clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with FASB 109.
The Interpretation prescribes a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax position
taken
or expected to be taken in a tax return. The Interpretation also provides
guidance on derecognition, classification, interest and penalties, accounting
in
interim periods, disclosure and transition. The Interpretation is effective
for
fiscal years beginning after December 15, 2006. The Company has not yet
determined the impact on the Company’s consolidated financial position or
results of operations.
Fair
Value Measurements.
In September 2006, the FASB issued SFAS 157, “Fair
Value Measurements”, which defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles (“GAAP”), and
expands disclosures about fair value measurements. Prior to this Statement,
there were different definitions of fair value and limited guidance for applying
those definitions in GAAP. This Statement provides the definition to increase
consistency and comparability in fair value measurements and for expanded
disclosures about fair value measurements. The Statement emphasizes that
fair
value is a market-based measurement, not an entity-specific measurement.
The
Statement clarifies that market participant assumptions include assumptions
about risk, i.e. the risk inherent in a particular
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair
Value Measurements (continued)
valuation
technique used to measure fair value and/or the risk inherent in the inputs
to
the valuation technique. The Statement expands disclosures about the use
of fair
vale to measure assets and liabilities in interim and annual periods subsequent
to initial recognition. The disclosures focus on the inputs used to measure
fair
value and for recurring fair value measurements using significant unobservable
inputs, the effect of the measurements on earnings for the period. The Statement
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. Earlier
application is encouraged, provided that the reporting entity has not yet
issued
financial statements for that fiscal year, including the financial statements
for an interim period within that fiscal year. The Company does not expect
adoption of this standard will have a material impact on its financial position,
operations or cash flows.
In
December 2006, the FASB issued FSP EITF 00-19-2, Accounting for Registration
Payment Arrangements ("FSP 00-19-2") which addresses accounting for registration
payment arrangements. FSP 00-19-2 specifies that the contingent obligation
to
make future payments or otherwise transfer consideration under a registration
payment arrangement, whether issued as a separate agreement or included as
a
provision of a financial instrument or other agreement, should be separately
recognized and measured in accordance with FASB Statement No. 5, Accounting
for
Contingencies. FSP 00-19-2 further clarifies that a financial instrument
subject
to a registration payment arrangement should be accounted for in accordance
with
other applicable generally accepted accounting principles without regard
to the
contingent obligation to transfer consideration pursuant to the registration
payment arrangement. For registration payment arrangements and financial
instruments subject to those arrangements that were entered into prior to
the
issuance of EITF 00-19-2, this guidance shall be effective for financial
statements issued for fiscal years beginning after December 15, 2006 and
interim
periods within those fiscal years. The Company has not yet determined the
impact
that the adoption of FSP 00-19-2 will have on its financial
statements.
The
Fair Value Option for Financial Assets and Financial Liabilities.
In
February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
Assets and Financial Liabilities—including an amendment of FASB Statement No.
115”, permitting entities to choose to measure many financial instruments and
certain other items at fair value. The objective is to improve financial
reporting by providing entities with the opportunity to mitigate volatility
in
reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting measurement. The statement
applies to all entities, including not-for profit organizations. Most of
the
provisions of this Statement apply only to entities that elect the fair value
option. However, the amendment to FASB Statement No. 115, “Accounting for
Certain Investments in Debt and Equity Securities”, applies to all entities with
available-for-sale and trading securities. The Company does not expect adoption
of this standard will have a material impact on its financial position,
operations or cash flows
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
4 - TRADE RECEIVABLES
Historically,
through March 31, 2007, all of the Company’s trade receivables related to its
working interest share of oil and gas sales have been collected. No allowance
for doubtful accounts has been recorded at March 31, 2007 and
2006.
NOTE
5 - PROPERTY, PLANT AND EQUIPMENT, PROPERTY ACQUISITIONS AND DISPOSITIONS AND
CAPITALIZED INTEREST
Oil
and Gas Properties
Major
classes of oil and gas properties under the full cost method of accounting
at
March 31, 2007 and 2006 consist of the following:
|
|
March
31,
|
|
|
|
2007
|
|
|
2006
|
|
Proved
properties
|
|
$
|
3,254,211
|
|
|
$
|
722,056
|
|
Unevaluated
and unproved properties
|
|
|
1,927,776
|
|
|
|
356,729
|
|
Gross
oil and gas properties-onshore
|
|
|
5,181,987
|
|
|
|
1,078,785
|
|
Less:
accumulated depletion
|
|
|
(315,937
|
)
|
|
|
(127,586
|
)
|
Net
oil and gas properties-onshore
|
|
$
|
4,866,050
|
|
|
$
|
951,199
|
|
Included
in the Company's oil and gas properties are asset retirement obligations
of
$41,552 and $25,300 as of March 31, 2007 and 2006,
respectively.
Depletion
expense was $188,351 and $65,311 or $23.33 and $19.10 per barrel of production
for the years ended March 31, 2007 and 2006, respectively.
It
is
anticipated that the cost of undeveloped acreage of $258,298 and exploration
costs of $1,669,478 will be included in depreciation, depletion and amortization
when the related projects are planned and drilled and completed. Included
in
exploration cost and undeveloped acreage are costs of approximately $1.3
million
related to costs of drilling the Ilse 1 well that has been drilled, but not
tested or completed (see Note 1), approximately $0.2 million related to
undeveloped leasehold for the West 1 that will be drilled in fiscal year
2008,
and approximately $0.3 million related to the ADC exploration
agreements.
At
March
31, 2007 and 2006, the Company excluded the following capitalized costs from
depletion, depreciation and amortization:
|
|
March
31, 2007
|
|
|
March
31, 2006
|
|
Not
subject to depletion-onshore:
|
|
|
|
|
|
|
Exploration
costs
|
|
$
|
1,669,478
|
|
|
$
|
236,806
|
|
Cost
of undeveloped acreage
|
|
|
258,298
|
|
|
|
119,923
|
|
Total
not subject to depletion
|
|
$
|
1,927,776
|
|
|
$
|
356,729
|
|
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
Acquisitions
and Dispositions
During
the fiscal year, the Company entered into Seismic Reprocessing and Exploration
Agreements with ADC Petroleum, L.P. (“ADC”) covering prospective areas in the US
Gulf Coast. The Agreements enable Index Inc to participate in the reprocessing
of certain existing 3 Dimensional (“3D”) land seismic data already available to
ADC as a result of its participation in an agreement signed between ADC and
two
of its other industry partners (the "ADC Agreements"). This seismic data
covers
prospective areas in the Gulf Coast U.S., throughout Texas, Alabama and
Mississippi. The ADC Agreements set forth the rights of the parties in their
joint participation of generating drilling prospects from such reprocessed
data
and allow the parties to jointly exploit the prospects generated. A total
of
$337,344 has not been ascribed to specific wells and is included in exploration
costs and excluded from the depletion base at March 31, 2007.
In
September 2006, the Company signed an agreement to participate in the New
Taiton
Project in Wharton County. A total of $60,000 for unproved property acquisition
costs is excluded from the depletion base. The first well, Ilse 1 with a
planned
total depth of over 17,000 feet, targeted stacked Wilcox sands on trend with
large nearby gas fields producing gas from the same Wilcox reservoirs. The
prospect is defined by modern 3D seismic data. Ilse 1 spudded in December
2006.
Total well costs of $1,216,864 are excluded from the depletion base as the
well
is still under evaluation (see Note #1).
In
December 2006, the Company announced that it signed an exploration agreement
to
participate at 15% working interest in the West 1 exploration well targeting
the
high-potential Edwards Limestone in Lavaca County, Texas. The well is planned
to
spud during the remainder of calendar year 2007. Leasehold and exploration
costs
of $206,175 are excluded from the depletion base.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
5 - PROPERTY, PLANT AND EQUIPMENT, PROPERTY ACQUISITIONS AND DISPOSITIONS AND
CAPITALIZED INTEREST (continued)
Other
Property and Equipment
Property
and equipment are stated at cost. When retired or otherwise disposed, the
related carrying value and accumulated depreciation are removed from the
respective accounts and the net difference less any amount realized from
disposition, is reflected in earnings. For financial statement purposes,
property and equipment are depreciated using the straight-line method over
their
estimated useful lives of the assets. Maintenance, repairs, and minor renewals
are charged against earnings when incurred. Additions and major renewals are
capitalized. Major assets at March 31, 2007 and 2006 were as
follows:
|
|
March
31,
|
|
|
|
2007
|
|
|
2006
|
|
Computer
Costs, including foreign translation
|
|
$
|
23,858
|
|
|
$
|
11,217
|
|
Less:
accumulated depreciation
|
|
|
(11,365
|
)
|
|
|
(9,490
|
)
|
Total
other property and equipment
|
|
$
|
12,493
|
|
|
$
|
1,727
|
|
Depreciation
expenses from continuing operations amounted to $1,028 and $6,260 for the
years
ended March 31, 2007 and 2006, respectively.
Capitalized
Interest
There
was
no interest capitalized in property, plant and equipment at March 31, 2007
and
2006.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
6 - NOTES PAYABLE
Index
Ltd
incurred debt and raised capital through a series of rounds of fundraising
from
inception through March 31, 2006. All of the Index Ltd stockholder funding
was
later converted to common stock at par and additional paid in capital. There
were no fundraising in fiscal year 2007 that involved convertible debt. The
transactions involving debt or convertible debt are summarized below by period
for Index Ltd.:
|
|
Equity
Issuances
|
|
|
Debt
& Subsequent Equity Conversions (1)
|
|
|
|
Total
Proceeds
|
|
|
Common
Stock
|
|
|
Additional
Paid
In
Capital
|
|
|
Convertible
Debt
|
|
|
Debt
Converted
To
Stock
|
|
|
Common
Stock
Converted
From Debt
|
|
|
Additional
Paid
In
Capital
Converted
From
Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended March 31, 2005
|
|
$
|
1,003,503
|
|
|
$
|
268,840
|
|
|
$
|
71,445
|
|
|
$
|
669,048
|
|
|
$
|
(574,445
|
)
|
|
$
|
451,088
|
|
|
$
|
117,527
|
|
Round
4
|
|
|
676,664
|
|
|
|
-
|
|
|
|
-
|
|
|
|
676,664
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Round
4 conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(663,872
|
)
|
|
|
331,936
|
|
|
|
331,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of 2005 Stockholder loan
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(86,758
|
)
|
|
|
43,379
|
|
|
|
43,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(20,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended March 31, 2006
|
|
$
|
676,664
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
676,664
|
|
|
$
|
771,267
|
|
|
$
|
375,315
|
|
|
$
|
375,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
through March 31, 2006
|
|
$
|
1,680,167
|
|
|
$
|
268,840
|
|
|
$
|
71,445
|
|
|
$
|
1,345,712
|
|
|
$
|
(1,345,712
|
)
|
|
$
|
826,403
|
|
|
$
|
492,842
|
|
(1)
The
debt for Round 4 financing was convertible at a price per share which averaged
$0.36 per share and conversion of 2005 stockholder loan averaged $0.35 per
share. After all conversion of stock, there was no note payable-long term at
March 31, 2007 and 2006.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
6 - NOTES PAYABLE (continued)
In
addition, in the year to March 31, 2006 Index Ltd entered into a one-year
term
note for additional finance for operations. The amount borrowed was $51,374
in
April 2005 at the ruling transaction rate. The term loan is financed at a
rate
of 2% over the bank’s prime interest rate. At expiration date in April 2006, the
bank renewed the loan for up to an additional year. This is shown on the
balance
sheet at March 31, 2006 in current liabilities as “Bank Loan”. The Company
repaid the total amount of the loan in the first quarter of fiscal year 2007.
