UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 2009
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from [ ] to [ ]
Commission file number
000-50861
CHEETAH OIL & GAS
LTD.
(Exact name of registrant as specified in its
charter)
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Nevada
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93-1118938
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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17 VICTORIA ROAD, NANAIMO, BRITISH COLUMBIA, CANADA
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V9R 4N9
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(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number, including area code:
250-714-1101
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange On Which Registered
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N/A
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N/A
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Securities registered pursuant to Section 12(g) of the Act:
N/A
(Title of class)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 the Securities Act.
Yes
[ ] No [x]
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act
Yes [
] No [x]
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the last 90 days.
Yes [x] No [
]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[
]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definition of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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[ ]
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Accelerated filer
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[ ]
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Non-accelerated filer
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[ ]
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Smaller reporting company
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[x]
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Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes[ ] No[x]
The aggregate market value of Common Stock held by
non-affiliates of the Registrant on March 19, 2010 was $1,152,972 based on a
$0.13 closing price for the Common Stock on March 19, 2010. For purposes of this
computation, all executive officers and directors have been deemed to be
affiliates. Such determination should not be deemed to be an admission that such
executive officers and directors are, in fact, affiliates of the Registrant.
Indicate the number of shares outstanding of each of the
registrant’s classes of common stock as of the latest practicable
date.
10,728,625 common shares as of March 19, 2010
DOCUMENTS INCORPORATED BY REFERENCE
None.
2
TABLE OF CONTENTS
3
PART I
Item 1. Business
This annual report contains forward-looking statements. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as “may”,
“should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”,
“predicts”, “potential” or “continue” or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled “Risk Factors” that may cause our or our industry’s actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.
Our financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles.
In this annual report, unless otherwise specified, all dollar
amounts are expressed in United States dollars and all references to “common
shares” refer to the common shares in our capital stock.
As used in this current report and unless otherwise indicated,
the terms "we", "us", "our" and "Cheetah" mean Cheetah Oil & Gas Ltd.
General Overview
We were incorporated under the laws of the State of Nevada on
May 5, 1992 under the name “Bio-American Capital Corporation”.
On March 5, 2004 we acquired all of the issued and outstanding
shares of Cheetah BC, a private British Columbia company, in exchange for
25,000,000 shares of our common stock. Therefore, for accounting purposes,
Cheetah BC was deemed to have acquired Bio-American Capital Corporation.
Bio-American Capital Corporation changed its name to “Cheetah
Oil & Gas Ltd.” (“Cheetah”) by a Certificate of Amendment filed on May 25,
2004 with the Nevada Secretary of State. Immediately prior to the Cheetah
acquisition we had 62 shareholders of record.
On April 24, 2007, we increased the authorized number of shares
of our common stock from 50,000,000 shares to 500,000,000 shares, par value of
$0.001 per share and altered our authorized share capital to authorize the
issuance of up to 100,000,000 shares of preferred stock, par value of $0.001 per
share, for which the Board of Directors may fix and determine the designations,
rights, preferences or other variations of each class or series within each
class of the preferred shares.
The general purpose and effect of the amendment to our
corporation’s Articles is to increase our authorized share capital and authorize
the preferred shares, which will enhance our company’s ability to finance the
development and operation of our business.
Our common shares were quoted for trading on the OTCBB on
December 8, 1998 under the symbol “BIAN”. In October 1999, due to the change in
Rule 15c2-11, we were reduced to trading in the “Pink Sheets” because we did not
have an effective Form 10-SB. In August 1999 our Form 10-SB became effective. A
Form 211 application was accepted by the NASD Regulations, Inc. and our shares of common
stock were quoted for trading on the OTCBB in June 2002. On May 25, 2004 our
symbol changed to “COGL”.
4
We have not been involved in any bankruptcy, receivership or
similar proceeding.
We are engaged in the exploration for and production of oil and
natural gas, primarily in the State of Mississippi USA. Until recently, we were
engaged in the exploration for petroleum and natural gas in the country of Papua
New Guinea through our ten percent equity interest in Cheetah Oil & Gas B.C.
Ltd. (“Cheetah BC”). On November 25, 2008, we sold our remaining 10% interest in
Cheetah BC.
Due to the implementation of British Columbia Instrument 51-509
on September 30, 2008 by the British Columbia Securities Commission, we have
been deemed to be a British Columbia based reporting issuer. As such, we are
required to file certain information and documents at
www.sedar.com
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Overview of Business over the Last Five Years
We were incorporated under the laws of the State of Nevada on
May 5, 1992 under the name “Bio-American Capital Corporation”.
On March 5, 2004 we acquired all of the issued and outstanding
shares of Cheetah BC, a private British Columbia company, in exchange for
25,000,000 shares of our common stock. Therefore, for accounting purposes,
Cheetah BC was deemed to have acquired Bio-American Capital Corporation. The
principal assets of Cheetah BC were three petroleum prospecting licenses: PPL
#249, PPL #250 and PPL #252 issued by the Minister of Petroleum and Energy for
Papua New Guinea. The licenses required Cheetah to engage in exploratory and
developmental activities by certain dates as specified in the respective
licenses, including obtaining seismic data, drilling an exploratory well,
drilling an appraisal well and conducting related activities. PPL #249 covers a
total of 1,501,050 acres, PPL #250 covers a total of 2,001,400 acres and PPL
#252 covers a total of 1,841,288 acres.
On June 24, 2004, our former wholly owned subsidiary Cheetah BC
entered into an acquisition agreement with the controlling shareholders of
Scotia Petroleum Inc. (“Scotia”) to acquire 31,518,829 Scotia common shares or
an 85.14% controlling interest (of a total of 37,018,829 Scotia shares issued
and outstanding). As consideration, we paid the sum of $301,887 US dollars to
the selling Scotia shareholders. In addition, one of our shareholders (who was
not an affiliate of our company) who was also a Scotia shareholder contributed
256,315 shares of restricted stock of our company valued at $1,817,273 to the
other Scotia shareholders. The share value of $7.09 was based on the average
market price of our company’s common stock over the five-day period before and
after May 13, 2004, the date of agreement to purchase our company. Cheetah BC
has also acquired an option to purchase an additional 13.51%, or 5,000,000
shares, of the issued shares of Scotia for a period of two years for $1,000,000.
On March 10, 2005 we exercised our option to acquire the additional Scotia
shares, and as consideration for which we issued 142,000 restricted shares of
common stock on March 17, 2005 of our company at $7.04 per share. The share
value of $7.04 was based on the average market price of our company’s common
stock over the five-day period before and after March 10, 2005. As a result,
Scotia became a majority controlled subsidiary as Cheetah BC held 98.65% of the
issued and outstanding shares of Scotia. As a consequence of the sale of our
company’s 90% interest, Scotia ceased to remain a majority controlled
subsidiary.
The principal assets of Scotia were two Petroleum Prospecting
Licenses (PPL) - PPL #245 and PPL #246 - issued by the Minister of Petroleum
Energy for Papua New Guinea. The licenses required Scotia to engage in
exploratory and developmental activities by certain dates, including obtaining
seismic data, drilling an exploratory well, drilling an appraisal well and
conducting related activities. Scotia was required to expend certain minimum
amounts in respect of the licenses.
Subsequent to Cheetah acquiring Scotia, our company hired
Tayfun Babadagli, PhD to prepare a reservoir study on the Kuru structure. The
results of the study were received during November 2004. Under PPL #246 Cheetah
then applied for a petroleum retention license (PRL) on the Kuru structure on
November 12, 2004 and was granted PRL #13 on January 27, 2005, covering 40,000
acres. PRL #13 was the only PRL granted.
5
As a result of the above acquisitions, we held five petroleum
prospecting licenses in Papua New Guinea directly and through our former
majority controlled subsidiary, Scotia, which in total are petroleum prospecting
licenses in Papua New Guinea covering approximately 8.3 million acres. PRL 13,
PPL 246 and PPL 250 are located in South-Central of Papua New Guinea and PPL
245, PPL 249 and PPL 252 are located along the Northern Coast. We evaluated and
explored some of our oil and gas prospects over approximately 8.3 million acres
in our five license areas in Papua New Guinea. Our consultants produced an
evaluation based on available existing survey and seismic data from historical
operations on the licenses. In addition, we have gathered extensive information
from the reports that we have commissioned on the licenses and have reviewed
information and valuations regarding competitors who have acquired similar
licenses in the region.
On July 20, 2007, our company entered into a share subscription
agreement with Kepis & Pobe Investments Inc. (“K&P”) and its assigns.
Under the terms of the agreement K&P had the right to acquire, through the
subscription for shares, a 90% interest in Cheetah BC, a wholly owned subsidiary
of our company which through ownership of other subsidiaries has title to our
company’s Petroleum Prospecting Licenses and the Petroleum Retention License.
The subscription price for these shares would be approximately $15,000,000 of
which a maximum of $6,600,000 would be advanced to our company to retire its
debts plus the assignment of the Convertible Notes held by Macquarie Holdings
(USA) Inc., including interest, fees and penalties, in favor of our company at
an agreed value of $7,550,000. K&P also agreed that on or before December
31, 2008, it would make an additional contribution of capital to Cheetah BC of
$10,000,000. K&P assigned its rights under this agreement to Invicta Oil and
Gas Ltd., a company listed on the TSX Venture Exchange. Under the terms of the
Agreement it was further agreed that upon closing of the transaction, our
company would transfer all of the warrants, which were held by Macquarie, to
K&P with the same terms and conditions that existed when held by Macquarie.
On September 27, 2007 our company entered into an amendment to
the Agreement, extending the closing of the Agreement from October 2, 2007 to
November 30, 2007 and adding a price adjustment mechanism linked to increases in
the consolidated liabilities of Cheetah BC.
The price adjustment mechanism adjusted the $15,000,000
consideration Invicta was required to pay to our company by decreasing such
amount by the increase in the consolidated liabilities of Cheetah BC from June
30, 2007 to the closing date. As at the closing date of the transaction, Cheetah
BC’s consolidated liabilities was approximately $850,000 higher than on June 30,
2007. Therefore, the final consideration to be received by our company totaled
$13,691,278, allocated between the cancellation of the convertible notes
($7,550,000) and settlement of the other liabilities owing to creditors of our
company ($6,141,278).
In addition to the above, a unanimous shareholders agreement
was entered into between our company, Invicta and Cheetah BC whereby the parties
agreed to the following:
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1.
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The cancellation of any debt due from Cheetah BC to our
company, after the settlement of our company’s debts totaling
$13,691,278.
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2.
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Invicta agrees to contribute $10,000,000 to Cheetah BC as
a contribution of capital on or before December 31, 2008.
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3.
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Proportionate contributions to the joint oil and gas
exploration program of 90% on the part of Invicta and 10% on the part of
our company, subsequent to the contribution commitment described in clause
(2).
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4.
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Once Invicta has fulfilled the contribution commitment
described in clause (2), if our company fails to contribute all or any
portion of its proportionate contribution within 30 days of receiving a
funding request, and provided that Invicta has fulfilled its contribution
obligation with respect to such funding request, then Invicta may pay all
of our company’s contribution deficiency. Any amount advanced by Invicta
on behalf of our company shall bear interest at a rate of 18% per annum,
calculated annually on the anniversary date of such advance. The principal
amount of such loan advance and all accrued interest payable thereon shall
become due and payable in-full on the earlier of the third anniversary of
such an advance and the date, if any upon which our company disposes of
any of its shares of Cheetah BC.
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6
As a result of our company’s sale of 90% ownership in Cheetah
BC on November 30, 2007, our company ceased to consolidate the financial
position, results of operations and changes in cash flows of Cheetah BC and
subsidiary companies as at that date. In addition, our company did not exercise
any significant influence over Cheetah BC as a result of its residual 10%
ownership interest. The carrying value of our company’s remaining investment in
Cheetah BC ($1,521,329) was calculated at 10% of the carrying value of the net
assets of Cheetah BC and subsidiary companies immediately before the dilution
under the equity method of accounting for business combinations.
As a result of the transaction entered into by our company, we
were able to satisfy the convertible notes, including all interest, fees and
penalties at a cost of $7,550,000 resulting in a gain on settlement of debt in
the amount of $1,543,584 and retire other liabilities owing to unsecured
creditors at a cost of $6,141,278 resulting in a gain on settlement of debt in
the amount of $917,486.
Cheetah BC was required to expend certain minimum amounts in
respect of its licenses. Under the terms of the agreement, to maintain our 10%
equity interest in Cheetah BC, was required to proportionately contribute,
according to our shareholdings in Cheetah BC, any capital required by Cheetah
BC. The failure by us to contribute the required capital at the times needed to
continue to maintain our 10% interest in these licenses, and the ability to
modify the agreements or extend the time periods, could result in their
termination and the loss of their benefits to us. To this end, we entered into
an agreement with Invicta on March 12, 2008 whereby Invicta agreed to advance by
way of a loan up to $500,000 to fund our estimated working capital requirements.
The loan carried an annual interest rate of 8% and was secured against our 10%
equity interest in Cheetah BC.
With reference to the loan agreement dated March 12, 2008
between Cheetah and Invicta for the principal amount of $500,000 due on demand,
the following events constitutes a default by Cheetah (Borrower) unless Invicta
(Lender) agrees to waive such default:
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The Borrower fails to pay any amount owing to the Lender under this
agreement when due, and such amount remains unpaid for five days;
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Any of the representations or warranties of the Borrower in this Agreement
are misleading, or incorrect in any material respect;
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The Lender ceases to have a valid, perfected and enforceable charge over
the Collateral;
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An order is made or a resolution passed by the liquidation or winding-up
of the Borrower; or
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If the Borrower becomes insolvent, admits in writing its inability to pay
its debts as they become due or otherwise acknowledges its insolvency, commits
an act of bankruptcy, makes an assignment or bulk sale of its assets, is
adjudged or declared bankrupt or makes an assignment for the benefit of
creditors or a proposal or similar action under the
Bankruptcy and
Insolvency Act
(Canada),
the Companies Creditors’
Arrangement
Act
(Canada) or any similar legislation, or commences any other
proceedings relating to it under any reorganization, arrangement, readjustment
of debt, dissolution or liquidation law or statute of any jurisdiction whether
now or thereafter in effect, or consents to any such proceeding.
On March 28, 2008, Invicta changed its name to LNG Energy
Ltd.
On September 11, 2008, we received notification from LNG Energy
Ltd. giving notice for all funds to be paid on the demand loan advanced. We had
90 days from receipt of the demand letter to pay LNG Energy all funds owing plus
interest due on the loan.