As
at March 31, 2006, Bank Loans of $48,569 was outstanding at the closing exchange
rate. The bank held the following security: a secured debenture including
fixed
equitable charge over all present and future freehold and leasehold property
of
Index Ltd; first fixed charge over, among other things, book and other debts,
chattels, goodwill and uncalled capital; first floating charge over all assets
and undertakings both present and future of Index Ltd.; joint and severable
guarantee given by Lyndon West and Michael Scrutton.
The
fund
raising activities of Index Ltd during the year ended March 31, 2006 were
generally offered to investors with minimum and maximum capital achievements
and
structured to be a range of one-third to one-half for common stock in the
Company with the corresponding two-thirds to one-half for debt payable to
investors. In each case the capital requirements were achieved with equity
and
debt summarized in the tables discussed above. Total loans to Index Ltd during
the year ended March 31, 2006 totaled $676,664 ($663,872 at the transaction
date
foreign currency rate of $1.8088 to ₤1.0) in loans which converted into
1,835,117 shares of common stock, and of which $94,603 ($91,303 at the original
transaction date foreign currency rate, and $86,758 at the conversion date
foreign currency rate) in loans converted to 250,325 shares of common stock
(converted to 715,143 shares of Company stock) in the year ended March 31,
2006.
There
was
$43,234 in debt issue costs incurred during the year ended March 31, 2006.
Total
amortization expense in these same periods was $43,234. The debt issue costs
were capitalized and were amortized up to the point of conversion to common
stock. There was no unamortized debt issue cost at March 31,
2006.
NOTE
7 - ASSET RETIREMENT OBLIGATION
Activity
related to the Company’s ARO during the years ended March 31, 2006 is as
follows:
|
|
March
31,
|
|
|
|
2007
|
|
|
2006
|
|
ARO
as of beginning of period
|
|
$
|
25,300
|
|
|
$
|
16,500
|
|
Liabilities
incurred during period
|
|
|
16,252
|
|
|
|
8,800
|
|
Liabilities
settled during period
|
|
|
-
|
|
|
|
-
|
|
Accretion
expense
|
|
|
-
|
|
|
|
-
|
|
Balance
of ARO as of end of period
|
|
$
|
41,552
|
|
|
$
|
25,300
|
|
Of
the
total ARO, $41,552 and $25,300 are classified as a long-term liability at
March 31, 2007 and 2006, respectively. For each of the years ended
March 31, 2007 and 2006, the Company recognized depreciation expense
related to its ARO of $0, due to the assumption of a full offset of salvage
values.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
8 - INCOME TAXES
Financial
Accounting Standard No. 109 requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have been
included in the financial statement or tax returns. Under this method, deferred
tax liabilities and assets are determined based on the difference between
financial statements and tax bases of assets and liabilities using enacted
tax
rates in effect for the year in which the differences are expected to
reverse.
At
March
31, 2007 and 2006, the Company generated for federal income tax purposes
a net
operating loss carry forward of approximately $6,900,000 and $2,700,000
respectively, both inclusive of basis differences for net intangible drilling
costs which are deductible for tax purposes but capitalized and depreciated
for
book purposes. The latest expiry date within the net operating loss carry
forward at March 31, 2007 is in 2027, and this loss can be used to offset
future
taxable income. However, a valuation allowance of $1,411,719 and $912,038
was
recorded for the years ended March 31, 2007 and 2006, respectively on the
total
tax provision as the Company believes it is more likely than not that the
asset
will not be utilized during the next year. Of the total net operating loss
carryforward, the United Kingdom (“UK”) total net operating loss of
approximately $850,000 and $700,000 for the years ended March 31, 2007 and
2006,
respectively, are not expected to be utilized. The United States federal
and
state net operating loss carryforwards are generally subject to limitations
on
their annual usage. Realization of the deferred tax assets and net operating
loss carryforwards is dependent, in part, on generating sufficient taxable
income prior to expiration of the loss carryforwards. The amount of the deferred
tax asset considered realizable, however, might be adjusted if estimates
of
future taxable income during a future period are expected.
The
Company’s income tax expense (benefit) from continuing operations consists of
the following:
|
|
|
|
|
|
|
|
|
March
31,
|
|
|
|
2007
|
|
|
2006
|
|
Current
|
|
|
|
|
|
|
UK
|
|
$
|
-
|
|
|
$
|
-
|
|
US
|
|
|
-
|
|
|
|
-
|
|
State
|
|
|
-
|
|
|
|
-
|
|
Total
current tax expense (benefit)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
UK
|
|
|
(256,247
|
)
|
|
|
(210,174
|
)
|
US
|
|
|
(1,004,758
|
)
|
|
|
(610,317
|
)
|
State
|
|
|
(150,714
|
)
|
|
|
(91,548
|
)
|
Total
deferred tax expense (benefit)
|
|
|
(1,411,719
|
)
|
|
|
(912,038
|
)
|
Less
valuation allowance
|
|
|
1,411,719
|
|
|
|
912,038
|
|
Total
deferred tax expense (benefit)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
tax provision-continuing operations
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
8 - INCOME TAXES (continued)
The
following tax rates have been used in the calculation of income taxes: US
federal taxation 30%, US state taxation 4.5% and UK taxation
30%.
Components
of deferred tax amounts are as follows:
|
|
|
|
|
|
|
Deferred
Tax Components
|
|
March
31,
|
|
|
|
2007
|
|
|
2006
|
|
Deferred
tax assets
|
|
|
|
|
|
|
Restricted
stock compensation accrual
|
|
$
|
-
|
|
|
$
|
-
|
|
Share
issue basis difference
|
|
|
-
|
|
|
|
-
|
|
Foreign
currency translation
|
|
|
-
|
|
|
|
-
|
|
Oil
& Gas basis differences
|
|
|
-
|
|
|
|
66,791
|
|
Depreciation
|
|
|
-
|
|
|
|
-
|
|
Net
operating loss carryforward
|
|
|
2,358,427
|
|
|
|
857,049
|
|
Total
gross deferred tax assets
|
|
|
2,358,427
|
|
|
|
923,840
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
|
|
|
|
|
|
|
Amortization
of share issue costs
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
Foreign
currency translation
|
|
|
-
|
|
|
|
-
|
|
Oil
& Gas basis differences
|
|
|
843,573
|
|
|
|
-
|
|
Depreciation
|
|
|
103,135
|
|
|
|
11,802
|
|
State
taxes
|
|
|
-
|
|
|
|
-
|
|
Total
gross deferred tax liabilities
|
|
|
946,708
|
|
|
|
11,802
|
|
|
|
|
|
|
|
|
|
|
Less
valuation allowance
|
|
|
(1,411,719
|
)
|
|
|
(912,038
|
)
|
Net
deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
9 - COMMITMENTS AND CONTINGENCIES
The
Company has various commitments to oil and gas exploration and production
capital expenditure with ongoing planned expenditures on the Kansas properties,
and commitments relating to new wells in Texas and Louisiana arising out
of the
normal course of business. The Company is currently not involved in any
litigation matters arising from our oil and gas exploration and production
activities and as such has accrued no liability or legal fees with respect
to
litigation.
At
March
31, 2007, the Company has entered into an Exploration Agreement on the
West 1
well which had not commenced drilling and for which drilling expenditures
have
not been incurred.
Lease
Commitments
The
Company does not have any capital lease commitments. The Company rents
its main
operating office in Houston on a month-to-month basis for which payments
began
in November 2005. The Company also has a nine month lease, committed to
in April
2007, related to corporate housing for UK based officers while periodically
working at the corporate office.
Consulting
Agreements
The
Company has held consulting agreements with outside contractors, certain
of whom
are also Company stockholders. The Agreements are generally for a fixed
term
from inception and renewable from time to time unless either the Company
or
Consultant terminates such engagement by written notice. See Note 14 for
Related
Party Transactions.
Stockholder
Matters
As
our
Common Stock is a security registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), we must solicit proxies
or obtain consent or authorizations by or on behalf of our management from
the
holders of record of our common stock in accordance with the rules and
regulations of the Exchange Act, including those prescribed in Section
14 of the
Act. On November 25, 2005, prior management of the Company obtained the
approval
of the majority of its stockholders ratifying the increase of authorized
common
stock of the Company from 25,000,000 to 75,000,000 which occurred in November
2005 pursuant to stockholder approval under Nevada Revised Statutes. On
September 15, 2006, the stockholders of the Company holding the majority
of
issued and outstanding common stock of the Company ratified the increase
in the
authorized common stock of the Company from 25,000,000 shares to 75,000,000
shares
In
addition, on September 15, 2006, the stockholders of the Company holding
the
majority of issued and outstanding common stock of the Company approved
the
increase in authorized common stock of the Company from 75,000,000 shares
to
500,000,000 shares and approved for the Company to create 10,000,000 shares
of
“blank check” preferred stock, $0.001 par value per share (the “Approvals”).
Subsequently, the Company filed a Certificate of Amendment to its Articles
of
Incorporation, as amended, with the Secretary of State of the State of
Nevada
that was effective as of September 21, 2006. The Amendment was filed to
effect
the Approvals.
Additionally,
on equal date, the stockholders of the Company holding the majority of
issued
and outstanding common stock of the Company approved the adoption of the
2006
Incentive Stock Option Plan and ratified the selection of RBSM LLP (formerly
Russell Bedford Stefanou Mirchandani LLP) (“RBSM”) as the Company’s independent
auditors for the fiscal years ending March 31, 2007 and 2006.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
9 - COMMITMENTS AND CONTINGENCIES (continued)
Registration
Statement
On
August
29, 2006, the Company completed a private placement offering in which the
Company sold 1419.58 units of its securities at a price of $5,000 per unit
to
certain accredited investors (“Investors #1”), each unit consisting of 5,000
shares of common stock of the Company for a total of 7,097,898 shares of
$0.001
par value common stock of the Company at a price of $1.00 per share for
aggregate proceeds of approximately $7.1 million. Furthermore on October
4,
2006, the company completed a second closing of the private placement offering
in which the Company sold an additional 693.54 units of its securities at
a
price of $5,000 per unit to certain accredited investors (“Investors #2”,
Investors #1 and Investors #2 shall collectively be referred to as the
“Investors”), each unit consisting of 5000 shares of common stock of the Company
for gross proceeds of approximately $3.5 million and subsequently sold another
80 units on October 5, 2006, also to the group of Investors #2, for an overall
total of 3,867,700 shares of $0.001 par value common stock of the Company
at a
price of $1.00 per share for overall aggregate proceeds of approximately
$3.9
million.
Subsequently,
on October 11, 2006 pursuant to the requirements of the Registration Rights
Agreement entered into by and among the Company and the Investors, the Company
filed a Registration Statement with the SEC on Form SB-2 to register, among
other securities, the units of common stock sold in the private placement
offering. The Company had agreed to have the Registration Statement declared
effective by the SEC no later than 180 days from August 29, 2006. If the
Company
should fail to have the Registration Statement declared effective on or before
them time frame described, the Investors will entitled to the liquidated
damages
from the Company in an amount equal to 2% of the aggregate subscription amounts
per month for each month that the Company is delinquent in failing to obtain
the
effectiveness of the Registration Statement, subject to an overall limit
of up
to 15 months of partial liquidated damages. The Company obtained effectiveness
in the time frame described. The Company has therefore, not incurred any
contingent liability associated with the liquidated damages.
Litigation
The
Company is subject to various legal proceedings and claims, which arise in
the
ordinary course of its business. Although occasional adverse decisions or
settlements may occur, the Company believes that the final disposition of such
matters will not have material adverse effect on its financial position, results
of operations or liquidity. Consequently, the Company has not recorded any
reserve for legal matters.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
10 - CAPITAL STOCK
During
the fiscal year ended March 31, 2006:
The
breakdown of stock issuances of 3,609,517 shares (converted into 10,311,898
shares of the Company’s stock) and the breakdown of the related warrants issued
of 333,923 (converted into 954,021 of Company warrants) by Index Ltd. and the
related conversion to Company stock and warrants in the year to March 31, 2006
were as follows:
|
|
#
of Index Ltd. Shares
|
|
|
#
of Index Shares
|
|
|
#
of Index Ltd.
Warrants
|
|
|
#
of Index Warrants
|
|
Conversion
of stockholder loan of $94,603
|
|
|
250,325
|
|
|
|
715,143
|
|
|
|
50,065
|
|
|
|
143,037
|
|
Equity
fundraising of $238,591
|
|
|
687,500
|
|
|
|
1,964,090
|
|
|
|
137,500
|
|
|
|
392,839
|
|
Subscription
of compensation of $274,517
|
|
|
783,500
|
|
|
|
2,238,349
|
|
|
|
137,000
|
|
|
|
391,410
|
|
Private
placement equity offering
|
|
|
1,835,117
|
|
|
|
5,242,669
|
|
|
|
-
|
|
|
|
-
|
|
Subscription
of Professional fees of $9,021
|
|
|
25,000
|
|
|
|
71,421
|
|
|
|
-
|
|
|
|
-
|
|
Subscription
of Professional fees of $9,900
|
|
|
28,075
|
|
|
|
80,206
|
|
|
|
9,358
|
|
|
|
26,735
|
|
Totals
during fiscal year 2006
|
|
|
3,609,517
|
|
|
|
10,311,878
|
|
|
|
333,923
|
|
|
|
954,021
|
|
The
warrants totaling 333,923 (converted to 954,021 of Company warrants at the
recapitalization (reverse merger) transaction date were issued as part of
various fundraising and equity transactions.
The
convertible stockholder loan described in Note 6 of $94,603 ($91,302 at the
original transaction date foreign currency rate and $86,758 at the conversion
date foreign currency rate) in loans converted to 250,325 shares of common
stock
(converted to 715,143 shares of Company stock) in November 2005 and 50,065
of
warrants to purchase shares of Index Ltd.’s common stock (converted to 143,037
of Company warrants).
An
equity
fundraising for 687,500 shares (converted to 1,964,090 shares of Company stock)
totaling $238,591 also included 137,500 of warrants to purchase shares of Index
Ltd.’s common stock (converted to 392,839 of Company warrants).
Additionally,
management compensation with a fair value of $274,517 for 783,500 shares of
common stock (converted to 2,238,349 shares of Company stock) also included
warrants of 137,000 to purchase shares of Index Ltd.’s common stock (converted
to 391,410 of Company warrants).
As
discussed in Note 6, total convertible stockholder loans to Index Ltd. during
the year ended March 31, 2006 totaled $676,664 of which $676,664 ($663,872
at
the transaction date foreign currency rate of $1.8088 to ₤1.0) were converted
into 1,835,117 shares of common stock (converted into 5,249,669 shares of the
Company stock). Of this amount, 50,000 shares of common stock (converted into
142,843 shares of Company stock) related to directors of Index Ltd. with
the remaining shares for outside investors.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
10 - CAPITAL STOCK (continued)
Professional
fees with a fair value totaling approximately $9,021 for 25,000 shares
(converted to 71,421 shares of Company stock).
Professional
fees, issued to the same stockholder, with a fair value totaling approximately
$9,900 for 28,075 shares (converted to 80,206 shares of Company stock) included
warrants of 9,358 to purchase shares of Index Ltd.’s common stock (converted to
26,735 of Company warrants).
Additionally,
during fiscal year ended March 31, 2006, the Company issued 303,793 shares
of
common stock to management as compensation expense which was valued at
$37,578.
On
January 20, 2006, the stockholders of Index Ltd. entered into Acquisition and
Share Exchange Agreements (“Acquisition Agreements”, “the Transaction”) with the
Company. The Company had a total of 75,000,000 authorized shares with a par
value of $0.001 per share and 33,220,000 shares issued and outstanding as of
December 31, 2005. As part of the Transaction it was agreed that, subsequent
to
the Transaction, 10,128,333 shares of common stock held by the former directors
and officers of the Company were retired and subsequently canceled by the
transfer agent for the Company. The effect of the Transaction was that
23,091,667 shares of Common Stock would be retained.
As
part
of the Transaction, a total of 7,916,232 Index Ltd. shares of common stock
in
issue were exchanged for a total of 22,615,552 shares of common stock of the
Company.
Concurrent
with the Transaction was a private placement totaling $5.12 million for
8,533,333 shares of $0.001 par value common stock of the Company at a price
of
$0.60 per share.
The
Company has reserved 455,655 shares of common stock for potential issuance
related to compensation of directors and officers contingent upon meeting
certain performance criteria.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
10 - CAPITAL STOCK (continued)
During
the fiscal year ended March 31, 2007:
The
breakdown of stock issuances of 11,192,691 shares of the Company’s common stock,
$0.001 par value, during the year ended March 31, 2007 was as
follows:
Issuance
of common stock on private offerings
|
|
|
10,965,598
|
|
Issuance
of stock upon vesting of stock award
|
|
|
50,000
|
|
Issuance
of stock for services
|
|
|
40,000
|
|
Issuance
of stock upon exercise of warrants
|
|
|
124,593
|
|
Issuance
of stock for performance bonuses
|
|
|
12,500
|
|
Total
|
|
|
11,192,691
|
|
As
our
Common Stock is a security registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), we must solicit proxies
or obtain consent or authorizations by or on behalf of our management from
the
holders of record of our common stock in accordance with the rules and
regulations of the Exchange Act, including those prescribed in Section
14. On
November 25, 2005, prior management of the Company obtained the approval
of the
majority of stockholders of the Company authorizing it to increase the
authorized common stock of the Company from 25,000,000 to 75,000,000 (the
“Increase”).
In
September 2006, the stockholders of the Company holding the majority of
issued
and outstanding common stock of the Company approved the increase in authorized
common stock of the Company from 75,000,000 shares to 500,000,000 shares
and to
create 10,000,000 shares of “blank check” preferred stock, $0.001 par value per
share (the “Approvals”). Subsequently, the Company filed a Certificate of
Amendment to its Articles of Incorporation, as amended, with the Secretary
of
State of the State of Nevada that was effective as of September 21, 2006.
The
Amendment was filed to effect the Approvals.
On
August
29, 2006, the Company completed the first closing under a private placement
offering in which the Company sold 1419.58 units of its securities at a
price of
$5,000 per unit to certain accredited investors, each unit consisting of
5,000
shares of common stock of the Company for a total of 7,097,898 shares of
$0.001
par value common stock of the Company at a price of $1.00 per share for
aggregate gross proceeds of approximately $7.1 million. Total fees paid
on the
first closing of the private placement were approximately $730,000.
Furthermore
on October 4, 2006, the Company completed a second closing of the private
placement offering in which the Company sold an additional 693.54 units
of its
securities at a price of $5,000 per unit to certain accredited investors,
each
unit consisting of 5000 shares of common stock of the Company for gross
proceeds
of approximately $3.5 million and it subsequently sold another 80 units
on
October 5, 2006, for a total of 3,867,700 shares of common stock of the
Company
at a price of $1.00 per share for overall aggregate proceeds of approximately
$3.9 million. Total fees paid on the second closing were approximately
$316,000.
The combined net proceeds of this placement are being applied to the expansion
of Company's operations in the U.S.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
10 - CAPITAL STOCK (continued)
The
purchasers agreed not to sell the Common stock included in the units for
a
period of six months from the date of their purchase, unless permitted earlier
by the Company. Notwithstanding the foregoing, the purchasers further agreed
to
be bound by any lock-up period required by state or federal regulation. The
shares of common stock are restricted securities under Securities Act of
1933,
as amended and applicable state securities laws and, therefore, may only
be
transferred pursuant to the registration requirements of federal and state
securities laws or pursuant to an exemption from such registration
requirements.
Subsequently,
on October 11, 2006 pursuant to the requirements of the Registration Rights
Agreement entered into by and among the Company and the Investors, the Company
filed a Registration Statement with the SEC on Form SB-2 to register, among
other securities, the units of common stock sold in the private placement
offering. The Company agreed to have the Registration Statement declared
effective by the SEC no later than 180 days from August 29, 2006. If the
Company
had failed to have the Registration Statement declared effective on or before
them time frame described, the Investors would have been entitled to the
liquidated damages from the Company in an amount equal to 2% of the aggregate
subscription amounts per month for each month that the Company was delinquent
in
failing to obtain the effectiveness of the Registration Statement, subject
to an
overall limit of up to 15 months of partial liquidated damages. The Company
obtained effectiveness on February 9, 2007, within the time frame prescribed.