Effective November 25, 2008, we entered into a share purchase
agreement, with LNG Energy Ltd. (formerly, Invicta Oil and Gas Ltd.) and LNG
Energy (BC) Ltd. (formerly, Cheetah BC), wherein LNG Energy agreed to purchase
our 10% interest in LNG BC, or 100 Class A common shares of LNG BC owned by our
company, for the purchase price of US$250,000. Once purchased, LNG Energy would
be the sole shareholder of LNG BC and LNG Energy shall forgive a loan to our
company of Cdn$300,000 (US253,576) secured by way of a demand loan bearing
interest at 8% per annum entered into on March 12, 2008. Cheetah shall forgive
all outstanding accounts receivable between LNG Energy and Cheetah in the amount
of $340,000. We also entered into a warrant cancellation agreement with Kepis
& Pobe Investments Inc. pursuant to which 3,000,000 share purchase warrants
held by Kepis & Pobe have been cancelled.
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On March 4, 2009 Cheetah settled outstanding liabilities with
two of our former directors paying $24,000 in the settlement of $39,249 in
consulting liabilities and the return to treasury of 3,000,000 (300,000
post-reverse stock split) issued and outstanding shares to our company’s
treasury.
On April 3, 2009, our company entered into an asset purchase
agreement with Delta Oil & Gas, Inc. and The Stallion Group wherein our
company agreed to acquire an 8% interest in certain oil and gas interests
located in the State of Mississippi, known as the Belmont Lake field. The
Belmont Lake field currently has two producing wells. In addition to acquiring
the 8% working interest, we acquired a 40% working interest on an option to
drill wells on over 140,000 acres of exploration lands. These lands have
extensive existing 2-D and 3-D seismic coverage and the project operations have
identified multiple targets for potential future drilling. We acquired these
assets for $179,309.
On June 19, 2009 with the approval of our board of directors, a
certificate of change was filed with the Nevada Secretary of State effecting a
four (4) for one (1) consolidation of our authorized and issued and outstanding
shares of common stock. The certificate of change had an effective date of July
17, 2009.
On July 15, 2009, our board of directors approved an amendment
to the consolidation so that the consolidation would be on a ten (10) for one
(1) basis. In connection with the amendment of the consolidation, our company
filed a certificate of correction with the Nevada Secretary of State, wherein
Cheetah’s authorized and issued and outstanding shares of common stock would be
consolidated on a ten (10) for one (1) basis, with an August 15, 2009 effective
date. As a result, effective August 15, 2009, Cheetah’s authorized capital
decreased from 500,000,000 shares of common stock with a par value of $0.001 to
50,000,000 shares of common stock with a par value of $0.001 and our issued and
outstanding shares decreased from 37,086,740 shares of common stock to 3,708,625
shares of common stock. The consolidation will become effective with the
Over-the-Counter Bulletin Board at the opening for trading on August 20, 2009
under the new stock symbol “
COHG
”. Our new CUSIP number is
163076201
.
On August 31, 2009, our company entered into an assignment
agreement with Golden Aria Corp. The assignment agreement dated August 28, 2009,
provides for the purchase by Golden Aria of a revenue interest of 40.432% of
Cheetah’s 8% share of our net revenue after field operating expenses from our
Belmont Lake PP F-12-4 horizontal well, located in Belmont Lake Field, Wilkinson
County, Mississippi. As consideration, Golden Aria has agreed to pay 57.76% of
the costs currently budgeted at $77,905, subject to revision and 57.76% of the
8% share of PP F-12-4 well costs from time to time for infrastructure, pipes,
tanks, compressors, trucking, etc.
On August 31, 2009, our company entered into an assignment
agreement with an individual. The assignment agreement dated August 28, 2009,
provides for the purchase by the individual of a revenue interest of 75% in
one-half of our investment in the Belmont Lake PPF-12-4 horizontal well located
in the Belmont Lake Field, Wilkinson County, Mississippi. As consideration, the
individual has agreed to pay 100% of Cheetah’s costs subject to revision. The
assignment of the interest is limited to a gross 500% revenue payout based on
the total amount paid for the working interest, after which all rights,
interests and benefits cease. As consideration, the individual has agreed to pay
100% of our costs currently budgeted at $77,905, subject to revision and 100% of
Cheetah’s 8% share of PP F-12-4 well costs from time to time for infrastructure,
pipes, tanks, compressors, trucking, etc.
On August 10, 2009, we issued 1,230,000 units at a unit price
of $0.05 per unit for the net proceeds of $61,500. Each unit is comprised of one
restricted common share and one warrant to purchase one additional share of
common stock, exercisable until August 10, 2011. The exercise price of the
warrants is $0.20. Assuming that all of the warrants are exercised by the
holders, the gross proceeds received by our company from the warrants will equal
approximately $246,000.
Also on September 14, 2009, we reached a debt settlement with
two directors of our company in the amount of $151,000 by issuing 3,020,000
shares at a price of $0.05 per share.
8
On September 14, 2009 our company granted 150,000 stock options
to a director and officer of our company, pursuant to our 2005 Stock Plan, with
an exercise price of $0.10, vesting immediately and re-priced 200,000 of the
previously issued stock options from $0.15 to $0.10.
On October 17, 2009, our company settled a note payable and
interest payable totaling $59,000 by issuing an aggregate of 1,180,000 shares of
common stock, at a deemed price of $0.05 per share and 1,000,000 warrants at
0.10 exercisable until August 10, 2011. The shares were issued to Sage
Investments Ltd. in payment of a debt conversion agreement between our company
and Sage Investments Ltd. Concurrent with this share issuance Sage Investments
Ltd. agreed to release its remaining security interest in certain assets of our
company. Effectively, at October 17, 2009 Cheetah’s oil & gas assets were
unencumbered.
On October 23, 2009 we issued 1,500,000 units at a price of
$0.05 per unit for net proceeds of $75,000. Each unit is comprised of one
restricted common share and one warrant to purchase one additional share of
common stock, exercisable until October 23, 2011. Assuming that all of the
warrants are exercised by the holders, the gross proceeds received by our
company from the warrants will equal approximately $300,000. In addition, our
company issued 90,000 shares of stock to an individual who facilitated the sale
of the units.
On November 13, 2009, our company announced that its Operator
in Mississippi, Griffin & Griffin Exploration LLC, has declared force
majeure on the Belmont Lake offset wells at this time.
On November 27, 2009, we granted stock options to our officers
and directors, pursuant to our 2009 Stock Plan, to purchase up to 300,000 shares
of our common stock at an exercise price of $0.10 per share, exercisable until
November 27, 2014.
Our Current Business
The Company is an oil and gas company engaged in the
exploration for and production of oil and natural gas, primarily in the State of
Mississippi, USA. The Company is currently generating revenues from its business
operations in Mississippi.
We are currently seeking opportunities to acquire prospective
or producing oil and gas properties or other oil and gas resource related
projects. Simultaneously, we are seeking business opportunities with established
business entities for the merger of a target business with our company. In
certain instances, a target business may wish to become a subsidiary of us or
may wish to contribute assets to us rather than merge. We are currently in
negotiations with several parties to enter into a business opportunity but we
have not entered into any definitive agreements to date and there can be no
assurance that we will be able to enter into any definitive agreements. We
anticipate that any new acquisition or business opportunities by our company
will require additional financing. There can be no assurance, however, that we
will be able to acquire the financing necessary to enable us to pursue our plan
of operation. If our company requires additional financing and we are unable to
acquire such funds, our business may fail.
Management of our company believes that there are perceived
benefits to being a reporting company with a class of publicly-traded
securities. These are commonly thought to include: (i) the ability to use
registered securities to acquire assets or businesses; (ii) increased visibility
in the financial community; (iii) the facilitation of borrowing from financial
institutions; (iv) improved trading efficiency; (v) stockholder liquidity; (vi)
greater ease in subsequently raising capital; (vii) compensation of key
employees through stock options; (viii) enhanced corporate image; and (ix) a
presence in the United States capital market.
We may seek a business opportunity with entities that have
recently commenced operations, or entities who wish to utilize the public
marketplace in order to raise additional capital in order to expand business
development activities, to develop a new product or service, or for other
corporate purposes. We may acquire assets and establish wholly-owned
subsidiaries in various businesses or acquire existing businesses as
subsidiaries.
9
In implementing a structure for a particular business
acquisition or opportunity, we may become a party to a merger, consolidation,
reorganization, joint venture, or licensing agreement with another corporation
or entity. We may also acquire stock or assets of an existing business. Upon the
consummation of a transaction, it is likely that our present management will no
longer be in control of our company. In addition, it is likely that our officers
and directors will, as part of the terms of the acquisition transaction, resign
and be replaced by one or more new officers and directors.
As of the date hereof, management has not entered into any
formal written agreements for a business combination or opportunity. When any
such agreement is reached, we intend to disclose such an agreement by filing a
current report on Form 8-K with the Securities and Exchange Commission.
The Company may not be able to fund our cash requirements
through our current operations. Historically, we have been able to raise a
limited amount of capital through private placements of our equity stock, but we
are uncertain about our continued ability to raise funds privately. Further, we
believe that our company may have difficulties raising capital until we locate a
prospective property through which we can pursue our plan of operation. If we
are unable to secure adequate capital to continue our acquisition efforts, our
shareholders may lose some or all of their investment and our business may
fail.
Competition
The Company is engaged in the acquisition and exploration of
oil and gas properties. We compete with other companies for both the acquisition
of prospective properties and the financing necessary to develop such
properties.
We conduct our business in an environment that is highly
competitive and unpredictable. In seeking out prospective properties, we have
encountered intense competition in all aspects of our proposed business as we
compete directly with other development stage companies as well as established
international companies. Many of our competitors are national or international
companies with far greater resources, capital and access to information than us.
Accordingly, these competitors may be able to spend greater amounts on the
acquisition of prospective properties and on the exploration and development of
such properties. In addition, they may be able to afford greater geological
expertise in the exploration and exploitation of oil and gas properties. This
competition could result in our competitors having resource properties of
greater quality and attracting prospective investors to finance the development
of such properties on more favorable terms. As a result of this competition, we
may become involved in an acquisition with more risk or obtain financing on less
favorable terms.
Compliance with Government Regulation
We will not know the government regulations and the cost of
compliance with such regulations with which we must comply until such time as we
acquire an interest in a particular oil and gas property. If we are successful
in acquiring a property interest, we will be required to comply with the
regulations of governmental authorities and agencies applicable to the federal,
state or provincial and local jurisdictions where the property is located.
Exploitation and development of oil and gas properties may require prior
approval from applicable governmental regulatory agencies. There can be no
assurance that such approvals will be obtained.
If our activities should advance to the point where we engage
in oil and gas operations, we could become subject to environmental regulations
promulgated by federal, state or provincial, and local government agencies as
applicable. Environmental legislation provides for restrictions and prohibitions
on spills, releases or emissions of various substances produced in association
with the oil and gas industries which could result in environmental liability. A
breach or violation of such legislation may result in the imposition of fines
and penalties. In addition, certain types of operations require the submission
and approval of environmental impact assessments. Environmental assessments are
increasingly imposing higher standards, greater enforcement, fines and penalties
for non-compliance. Environmental assessments of proposed projects carry a
heightened degree of responsibility for companies, directors, officers and
employees. The cost of compliance in respect of environmental regulation has the
potential to reduce the profitability of any future revenues that our company
may generate.
10
Employees
We have no employees other than our directors and executive
officers. We anticipate that we will be conducting most of our business through
agreements with consultants and third parties.
Research and Development
We have incurred $Nil in research and development expenditures
over the last fiscal year.
Item 1A. Risk Factors
Our business operations are subject to a number of risks and
uncertainties, including, but not limited to those set forth below:
We have had negative cash flows from operations and if we
are not able to obtain further financing, our business operations may
fail.
We had cash in the amount of $164,006 and a working capital
deficit of $148,365 as of December 31, 2009. We do not have sufficient funds to
independently finance the acquisition and development of prospective oil and gas
properties, nor do we have the funds to independently finance our daily
operating costs. The Company has generated revenue, however has an accumulated
deficit and negative working capital, accordingly, we will require additional
funds, either from equity or debt financing, to maintain our daily operations
and to locate, acquire and develop a prospective property. Obtaining additional
financing is subject to a number of factors, including market prices for oil and
gas, investor acceptance of any property we may acquire in the future, and
investor sentiment. Financing, therefore, may not be available on acceptable
terms, if at all. The most likely source of future funds presently available to
us is through the sale of equity capital. Any sale of share capital, however,
will result in a dilution to existing shareholders. If we are unable to raise
additional funds when required, we may be forced to delay our plan of operation
and our entire business may fail.
We currently do not generate sufficient revenues, and as a
result, we face a high risk of business failure.
Since March 5
th
2004, we have primarily focused on
the location and acquisition of oil and gas properties. In order to generate
revenues, we will incur substantial expenses in the location, acquisition and
development of a prospective property. We therefore expect to incur significant
losses into the foreseeable future. We recognize that if we are unable to
generate significant revenues from our activities, our entire business may fail.
There is no history upon which to base any assumption as to the likelihood that
we will be successful in our plan of operation, and we can provide no assurance
to investors that we will generate any operating revenues or achieve profitable
operations.
Due to the speculative nature of the exploration of oil and
gas properties, there is substantial risk that our business will fail.
The business of oil and gas exploration and development is
highly speculative involving substantial risk. There is generally no way to
recover any funds expended on a particular property unless reserves are
established and unless we can exploit such reserves in an economic manner. We
can provide investors with no assurance that any property interest that we may
acquire will provide commercially exploitable reserves. Any expenditure by our
company in connection with locating, acquiring and developing an interest in an
oil and gas property may not provide or contain commercial quantities of
reserves.
Even if we discover commercial reserves, we may not be able
to successfully obtain commercial production.
Even if we are successful in acquiring an interest in a
property that has proven commercial reserves of oil and gas, we will require
significant additional funds in order to place the property into commercial
production. We can provide no assurance to investors that we will be able to
obtain the financing necessary to extract such reserves.
11
If we are unable to hire and retain key personnel, we may
not be able to implement our plan of operation and our business may fail.
Our success will be largely dependent on our ability to hire
and retain highly qualified personnel. This is particularly true in the highly
technical businesses of oil and gas exploration. These individuals may be in
high demand and we may not be able to attract the staff we need. In addition, we
may not be able to afford the high salaries and fees demanded by qualified
personnel, or we may fail to retain such employees after they are hired. At
present, we have not hired any key personnel. Our failure to hire key personnel
when needed will have a significant negative effect on our business.
Competition in the oil and gas industry is highly
competitive and there is no assurance that we will be successful in acquiring
the licenses.
The oil and gas industry is intensely competitive. We compete
with numerous individuals and companies, including many major oil and gas
companies, which have substantially greater technical, financial and operational
resources and staffs. Accordingly, there is a high degree of competition for
desirable oil and gas properties for drilling operations and necessary drilling
equipment, as well as for access to funds. There can be no assurance that the
necessary funds can be raised or that any projected work will be acquired.
Our common stock is illiquid and shareholders may be unable
to sell their shares.