The Company has therefore, not incurred any liability associated with the
liquidated damages.
On
August
29, 2006, the Board of Directors appointed John Williams as Executive Vice
President of Exploration and Production and a director of the Company effective
August 1, 2006. In addition to Mr. Williams’ salary, he was awarded a restricted
bonus stock award of 50,000 shares of the Company’s common stock contingent on
183 days of continuous service to the Company. Total compensation expense
over
the vesting period of $60,000 was recorded on the award at the market price
of
$1.20 per share, the market price at the date of the grant. The terms of
the
award were satisfied in January 2007 and Mr. Williams was issued 50,000 shares
of restricted common stock of the Company. Additionally, Mr. Williams was
awarded a performance bonus of 37,500 shares of restricted common stock per
the
terms of his bonus program. The shares vest one-third at the date of the
grant,
March 31, 2007, with the remaining shares vesting at one-third in each of
the
next two consecutive years. The shares were valued at $1.50 per share of
the
date of the first vesting award or March 31, 2007 for compensation expense
of
$18,750.
In
February 2007, 40,000 shares of common stock of the Company were issued for
legal services related to the filing of the Registration Statement and other
services at a value of $1.60 per share for a total cost of
$64,000.
In
February 2007, 124,593 warrants were exercised into 124,593 shares of common
stock at an exercise price of $0.14 per share or $17,443 by a
stockholder.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
11 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION
Warrants
The
following tables summarize the changes in warrants outstanding and exercised
and
the related exercise prices for the shares of the Company's common stock issued
as follows (See Note 10):
|
|
Number
of Shares
|
|
|
Weighted
Average Exercise Price Per Share
|
|
Outstanding
and Exercisable March 31, 2005
(333,923
of Index Ltd.)
|
|
|
138,655
|
|
|
$
|
0.07
|
|
Granted
|
|
|
954,021
|
|
|
|
0.14
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Canceled
or expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding
and Exercisable at March 31, 2006
|
|
|
1,092,676
|
|
|
$
|
0.13
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exchanged
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(124,593
|
)
|
|
|
0.14
|
|
Canceled
or expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding
and Exercisable at March 31, 2007
|
|
|
968,083
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
11 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION
(continued)
Warrants
Outstanding
|
|
Warrants
Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
Prices
|
Number
Outstanding
|
Weighted
Average
Remaining
Contractual Life (Years)
|
Weighted
Average
Exercise
Price
|
Number
Exercisable
|
Weighted
Average Exercise Price
Exercise
Price
|
$0.07
|
|
138,655
|
|
3.5
|
|
$0.07
|
|
138,655
|
|
$0.07
|
$0.14
|
|
143,037
|
|
3.5
|
|
$0.14
|
|
143,037
|
|
$0.14
|
$0.14
|
|
268,246
|
|
3.5
|
|
$0.14
|
|
268,246
|
|
$0.14
|
$0.14
|
|
391,410
|
|
3.5
|
|
$0.14
|
|
391,410
|
|
$0.14
|
$0.14
|
|
26,735
|
|
3.5
|
|
$0.14
|
|
26,735
|
|
$0.14
|
|
|
968,083
|
|
3.5
|
|
$0.13
|
|
968,083
|
|
$0.13
|
In
February 2003 and July 2003, 45,882 warrants (converted into 131,078 of Company
warrants) and 2,653 warrants (converted into 7,577 of Company warrants),
respectively to acquire Index Ltd.’s common stock were issued to a third party
advisor for services incurred.
The
warrants totaling 333,923 (converted to 954,021 of Company warrants) were
issued
as part of various fundraising and equity transactions. The convertible
stockholder loan described in Note 6 of $94,603 ($91,302 at the original
transaction date foreign currency rate and $86,758 at the conversion date
foreign currency rate) in loans converted to 250,325 shares of common stock
(converted to 715,143 shares of Company stock) in November 2005 and 50,065
of
warrants to purchase shares of Index Ltd.’s common stock (converted to 143,037
of Company warrants). An equity fundraising for 687,500 shares (converted
to
1,964,090 shares of Company stock) totaling $238,591 also included 137,500
of
warrants to purchase shares of Index Ltd.’s common stock (converted to 392,839
of Company warrants, of which 124,593 were exercised in February 2007).
Additionally, management compensation with a fair value of $274,517 for 783,500
shares of common stock (converted to 2,238,349 shares of Company stock) also
included warrants of 137,000 to purchase shares of Index Ltd.’s common stock
(converted to 391,410 of Company warrants). Professional fees with a fair
value
totaling approximately $9,900 for 28,075 shares (converted to 80,206 shares
of
Company stock) included warrants of 9,358 to purchase shares of Index Ltd.’s
common stock (converted to 26,735 of Company warrants). All transactions
were
valued at fair market value in accordance with SFAS 123-R.
Since
there was no public market for Index Ltd.’s stock and operations were not
comparable to a peer group, the latest stock issuance price of ₤0.20, or $0.35
at a foreign currency rate of 1.7329, used in previous fundraising was used
as
the share market price and an exercise price of ₤0.20 or $0.35 at a foreign
currency rate of 1.7329. The weighted-average fair value of warrants under
the
fair valued based method of $0.03, using the Black Scholes model, was determined
using the following assumptions: (1) a risk free rate of 4.56%; (2) a volatility
rate of 0% under the minimum value method allowed for non-public companies
under
SFAS 123; (3) a zero dividend rate; (4) a zero percent forfeiture rate; (5)
the
latest stock issuance price used as the share market price; and (6) 2 year
life.
On
January 20, 2006, these total warrants of 382,458 were exchanged as part
of the
transaction described in Note 2, Merger and Corporate Restructure,
at a ratio of approximately 2.857 to 1 or a total of 1,092,676. The total
warrants of 48,535 issued in fiscal year 2005 were exchanged for 138,655
warrants. The warrants issued in fiscal year 2006 of 333,923 were also exchanged
as part of the transaction described in Note 2, Merger and Corporate
Restructure, at a ratio of approximately 2.857 to 1 or a total of 954,021
warrants.
In
February 2007, a total of 124,593 warrants were exercised at a price of $0.14
for a total of $17,443 and a total of 124,593 shares of common stock, $0.001
par
value, were issued to the stockholder.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
11 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION
(continued)
There
was
no compensation expense recorded for the exchange of these warrants since there
was no modification of terms upon exchange.
Stock
Options
The
following tables summarize the changes in options outstanding and exercised
and
the related exercise prices for the shares of the Company's common stock issued
to certain directors and stockholders at March 31, 2007 and 2006 restated for
the recapitalization which occurred on January 20, 2006 at an exchange rate
of
one Index Ltd. share or warrant for approximately 2.857 shares or warrants
of
the Company’s (See Note 10).
|
|
Number
of Shares
|
|
|
Weighted
Average Exercise Price Per Share
|
|
Outstanding
at March 31, 2005
|
|
|
-
|
|
|
|
-
|
|
Granted
|
|
|
4,577,526
|
|
|
|
0.35
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Canceled
or expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding
at March 31, 2006
|
|
|
4,577,526
|
|
|
$
|
0.35
|
|
Granted
|
|
|
500,000
|
|
|
$
|
1.42
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Canceled
or expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding
at March 31, 2007
|
|
|
5,077,526
|
|
|
$
|
0.46
|
|
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
11 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION
(continued)
Options
Outstanding
|
|
|
Options
Exercisable
|
|
Exercise
Price
|
|
|
Number
Outstanding
|
|
|
Weighted
Average Remaining Contractual Life (Years)
|
|
|
Weighted
Average Exercise Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average Exercise Price
|
|
$
|
0.35
|
|
|
|
4,577,526
|
|
|
|
3.81
|
|
|
$
|
0.35
|
|
|
|
3,433,145
|
|
|
$
|
0.35
|
|
$
|
1.42
|
|
|
|
500,000
|
|
|
|
1.97
|
|
|
$
|
1.42
|
|
|
|
250,000
|
|
|
$
|
1.42
|
|
|
|
|
|
|
5,077,526
|
|
|
|
|
|
|
$
|
0.46
|
|
|
|
3,683,145
|
|
|
$
|
0.42
|
|
Prior
to
the reverse merger with Index Inc., Index Ltd. adopted a Stock Option Plan
to
grant options to various officers, directors and others. As contemplated
by the
Acquisition Agreements, following the completion of the acquisition the Board
of
Directors of Index Inc. agreed to the adoption of the Stock Option Plan and
ratified it on March 14, 2006 effective as of January 20, 2006, providing
for
the issuance of up to 5,225,000 shares of Common Stock of Index Inc. to
officers, directors, employees and consultants of Index Inc. and/or its
subsidiaries. Pursuant to the Stock Option Plan, Index Inc. allowed for the
issuance of options to purchase 4,577,526 shares of Common Stock at $0.35
per
share to newly appointed directors and officers of Index Inc. that had held
options to purchase ordinary shares of Index Ltd. prior to the completion
of the
acquisition. Total compensation expense recorded for the issuance of these
options in the fourth quarter and the twelve months ended March 31, 2007
was
$79,862 and $594,599, respectively. At March 31, 2007, John Williams, an
officer
and director was awarded options to purchase 500,000 shares of Common Stock
at
$1.42 per share under the Stock Option Plan.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
11 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION
(continued)
The
principal terms and conditions of the share options granted under the Share
Option Plan are that vesting of the options granted occurs in three stages:
(1)
50% on grant; (2) 25% one year after grant; and (3) 25% two years after grant.
The 2006 options granted are exercisable at $0.35 per share. Furthermore,
the
share options granted under the Share Option Plan are generally non-transferable
other than to a legal or beneficial holder of the options upon the option
holder’s death. The rights to vested but unexercised options cease to be
effective: (1) 18 months after death of the stock options holder; (2) 6 months
after Change of Control of Index Inc.; (3) 12 months after loss
of
office due to health related incapacity or redundancy;
or (4) 12 months after the retirement of the options holder from a position
with
Index Inc. All options have a 5 years expiring term.
Since
there was no public market for the Company’s stock and operations were not
comparable to a peer group prior to the acquisition, the stock issuance price
for the private placement equity raising at the date of acquisition of $0.60
was
used as the share market price for the 2006 options with an exercise price
of
$0.35. The weighted-average fair value of options granted under the fair
valued
based method or $0.398, using the Black Scholes model, was determined using
the
following assumptions: (1) a risk free rate of 4.38%; (2) a volatility rate
of
100%; (3) a zero dividend rate; (4) a zero percent forfeiture rate; (5) the
latest stock issuance price used as the share market price; and (6) 2 year
life.
The weighted-average fair value of the 2007 options granted to John Williams
under the fair valued based method or $0.53, using the Black Scholes model,
was
determined using the following assumptions: (1) a risk free rate of 4.60%;
(2) a
volatility rate of 66%; (3) a zero dividend rate; (4) a zero percent forfeiture
rate; (5) the latest stock issuance price used as the share market price
or
$1.42; and (6) 2 year life.
NOTE
12 - EARNINGS PER SHARE
Basic
earnings per share is computed by dividing income available to common
stockholders by the weighted average number of shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
contracts to issue common stock and related stock options were exercised
at the
end of the period. For the years ended March 31, 2007 and 2006, excluded
from
diluted earnings per share are 968,083 and 1,092,676, respectively of warrants
to acquire common stock. As of both March 31, 2007 and 2006, there are 4,577,
526 of options to acquire the Company’s common stock that were excluded from the
computation of diluted earnings per share, and which excluded 500,000 of
out of
the money options at March 31, 2007. As of March 31, 2007 25,000 shares yet
to
vest under a performance bonus award have been excluded from the computation
of
diluted earnings per share.
The
following is a calculation of basic and diluted weighted average shares
outstanding:
|
|
For
the year ended March 31,
|
|
|
|
2007
|
|
|
2006
|
|
Shares—basic
|
|
|
65,623,365
|
|
|
|
22,391,357
|
|
Dilution
effect of stock option and awards at end of period
|
|
|
-
|
|
|
|
-
|
|
Shares—diluted
|
|
|
65,623,365
|
|
|
|
22,391,357
|
|
Stock
awards and shares excluded from diluted earnings per share due
to
anti-dilutive effect
|
|
|
5,570,609
|
|
|
|
5,670,202
|
|
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
13 - MAJOR CUSTOMERS
For
the
fiscal year 2007, approximately 100% of revenues from the Company’s share of oil
production were sold to two independent crude oil purchasers, together with
low
levels of gas sales, and for the fiscal year 2006, approximately 91%, of
oil
sales were sold to a single independent crude oil
purchaser.
NOTE
14 - RELATED PARTY TRANSACTIONS
As
discussed in Note 6, total stockholder loans to Index Ltd. during the year
ended
March 31, 2006 totaled $676,664 of which $676,664 ($663,872 at the transaction
date foreign currency rate of $1.8088 to ₤1.0) were converted into 1,835,117
shares of common stock in the year ended March 31, 2006. Of this amount,
50,000
shares of common stock related to directors of Index Ltd. with the remaining
shares for outside investors. The $94,603 ($91,302 at the original transaction
date foreign currency rate and $86,758 at the conversion date foreign currency
rate) stockholder loans converted to 250,325 shares of common stock (converted
to 715,143 shares of Company stock) in November 2005, together with the issue
of
50,065 warrants (converted to 143,029 of Company warrants). Of these totals
119,585 shares (converted to 341,637 of Company stock) and 23,917 warrants
(converted to 68,327 of Company warrants) were issued to directors of Index
Ltd.
At
March
31, 2006, the Company owes various directors $1,007 for refunds of payroll
taxes.
Lyndon
West and Michael Scrutton, jointly and severally, guaranteed the bank loan
until
it was paid off in June 2006.
During
fiscal year 2007, the Company incurred a fee of $750 for real estate location
services from a firm in
Which,
a
principal partner is related to an officer of the Company. The fee was paid
in
May 2007.
INDEX
OIL AND GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2007 AND 2006
NOTE
15 - SUBSEQUENT EVENTS
In
April,
2007, the Company announced success on two exploration wells in Goliad and
Victoria Counties, Texas. The Serrano well commenced producing in May 2007
and
the Habanero well is expected to be connected to local pipeline infrastructure
and to be brought on-line during the second calendar quarter 2007. Index
has a
37.5% working interest and a 28.125% net revenue interest in each
well.
The
Company announced in April 2007 that it has signed a Participation Agreement
to
explore for gas in the West Wharton prospect. This could consist of up to
four
exploration wells within the area of mutual interest in Wharton County, Texas.
Index has a 12.5% working interest in the project that will reduce to 9.375%
after payout. The first well is planned to spud during the third calendar
quarter of 2007.
The
Company announced in May 2007 that it had signed a participation agreement
for
exploration of the Fern Lake prospect in Nacogdoches County, Texas, through
the
Cason 1 well (a first well resulting from the ADC Agreements). The well is
expected to spud in the second calendar quarter 2007.
In
April
2007, the Company committed to a nine month lease, related to corporate housing
for UK based officers while periodically working at the corporate
office.
INDEX
OIL AND GAS, INC.
SUPPLEMENTAL
INFORMATION (UNAUDITED)
FOR
THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005
Oil
and Natural gas Producing Activities
The
following disclosures for the Company are made in accordance with Statement
of
Financial Accounting Standards (“SFAS”) No. 69, “Disclosures About Oil and
Natural gas Producing Activities (an amendment of FASB Statements 19, 25, 33
and
39)” (“SFAS No. 69”). Users of this information should be aware that the
process of estimating quantities of proved, proved developed and proved
undeveloped crude oil and natural gas reserves is very complex, requiring
significant subjective decisions in the evaluation of all available geological,
engineering and economic data for each reservoir. The data for a given reservoir
may also change substantially over time as a result of numerous factors
including, but not limited to, additional development activity, evolving
production history and continual reassessment of the viability of production
under varying economic conditions. Consequently, material revisions to existing
reserve estimates occur from time to time. Although every reasonable effort
is
made to ensure that reserve estimates reported represent the most accurate
assessments possible, the significance of the subjective decisions required
and
variances in available data for various reservoirs make these estimates
generally less precise than other estimates presented in connection with
financial statement disclosures.
Proved
reserves represent estimated quantities of natural gas and crude oil that
geological and engineering data demonstrate, with reasonable certainty, to
be
recoverable in future years from known reservoirs under economic and operating
conditions existing at the time the estimates were made.
Proved
developed reserves are proved reserves expected to be recovered, through wells
and equipment in place and under operating methods being utilized at the time
the estimates were made.
Proved
undeveloped reserves are reserves that are expected to be recovered from new
wells on undrilled acreage or from existing wells where a relatively major
expenditure is required for recompletion. Reserves on undrilled acreage are
limited to those drilling units offsetting productive units that are reasonably
certain of production when drilled. Proved reserves for other undrilled units
can be claimed only where it can be demonstrated with certainty that there
is
continuity of production from the existing productive formation. Estimates
for
proved undeveloped reserves are not attributed to any acreage for which an
application of fluid injection or other improved recovery technique is
contemplated, unless such techniques have been proved effective by actual tests
in the area and in the same reservoir.
Estimates
of proved developed and proved undeveloped reserves as of March 31, 2007,
2006 and 2005 were based on estimates made by Ancell Energy Consulting, Inc,
independent petroleum engineers. Our independent engineers, Ancell Energy
Consulting, Inc. are engaged by and provide their reports to our senior
management team. We make representations to the independent engineers that
we
have provided all relevant operating data and documents, and in turn, we
review
these reserve reports provided by the independent engineers to ensure
completeness and accuracy. Our Vice President, Exploration and Production,
and
Managing Director make the final decision on booked proved reserves by
incorporating the proved reserves from the independent engineers’
reports.
Our
relevant management controls over proved reserve attribution, estimation and
evaluation include:
|
•
|
|
controls
over and processes for the collection and processing of all pertinent
operating data and documents needed by our independent reservoir
engineers
to estimate our proved reserves;
|
|
•
|
|
engagement
of well qualified and independent reservoir engineers for review
of our
operating data and documents and preparation of reserve reports annually
in accordance with all SEC reserve estimation guidelines;
and
|
|
•
|
|
review
by our Vice President, Exploration and Production, of the independent
reservoir engineers’ reserves reports for completion and
accuracy.
|
INDEX
OIL AND GAS, INC.
SUPPLEMENTAL
INFORMATION (UNAUDITED)
FOR
THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005
Market
prices as of each year-end were used for future sales of natural gas, crude
oil
and natural gas liquids. Future operating costs, production and ad valorem
taxes
and capital costs were based on current costs as of each year-end, with no
escalation. There are numerous uncertainties inherent in estimating quantities
of proved reserves and in projecting the future rates of production and timing
of development expenditures. Reserve data represent estimates only and should
not be construed as being exact. Moreover, the standardized measure should
not
be construed as the current market value of the proved oil and natural gas
reserves or the costs that would be incurred to obtain equivalent reserves.
A
market value determination would include many additional factors including
(a) anticipated future changes in natural gas and crude oil prices,
production and development costs, (b) an allowance for return on
investment, (c) the value of additional reserves, not considered proved at
present, which may be recovered as a result of further exploration and
development activities, and (d) other business risk.
Capitalized
Costs Relating to Oil and Gas Producing Activities
The
following table sets forth the capitalized costs relating to the Company’s
natural gas and crude oil producing activities at March 31, 2007, 2006 and
2005:
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
|
March
31,
|
|
|
March
31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Evaluated
properties
|
|
$
|
3,254,211
|
|
|
$
|
722,056
|
|
|
$
|
334,080
|
|
Unevaluated
properties
|
|
|
1,927,776
|
|
|
|
356,729
|
|
|
|
76,529
|
|
Total
|
|
|
5,181,987
|
|
|
|
1,078,785
|
|
|
|
410,609
|
|
Less:
accumulated depreciation, depletion, amortization
|
|
|
315,937
|
|
|
|
127,586
|
|
|
|
62,275
|
|
Net
capitalized costs
|
|
$
|
4,866,050
|
|
|
$
|
951,199
|
|
|
$
|
348,334
|
|
INDEX
OIL AND GAS, INC.
SUPPLEMENTAL
INFORMATION (UNAUDITED)
FOR
THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005
Costs
Incurred in Oil and Natural Gas Property Acquisition, Exploration and
Development Activities
The
following table sets forth costs incurred related to the Company’s oil and
natural gas activities for the twelve months ended March 31, 2007, 2006 and
2005:
The
following estimates of proved and proved developed reserve quantities are
estimates only. The Company emphasizes that reserve estimates are inherently
imprecise and that estimates of new discoveries are more imprecise than those
of
producing oil and gas properties. Accordingly, these estimates are expected
to
change as future information becomes available. All of the Company's reserves
are located in the United States.