There is currently a limited market for our common stock and we
can provide no assurance to investors that a market will develop. If a market
for our common stock does not develop, our shareholders may not be able to
re-sell the shares of our common stock that they have purchased and they may
lose all of their investment. Public announcements regarding our company,
changes in government regulations, conditions in our market segment or changes
in earnings estimates by analysts may cause the price of our common shares to
fluctuate substantially. In addition, stock prices for junior mining and oil and
gas companies fluctuate widely for reasons that may be unrelated to their
operating results. These fluctuations may adversely affect the trading price of
our common shares.
Penny stock rules will limit the ability of our stockholders
to sell their stock.
The Securities and Exchange Commission has adopted regulations
which generally define “penny stock” to be any equity security that has a market
price (as defined) less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exceptions. Our securities are covered by
the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
“accredited investors”. The term “accredited investor” refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the Securities and
Exchange Commission which provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer’s account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer’s confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser’s written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.
12
The Financial Industry Regulatory Authority, or FINRA, has
adopted sales practice requirements which may also limit a shareholder's ability
to buy and sell our stock.
In addition to the "penny stock" rules described above, FINRA
has adopted rules that require that in recommending an investment to a customer,
a broker-dealer must have reasonable grounds for believing that the investment
is suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, FINRA believes that there is a high probability that speculative
low priced securities will not be suitable for at least some customers. FINRA
requirements make it more difficult for broker-dealers to recommend that their
customers buy our common stock, which may limit your ability to buy and sell our
stock and have an adverse effect on the market for its shares.
Other Risks
Trends, Risks and Uncertainties
We have sought to identify what we believe to be the most
significant risks to our business, but we cannot predict whether, or to what
extent, any of such risks may be realized nor can we guarantee that we have
identified all possible risks that might arise. Investors should carefully
consider all of such risk factors before making an investment decision with
respect to our common stock.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Executive Offices
Our executive office is located at 17 Victoria Road, Nanaimo,
B.C. V9R 4N9.
Resource Properties
On April 3, 2009, our company entered into an asset purchase
agreement with Delta Oil & Gas, Inc. and The Stallion Group wherein we
agreed to acquire an 8% interest in certain oil and gas interests located in the
State of Mississippi, known as the Belmont Lake Field for a value of $179,309.
The Company is required to pay $400 per month for a period of 4 years from the
closing as part of the purchase price. The Belmont Lake field currently has two
producing wells.
In addition to acquiring the 8% working interest, our company
also acquired a 40% working interest on an option to drill wells on over l40,000
acres of exploration lands. These lands have extensive existing 2-D and 3-D
seismic coverage and the project operations have identified multiple targets for
potential future drilling.
In August 2009 the operator of the Belmont Lake Field decided
to drill a new horizontal well named the Belmont Lake PPF-12-4 and Cheetah
received a notice that its share of the anticipated drilling and development
cost was $77,900. After the operator sent the notice of its intent to drill the
well, certain working interest owners declined the investment; therefore,
Cheetah was given the opportunity to purchase an additional interest in the
proposed well in an amount equal to its original commitment.
Cheetah’s management determined that it was in the best
interest for our company to exercise their right to invest in the well. Cheetah
did not have sufficient cash for the entire investment totaling approximately
$155,800 and therefore, divided its proposed investment into two equal parts:
13
On August 31, 2009, company entered into an assignment
agreement with a corporation. The assignment agreement provided for the purchase
of a revenue interest of 40.432% in one-half of Cheetah’s investment in the
proposed well for $45,000. The corporation has agreed to pay 57.76% of Cheetah’s
drilling, completion and tie in costs to earn the 40.432% .
On August 31, 2009, our company entered into an assignment
agreement with an individual. The assignment agreement provided for the purchase
of a revenue interest of 75% in one-half of its investment in the proposed well
for $77,905 covering 100% of the current budgeted costs. As consideration, the
individual has agreed to pay 100% of Cheetah’s costs subject to revision. This
interest will revert back to the owner once the purchaser has achieved a 500%
payout.
Productive Wells
See below production data as at December 31, 2009:
|
For the fiscal year
ended
December 31, 2009
|
For the fiscal year
ended
December 31, 2008
|
|
Production Data:
|
|
|
|
Natural gas (Mcf)
|
714
|
NA
|
|
Oil (Bbls)
|
1,210
|
NA
|
|
Average Prices:
|
|
NA
|
|
Natural gas (per Mcf)
|
$ 3.35
|
NA
|
|
Oil (per Bbl)
|
$65.45
|
NA
|
Productive Wells
The following table summarizes information at December 31,
2009, relating to the productive wells in which we owned a working interest as
of that date. Productive wells consist of producing wells and wells capable of
production, but specifically exclude wells drilled and cased during the fiscal
year that have yet to be tested for completion (e.g., all of the operated wells
drilled by our company during this year have been cased in preparation for
completion, but no operations have been initiated that would allow these wells
to be productive). Gross wells are the total number of producing wells in which
we have an interest, and net wells are the sum of our fractional working
interests in the gross wells.
|
|
Gross
|
|
Net
|
|
Location
|
Oil
|
|
Gas
|
|
Total
|
|
Oil
|
|
Gas
|
|
Total
|
|
Mississippi
|
2
|
|
1
|
|
3
|
|
0.104
|
|
0.06
|
|
0.164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
2
|
|
1
|
|
3
|
|
0.104
|
|
0.06
|
|
0.164
|
Unaudited Oil and Gas Reserve Quantities
The unaudited reserve estimates for Mississippi, as of December
31, 2009, were prepared by Veazey & Associates, an independent petroleum
engineering firm.
14
The estimated proved reserves prepared by Veazey and Associates
are summarized in the table below, in accordance with definitions and pricing
requirements as prescribed by the Securities and Exchange Commission (the
“SEC”). Prices paid for oil and natural gas vary widely depending upon the
quality such as the Btu content of the natural gas, gravity of the oil, sulfur
content and location of the production related to the refinery or pipelines.
There are many uncertainties inherent in estimating proved
reserve quantities and in projecting future production rates and the timing of
development expenditures. In addition, reserve estimates of new discoveries that
have little production history are more imprecise than those of properties with
more production history. Accordingly, these estimates are expected to change as
future information becomes available.
Proved oil and gas reserves are the estimated quantities of
crude oil and natural gas which 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 oil and gas reserves are those reserves
expected to be recovered through existing wells with existing equipment and
operating methods.
In 2009, the SEC issued its final rule on the modernization of
oil and gas reporting, and the FASB adopted conforming changes to ASC Topic 932,
“
Extractive Industries”
, to align the FASB’s reserves requirements with
those of the SEC. The final rule is now in effect for companies with fiscal
years ending on or after December 31, 2009.
As it affects our reserve estimates and disclosures, the final
rule:
-
amends the definition of proved reserves to require the use of average
commodity prices based upon the prior 12-month period rather than year-end
prices (Oil - $63.58 bbl; Gas – $3.86 mcf for year ended December 31, 2009);
-
expands the type of technologies available to establish reserve estimates
and categories;
-
modifies certain definitions used in estimating proved reserves;
-
permits disclosure of probable and possible reserves;
-
requires disclosure of internal controls over reserve estimations and the
qualifications of technical persons primarily responsible for the preparation
or audit of reserve estimates;
-
permits disclosure of reserves based on different price and cost criteria,
such as futures prices or management forecasts; and
-
requires disclosure of material changes in proved undeveloped reserves,
including a discussion of investments and progress made to convert proved
undeveloped reserves to proved developed reserves
We emphasize that reserve estimates are inherently imprecise.
Accordingly, the estimates are expected to change as more current information
becomes available. In addition, a portion of our proved reserves are classified
as proved developed nonproducing and proved undeveloped, which increases the
imprecision inherent in estimating reserves which may ultimately be
produced.
The following table sets forth estimated proved oil and gas
reserves together with the changes therein for the year ended December 31,
2009:
|
|
|
Oil
|
|
|
Gas
|
|
|
|
|
(bbls)
|
|
|
(mcf)
|
|
|
Proved developed and undeveloped reserves
|
|
|
|
|
|
|
|
Beginning
of year
|
|
–
|
|
|
–
|
|
|
Revisions of previous
estimates
|
|
–
|
|
|
–
|
|
|
Improved
recovery
|
|
–
|
|
|
–
|
|
|
Purchases of minerals in
place
|
|
17,830
|
|
|
7,374
|
|
|
Extensions and discoveries
|
|
–
|
|
|
–
|
|
|
Production
|
|
(1,210
|
)
|
|
(714
|
)
|
|
Sales
|
|
–
|
|
|
–
|
|
|
End of Year
|
|
16,620
|
|
|
6,660
|
|
|
Proved developed reserves
|
|
|
|
|
|
|
|
Beginning of year
|
|
–
|
|
|
–
|
|
|
End of
Year
|
|
6,920
|
|
|
6,660
|
|
15
The standardized measure of discounted future net cash flows
relating to proved natural gas and oil reserves is as follows:
|
|
USD$
|
|
Future cash inflows
|
1,082,020
|
|
Future production costs
|
(293,855)
|
|
Future development costs
|
(34,795)
|
|
Future net cash flows
|
753,370
|
|
10% annual discount for estimated timing of
cash flows
|
(128,752)
|
|
Standardized measure of discounted future net cash flows
|
624,618
|
|
|
The following reconciles the change in the standardized
measure of discounted future net cash flow during 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
$
|
-
|
|
|
|
Sales of oil and gas produced, net of production costs
|
|
(37,207
|
)
|
|
|
Net changes in prices and production costs
|
|
-
|
|
|
|
Extensions, discoveries, and improved recovery, less
related costs
|
|
-
|
|
|
|
Development costs incurred during the year which were
previously estimated
|
|
-
|
|
|
|
Net change in estimated future development costs
|
|
-
|
|
|
|
Revisions of previous quantity estimates
|
|
-
|
|
|
|
Net change from purchases and sales of minerals in place
|
|
661,825
|
|
|
|
Accretion of discount
|
|
-
|
|
|
|
Net change in income taxes
|
|
-
|
|
|
|
Other
|
|
-
|
|
|
|
|
|
|
|
|
|
End of year
|
$
|
624,618
|
|
|
|
|
|
|
|
Oil and Gas Acreage
The following table sets forth the undeveloped and developed
acreage, by area, held by us as of December 31, 2009. Undeveloped acres are
acres on which wells have not been drilled or completed to a point that would
permit the production of commercial quantities of oil and gas, regardless of
whether or not such acreage contains proved reserves. Developed acres are acres,
which are spaced or assignable to productive wells. Gross acres are the total
number of acres in which we have a working interest. Net acreage is obtained by
multiplying gross acreage by our working interest percentage in the properties. The table does
not include acreage in which we have a contractual right to acquire or to earn
through drilling projects, or any other acreage for which we have not yet
received leasehold assignments.
16
|
|
Undeveloped Acres
|
|
Developed Acres
|
|
|
Gross
|
Net
|
|
Gross
|
Net
|
|
|
|
|
|
|
|
|
Mississippi
|
220
|
88
|
|
1,160
|
192
|
|
Total
|
220
|
88
|
|
1,160
|
192
|
Item 3. Legal Proceedings
We know of no material, existing or pending legal proceedings
against us, nor are we involved as a plaintiff in any material proceeding or
pending litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered or beneficial shareholder, is an
adverse party or has a material interest adverse to our company.
Item 4. [Removed and Reserved]
PART II
Item 5. Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities
Our common shares are quoted on the Over-the-Counter Bulletin
Board under the symbol “COHG.” The following quotations, obtained from Yahoo
Finance, reflect the high and low bids for our common shares based on
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.
The high and low bid prices of our common stock for the periods
indicated below are as follows:
|
National Association of Securities Dealers
OTC Bulletin Board
(1)
|
|
Quarter Ended
|
High
|
Low
|
|
December 31, 2009
|
$0.38
|
$0.08
|
|
September 30, 2009
|
$0.045
|
$0.045
|
|
June 30, 2009
|
$0.006
|
$0.0051
|
|
March 31, 2009
|
$0.015
|
$0.012
|
|
December 31, 2008
|
$0.03
|
$0.01
|
|
September 30, 2008
|
$0.13
|
$0.02
|
|
June 30, 2008
|
$0.08
|
$0.03
|
|
March 31, 2008
|
$0.17
|
$0.06
|
|
December 31, 2007
|
$0.45
|
$0.08
|
(1) Over-the-counter market quotations
reflect inter-dealer prices without retail mark-up, mark-down or commission, and
may not represent actual transactions.
17
Our common shares are issued in registered form. Standard
Registrar and Transfer Company, Inc. 12528 South 1840 East Draper, Utah 84020
(Telephone: 801.571.8844; Facsimile: 801.571.2551) is the registrar and transfer
agent for our common shares.
On March 19, 2010, the shareholders' list showed 163 registered
shareholders and 10,728,625 common shares outstanding.
Dividend Policy
We have not paid any cash dividends on our common stock and
have no present intention of paying any dividends on the shares of our common
stock. Our current policy is to retain earnings, if any, for use in our
operations and in the development of our business. Our future dividend policy
will be determined from time to time by our board of directors.
Equity Compensation Plan Information
On June 6, 2005, our Board of Directors approved our 2005 Stock
Option Plan pursuant to which we may grant an aggregate of up to 3,500,000
common shares or options to purchase common shares to employees, consultants or
directors of our company or of any of our subsidiaries. The purpose of the 2005
Stock Option Plan is to give our company the ability to motivate participants to
contribute to our growth and profitability. The 2005 Stock Option Plan is
administered by our Board of Directors. It will continue in effect until the
earlier of the (a) date that we have granted all of the securities that can be
issued pursuant to its terms or (b) June 6, 2015.
Awards under our 2005 Stock Option Plan will vest as determined
by our Board of Directors and as established in stock option agreements to be
entered into between our company and each participant receiving an award.
Options granted under the 2005 Stock Option Plan will have a term of 5 years
from the date of grant but are subject to earlier termination in the event of
death, disability or the termination of the employment or consulting
relationship.
On July 31, 2008 our company’s board of directors approved the
grant of 2,000,000 stock options at a purchase price of $0.15 per share to
Robert McAllister with 500,000 options vested immediately, 500,000 vested on
October 31, 2008 and the balance vested on January 31, 2009.
On July 15, 2009 our company approved a 1 for 10 share
consolidation. The 3,500,000 maximum granting of stock options has now been
reduced to 350,000 stock options pursuant to the 2005 stock option plan.
On September 14, 2009 our company’s board of directors approved
the grant of 150,000 stock options at a purchase price of $0.10 per share to
Georgina Martin, vesting immediately and re-priced 200,000 stock options
previously issued to Robert McAllister from $0.15 to $0.10.