Proved
reserves are estimated reserves of crude oil (including condensate and natural
gas liquids) that geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under existing
economic and operating conditions. Proved developed reserves are those expected
to be recovered through existing wells, equipment, and operating
methods.
|
|
|
|
|
|
|
|
|
Continuing
Operations
|
|
|
Discontinued
Operations
|
|
Year
Ended March 31, 2005:
|
|
$
|
415,516
|
|
|
$
|
-
|
|
Acquisition
costs of properties
|
|
|
|
|
|
|
|
|
Proved
|
|
$
|
-
|
|
|
$
|
-
|
|
Unproved
|
|
|
-
|
|
|
|
-
|
|
Subtotal
|
|
|
-
|
|
|
|
-
|
|
Exploration
and development costs
|
|
|
70,540
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
486,056
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Year
Ended March 31, 2006:
|
|
|
|
|
|
|
|
|
Acquisition
costs of properties
|
|
|
|
|
|
|
|
|
Proved
|
|
$
|
-
|
|
|
$
|
-
|
|
Unproved
|
|
|
-
|
|
|
|
|
|
Subtotal
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
and development costs
|
|
|
659,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,145,432
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Year
Ended March 31, 2007:
|
|
|
|
|
|
|
|
|
Acquisition
costs of properties
|
|
|
|
|
|
|
|
|
Proved
|
|
$
|
-
|
|
|
$
|
-
|
|
Unproved
|
|
|
355,641
|
|
|
|
|
|
Subtotal
|
|
|
355,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
and development costs
|
|
|
3,731,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,086,949
|
|
|
$
|
-
|
|
INDEX
OIL AND GAS, INC.
SUPPLEMENTAL
INFORMATION (UNAUDITED)
FOR
THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005
Results
of Operations for Oil and Natural Gas Producing
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
March 31,
2007
|
|
|
Year
Ended
March 31,
2006
|
|
|
Year
Ended
March 31,
2005
|
|
Oil
and natural gas production revenues
|
|
|
|
|
|
|
|
|
|
Third-party
|
|
$
|
457,046
|
|
|
$
|
191,114
|
|
|
$
|
88,176
|
|
Affiliate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
|
457,046
|
|
|
|
191,114
|
|
|
|
88,176
|
|
Exploration
expenses, including dry hole
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Production
costs
|
|
|
(114,735
|
)
|
|
|
(41,953
|
)
|
|
|
(23,584
|
)
|
Impairment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Depreciation,
depletion and amortization
|
|
|
(188,351
|
)
|
|
|
(65,311
|
)
|
|
|
(36,154
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before income taxes
|
|
|
153,960
|
|
|
|
83,850
|
|
|
|
28,438
|
|
Income
tax provision (benefit)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results
of continuing operations
|
|
$
|
153,960
|
|
|
$
|
83,850
|
|
|
$
|
28,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results
of discontinued operations
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
results of operations for oil and natural gas producing activities excludes
interest charges and general and administrative expenses. Sales are based on
market prices.
INDEX
OIL AND GAS, INC.
SUPPLEMENTAL
INFORMATION (UNAUDITED)
FOR
THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005
Net
Proved and Proved Developed Reserve Summary
The
following table sets forth the Company’s net proved and proved developed
reserves (all within the United States) at March 31, 2007, 2006 and 2005,
and the changes in the net proved reserves for each of the two years in the
period then ended as estimated by the independent petroleum consultants. See
Note 3.
|
|
Continuing
Operations
|
|
|
Discontinued
Operations
|
|
Natural
gas (Bcf)(1):
|
|
|
|
|
|
|
Net
proved reserves at March 31, 2004
|
|
|
-
|
|
|
|
-
|
|
Revisions
of previous estimates
|
|
|
-
|
|
|
|
-
|
|
Purchases
in place
|
|
|
-
|
|
|
|
-
|
|
Extensions,
discoveries and other additions
|
|
|
-
|
|
|
|
-
|
|
Sales
in place
|
|
|
-
|
|
|
|
-
|
|
Production
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
proved reserves at March 31, 2005
|
|
|
-
|
|
|
|
-
|
|
Revisions
of previous estimates
|
|
|
-
|
|
|
|
-
|
|
Purchases
in place
|
|
|
0.144
|
|
|
|
-
|
|
Extensions,
discoveries and other additions
|
|
|
-
|
|
|
|
-
|
|
Sales
in place
|
|
|
-
|
|
|
|
-
|
|
Production
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
proved reserves at March 31, 2006
|
|
|
0.144
|
|
|
|
-
|
|
Revisions
of previous estimates
|
|
|
0.157
|
|
|
|
-
|
|
Purchases
in place
|
|
|
0.008
|
|
|
|
-
|
|
Extensions,
discoveries and other additions
|
|
|
0.240
|
|
|
|
-
|
|
Sales
in place
|
|
|
-
|
|
|
|
-
|
|
Production
|
|
|
(0.008
|
)
|
|
|
-
|
|
Net
proved reserves at March 31, 2007
|
|
|
0.541
|
|
|
|
-
|
|
INDEX
OIL AND GAS, INC.
SUPPLEMENTAL
INFORMATION (UNAUDITED)
FOR
THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005
Natural
gas liquids and crude oil (MBbls)(2)(3):
|
|
|
|
|
|
|
Net
proved reserves at March 31, 2004
|
|
|
11.069
|
|
|
|
-
|
|
Revisions
of previous estimates
|
|
|
4.832
|
|
|
|
-
|
|
Purchases
in place
|
|
|
-
|
|
|
|
-
|
|
Extensions,
discoveries and other additions
|
|
|
6.758
|
|
|
|
-
|
|
Sales
in place
|
|
|
-
|
|
|
|
-
|
|
Production
|
|
|
(2.068
|
)
|
|
|
-
|
|
Net
proved reserves at March 31, 2005
|
|
|
20.591
|
|
|
|
-
|
|
Revisions
of previous estimates
|
|
|
1.566
|
|
|
|
-
|
|
Purchases
in place
|
|
|
11.565
|
|
|
|
-
|
|
Extensions,
discoveries and other additions
|
|
|
5.060
|
|
|
|
-
|
|
Sales
in place
|
|
|
-
|
|
|
|
-
|
|
Production
|
|
|
(3.381
|
)
|
|
|
-
|
|
Net
proved reserves at March 31, 2006
|
|
|
35.401
|
|
|
|
-
|
|
Revisions
of previous estimates
|
|
|
(5.349
|
)
|
|
|
-
|
|
Purchases
in place
|
|
|
0.066
|
|
|
|
-
|
|
Extensions,
discoveries and other additions
|
|
|
0.875
|
|
|
|
-
|
|
Sales
in place
|
|
|
-
|
|
|
|
-
|
|
Production
|
|
|
(6.660
|
)
|
|
|
-
|
|
Net
proved reserves at March 31, 2007
|
|
|
24.333
|
|
|
|
-
|
|
INDEX
OIL AND GAS, INC.
SUPPLEMENTAL
INFORMATION (UNAUDITED)
FOR
THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005
(MBO)(2)
equivalents(4):
|
|
|
|
|
|
|
Net
proved reserves at March 31, 2004
|
|
|
11.069
|
|
|
|
-
|
|
Revisions
of previous estimates
|
|
|
4.832
|
|
|
|
-
|
|
Purchases
in place
|
|
|
-
|
|
|
|
-
|
|
Extensions,
discoveries and other additions
|
|
|
6.758
|
|
|
|
-
|
|
Sales
in place
|
|
|
-
|
|
|
|
-
|
|
Production
|
|
|
(2.068
|
)
|
|
|
-
|
|
Net
proved reserves at March 31, 2005
|
|
|
20.591
|
|
|
|
-
|
|
Revisions
of previous estimates
|
|
|
1.566
|
|
|
|
-
|
|
Purchases
in place
|
|
|
35.635
|
|
|
|
-
|
|
Extensions,
discoveries and other additions
|
|
|
5.060
|
|
|
|
-
|
|
Sales
in place
|
|
|
-
|
|
|
|
-
|
|
Production
|
|
|
(3.381
|
)
|
|
|
-
|
|
Net
proved reserves at March 31, 2006
|
|
|
59.471
|
|
|
|
-
|
|
Revisions
of previous estimates
|
|
|
20.748
|
|
|
|
-
|
|
Purchases
in place
|
|
|
1.478
|
|
|
|
-
|
|
Extensions,
discoveries and other additions
|
|
|
40.956
|
|
|
|
-
|
|
Sales
in place
|
|
|
-
|
|
|
|
-
|
|
Production
|
|
|
(8.075
|
)
|
|
|
-
|
|
Net
proved reserves at March 31, 2007
|
|
|
114.578
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
INDEX
OIL AND GAS, INC.
SUPPLEMENTAL
INFORMATION (UNAUDITED)
FOR
THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005
Net
proved developed reserves:
|
|
|
|
|
|
|
Natural
gas (Bcf)(1)
|
|
|
|
|
|
|
March
31, 2005
|
|
|
-
|
|
|
|
-
|
|
March
31, 2006
|
|
|
0.090
|
|
|
|
-
|
|
March
31, 2007
|
|
|
0.541
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Natural
gas liquids and crude oil (MBbls)(2)(3)
|
|
|
|
|
|
|
|
|
March
31, 2005
|
|
|
12.354
|
|
|
|
-
|
|
March
31, 2006
|
|
|
28.942
|
|
|
|
-
|
|
March
31, 2007
|
|
|
22.953
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
MBO(2)
equivalents(4)
|
|
|
|
|
|
|
|
|
March
31, 2005
|
|
|
12.354
|
|
|
|
-
|
|
March
31, 2006
|
|
|
30.518
|
|
|
|
-
|
|
March
31, 2007
|
|
|
113.198
|
|
|
|
-
|
|
_______________
(1)
|
Billion
cubic feet or billion cubic feet equivalent, as
applicable.
|
(3)
|
Includes
crude oil, condensate and natural gas
liquids.
|
(4)
|
Natural
gas volumes have been converted to equivalent natural gas liquids
and
crude oil volumes using a conversion factor of six thousand cubic
feet of
natural gas to one barrel of natural gas liquids or crude
oil.
|
INDEX
OIL AND GAS, INC.
SUPPLEMENTAL
INFORMATION (UNAUDITED)
FOR
THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005
Standardized
Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Natural
Gas Reserves
The
following information has been developed utilizing procedures prescribed by
SFAS
No. 69 and based on natural gas and crude oil reserve and production
volumes estimated by the independent petroleum reservoir engineers. This
information may be useful for certain comparison purposes but should not be
solely relied upon in evaluating the Company or its performance. Further,
information contained in the following table should not be considered as
representative of realistic assessments of future cash flows, nor should the
standardized measure of discounted future net cash flows be viewed as
representative of the current value of the Company’s oil and natural gas
assets.