The following table summarizes certain information regarding
our 2005 equity compensation plans as at December 31, 2009:
|
Equity Compensation Plan
Information
|
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))
|
|
Equity compensation plans approved by security holders
|
Nil
|
Nil
|
Nil
|
18
|
Equity Compensation Plan
Information
|
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))
|
|
Equity compensation plans not approved by security holders
|
350,000 (1)
|
$0.10 (2)
|
Nil
|
|
Total
|
350,000 (1)
|
$0.10 (2)
|
Nil
|
On November 27, 2009, our Board of Directors approved our 2009
Stock Option Plan pursuant to which we may grant an aggregate of up to 1,000,000
common shares or options to purchase common shares to employees, consultants or
directors of our company or of any of our subsidiaries. The purpose of the 2009
Stock Option Plan is to give our company the ability to motivate participants to
contribute to our growth and profitability. The 2009 Stock Option Plan is
administered by our Board of Directors. It will continue in effect until the
earlier of the (a) date that we have granted all of the securities that can be
issued pursuant to its terms or (b) November 27, 2019.
Awards under our 2009 Stock Option Plan will vest as determined
by our Board of Directors and as established in stock option agreements to be
entered into between our company and each participant receiving an award.
Options granted under the 2005 Stock Option Plan will have a term of 5 years
from the date of grant but are subject to earlier termination in the event of
death, disability or the termination of the employment or consulting
relationship
On November 27, 2009 our company’s board of directors approved
the grant of 300,000 stock options at a purchase price of $0.10 per share to
Robert McAllister, Georgina Martin and Don Findlay, vesting immediately.
The following table summarizes certain information regarding
our 2009 equity compensation plans as at December 31, 2009:
|
Equity Compensation Plan
Information
|
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))
|
|
Equity compensation plans approved by security holders
|
Nil
|
Nil
|
Nil
|
|
Equity compensation plans not approved by security holders
|
300,000
|
$0.10
|
700,000
|
|
Total
|
300,000
|
$0.10
|
700,000
|
Recent Sales of Unregistered Securities; Use of Proceeds
from Registered Securities
We did not sell any equity securities which were not registered
under the Securities Act during the year ended December 31, 2009 that were not
otherwise disclosed on our quarterly reports on Form 10-Q or our current reports
on Form 8-K filed during the year ended December 31, 2009.
19
Purchase of Equity Securities by the Issuer and Affiliated
Purchasers
We did not purchase any of our shares of common stock or other
securities during our fourth quarter of our fiscal year ended December 31,
2009.
Item 6. Selected Financial Data
As a “smaller reporting company”, we are not required to
provide the information required by this Item.
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion should be read in conjunction with our
audited financial statements and the related notes that appear elsewhere in this
annual report. The following discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward looking statements. Factors that
could cause or contribute to such differences include, but are not limited to;
those discussed below and elsewhere in this annual report, particularly in the
section entitled “Risk Factors” beginning on page 10 of this annual report.
Our audited financial statements are stated in United States
Dollars and are prepared in accordance with United States Generally Accepted
Accounting Principles.
Results of Operations for our Years Ended December 31,
2009 and 2008
Our net loss and comprehensive loss for our year ended December
31, 2009, for our year ended December 31, 2008 and the changes between those
periods for the respective items are summarized as follows:
|
Year Ended
December 31,
2009
$
|
Year Ended
December 31,
2008
$
Restated
|
Change Between
Year Ended
December 31, 2009
and Year
Ended
December 31, 2008
$
|
|
Natural oil & gas revenue
|
81496
|
Nil
|
81,496
|
|
Cost ore revenue
|
(44,289)
|
Nil
|
(46,804)
|
|
Legal, accounting and audit
|
(76,651)
|
(114,216)
|
37,565
|
|
General and administrative
|
(47,068)
|
(52,272)
|
5,204
|
|
Consulting fees & director fees
|
(120,000)
|
(130,783)
|
10,783
|
|
Interest and accretion
|
(50,530)
|
(22,320)
|
(28,210)
|
|
Discontinued operations
|
Nil
|
(1,354,753)
|
1,354,753
|
|
Forgiveness of debt
|
39,249
|
Nil
|
39,249
|
|
Unrealized gains (loss) on warrants
|
Nil
|
13,000
|
(13,000)
|
|
Foreign exchange gain (loss)
|
(9,100)
|
43,676
|
(52,776)
|
|
Depletion expense
|
(16,195)
|
Nil
|
( 23,454)
|
|
Net loss and comprehensive loss for the period
|
(243,088)
|
(1,617,668)
|
1,364,806
|
20
General and Administrative
The decrease in our general and administrative expenses for our
year ended December 31, 2009 was due to a decrease in stock-based compensation,
provisions for uncollectible funds and rentals and communication.
Accounting, Audit and Legal
The decrease in accounting, audit and legal fees for our year
ended December 31, 2009 was due to a decrease in audit fees.
Consulting Fees and Director Fees
The decrease in consulting fees and director fees for our year
ended December 31, 2009 was due to a decrease in payments to the directors.
Interest and Accretion
The increase in interest and accretion for our year ended
December 31, 2009 was due to the interest record for the loan payable to Sage
Investments Ltd.
Foreign Exchange Gain (loss)
The decrease in foreign exchange gain for our year ended
December 31, 2009 was due to currency fluctuations.
Liquidity and Financial Condition
Working Capital
|
|
|
At
|
|
|
At
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
(Restated)
|
|
|
Current assets
|
$
|
232,055
|
|
$
|
251,538
|
|
|
Current liabilities
|
|
380,420
|
|
|
390,803
|
|
|
Working capital
|
$
|
(148,365
|
)
|
$
|
(139,265
|
)
|
Cash Flows
|
|
|
Year Ended
|
|
|
|
|
December 31,
|
|
|
December 31
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
(
Restated
)
|
|
|
Cash flows from (used in) operating
activities
|
$
|
(15,803
|
)
|
$
|
(248,504
|
)
|
|
Cash flows provided by (used in) investing activities
|
|
12,646
|
|
$
|
Nil
|
|
|
Cash flows provided by (used in) financing
activities
|
|
165,625
|
|
$
|
242,181
|
|
|
Net increase (decrease) in cash during period
|
$
|
162,468
|
|
$
|
(6,323
|
)
|
Operating Activities
Net cash used in operating activities was $15,803 for our year
ended December 31, 2009 compared with cash used in operating activities of
$248,504 in the same period in 2008. The decrease of $232,701 in operating
activities is mainly attributable to revenue received in 2009, debt forgiveness
recorded, and an overall decrease in expenses.
21
Investing Activities
Net cash provided by investing activities was $12,646 for our
year ended December 31, 2009 compared to net cash used in investing activities
of $Nil in the same period in 2008 was mainly attributable to the proceeds from
the sale of Cheetah BC and purchase of oil & gas properties..
Financing Activities
Net cash from financing activities was $165,625 for our year
ended December 31, 2009 compared to $242,181 in the same period in 2008 was
mainly attributable to the decrease of advance received.
Contractual Obligations
As a “smaller reporting company”, we are not required to
provide tabular disclosure obligations.
Going Concern
The financial statements have been prepared in accordance with
accounting principles generally accepted in the United States applicable to a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities and commitments in the normal course of business. The Company has
incurred a net loss/gain of $243,088 for the year ended December 31, 2009 [2008
- $1,617,668] and at December 31, 2009 had a deficit accumulated of $16,096,121
[2008 – $15,853,033]. The Company has generated revenue, however has an
accumulated deficit and negative working capital of $148,365 as at December 31,
2009. The Company requires additional funds to maintain its existing operations
and to acquire new business assets. These conditions raise substantial doubt
about our company’s ability to continue as a going concern. Management’s plans
in this regard are to raise equity and debt financing as required, but there is
no certainty that such financing will be available or that it will be available
at acceptable terms. The outcome of these matters cannot be predicted at this
time.
These financial statements do not include any adjustments to
reflect the future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that might result from the outcome
of this uncertainty.
At this time, we cannot provide investors with any assurance
that we will be able to raise sufficient funding from the sale of our common
stock or through a loan from our directors to meet our obligations over the next
twelve months. We do not have any arrangements in place for any future debt or
equity financing.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to stockholders.
Critical Accounting Policies
The discussion and analysis of our financial condition and
results of operations are based upon our financial statements, which have been
prepared in accordance with the accounting principles generally accepted in the
United States of America. Preparing financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. These estimates and assumptions are affected
by management’s application of accounting policies. We believe that
understanding the basis and nature of the estimates and assumptions involved
with the following aspects of our financial statements is critical to an
understanding of our financial statement.
22
Recent Accounting Pronouncements
The FASB established the
FASB Accounting Standards
Codification
(“Codification”) as the source of authoritative U.S. generally
accepted accounting principles (“GAAP”) recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements issued for
interim and annual periods ending after September 15, 2009. The codification has
changed the manner in which U.S. GAAP guidance is referenced, but did not have
an impact on our consolidated financial position, results of operations or cash
flows.
In January 2010, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update (“ASU”) 2010-06, “Fair Value
Measurements and Disclosures (Topic 820) — Improving Disclosures about Fair
Value Measurements.” This ASU requires some new disclosures and clarifies some
existing disclosure requirements about fair value measurement as set forth in
Accounting Standards Codification (“ASC”) 820. ASU 2010-06 amends ASC 820 to now
require: (1) a reporting entity should disclose separately the amounts of
significant transfers in and out of Level 1 and Level 2 fair value measurements
and describe the reasons for the transfers; and (2) in the reconciliation for
fair value measurements using significant unobservable inputs, a reporting
entity should present separately information about purchases, sales, issuances,
and settlements. In addition, ASU 2010-06 clarifies the requirements of existing
disclosures. ASU 2010-06 is effective for interim and annual reporting periods
beginning after December 15, 2009, except for the disclosures about purchases,
sales, issuances, and settlements in the roll forward of activity in Level 3
fair value measurements. Those disclosures are effective for fiscal years
beginning after December 15, 2010, and for interim periods within those fiscal
years. Early application is permitted. The Company will comply with the
additional disclosures required by this guidance upon its adoption in January
2010.
Also in January 2010, the FASB issued Accounting Standards
Update No. 2010-03, “Extractive Activities—Oil and Gas—Oil and Gas Reserve
Estimation and Disclosures.” This ASU amends the “Extractive Industries—Oil and
Gas” Topic of the Codification to align the oil and gas reserve estimation and
disclosure requirements in this Topic with the SEC’s Release No. 33-8995,
“Modernization of Oil and Gas Reporting Requirements (Final Rule),” discussed
below. The amendments are effective for annual reporting periods ending on or
after December 31, 2009, and the adoption of these provisions on December 31,
2009 did not have a material impact on our consolidated financial
statements.
SEC’s Final Rule on Oil and Gas Disclosure
Requirements
On December 31, 2008, the Securities and Exchange Commission,
referred to in this report as the SEC, issued Release No. 33-8995,
“Modernization of Oil and Gas Reporting Requirements (Final Rule),” which
revises the disclosures required by oil and gas companies. The SEC disclosure
requirements for oil and gas companies have been updated to include expanded
disclosure for oil and gas activities, and certain definitions have also been
changed that will impact the determination of oil and gas reserve quantities.
The provisions of this final rule are effective for registration statements
filed on or after January 1, 2010, and for annual reports for fiscal years
ending on or after December 31, 2009
In August 2009, the FASB issued ASU No. 2009-05, “Fair Value
Measurements and Disclosures (Topic 820) —Measuring Liabilities at Fair Value,”
related to fair value measurement of liabilities. This update provides
clarification that in circumstances in which a quoted price in an active market
for an identical liability is not available, a reporting entity is required to
measure fair value using one or more valuation techniques. This guidance is
effective for the first reporting period beginning after issuance.
In June 2009, the FASB issued guidance under ASC 105,
“Generally Accepted Accounting Principles.” This guidance established a new
hierarchy of GAAP sources for non-governmental entities under the FASB
Accounting Standards Codification. The Codification is the sole source for
authoritative U.S. GAAP and supersedes all accounting standards in U.S. GAAP,
except for those issued by the SEC. The guidance was effective for financial
statements issued for reporting periods ending after September 15, 2009. The
adoption had no impact on our company’s financial position, cash flows or
results of operations.
In May 2009, the FASB issued guidance under ASC 855 “Subsequent
Events,” which sets forth: (1) the period after the balance sheet date during
which management of reporting entity should evaluate events or transactions that
may occur for potential recognition or disclosure in the financial
statements, (2) the circumstances under which an entity should recognize events
or transactions occurring after the balance sheet date in its financial
statements and (3) the disclosures that an entity should make about events or
transactions that occurred after the balance sheet date. The guidance was
effective on a prospective basis for interim or annual financial periods ending
after June 15, 2009.
23
In April 2009, the FASB updated its guidance under ASC 820,
“Fair Value Measurements and Disclosures,” related to estimating fair value when
the volume and level of activity for an asset or liability have significantly
decreased and identifying circumstances that indicate a transaction is not
orderly. The guidance was effective for interim and annual reporting periods
ending after June 15, 2009 with early adoption permitted for periods ending
after March 15, 2009. The adoption of this guidance did not have any impact on
our company’s results of operations.
Also in April 2009, the FASB updated its guidance under ASC
825, “Financial Instruments,” which requires disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This guidance also requires those
disclosures in summarized financial information at interim reporting periods.
The guidance was effective for interim reporting periods ending after June 15,
2009 with early adoption permitted for periods ending after March 15, 2009.
The FASB updated its guidance under ASC 805, “Business
Combinations,” in April 2009, which addresses application issues on initial
recognition and measurement, subsequent measurement and accounting, and
disclosure of assets and liabilities arising from contingencies in a business
combination. This guidance was effective for business combinations occurring on
or after the beginning of the first annual period on or after December 15, 2008.
In June 2008, the FASB updated its guidance under ASC 260,
“Earnings Per Share.” This guidance clarified that all unvested share-based
payment awards with a right to receive nonforfeitable dividends are
participating securities and provides guidance on how to allocate earnings to
participating securities and compute basic earnings per share using the
two-class method. This guidance was effective for fiscal years beginning after
December 15, 2008. The Company adopted this guidance on January 1, 2009. The
adoption did not have a material impact on our company’s earnings per share
calculations.
In March 2008, the FASB issued guidance under ASC 815,
“Derivatives and Hedging,” which changes the disclosure requirements for
derivative instruments and hedging activities. Entities will be required to
provide enhanced disclosures about how and why an entity uses derivative
instruments, how derivative instruments and related hedged items are accounted
for, and how derivative instruments and related items affect an entity’s
financial position, operations and cash flows. This guidance was effective as of
the beginning of an entity’s fiscal year that begins after November 15, 2008.
The Company adopted this guidance on January 1, 2009.
Fair Value of Financial Instruments
The Company measures the fair value of its financial
instruments in accordance with ASC 820, “Fair Value Measurements and
Disclosures.” The guidance defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants. It is determined based on assumptions
that market participants would use in pricing an asset or liability. As a basis
for considering such assumptions, ASC 820 establishes the following hierarchy
that prioritizes the inputs to valuation methodologies used to measure fair
value:
Level 1 — Valuations based on quoted
prices for identical assets and liabilities in active markets.
Level 2 — Valuations based on
observable inputs other than quoted prices included in Level 1, such as quoted
prices for similar assets and liabilities in active markets, quoted prices for
identical or similar assets and liabilities in markets that are not active, or
other inputs that are observable or can be corroborated by observable market
data.