The
future cash flows presented below are based on sales prices, cost rates and
statutory income tax rates in existence as of the date of the projections.
It is
expected that material revisions to some estimates of natural gas and crude
oil
reserves may occur in the future, development and production of the reserves
may
occur in periods other than those assumed, and actual prices realized and costs
incurred may vary significantly from those used. Income tax expense has been
computed using expected future tax rates and giving effect to tax deductions
and
credits available, under current laws, and which relate to oil and natural
gas
producing activities.
Management
does not rely upon the following information in making investment and operating
decisions. Such decisions are based upon a wide range of factors, including
estimates of probable as well as proved reserves and varying price and cost
assumptions considered more representative of a range of possible economic
conditions that may be anticipated.
The
following table sets forth the standardized measure of discounted future
net
cash flows from projected production of the Company’s natural gas and crude oil
reserves for the years ended March 31, 2007, 2006 and 2005:
|
|
Continuing
Operations
|
|
|
Discontinued
Operations
|
|
|
|
(in
$’000)
|
|
March
31, 2005:
|
|
|
|
|
|
|
Future
cash inflows
|
|
$
|
1,088.787
|
|
|
$
|
-
|
|
Future
production costs
|
|
|
(474.193
|
)
|
|
|
-
|
|
Future
development costs
|
|
|
(131.248
|
)
|
|
|
-
|
|
Future
income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Future
net cash flows
|
|
|
483.346
|
|
|
|
-
|
|
Discount
to present value at 10% annual rate
|
|
|
(131.571
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Standardized
measure of discounted future net cash flows relating to proved
natural
gas, natural gas liquids and crude oil reserves
|
|
$
|
351.775
|
|
|
$
|
-
|
|
INDEX
OIL AND GAS, INC.
SUPPLEMENTAL
INFORMATION (UNAUDITED)
FOR
THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005
|
|
Continuing
|
|
|
Discontinued
|
|
|
|
Operations
|
|
|
Operations
|
|
March 31,
2006:
|
|
|
|
|
|
|
Future
cash inflows
|
|
$
|
3,080.376
|
|
|
$
|
-
|
|
Future
production costs
|
|
|
(855.120
|
)
|
|
|
-
|
|
Future
development costs
|
|
|
(515.632
|
)
|
|
|
-
|
|
Future
income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Future
net cash flows
|
|
|
1,709.624
|
|
|
|
-
|
|
Discount
to present value at 10% annual rate
|
|
|
(362.391
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Standardized
measure of discounted future net cash flows relating to proved
natural
gas, natural gas liquids and crude oil reserves
|
|
$
|
1,347.233
|
|
|
$
|
-
|
|
|
|
Continuing
|
|
|
Discontinued
|
|
|
|
Operations
|
|
|
Operations
|
|
March 31,
2007:
|
|
|
|
|
|
|
Future
cash inflows
|
|
$
|
5,049.821
|
|
|
$
|
-
|
|
Future
production costs
|
|
|
(1,055.600
|
)
|
|
|
-
|
|
Future
development costs
|
|
|
(53.403
|
)
|
|
|
-
|
|
Future
income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Future
net cash flows
|
|
|
3,940.818
|
|
|
|
-
|
|
Discount
to present value at 10% annual rate
|
|
|
(841.922
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Standardized
measure of discounted future net cash flows relating to proved
natural
gas, natural gas liquids and crude oil reserves
|
|
$
|
3,098.896
|
|
|
$
|
-
|
|
INDEX
OIL AND GAS, INC.
SUPPLEMENTAL
INFORMATION (UNAUDITED)
FOR
THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005
Changes
in Standardized Measure of Discounted Future Net Cash
Flows
The
following table sets forth the changes in the standardized measure of discounted
future net cash flows at March 31, 2007, 2006 and 2005:
|
|
Continuing
|
|
|
Discontinued
|
|
|
|
Operations
|
|
|
Operations
|
|
|
|
(in
$’000)
|
|
Balance,
April 1, 2004
|
|
$
|
113.318
|
|
|
$
|
-
|
|
Sales
and transfers of natural gas, natural gas liquids and crude oil
produced,
net of production costs
|
|
|
(64.592
|
)
|
|
|
-
|
|
Net
changes in prices and production costs
|
|
|
155.685
|
|
|
|
-
|
|
Extensions,
discoveries, additions and improved recovery, net of related
costs
|
|
|
81.085
|
|
|
|
-
|
|
Development
costs incurred
|
|
|
70.540
|
|
|
|
-
|
|
Revisions
of previous quantity estimates and development costs
|
|
|
(3.657
|
)
|
|
|
-
|
|
Accretion
of discount
|
|
|
(2.291
|
)
|
|
|
-
|
|
Net
change in income taxes
|
|
|
-
|
|
|
|
-
|
|
Purchases
of reserves in place
|
|
|
-
|
|
|
|
-
|
|
Sales
of reserves in place
|
|
|
-
|
|
|
|
-
|
|
Changes
in timing and other
|
|
|
1.687
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2005
|
|
$
|
351.775
|
|
|
$
|
-
|
|
INDEX
OIL AND GAS, INC.
SUPPLEMENTAL
INFORMATION (UNAUDITED)
FOR
THE YEARS ENDED MARCH 31, 2007, 2006 AND 2005
|
|
|
|
|
|
|
Sales
and transfers of natural gas, natural gas liquids and crude oil
produced,
net of production costs
|
|
$
|
(149.200
|
)
|
|
$
|
-
|
|
Net
changes in prices and production costs
|
|
|
92.288
|
|
|
|
-
|
|
Extensions,
discoveries, additions and improved recovery, net of related
costs
|
|
|
86.546
|
|
|
|
-
|
|
Development
costs incurred
|
|
|
659.376
|
|
|
|
-
|
|
Revisions
of previous quantity estimates and development costs
|
|
|
(412.504
|
)
|
|
|
-
|
|
Accretion
of discount
|
|
|
(97.672
|
)
|
|
|
-
|
|
Net
change in income taxes
|
|
|
-
|
|
|
|
-
|
|
Purchases
of reserves in place
|
|
|
813.43
|
|
|
|
-
|
|
Sales
of reserves in place
|
|
|
-
|
|
|
|
-
|
|
Changes
in timing and other
|
|
|
3.194
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2006
|
|
$
|
1,347.233
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
Sales
and transfers of natural gas, natural gas liquids and crude oil
produced,
net of production costs
|
|
$
|
(342.311
|
)
|
|
$
|
-
|
|
Net
changes in prices and production costs
|
|
|
(46.758
|
)
|
|
|
-
|
|
Extensions,
discoveries, additions and improved recovery, net of related
costs
|
|
|
1,180.549
|
|
|
|
-
|
|
Development
costs incurred
|
|
|
1,320.745
|
|
|
|
-
|
|
Revisions
of previous quantity estimates and development costs
|
|
|
(820.626
|
)
|
|
|
-
|
|
Accretion
of discount
|
|
|
134.723
|
|
|
|
-
|
|
Net
change in income taxes
|
|
|
-
|
|
|
|
-
|
|
Purchases
of reserves in place
|
|
|
486.467
|
|
|
|
-
|
|
Sales
of reserves in place
|
|
|
-
|
|
|
|
-
|
|
Changes
in timing and other
|
|
|
(161.126
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2007
|
|
$
|
3,098.896
|
|
|
$
|
-
|
|
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
24. Indemnification of Directors and Officers
Our
Bylaws, as amended, provide to the fullest extent permitted by Nevada law that
our directors or officers shall not be personally liable to us or our
shareholders for damages for breach of such director's or officer's fiduciary
duty. The effect of this provision of our Articles of Incorporation, as amended,
is to eliminate our rights and our shareholders (through shareholders'
derivative suits on behalf of our company) to recover damages against a director
or officer for breach of the fiduciary duty of care as a director or officer
(including breaches resulting from negligent or grossly negligent behavior),
except under certain situations defined by statute. We believe that the
indemnification provisions in our Articles of Incorporation, as amended, are
necessary to attract and retain qualified persons as directors and
officers.
Section
78.7502 of the Nevada Revised Statutes provides that a corporation may indemnify
a director, officer, employee or agent made a party to an action by reason
of
that fact that he or she was a director, officer employee or agent of the
corporation or was serving at the request of the corporation against expenses
actually and reasonably incurred by him or her in connection with such action
if
he or she acted in good faith and in a manner he or she reasonably believed
to
be in, or not opposed to, the best interests of the corporation and with respect
to any criminal action, had no reasonable cause to believe his or her conduct
was unlawful.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The
following table sets forth an itemization of all estimated expenses, all of
which we will pay, in connection with the issuance and distribution of the
securities being registered:
|
|
Amount
|
|
SEC
registration fee
|
|
$
|
7,216.28
|
|
Accounting
fees and expenses
|
|
|
7,500.00*
|
|
Legal
fees and expenses
|
|
|
50,000.00*
|
|
TOTAL
|
|
$
|
64,216.28*
|
|
*
Estimated
Item
26. Recent Sales of Unregistered Securities
On
January 20, 2006 the Company completed a private placement for 8,533,333 shares
of common stock of the Company at a price of $0.60 per share for an aggregate
sum of $5,120,000.
In
addition, on January 20, 2006, the Company issued an aggregate of 22,615,552
shares of common stock of the Company and 1,092,676 warrants to subscribe for
Common Stock of the Company as consideration for the acquisition of Index Ltd.’s
outstanding equity stock and warrants from the Index Ltd.’s Stockholders. As
part of the Acquisition, an additional 759,448 shares of Common Stock were
reserved for issuance by the Company, of which 303,793 shares were issued as
of
the date of this Registration Statement.
On
August
29, 2006 the Company closed on a private placement offering (the “Offering”) in
which it sold an aggregate of 1,419.58 units (the "Units") of its securities
at
a price of $5,000 per Unit, each Unit consisting of 5000 shares of common stock
of the Company for aggregate gross proceeds of $7,097,898.
On
October 4, 2006, the Company effected a second closing of the Offering in which
it sold an additional 693.54 Units of for aggregate gross proceeds of
$3,467,700, and it subsequently sold another 80 Units on October 5, 2006, for
total aggregate gross proceeds of the second closing of the Offering of
$3,867,700.
On
August 29, 2006, a restricted bonus
stock award of 50,000 shares of the Company’s common stock was awarded to Mr.