Level 3 — Valuations based on
unobservable inputs in which there are little or no market data, which require
the reporting entity to develop its own assumptions.
24
The Company measures the fair value of money market funds based
on quoted prices in active markets for identical assets or liabilities.
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk
As a “smaller reporting company”, we are not required to
provide the information required by this Item.
Item 8. Financial Statements and Supplementary Data
25
Financial Statements
Cheetah Oil & Gas Ltd.
December 31, 2009 & 2008
26
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and
Stockholders of Cheetah Oil
& Gas, Ltd.
Nanaimo, British Columbia, Canada
We have audited the accompanying balance sheets of Cheetah Oil
& Gas, Ltd. as of December 31, 2009 and 2008, and the related statements of
operations, stockholders’ equity (deficit), and cash flows for the years then
ended. Cheetah Oil & Gas, Ltd.’s management is responsible for these
financial statements. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that 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 Cheetah Oil
& Gas, Ltd. as of December 31, 2009 and 2008, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 2 to
the financial statements, the Company has generated revenues from operations but
has substantial accumulated deficit and working capital deficiency and this
raises substantial doubt about its ability to continue as a going concern.
Management’s plans in regard to these matters are also described in Note 2. The
2009 and 2008 financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Killman, Murrell & Company, P.C.
Killman, Murrell & Company, P.C.
Odessa, Texas
March 31, 2010
27
Cheetah Oil & Gas Ltd.
BALANCE SHEETS
(expressed in U.S. dollars)
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
164,006
|
|
|
1,538
|
|
|
Receivables
[note 4]
|
|
68,049
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
232,055
|
|
|
251,538
|
|
|
|
|
|
|
|
|
|
|
Oil & gas properties
[notes 3 & 15]
|
|
180,372
|
|
|
-
|
|
|
Equipment
[note 5]
|
|
1,673
|
|
|
2,091
|
|
|
TOTAL ASSETS
|
|
414,100
|
|
|
253,629
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
[note 8]
|
|
307,779
|
|
|
390,803
|
|
|
Accrued drilling costs
|
|
72,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
380,420
|
|
|
390,803
|
|
|
|
|
|
|
|
|
|
|
Long term drilling liability
|
|
10,800
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Asset retirement obligation
|
|
2,515
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
393,735
|
|
|
390,803
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par
value, authorized 100,000,000 shares
|
|
-
|
|
|
-
|
|
|
Common stock
[note 7]
|
|
|
|
|
|
|
Common stock, $0.001 par value, authorized
50,000,000 shares
issued and outstanding: 10,728,625
shares
[December 31, 2008 – 4,008,625 shares]
|
|
10,729
|
|
|
4,009
|
|
|
Additional paid in capital
|
|
16,105,757
|
|
|
15,711,850
|
|
|
Deficit
|
|
(16,096,121
|
)
|
|
(15,853,033
|
)
|
|
Total Stockholders' Equity (Deficit)
|
|
20,365
|
|
|
(137,174
|
)
|
|
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
|
|
414,100
|
|
|
253,629
|
|
See accompanying notes
28
Cheetah Oil & Gas Ltd.
STATEMENTS OF OPERATIONS
(expressed in U.S.
dollars)
|
|
|
Twelve months
|
|
|
Twelve months
|
|
|
|
|
ended
|
|
|
ended
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
$
|
|
|
$
|
|
|
Revenue
|
|
|
|
|
|
|
|
Natural oil & gas revenue
|
|
81,496
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
|
|
|
|
|
Natural oil & gas operating costs
|
|
39,343
|
|
|
-
|
|
|
Production Taxes
|
|
4,946
|
|
|
-
|
|
|
Depreciation, depletion and amortization
|
|
16,195
|
|
|
-
|
|
|
|
|
21,012
|
|
|
-
|
|
|
General and administrative expenses
|
|
|
|
|
|
|
|
Liquidated damages fees
|
|
-
|
|
|
(85,000
|
)
|
|
Accounting, audit and legal
|
|
76,651
|
|
|
114,216
|
|
|
Depreciation
|
|
418
|
|
|
523
|
|
|
Interest
|
|
50,530
|
|
|
22,320
|
|
|
Consulting fees
|
|
120,000
|
|
|
130,783
|
|
|
Office and miscellaneous
|
|
1,447
|
|
|
10,316
|
|
|
Investor relations and
shareholder information
|
|
5,753
|
|
|
5,400
|
|
|
Rental and communication
|
|
4,783
|
|
|
6,762
|
|
|
Stock-based compensation
|
|
34,667
|
|
|
85,833
|
|
|
Provisions for uncollectable funds
|
|
-
|
|
|
28,438
|
|
|
|
|
294,249
|
|
|
319,591
|
|
|
|
|
|
|
|
|
|
|
Loss before other income (expense)
|
|
(273,237
|
)
|
|
(319,591
|
)
|
|
Foreign exchange gain (loss)
|
|
(9,100
|
)
|
|
43,676
|
|
|
Unrealized gains (losses) on
warrants
|
|
-
|
|
|
13,000
|
|
|
Forgiveness of debt
|
|
39,249
|
|
|
-
|
|
|
Net loss from continuing operations
|
|
(243,088
|
)
|
|
(262,915
|
)
|
|
Discontinued operations
|
|
-
|
|
|
(1,354,753
|
)
|
|
Net Loss
|
|
(243,088
|
)
|
|
(1,617,668
|
)
|
|
Loss per share – basic and diluted
|
|
|
|
|
|
|
|
Loss from continuing
operations
|
$
|
(0.04
|
)
|
$
|
(0.06
|
)
|
|
Loss from discontinued operations
|
|
-
|
|
|
(0.35
|
)
|
|
Net Loss
|
$
|
(0.04
|
)
|
$
|
(0.41
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common stock
outstanding - basic and diluted
|
|
5,683,564
|
|
|
3,901,835
|
|
See accompanying notes
29
Cheetah Oil & Gas Ltd.
STATEMENTS OF CASH FLOWS
(expressed in U.S.
dollars)
|
|
|
Twelve
|
|
|
Twelve
|
|
|
|
|
months ended
|
|
|
months ended
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net loss for the period
|
|
(243,088
|
)
|
|
(1,617,668
|
)
|
|
Less loss from discontinued operations
|
|
-
|
|
|
1,354,753
|
|
|
Net loss from continuing operations
|
|
(243,088
|
)
|
|
(262,915
|
)
|
|
Adjustments to reconcile net loss to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
Depreciation & depletion
|
|
16,613
|
|
|
523
|
|
|
Debt foregiveness
|
|
(39,249
|
)
|
|
-
|
|
|
Unrealized gain on warrants
|
|
-
|
|
|
(13,000
|
)
|
|
Non-cash interest fees
|
|
43,460
|
|
|
8,000
|
|
|
Stock-based compensation
|
|
34,667
|
|
|
85,833
|
|
|
Accrued Interest paid in stock
|
|
5,875
|
|
|
|
|
|
Change in other assets and liabilities:
|
|
|
|
|
|
|
|
Prepaids and deposits
|
|
-
|
|
|
446
|
|
|
Accounts receivable
|
|
(5,549
|
)
|
|
19,343
|
|
|
Accounts payable and accrued drilling liabilities
|
|
171,468
|
|
|
(86,734
|
)
|
|
Cash provided by continuing
activities
|
|
(15,803
|
)
|
|
(248,504
|
)
|
|
Cash provided by (used in) discontinued activities
|
|
-
|
|
|
-
|
|
|
Net cash used in operating activities
|
|
(15,803
|
)
|
|
(248,504
|
)
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Proceeds on issuance of common shares, net
of share issuance costs
|
|
136,500
|
|
|
-
|
|
|
Proceeds on exercise of warrants
|
|
-
|
|
|
-
|
|
|
Net loan proceeds
|
|
53,125
|
|
|
242,181
|
|
|
Purchase of Cheetah shares for cancellation
|
|
(24,000
|
)
|
|
-
|
|
|
Cash provided by continuing activities
|
|
165,625
|
|
|
242,181
|
|
|
Cash provided by (used in) discontinued activities
|
|
-
|
|
|
-
|
|
|
Net cash from financing activities
|
|
165,625
|
|
|
242,181
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Proceeds from sale of Cheetah BC
|
|
187,500
|
|
|
|
|
|
Purchase of oil & gas properties
|
|
(174,854
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) continuing activities
|
|
12,646
|
|
|
-
|
|
|
Cash provided by (used in) discontinued
activities
|
|
-
|
|
|
-
|
|
|
Net cash used
in investing activities
|
|
12,646
|
|
|
-
|
|
|
Increase (decrease) in cash and cash
equivalents
|
|
162,468
|
|
|
(6,323
|
)
|
|
Cash and cash
equivalents, beginning of period
|
|
1,538
|
|
|
7,861
|
|
|
Cash and cash equivalents, end of period
|
|
164,006
|
|
|
1,538
|
|
See accompanying notes
30
Cheetah Oil & Gas Ltd.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(expressed
in U.S. dollars)
|
|
|
|
|
|
|
|
|
Additional paid
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
in capital
|
|
|
Deficit accumulated
|
|
|
Total
|
|
|
|
|
Shares
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Balance, December 31, 2007 as previously
reported
|
|
37,934,991
|
|
|
37,935
|
|
|
15,192,568
|
|
|
(14,235,365
|
)
|
|
995,138
|
|
|
Reverse stock
split - 10 for 1
|
|
(34,141,541
|
)
|
|
(34,141
|
)
|
|
34,141
|
|
|
-
|
|
|
-
|
|
|
Balance, December 31, 2007 as
restated
|
|
3,793,450
|
|
|
3,794
|
|
|
15,226,709
|
|
|
(14,235,365
|
)
|
|
995,138
|
|
|
Shares issued for loan fees
|
|
10,000
|
|
|
10
|
|
|
7,990
|
|
|
-
|
|
|
8,000
|
|
|
Shares issued for interest owing
|
|
119,675
|
|
|
120
|
|
|
323,003
|
|
|
-
|
|
|
323,123
|
|
|
Settled minority S/H of Scotia Petroleum
|
|
85,500
|
|
|
85
|
|
|
68,315
|
|
|
-
|
|
|
68,400
|
|
|
Stock-based compensation
|
|
-
|
|
|
-
|
|
|
85,833
|
|
|
-
|
|
|
85,833
|
|
|
Net loss for the
year
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,617,668
|
)
|
|
(1,617,668
|
)
|
|
Balance, December 31, 2008
|
|
4,008,625
|
|
|
4,009
|
|
|
15,711,850
|
|
|
(15,853,033
|
)
|
|
(137,174
|
)
|
|
Shares purchased and cancelled
|
|
(300,000
|
)
|
|
(300
|
)
|
|
(23,700
|
)
|
|
-
|
|
|
(24,000
|
)
|
|
Shares issued for debt owing directors
|
|
3,020,000
|
|
|
3,020
|
|
|
147,980
|
|
|
-
|
|
|
151,000
|
|
|
Issuance of common stock pursuant to a private placement at
$.05 per share
|
|
1,230,000
|
|
|
1,230
|
|
|
60,270
|
|
|
-
|
|
|
61,500
|
|
|
Issuance of common stock pursuant to a
private placement at $.047 per share
|
|
1,590,000
|
|
|
1,590
|
|
|
73,410
|
|
|
-
|
|
|
75,000
|
|
|
Debt settlement for demand loan payable and accrued
interest at $.05 per share
|
|
1,180,000
|
|
|
1,180
|
|
|
57,820
|
|
|
-
|
|
|
59,000
|
|
|
Value of 1,000,000 warrants granted for
interest
|
|
|
|
|
|
|
|
43,460
|
|
|
|
|
|
43,460
|
|
|
Stock-based compensation
|
|
-
|
|
|
-
|
|
|
34,667
|
|
|
-
|
|
|
34,667
|
|
|
Net loss for the year
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(243,088
|
)
|
|
(243,088
|
)
|
|
Balance, December 31, 2009
|
|
10,728,625
|
|
|
10,729
|
|
|
16,105,757
|
|
|
(16,096,121
|
)
|
|
20,365
|
|
See accompanying notes
31
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
1. INCORPORATION AND NATURE OF OPERATIONS
Cheetah Oil & Gas Ltd. (“Cheetah Nevada” or the “Company”)
was incorporated in May 1992 under the laws of the State of Nevada on May 5,
1992 under the name of “Bio-American Capital Corporation”. Effective May 26,
2004 the name was changed to Cheetah Oil & Gas Ltd.
On March 5, 2004, Cheetah Nevada entered into an Acquisition
Agreement (the “Agreement”), whereby Cheetah Nevada issued 25,000,000 common
stock in exchange for all of the issued and outstanding common stock of Cheetah
Oil & Gas (B.C.) Ltd. (“Cheetah BC”), a Canadian company. In connection with
this transaction, $130,000 debt owed by Cheetah Nevada was assumed and settled.
For accounting purposes, the share exchange was considered a reverse takeover
under applicable accounting rules, whereby Cheetah BC was considered the
acquiring entity as the shareholders of Cheetah BC acquired more than 50% of the
outstanding shares of Cheetah Nevada. Cheetah Nevada was the surviving entity
for legal purposes. The combined company is considered to be a continuation of
the operations of Cheetah BC.
Cheetah BC was incorporated on January 28, 2003 in British
Columbia, Canada under the name of Universal Data Corp. and changed its name to
Cheetah Oil & Gas Ltd. effective December 11, 2003. Cheetah BC, an
exploration stage enterprise, is in the business of acquiring and exploring oil
and gas properties in Papua New Guinea (“PNG”).
On July 20, 2007 the Company entered into a Share Subscription
Agreement (“Agreement”) with Kepis & Pobe Investments Inc. (“K&P”) and
its assigns. Under the terms of the agreement K&P had the right to acquire,
through the subscription for shares, a 90% interest in Cheetah BC, a wholly
owned subsidiary of the Company which through ownership of other subsidiaries
has title to the Company’s Petroleum Prospecting Licences and the Petroleum
Retention Licence.
On September 27, 2007 the Company entered into an amendment to
the Agreement, extending the closing of the agreement from October 2, 2007 to
November 30, 2007 and adding a price adjustment mechanism linked to increases in
the consolidated liabilities of Cheetah BC.
On November 30, 2007 the Company closed on the sale of 90%
interest in Cheetah BC, a wholly owned subsidiary of the Company which through
ownership of other subsidiaries had title to the Company’s Petroleum Prospecting
Licences and the Petroleum Retention Licence. The Company received a non-cash
consideration of $13,691,278. Effective December 1, 2007 the financial
statements of the Company ceased to be consolidated with those of Cheetah BC,
Cheetah BC’s wholly owned subsidiary Cheetah Oil & Gas (PNG) Ltd. (“Cheetah
PNG”) and Cheetah PNG’s 98.65% owned subsidiary Scotia Petroleum Inc.
(“Scotia”). Commencing December 1, 2007, the Company recorded its residual 10%
equity investment in Cheetah BC at a cost of $1,521,329.
On November 25, 2008 the Company entered into a share purchase
agreement with LNG Energy Ltd.(“LNG”) and LNG Energy (BC) Ltd.,(“LNG BC”
“formerly Cheetah BC’) wherein LNG agreed to purchase our remaining 10%
investment in LNG BC for the purchase price of $250,000.
Due to the implementation of British Columbia Instrument 51-509
on September 30, 2008 by the British Columbia Securities Commission, we have
been deemed to be a British Columbia based reporting issuer. As such, we are
required to file certain information and documents at
www.sedar.com
.
32
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
1. INCORPORATION AND NATURE OF OPERATIONS – cont’d
On March 4, 2009 the Company agreed to purchase 3,000,000
pre-reverse split shares of common stock from two former directors for an
aggregate price of US $24,000.
On April 3, 2009 the Company entered into an asset purchase
agreement with Delta Oil & Gas, Inc. and The Stallion Group where we agreed
to acquire an 8% interest in certain oil and gas interest located in the state
of Mississippi, known as the Belmont Lake Field for $179,309.
In addition to acquiring the 8% working interest, the Company
also acquired a 40% working interest on an option to drill wells on over 140,000
acres of exploration lands.
Effective August 15, 2009 the Company’s authorized, issued and
outstanding shares of common stock was consolidated on a ten (10) for one (1)
basis. As a result, effective August 15, 2009, our authorized capital decreased
from 500,000,000 shares of common stock with a par value of $0.001 to 50,000,000
shares of common stock with a par value of $0.001 and our issued and outstanding
shares decreased from 37,086,740 shares of common stock to 3,708,625 shares of
common stock. The consolidation became effective with the Over-the-Counter
Bulletin Board at the opening for trading on August 20, 2009 under the new
symbol “COHG”.
2. BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTY
The balance sheet presented is that of the Company for the year
ended December 31, 2009. The statements of operations, cash flows and
shareholders equity reflect the changes in stockholders equity (deficit), the
results of operations and the changes in cash flows of the Company for the year
ended December 31, 2009.
These accompanying financial statements have been prepared by
management, who is responsible for their content, in accordance with accounting
principles generally accepted in the United States of America. The Company has
generated revenue in the current year however it has accumulated substantial
losses, and require additional funds to maintain its operations. Management’s
plans in this regard are to raise equity and/or debt financing as required.
Going concern uncertainty
These financial statements have been prepared in accordance
with accounting principles generally accepted in the United States applicable to
a going concern, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of business.
The Company has incurred a net loss of $243,088 for the year ended December 31,
2009 [2008 - $1,617,668] and at December 31, 2009 had a deficit accumulated of
$16,096,121 [2008 – $15,853,033]. The Company has generated revenue, however has
an accumulated deficit and negative working capital of $148,365 as at December
31, 2009. The Company requires additional funds to maintain its existing
operations and to acquire new business assets. These conditions raise
substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans in this regard are to raise equity and debt financing as
required, but there is no certainty that such financing will be available or
that it will be available at acceptable terms. The outcome of these matters
cannot be predicted at this time.
33
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
2. BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTY
–
cont’d
Going concern uncertainty – cont’d
These financial statements do not include any adjustments to
reflect the future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that might result from the outcome
of this uncertainty.
3. SIGNIFICANT ACCOUNTING POLICIES
Accounting estimates
The preparation of financial statements in conformity with
generally accepted accounting principles of the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates and assumptions.
Cash and cash equivalents
Cash equivalents comprise certain highly liquid instruments
with a maturity of three months or less when purchased. As of December 31, 2009
cash and cash equivalents consist of cash only.
Oil and gas properties
The Company utilizes the full cost method to account for its
investment in oil and gas properties. Accordingly, all costs associated with
acquisition, exploration and development of oil and gas reserves, including such
costs as leasehold acquisition costs, capitalized interest costs relating to
unproved properties, geological expenditures, tangible and intangible
development costs including direct internal costs are capitalized to the full
cost pool. When the Company obtains proven oil and gas reserves, capitalized
costs, including estimated future costs to develop the reserves and estimated
abandonment costs, net of salvage, will be depleted on the units-of-production
method using estimates of proved reserves.
Investments in unproved properties are not depleted pending
determination of the existence of proved reserves. Unproved properties are
assessed periodically to ascertain whether impairment has occurred. Unproved
properties whose costs are individually significant are assessed individually by
considering the primary lease terms of the properties, the holding period of the
properties, and geographic and geologic data obtained relating to the
properties. Where it is not practicable to assess individually the amount of
impairment of properties for which costs are not individually significant, such
properties are grouped for purposes of assessing impairment. The amount of
impairment assessed is added to the costs to be amortized, or is reported as a
period expense, as appropriate.
Pursuant to full cost accounting rules, the Company must
perform a ceiling test periodically on its proved oil and gas assets. The
ceiling test provides that capitalized costs less related accumulated depletion
and deferred income taxes for each cost center may not exceed the sum of (1) the
present value of future net revenue from estimated production of proved oil and
gas reserves using current prices, excluding the future cash outflows associated
with settling asset retirement obligations that have been accrued on the balance
sheet, at a discount factor of 10%; plus (2) the cost of properties not being
amortized, if any; plus (3) the lower of cost or estimated fair value of
unproved properties included in the costs being amortized, if any; less (4)
income tax effects related to differences in the book and tax basis of oil and
gas properties. Should the net capitalized costs for a cost center exceed the
sum of the components noted above, an impairment charge would be recognized to
the extent of the excess capitalized costs.
34
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
3. SIGNIFICANT ACCOUNTING POLICIES –cont’d
Oil and gas properties – cont’d
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 the statement of operations.
Exploration activities conducted jointly with others are
reflected at the Company’s proportionate interest in such activities.
Cost related to site restoration programs are accrued over the
life of the project.
Capitalized Interest
The Company capitalizes interest (nil in 2009) on expenditures
made in connection with exploration and development projects that are not
subject to current amortization. Interest is capitalized only for the period
that activities are in progress to bring the projects to their intended use.
Equipment
Depreciation is based on the estimated useful lives of the
assets and is computed using the declining-balance method. Equipment is recorded
at cost. Depreciation is provided using the following rates:
Office furniture and equipment 15%
Leases
Leases are classified as capital or operating leases. Leases
which transfer substantially all benefits and risks incidental to ownership of
property are accounted for as capital leases. All other leases are accounted for
as operating leases and the related lease payments are charged to expense as
incurred.
35
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
3. SIGNIFICANT ACCOUNTING POLICIES –cont’d
Stock-based compensation
The Company adopted SFAS No. 123(revised) (ASC 718 and ASC
505), “Share-Based Payment”, to account for its stock options and similar equity
instruments issued. Accordingly, compensation costs attributable to stock
options or similar equity instruments granted are measured at the fair value at
the grant date, and expensed over the expected vesting period. SFAS No.
123(revised) (ASC 718 and ASC 505) requires excess tax benefits be reported as a
financing cash inflow rather than as a reduction of taxes paid.
Earnings (loss) per share
Basic earnings (loss) per share are computed using the weighted
average number of shares outstanding during the period. The treasury stock
method is used to determine the diluted effect of stock options and warrants.
Diluted loss per share is equal to the basic loss per share for the years ended
December 31, 2009 and 2008 because common stock equivalents consisting of stock
purchase warrants of 3,852,143 [2008 – 122,143 after dilution] and stock options
of 650,000 [2008 – 200,000 after dilution] that were outstanding at December 31,
2009 and 2008 were anti-dilutive.
Foreign currency translation
The Company uses the United States Dollar as its functional
currency. The Company accounts for foreign currency transactions in accordance
with SFAS No. 52, “Foreign Currency Translation” (ASC 830). Monetary assets and
liabilities denominated in foreign currencies are translated into United States
Dollars at the period-end exchange rates. Non-monetary assets and liabilities
are translated at the historical rates in effect when the assets were acquired
or obligations incurred. Transactions occurring during the period are translated
at rates in effect at the time of the transaction. The resulting foreign
exchange gains and losses are included in operations.
Fair value of financial instruments
SFAS No. 157 (ASC 820)
“Fair Value Measurements”
requires an entity to maximize the use of observable inputs and minimize the
use of unobservable inputs when measuring fair value. SFAS No. 157 (ASC 820)
establishes a fair value hierarchy based on the level of independent, objective
evidence surrounding the inputs used to measure fair value. A financial
instrument’s categorization within the fair value hierarchy is based upon the
lowest level of input that is significant to the fair value measurement. SFAS
No. 157 (ASC 820) prioritizes the inputs into three levels that may be used to
measure fair value:
Level 1 – Quoted prices in active markets for identical assets
or liabilities;
Level 2 – Inputs other than quoted prices included within
Level 1 that are either directly or indirectly observable; and
Level 3 –
Unobservable inputs that are supported by little or no market activity,
therefore requiring an entity to develop its own assumptions about the
assumptions that market participants would use in pricing.
36
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
3. SIGNIFICANT ACCOUNTING POLICIES –cont’d
Fair value of financial instruments – cont’d
The following table summarizes the fair value measurement of
stock options and warrants for the years ended December 31, 2009 and 2008:
|
|
|
Quoted Prices in
|
|
|
|
|
|
Significant
|
|
|
|
|
Active Markets for
|
|
|
Significant Other
|
|
|
Unobservable
|
|
|
|
|
Identical Assets
|
|
|
Observable Inputs
|
|
|
Inputs
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
$
|
-
|
|
$
|
34,667
|
|
$
|
-
|
|
|
Warrants
|
$
|
-
|
|
$
|
43,460
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
$
|
-
|
|
$
|
85,833
|
|
$
|
-
|
|
The Company’s financial instruments consist principally of cash
and cash equivalents, accounts receivable, accounts payable and accrued
liabilities and loan payable. Pursuant to SFAS No. 157 (ASC 820), the fair value
of our cash and cash equivalents is determined based on “Level 1” inputs, which
consist of quoted prices in active markets for identical assets. The Company
believes that the recorded values of all of the other financial instruments
approximate their current fair values because of their nature and respective
maturity dates or durations.
Management is of the opinion that the Company is not exposed to
significant interest or credit risks arising from these financial
instruments.
Income taxes
The Company has adopted statement of Financial Accounting
Standards 109 (SFAS 109 (ASC 740),
Accounting for Income Taxes,
which
requires the Company to recognize deferred tax liabilities and assets for the
expected future tax consequences of events that have been recognized in the
Company’s financial statements or tax returns using the liability method. Under
this method, deferred tax liabilities and assets are determined based on the
temporary differences between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect in the year in which the
differences are expected to reverse.
37
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
3. SIGNIFICANT ACCOUNTING POLICIES – cont’d
Long-Lived Assets Impairment
Long-term assets of the Company are reviewed for impairment
when circumstances indicate the carrying value may not be recoverable in
accordance with the guidance established in Statement of Financial Accounting
Standards No. 144 (SFAS 144) (ASC 360),
Accounting for the impairment or
Disposal of Long-Lived Assets
. For assets that are to be held and used, an
impairment loss is recognized when the estimated undiscounted cash flows
associated with the asset or group of assets is less than their carrying value.
If impairment exists, an adjustment is made to write the asset down to its fair
value. Fair values are determined based on discounted cash flows or internal and
external appraisals, as applicable. Assets to be disposed of are carried at the
lower of carrying value or estimated net realizable value.
Asset Retirement Obligations
The Company accounts for asset retirement obligations in
accordance with the provisions of SFAS 143 (ASC 410)
“Accounting for Asset
Retirement Obligations”
. SFAS 143 (ASC 410) requires the Company to record
the fair value of an asset retirement obligation as a liability in the period in
which it incurs a legal obligation associated with the retirement of tangible
long-lived assets that result from the acquisition, construction, development
and/or normal use of the assets. The Company has a $2,515 asset retirement
obligation as of December 31, 2009.
Concentration of Credit risk
The Company places its cash and cash equivalent with high
credit quality financial institution.
4. RECEIVABLES
|
|
|
December 31
,
|
|
|
December 31
,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
$
|
|
|
$
|
|
|
MacDonald Tuskey Law Firm
|
|
-
|
|
|
187,500
|
|
|
Revenue Canada
|
|
62,500
|
|
|
62,500
|
|
|
Oil and Gas Sales
|
|
5,549
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
68,049
|
|
|
250,000
|
|
38
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
5. EQUIPMENT
|
|
|
|
|
|
Accumulated
|
|
|
Net book
|
|
|
|
|
Cost
|
|
|
depreciation
|
|
|
value
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Office equipment
|
|
3,844
|
|
|
2,171
|
|
|
1,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Office equipment
|
|
3,844
|
|
|
1,753
|
|
|
2,091
|
|
6. NOTE PAYABLE
On April 2, 2009, the Company entered a loan agreement to
borrow CDN $55,000 for a period of one year at an eighteen (18%) interest rate
and agreed to issue the lender warrants to purchase 1,000,000 shares of the
Company’s common stock at an exercise price of US $0.10. The warrants expire on
April 2, 2011. The fair value of the warrants was determined using the
Black-Scholes-Merton (“Black-Scholes”) pricing model with the following
assumptions:
|
Estimated fair value
|
$
|
0.12
|
|
|
Expected life (years)
|
|
2
|
|
|
Risk free interest rate
|
|
0.25%
|
|
|
Volatility
|
|
485%
|
|
|
Dividend yield
|
|
-
|
|
The value of the warrants was limited to the amount of the loan
measured in United States dollars ($43,460 at April 2, 2009), since the value of
the warrants was treated as debt discount. The debt discount is amortized over
the life of the loan using the interest method.
On October 17, 2009 the Company settled the note payable
totaling US $53,125 and accrued interest totaling $5,875 for shares of the
Company. The total secured loan payable owing of US $59,000 was converted for
1,180,000 shares of common stock.
7. COMMON STOCK
Common Stock
On March 4, 2009 the Company agreed to purchase 300,000
(3,000,000 pre-reverse split) shares of common stock from two former directors
for an aggregate purchase price of US $24,000. Upon the closing of the Share
Purchase Agreement any amounts owing the two former directors that were accrued
and outstanding at March 4, 2009 were forgiven (aggregating $39,249).
39
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
7. COMMON STOCK
– cont’d
Common Stock
– cont’d
On July 15, 2009 the Company amended its Articles of
Incorporation to undertake a one (1) for ten (10) share consolidation of its
authorized and issued and outstanding common stock. As a result, the Company’s
authorized capital decreased from 500,000,000 shares of common stock with a par
value of $0.001 to 50,000,000 shares of common stock with a par value of $0.001
and it’s issued and outstanding shares decreased from 40,086,740 shares of
common stock to 4,008,625 shares of common stock. The consolidation became
effective with the Over-the-Counter Bulletin Board at the opening for trading on
August 20, 2009 under the new stock symbol “COHG”.