John Williams, a former officer of the Company, contingent on 183 days of
continuous service to the Company. The terms of the award were satisfied
in
January 2007 and Mr. Williams was issued 50,000 shares of restricted Common
Stock of the Company. Additionally, Mr. Williams was awarded a performance
bonus
of 37,500 shares, 12,500 of which vested on March 31, 2007. The remaining
shares, which were due to vest on the successive two year anniversaries of
the
date of the grant, will no longer vest due to Mr. Williams resignation from
the
Company.
In
February 2007, 40,000 restricted shares of Common Stock of the Company were
issued for legal services rendered to the Company related to the filing of
the
Registration Statement and other services at a value of $1.60 per share for
a
total cost of $64,000.
In
February 2007, 124,593 common stock purchase warrants were exercised into
124,593 shares of the Common Stock at an exercise price of $0.14 per share
or
$17,443 by the holder of the warrants.
All
of the foregoing issuances were exempt from registration
under Section 4(2) of the Act and/or Regulation D or Regulation S, promulgated
under the Act. None of the purchasers who received shares under Regulation
S are
U.S. person as defined in Rule 902(k) of Regulation S, and no sales efforts
were
conducted in the U.S., in accordance with Rule 903(c). Such purchasers
acknowledged that the securities purchased must come to rest outside the U.S.,
and the certificates contain a legend restricting the sale of such securities
until the Regulation S holding period is satisfied. No advertising or general
solicitation was employed in offering the securities. The offerings and sales
were made to a limited number of persons, all of whom were accredited investors,
business associates of Index Oil and Gas, Inc. or executive officers of Index
Oil and Gas Inc., and transfer was restricted by Index Oil and Gas, Inc. in
accordance with the requirements of the Securities Act of 1933. In addition
to
representations by the above-referenced persons, we have made independent
determinations that all of the above-referenced persons were accredited or
sophisticated investors, and that they were capable of analyzing the merits
and
risks of their investment, and that they understood the speculative nature
of
their investment. Furthermore, all of the above-referenced persons were provided
with access to our Securities and Exchange Commission filings.
Purchases
of Equity Securities by the Issuer and Affiliated
Purchasers
None.
|
|
Description
|
3(i)1
|
|
Articles
of Incorporation of Index Oil & Gas, Inc. (4)
|
|
|
|
3(i)(2)
|
|
Certificate
of Amendment to the Articles of Incorporation of Index Oil and Gas
Inc.
(the "Company"), filed with the Secretary of the State of Nevada
on
November 28, 2005, changing the name of the Company from Thai One
On Inc.
to Index Oil & Gas, Inc., and increasing the number of authorized
shares from 25,000,000 to 75,000,000. (1)
|
|
|
|
3(i)(2)
|
|
Certificate
of Amendment to the Articles of Incorporation of Index Oil and Gas
Inc.
(the "Company"), filed with the Secretary of the State of Nevada
on
September 21, 2006, increasing the number of authorized shares from
75,000,000 to 500,000,000, and creating a class of preferred stock,
authorizing the issuance of 10,000,000 shares, $0.001 par value per
share,
of preferred stock. (7)
|
|
|
|
3(ii)
|
|
By-laws
of Index Oil and Gas Inc. (4)
|
|
|
|
5.1
|
|
Legality
Opinion of Sichenzia Ross Friedman Ference LLP. *
|
|
|
|
10.1
|
|
Acquisition
Agreement between Index Oil and Gas, Inc., certain stockholders of
Index
Oil & Gas Ltd., and Briner Group Inc. dated January 20, 2006.
(1)
|
|
|
|
10.2
|
|
Form
of Share Exchange Agreement entered into by and between Index Oil
&
Gas, Inc. and certain Index Oil & Gas Ltd. stockholders.
(1)
|
|
|
|
10.3+
|
|
Employment
Agreement entered into by and between Index Oil & Gas Ltd. and Lyndon
West, dated January 20, 2006. (1)
|
|
|
|
10.4+
|
|
Employment
Agreement entered into by and between Index Oil & Gas Ltd. and Andrew
Boetius, dated January 20, 2006. (1)
|
|
|
|
10.5+
|
|
Employment
Agreement entered into by and between Index Oil & Gas Ltd. and Daniel
Murphy, dated January 20, 2006. (1)
|
|
|
|
10.6+
|
|
Letter
Agreement entered into by and between Index Oil & Gas Ltd. and David
Jenkins, dated January 20, 2006. (1)
|
|
|
|
10.7+
|
|
Letter
Agreement entered into by and between Index Oil & Gas Ltd. and Michael
Scrutton, dated January 20, 2006. (1)
|
|
|
|
10.8+
|
|
Employment
Agreement entered into by and between Index Oil and Gas Inc. and
John G.
Williams, dated August 31, 2006. (5)
|
|
|
|
10.9
|
|
Form
of Subscription Agreement dated as of January 20, 2006.
(1)
|
|
|
|
10.10
|
|
Form
of Subscription Agreement dated as of August 29 and October 4, 2006.
(6)
|
|
|
|
10.11
|
|
Form
of Registration Rights Agreement dated as of August 29, 2006.
(6)
|
|
|
|
14.1
|
|
Code
of Ethics and Business Conduct for officers, directors and employees
of
Index Oil and Gas, Inc. adopted by the Company’s Board of Directors on
March 31, 2006. (3)
|
21.1
|
|
List
of subsidiaries of the Company. (1)
|
|
|
|
23.1
|
|
Consent
of RBSM LLP. *
|
|
|
|
23.2
|
|
Consent
of Ancell Energy Consulting, Inc. *
|
|
|
|
23.3
|
|
Consent
of Sichenzia Ross Friedman Ference LLP. * (included in exhibit
5.1)
|
|
|
|
24.1
|
|
Powers
of Attorney (8)
|
*
Filed Herewith
|
+
Compensatory plan or arrangement
|
(1)
Incorporated by reference to the Company’s Amended Current Report filed on
Form 8-K/A with the SEC on March 15, 2006.
|
(2)
Incorporated by reference to the Company’s Annual Report filed on Form
10-K with the SEC on March July 17, 2006.
|
(3)
Incorporated by reference to the Company’s Annual Report filed on Form
10-KSB with the SEC on March April 10, 2006.
|
(4)
Incorporated by reference to the Company’s Registration Statement filed on
Form SB-2 with the SEC on May 24, 2004.
|
(5)
Incorporated by reference to the Company’s Current Report filed on Form
8-K with the SEC on September 8, 2006.
|
(6)
Incorporated by reference to the Company’s Current Report filed on Form
8-K with the SEC on September 11, 2006.
|
(7)
Incorporated by reference to the Company’s Current Report filed on Form
8-K with the SEC on September 28, 2006.
|
(8)
Incorporated by reference to the Company’s Registration Statement filed on
Form SB-2 with the SEC on October 11,
2006.
|
(a)
|
The
undersigned registrant hereby
undertakes:
|
|
1.
|
For
determining liability under the Securities Act, treat each post-effective
amendment as a new registration statement of the securities offered,
and
the offering of the securities at that time to be the initial bona
fide
offering.
|
|
2.
|
File
a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the
offering.
|
|
3.
|
For
determining liability of the undersigned small business issuer
under the
Securities Act to any purchaser in the initial distribution of
the
securities, the undersigned small business issuer undertakes that
in a
primary offering of securities of the undersigned small business
issuer
pursuant to this registration statement, regardless of the underwriting
method used to sell the securities to the purchaser, if the securities
are
offered or sold to such purchaser by means of any of the following
communications, the undersigned small business issuer will be a
seller to
the purchaser and will be considered to offer or sell such securities
to
such purchaser:
|
|
i.
|
Any
preliminary prospectus or prospectus of the undersigned small business
issuer relating to the offering required to be filed pursuant to
Rule
424;
|
|
ii.
|
Any
free writing prospectus relating to the offering prepared by or
on behalf
of the undersigned small business issuer or used or referred to
by the
undersigned small business
issuer;
|
|
iii.
|
The
portion of any other free writing prospectus relating to the offering
containing material information about the undersigned small business
issuer or its securities provided by or on behalf of the undersigned
small
business issuer; and
|
|
iv.
|
Any
other communication that is an offer in the offering made by the
undersigned small business issuer to the
purchaser.
|
(b)
|
For
determining any liability under the Securities Act, treat the information
omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of
prospectus
filed by the small business issuer under Rule 424(b)(1), or (4)
or 497(h)
under the Securities Act as part of this registration statement
as of the
time the Commission declared it
effective.
|
(c)
|
For
determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as
a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as
the initial
bona fide offering of those
securities.
|
(d)
|
Insofar
as indemnification for liabilities arising under the Securities
Act of
1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing
provisions,
or otherwise, the small business issuer has been advised that in
the
opinion of the Securities and Exchange Commission such indemnification
is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such
liabilities (other than the payment by the small business issuer
of
expenses incurred or paid by a director, officer or controlling
person of
the small business issuer in the successful defense of any action,
suit or
proceeding) is asserted by such director, officer or controlling
person in
connection with the securities being registered, the small business
issuer
will, unless in the opinion of its counsel the matter has been
settled by
controlling precedent, submit to a court of appropriate jurisdiction
the
question whether such indemnification by it is against public policy
as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
|
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of
the
requirements of filing on Form SB-2 and authorized this registration statement
to be signed on its behalf by the undersigned, in Houston, Texas on October
26,
2007.
|
|
|
INDEX
OIL AND GAS, INC.
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
Lyndon West
|
|
|
|
|
Lyndon
West
|
|
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
Andrew Boetius
|
|
|
|
|
Andrew
Boetius
|
|
|
|
Chief
Financial Officer and Principal Accounting
Officer
|
POWER
OF ATTORNEY
In
accordance with the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons on behalf of the
Company in the capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Lyndon West
Lyndon
West
|
|
Chief
Executive Officer and Director
|
|
October
26, 2007
|
|
|
|
|
|
/s/
Andrew Boetius
|
|
Chief
Financial Officer, Principal Accounting Officer and Director
|
|
October
26, 2007
|
|
|
|
|
|
/s/
Daniel Murphy
|
|
Chairman
of the Board, Secretary and Director
|
|
October
26, 2007
|
|
|
|
|
|
/s/
David Jenkins
|
|
Director
|
|
October
26, 2007
|
|
|
|
|
|
/s/
Michael Scrutton
|
|
Director
|
|
October
26, 2007
|
Index Oil and Gas (CE) (USOTC:IXOG)
Gráfico Histórico do Ativo
De Set 2024 até Out 2024
Index Oil and Gas (CE) (USOTC:IXOG)
Gráfico Histórico do Ativo
De Out 2023 até Out 2024