On August 10, 2009 the Company closed a private placement for
1,230,000 units at a unit price of $0.05 per unit for the net proceeds of
$61,500. Each unit is comprised of one restricted common share and one warrant
to purchase one additional share of common stock, exercisable until August 10,
2011. The exercise price of the warrants is $0.20. Assuming that all of the
warrants are exercised by the holders, the gross proceeds received by Cheetah
from the warrants will equal approximately $246,000.
On September 14, 2009 Cheetah reached a debt settlement with
two directors of our Company in the amount of $151,000 by issuing 3,020,000
shares at a price of $0.05 per share.
On October 17, 2009 the Company settled a note payable and
interest payable totaling $59,000 for 1,180,000 shares of the Company stock and
1,000,000 warrants at $0.10 exercisable until August 10, 2011.
On October 23, 2009 the Company closed on a private placement
for 1,500,000 units at a unit price of $0.047 per unit for the net proceeds of
$75,000. Each unit is comprised of one restricted common share and one warrant
to purchase one additional share of common stock, exercisable until October 23,
2011. The exercise price of the warrants is $0.20. Assuming that all of the
warrants are exercised by the holders, the gross proceeds received by Cheetah
from the warrants will equal approximately $300,000.
Stock Options
The Company has a stock option plan for its directors,
officers, employees and consultants. Under the terms of the 2005 and 2009 stock
option plans, options become exercisable immediately upon grant. All stock
options granted to date have been pursuant to separate agreements which override
the terms of the standard plan.
On July 15, 2009, the Company had a 10 for 1 share
consolidation. The 2,000,000 maximum granting of stock options have now been
reduced to 200,000 stock options.
On September 14, 2009 the Company granted 150,000 stock options
to a director of the Company with an exercise price of $0.10, vested immediately
and re-priced 200,000 of the previously issued stock options from $0.15 to
$0.10.
On November 27, 2009, the Company granted 300,000 stock options
to three (3) directors with exercise price of $0.10, vested immediate and
expiring on November 27, 2010.
40
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
7. COMMON STOCK
– cont’d
Stock Options
– cont’d
Effective January 1, 2006, the Company accounts for stock
options in accordance with revised Statement of Financial Accounting Standards
(SFAS) No. 123
, Share-Based Payment
(SFAS 123R) (ASC 718 and 505).
Accordingly, stock compensation expense has been recognized in the statement of
operations based on the grant date fair value of the options for the period
ended December 31, 2006 and thereafter.
Under SFAS 123(R) (ASC 718 and 505), the fair value of options
is estimated at the date of grant using a Black-Scholes-Meron (“Black-Scholes”)
option-pricing model, which requires the input of highly subjective assumptions
including the expected stock price volatility. Volatility is determined using
historical stock prices over a period consistent with the expected term of the
option. The Company utilize the guidelines of staff Accounting Bulletin No. 107
(SAB 107) of the Securities and Exchange Commission relative to “plain vanilla”
options in determining the expected term of option grants. SAB 107 permits the
expected term of “plain vanilla” options to be calculated as the average of the
option’s vesting term and contractual period.
The Company has used this method in determining the expected
term of all options. The Company had one 2008 award that provided for graded
vesting. The Company recognizes compensation cost for this award with graded
vesting on straight-line basis over the requisite service period for the entire
award. The amount of compensation expense recognized at any date is at least
equal to the portion of the grant date value of the award that is vested at that
date.
The 450,000 options issued to directors as compensation in 2009
were valued using the Black-Scholes model with the following assumptions:
|
Estimated fair value
|
$ 0.04 - $0.07
|
|
Expected life (years)
|
5
|
|
Risk free interest rate
|
0.25%
|
|
Volatility
|
485%
|
|
Dividend yield
|
-
|
The fair value of these options was $27,000 and the value of
the 2008 graded vesting options were $7,667. Total option based compensation for
directors for the years ended December 31, 2009 and 2008 was $34,667 and
$85,833, respectively.
A summary of the status of the Company’s stock option plan as
of December 31, 2009 and 2008 and changes during the years is presented
below:
41
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
7. COMMON STOCK
– cont’d
Stock Options
– cont’d
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
Number of
|
|
|
average
|
|
|
Number of
|
|
|
average
|
|
|
|
|
Shares
|
|
|
exercise price
|
|
|
Shares
|
|
|
exercise price
|
|
|
|
|
#
|
|
|
$
|
|
|
#
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of year
|
|
2,000,000
|
|
|
0.15
|
|
|
2,000,000
|
|
|
0.15
|
|
|
Outstanding at January 1, 2009 (after share reverse split)
|
|
200,000
|
|
|
0.15
|
|
|
-
|
|
|
-
|
|
|
Outstanding at January 1, 2009 (amended Sept 14, 2009)
|
|
-
|
|
|
(0.05
|
)
|
|
-
|
|
|
-
|
|
|
Outstanding, January 1, 2009 amended
|
|
200,000
|
|
|
0.10
|
|
|
2,000,000
|
|
|
0.15
|
|
|
Granted
|
|
450,000
|
|
|
0.10
|
|
|
-
|
|
|
-
|
|
|
Exercised
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Forfeited or cancelled
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Outstanding at
end of year
|
|
650,000
|
|
|
0.10
|
|
|
2,000,000
|
|
|
0.15
|
|
|
Exercisable
|
|
650,000
|
|
|
0.10
|
|
|
2,000,000
|
|
|
0.15
|
|
Warrants
The following summarizes the stock purchase warrant
transactions for the year ended December 31, 2009 and 2008.
|
|
|
Number of
|
|
|
Weighted average
|
|
|
|
|
warrants
|
|
|
exercise price
|
|
|
|
|
|
|
|
$
|
|
|
Outstanding, December 31, 2007
|
|
4,221,429
|
|
|
4.46
|
|
|
Warrants issued
|
|
-
|
|
|
-
|
|
|
Warrants exercised
|
|
-
|
|
|
-
|
|
|
Warrants
forfeited/expired/cancelled
|
|
(3,000,000
|
)
|
|
3.42
|
|
|
Outstanding, December 31, 2008
|
|
1,221,429
|
|
|
7.00
|
|
|
Warrants adjusted
for reverse split - 10 to 1
|
|
(1,000,000
|
)
|
|
|
|
|
Outstanding, December 31, 2008 (adjusted)
|
|
122,143
|
|
|
7.00
|
|
|
Warrants issued
|
|
2,730,000
|
|
|
0.20
|
|
|
Warrants issued
|
|
1,000,000
|
|
|
0.10
|
|
|
Warrants
forfeited/expired/cancelled
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2009
|
|
3,852,143
|
|
|
0.39
|
|
42
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
8. RELATED PARTY TRANSACTIONS
Related party transactions are measured at the exchange amount
which is the amount of consideration established and agreed to by the related
parties.
For the year ended December 31, 2009, the Company incurred
consulting fees for two directors of the Company in the amount of $120,000 [2008
- $129,112]. Of this balance $50,000 remained unpaid as at December 31, 2009 and
is included in accounts payable.
On August 31, 2009, the Company entered into a farm-out
agreement with a corporation, controlled by the Chief Executive Officer of the
Company. The Company was paid $45,000 by the corporation for its participation
in the Belmont Lake PPF-12-4 well.
9. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year:
|
|
|
|
|
|
|
|
Interest
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
Shares issued for settlement of Scotia Minority
shareholders
|
|
—
|
|
|
68,400
|
|
|
Debt and accrued interest settled for
shares
[notes 6 & 7]
|
|
210,000
|
|
|
323,123
|
|
|
Accounts Receivable/Accounts Payable
|
|
—
|
|
|
1,650,000
|
|
|
Investment in Cheetah Oil & Gas (B.C.)
Ltd.
|
|
—
|
|
|
1,521,329
|
|
|
Oil and gas property acquisition.
|
|
2,515
|
|
|
—
|
|
|
Settlement of debt
|
|
—
|
|
|
—
|
|
10. CONTINGENCIES
Cheetah has agreed to pay to a Consultant a Consultant’s fee
totaling $5,000 payable $500 monthly once Cheetah receives net revenue from the
PPF-12-4 horizontal well. It is unknown at this time when drilling will start on
the PPF12-4 horizontal well.
At December 31, 2009, the Company has executed agreements with
the operator of its oil and gas wells to spend an additional $151,139 on future
exploration and developments costs.
43
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
11. RECENT ACCOUNTING PRONOUNCEMENTS
The FASB established the
FASB Accounting Standards
Codification
(“Codification”) as the source of authoritative U.S. generally
accepted accounting principles (“GAAP”) recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements issued for
interim and annual periods ending after September 15, 2009. The codification has
changed the manner in which U.S. GAAP guidance is referenced, but did not have
an impact on our consolidated financial position, results of operations or cash
flows.
In January 2010, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update (“ASU”) 2010-06, “Fair Value
Measurements and Disclosures (Topic 820) — Improving Disclosures about Fair
Value Measurements.” This ASU requires some new disclosures and clarifies some
existing disclosure requirements about fair value measurement as set forth in
Accounting Standards Codification (“ASC”) 820. ASU 2010-06 amends ASC 820 to now
require: (1) a reporting entity should disclose separately the amounts of
significant transfers in and out of Level 1 and Level 2 fair value measurements
and describe the reasons for the transfers; and (2) in the reconciliation for
fair value measurements using significant unobservable inputs, a reporting
entity should present separately information about purchases, sales, issuances,
and settlements. In addition, ASU 2010-06 clarifies the requirements of existing
disclosures. ASU 2010-06 is effective for interim and annual reporting periods
beginning after December 15, 2009, except for the disclosures about purchases,
sales, issuances, and settlements in the roll forward of activity in Level 3
fair value measurements. Those disclosures are effective for fiscal years
beginning after December 15, 2010, and for interim periods within those fiscal
years. Early application is permitted. The Company will comply with the
additional disclosures required by this guidance upon its adoption in January
2010.
Also in January 2010, the FASB issued Accounting Standards
Update No. 2010-03, “Extractive Activities—Oil and Gas—Oil and Gas Reserve
Estimation and Disclosures.” This ASU amends the “Extractive Industries—Oil and
Gas” Topic of the Codification to align the oil and gas reserve estimation and
disclosure requirements in this Topic with the SEC’s Release No. 33-8995,
“Modernization of Oil and Gas Reporting Requirements (Final Rule),” discussed
below. The amendments are effective for annual reporting periods ending on or
after December 31, 2009, and the adoption of these provisions on December 31,
2009 did not have a material impact on our consolidated financial
statements.
SEC’s Final Rule on Oil and Gas Disclosure
Requirements
On December 31, 2008, the Securities and Exchange Commission,
referred to in this report as the SEC, issued Release No. 33-8995,
“Modernization of Oil and Gas Reporting Requirements (Final Rule),” which
revises the disclosures required by oil and gas companies. The SEC disclosure
requirements for oil and gas companies have been updated to include expanded
disclosure for oil and gas activities, and certain definitions have also been
changed that will impact the determination of oil and gas reserve quantities.
The provisions of this final rule are effective for registration statements
filed on or after January 1, 2010, and for annual reports for fiscal years
ending on or after December 31, 2009
44
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
11. RECENT ACCOUNTING PRONOUNCEMENTS – cont’d
In August 2009, the FASB issued ASU No. 2009-05, “Fair Value
Measurements and Disclosures (Topic 820) —Measuring Liabilities at Fair Value,”
related to fair value measurement of liabilities. This update provides
clarification that in circumstances in which a quoted price in an active market
for an identical liability is not available, a reporting entity is required to
measure fair value using one or more valuation techniques. This guidance is
effective for the first reporting period beginning after issuance.
In June 2009, the FASB issued guidance under ASC 105,
“Generally Accepted Accounting Principles.” This guidance established a new
hierarchy of GAAP sources for non-governmental entities under the FASB
Accounting Standards Codification. The Codification is the sole source for
authoritative U.S. GAAP and supersedes all accounting standards in U.S. GAAP,
except for those issued by the SEC. The guidance was effective for financial
statements issued for reporting periods ending after September 15, 2009. The
adoption had no impact on the Company’s financial position, cash flows or
results of operations.
In May 2009, the FASB issued guidance under ASC 855 “Subsequent
Events,” which sets forth: (1) the period after the balance sheet date during
which management of reporting entity should evaluate events or transactions that
may occur for potential recognition or disclosure in the financial statements,
(2) the circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial statements
and (3) the disclosures that an entity should make about events or transactions
that occurred after the balance sheet date. The guidance was effective on a
prospective basis for interim or annual financial periods ending after June 15,
2009.
In April 2009, the FASB updated its guidance under ASC 820,
“Fair Value Measurements and Disclosures,” related to estimating fair value when
the volume and level of activity for an asset or liability have significantly
decreased and identifying circumstances that indicate a transaction is not
orderly. The guidance was effective for interim and annual reporting periods
ending after June 15, 2009 with early adoption permitted for periods ending
after March 15, 2009. The adoption of this guidance did not have any impact on
the Company’s results of operations.
Also in April 2009, the FASB updated its guidance under ASC
825, “Financial Instruments,” which requires disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This guidance also requires those
disclosures in summarized financial information at interim reporting periods.
The guidance was effective for interim reporting periods ending after June 15,
2009 with early adoption permitted for periods ending after March 15, 2009.
The FASB updated its guidance under ASC 805, “Business
Combinations,” in April 2009, which addresses application issues on initial
recognition and measurement, subsequent measurement and accounting, and
disclosure of assets and liabilities arising from contingencies in a business
combination. This guidance was effective for business combinations occurring on
or after the beginning of the first annual period on or after December 15, 2008.
In June 2008, the FASB updated its guidance under ASC 260,
“Earnings Per Share.” This guidance clarified that all unvested share-based
payment awards with a right to receive nonforfeitable dividends are
participating securities and provides guidance on how to allocate earnings to
participating securities and compute basic earnings per share using the
two-class method. This guidance was effective for fiscal years beginning after
December 15, 2008. The Company adopted this guidance on January 1, 2009. The
adoption did not have a material impact on the Company’s earnings per share
calculations.
45
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
11. RECENT ACCOUNTING PRONOUNCEMENTS – cont’d
In March 2008, the FASB issued guidance under ASC 815,
“Derivatives and Hedging,” which changes the disclosure requirements for
derivative instruments and hedging activities. Entities will be required to
provide enhanced disclosures about how and why an entity uses derivative
instruments, how derivative instruments and related hedged items are accounted
for, and how derivative instruments and related items affect an entity’s
financial position, operations and cash flows. This guidance was effective as of
the beginning of an entity’s fiscal year that begins after November 15, 2008.
The Company adopted this guidance on January 1, 2009.
12. INCOME TAXES
The Company accounts for income taxes under FASB Statement No.
109, "
Accounting for Income Taxes
." (ASC 740) Deferred income tax assets
and liabilities are determined based upon differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
Income tax expense differs from the amount that would result
from applying the U.S federal and state income tax rates to earnings before
income taxes.
Pursuant to SFAS 109 (ASC 740), the potential benefit of net
operating loss carry forwards has not been recognized in the financial
statements since the Company cannot be assured that it is more likely than not
that such benefit will be utilized in future years.
The Company is subject to United States federal and state
income taxes at an approximate rate of 35%. The reconciliation of the provision
for income taxes at the United States federal statutory rate compared to the
Company’s income tax expense as reported is as follows:
|
|
Year Ended
|
|
Year Ended
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
2009
|
|
2008
|
|
|
|
$000
|
|
$000
|
|
|
|
|
|
|
|
|
Loss before discontinued operations
|
$ 243
|
|
$ 346
|
|
|
Income tax rate
|
35%
|
|
35%
|
|
|
Income tax recovery
|
85
|
|
92
|
|
|
Permanent differences
|
(28
|
)
|
(30
|
)
|
|
Valuation allowance change
|
(57
|
)
|
(62
|
)
|
|
Deferred income
tax (recovery)
|
—
|
|
—
|
|
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
46
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
12. INCOME TAXES – cont’d
Future income taxes arise from temporary differences in the
recognition of income and expenses for financial reporting and tax purposes. The
significant components of future income tax assets and liabilities at December
31 are as follows:
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
$
|
000
|
|
$
|
000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
2,714
|
|
|
2,660
|
|
|
Warrants
|
|
|
|
|
—
|
|
|
Stock based compensation
|
|
|
|
|
—
|
|
|
Other
|
|
83
|
|
|
80
|
|
|
Total deferred tax assets
|
|
2,797
|
|
|
2,740
|
|
|
Valuation
allowance
|
|
(2,797
|
)
|
|
(2,740
|
)
|
|
Net deferred tax assets
|
|
—
|
|
|
—
|
|
|
Deferred income
tax (liability)
|
|
—
|
|
|
—
|
|
The Company has recognized a valuation allowance for the
deferred tax assets for which it is more likely than not that the realization
will not occur. The valuation allowance is reviewed periodically. When
circumstance change and this causes a change in management's judgment about the
realizeability of deferred tax assets, the impact of the change on the valuation
allowance is generally reflected in current income.
The net operating loss carryforwards for income tax purposes
are approximately $7,755,000 and will begin to expire in 2024.
Pursuant to Section 382 of the Internal Revenue Code, use of
the Company’s net operating loss carryforwards may be limited if the Company
experiences a cumulative change in ownership of greater than 50% in a moving
three year period. Ownership changes could impact the Company’s ability to
utilize net operating losses and credit carryforwards remaining at the ownership
change date. The limitation will be determined by the fair market value of
common stock outstanding prior to the ownership change, multiplied by the
applicable federal rate. The Canadian non-capital loss carryforwards may also be
limited by a change in Company ownership.
Management has adopted FIN 48 effective January 1, 2007.
Management has determined that there is no material effect on the financial
statements as at and for the year ended December 31, 2009.
47
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed
in U.S. dollars)
December 31, 2009
13. SUBSEQUENT EVENTS
The Company continues to wait for acceptable ground conditions
at Belmont Lake, Mississippi in order to be able to drill the awaited PPF-12-4
horizontal well. Using data supplied by the US Army Corps of Engineers website,
the Mississippi river levels since early summer 2008, have been at times among
the highest recorded since consistent records were kept beginning in 1941. There
was not a sufficient interval during all of 2009 to safely access the Belmont
Lake site long enough to be able to drill the expected horizontal well. Our
operators require roughly 4-5 uninterrupted weeks of water levels below 34 feet
measured at Natchez, in order to be able to drill the new horizontal well. On
average since 1941 the river as measured at Natchez is below 34 feet for roughly
9 months each year.
Likewise, the Company requires about 10 days below 34 feet
water level to be able to access Belmont Lake in order to conduct normal well
maintenance and treatments, which also have not been possible recently due to
the high river water. As a result, current production is lower than its
potential until such maintenance can be performed.
In May 2009, the FASB issued SFAS No. 165, Subsequent Events
(“SFAS 165”). SFAS 165 establishes general standards of accounting for and
disclosure of events after the balance sheet date but before financial
statements are issued or are available to be issued. The adoption in the fourth
quarter of 2009 did not have any material impact on the Company’s financial
statements. Accordingly, the Company evaluated subsequent events through March
31, 2010, the date the financial statements were issued.
14. COMPARATIVE FIGURES
Certain comparative figures for 2008 have been reclassified to
conform with the financial statement presentation adopted for 2009.
15. OIL AND GAS PROPERTIES
On April 3, 2009 the Company entered into an asset purchase
agreement with Delta Oil & Gas, Inc. and The Stallion Group wherein the
Company agreed to acquire an 8% interest in certain oil and gas interest located
in the State of Mississippi, known as the Belmont Lake Field for a value of
$179,309. The Company is required to pay $400 per month for a period of 4 years
from the closing as part of the purchase price. The Belmont Lake field currently
has two producing wells.
In addition to acquiring the 8% working interest, the Company
also acquired a 40% working interest on an option to drill wells on over 140,000
acres of exploration lands. These lands have extensive existing 2-D and 3-D
seismic coverage and the project operations have identified multiple targets for
potential future drilling.
In August 2009 the operator of the Belmont Lake Field decided
to drill a new horizontal well named the Belmont Lake PPF-12-4 and Cheetah
received a notice that its share of the anticipated drilling and development
cost was $77,900. After the operator sent the notice of its intent to drill the
well, certain working interest owners declined the investment; therefore,
Cheetah was given the opportunity to purchase additional interest in the
proposed well in an amount equal to its original commitment.
48
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
15. OIL AND GAS PROPERTIES – cont’d
Cheetah’s management determined that it was in the best
interest for the Company to exercise their right to invest in the well. Cheetah
did not have sufficient cash for the entire investment totaling approximately
$155,800 and therefore, divided its proposed investment into two equal
parts:
-
On August 31, 2009 the Company entered into an assignment agreement with a
corporation. The assignment agreement provides for the purchase of a revenue
interest of 40.432% in one-half of Cheetah’s investment in the proposed well
for $45,000.
-
The corporation has agreed to pay 57.76% of Cheetah’s drilling and
completion costs to earn the 40.432%.
-
On August 31, 2009 the Company entered into an assignment agreement with an
individual. The assignment agreement provided for the purchase of a revenue
interest of 75% in one-half of its investment in the proposed well for $77,905
covering 100% of the current budgeted drilling and completion costs. As
consideration, the individual has agreed to pay 100% of Cheetah’s costs
subject to revision. This interest will revert back to the original owner once
a 500% payout has been achieved.
The full cost pool is depleted using the unit-of-production
method based on the estimated proved reserves. For the twelve-month period ended
December 31, 2009 the Company has recorded $16,195 as depletion costs.
49
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
16. SUPPLEMENTAL INFORMATION ON OIL & GAS
(Unaudited)
|
Capitalized Costs Relating to Oil and Gas
Producing Activities at December 31, 2009
|
|
|
|
|
Unproved oil and gas properties
|
|
|
|
|
Proved oil and gas properties
|
$
|
196,567
|
|
|
|
|
|
|
|
Less accumulated depreciation, depletion,
amortization, and impairment
|
|
16,195
|
|
|
|
|
|
|
|
Net
capitalized costs
|
$
|
180,372
|
|
|
|
|
|
|
|
Costs incurred in Oil and Gas Producing Activities
for the Year Ended December 31, 2009
|
|
|
|
|
Property acquisition costs
|
|
|
|
|
Proved
|
$
|
196,567
|
|
|
Unproved
|
|
–
|
|
|
Exploration costs
|
|
–
|
|
|
Development costs
|
|
–
|
|
|
Amortization rate per equivalent barrel of
production
|
$
|
12.20
|
|
|
|
|
|
|
|
Results of Operations for Oil and Gas
Producing
Activities for the Year Ended December 31, 2009
|
|
|
|
|
Oil and gas sales
|
$
|
81,496
|
|
|
Gain on sale of oil and gas properties
|
|
–
|
|
|
Loss on expiration of oil and gas leases
|
|
–
|
|
|
Production costs
|
|
(44,289
|
)
|
|
Depreciation, depletion and amortization
|
|
(16,195
|
)
|
|
|
|
21,012
|
|
|
|
|
|
|
|
Income tax expense
|
|
–
|
|
|
Results of operations for oil and gas producing activities
(excluding corporate overhead and financing costs)
|
$
|
21,012
|
|
Reserve Information
The estimates of proved oil and gas reserves utilized in the
preparation of the financial statements were prepared by independent petroleum
engineers. Such estimates are in accordance with guidelines established by the
SEC and the FASB. All of our reserves are located in the United States.
In 2009, the SEC issued its final rule on the modernization of
oil and gas reporting, and the FASB adopted conforming changes to ASC Topic 932,
“
Extractive Industries”
, to align the FASB’s reserves requirements with
those of the SEC. The final rule is now in effect for companies with fiscal
years ending on or after December 31, 2009.
50
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
NOTE 16 – SUPPLEMENTAL OIL AND GAS INFORMATION (Unaudited)
cont’d
As it affects our reserve estimates and disclosures, the final
rule:
-
amends the definition of proved reserves to require the use of average
commodity prices based upon the prior 12-month period rather than year-end
prices (Oil - $63.58 bbl; Gas – $3.86 mcf for year ended December 31, 2009);
-
expands the type of technologies available to establish reserve estimates
and categories;
-
modifies certain definitions used in estimating proved reserves;
-
permits disclosure of probable and possible reserves;
-
requires disclosure of internal controls over reserve estimations and the
qualifications of technical persons primarily responsible for the preparation
or audit of reserve estimates;
-
permits disclosure of reserves based on different price and cost criteria,
such as futures prices or management forecasts; and
-
requires disclosure of material changes in proved undeveloped reserves,
including a discussion of investments and progress made to convert proved
undeveloped reserves to proved developed reserves
We emphasize that reserve estimates are inherently imprecise.
Accordingly, the estimates are expected to change as more current information
becomes available. In addition, a portion of our proved reserves are classified
as proved developed nonproducing and proved undeveloped, which increases the
imprecision inherent in estimating reserves which may ultimately be
produced.
The following table sets forth estimated proved oil and gas
reserves together with the changes therein for the year ended December 31,
2009:
|
|
|
Oil
|
|
|
Gas
|
|
|
|
|
(bbls)
|
|
|
(mcf)
|
|
|
Proved developed and undeveloped reserves
|
|
|
|
|
|
|
|
Beginning
of year
|
|
–
|
|
|
–
|
|
|
Revisions of previous
estimates
|
|
–
|
|
|
–
|
|
|
Improved
recovery
|
|
–
|
|
|
–
|
|
|
Purchases of minerals in
place
|
|
17,830
|
|
|
7,374
|
|
|
Extensions and discoveries
|
|
–
|
|
|
–
|
|
|
Production
|
|
(1,210
|
)
|
|
(714
|
)
|
|
Sales
|
|
–
|
|
|
–
|
|
|
End of Year
|
|
16,620
|
|
|
6,660
|
|
|
|
|
|
|
|
|
|
|
Proved developed reserves
|
|
|
|
|
|
|
|
Beginning
of year
|
|
–
|
|
|
–
|
|
|
End of Year
|
|
6,920
|
|
|
6,660
|
|
51
Cheetah Oil & Gas Ltd.
NOTES TO FINANCIAL STATEMENTS DEFICIENCY
(expressed in
U.S. dollars)
December 31, 2009
NOTE 16 – SUPPLEMENTAL OIL AND GAS INFORMATION (Unaudited)
cont’d
|
Standardized measure of Discounted Future
|
|
|
|
|
|
|
|
|
|
Net Cash Flows at December 31, 2009
|
|
|
|
|
Future cash inflows
|
$
|
1,082,020
|
|
|
Future production costs
|
|
(293,855
|
)
|
|
Future development costs
|
|
(34,795
|
)
|
|
Future income tax expenses
|
|
–
|
|
|
|
|
753,370
|
|
|
|
|
|
|
|
Future net cash flows
|
|
|
|
|
10% annual discount for estimated timing of cash flows
|
|
(128,752
|
)
|
|
|
|
|
|
|
Standardized Measures of Discounted Future
|
|
|
|
|
Net Cash Flows Relating to Proved Oil and Gas
Reserves
|
$
|
624,618
|
|
|
|
|
|
|
|
|
|
|
|
|
The following reconciles the change in the standardized
measure of
discounted future net cash flow during
2009
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
$
|
–
|
|
|
Sales
of oil and gas produced, net
of
production costs
|
|
(37,207
|
)
|
|
Net
changes in prices and production costs
|
|
–
|
|
Extensions,
discoveries, and
improved
recovery, less related costs
|
|
–
|
|
Development
costs incurred during the
year
which were previously estimated
|
|
–
|
|
Net
change in estimated
future
development costs
|
|
–
|
|
|
Revisions
of previous quantity estimates
|
|
–
|
|
Net
change from purchases and sales
of
minerals in place
|
|
661,825
|
|
|
Accretion
of discount
|
|
–
|
|
|
Net
change in income taxes
|
|
–
|
|
|
Other
|
|
–
|
|
|
|
|
|
|
|
End of
year
|
$
|
624,618
|
|
52
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
There were no disagreements related to accounting principles or
practices, financial statement disclosure, internal controls or auditing scope
or procedure during the two fiscal years and interim periods, including the
interim period up through the date the relationship ended.
Item 9A. Controls and Procedures
Management’s Report on Disclosure Controls and
Procedures
We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our reports
filed under the
Securities Exchange Act of 1934
, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms, and that such information
is accumulated and communicated to our management, including our president and
chief executive officer (also our principal executive officer) and our chief
financial officer (also our principal financial and accounting officer) to allow
for timely decisions regarding required disclosure. In designing and evaluating
our disclosure controls and procedures, our management recognizes that any
controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives, and our
management is required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Because of its inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation. Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
As of December 31, 2009, the end of our fiscal year covered by
this report, we carried out an evaluation, under the supervision and with the
participation of our president and chief executive officer (also our principal
executive officer) and our chief financial officer (also our principal financial
and accounting officer), of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on the foregoing, our president and
chief executive officer (also our principal executive officer) and our chief
financial officer (also our principal financial and accounting officer)
concluded that our disclosure controls and procedures were effective as of the
end of the period covered by this annual report in providing reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance’s with US generally
accepted accounting principles.
Management’s Report on Internal Control over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Responsibility, estimates
and judgments by management are required to assess the expected benefits and
related costs of control procedures. The objectives of internal control include
providing management with reasonable, but not absolute, assurance that assets
are safeguarded against loss from unauthorized use or disposition, and that
transactions are executed in accordance with management’s authorization and
recorded properly to permit the preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United
States. Our management assessed the effectiveness of our internal control over
financial reporting as of December 31, 2009. In making this assessment, our
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) in
Internal
Control-Integrated Framework
. Our management has concluded that, as of
December 31, 2009, our internal control over financial reporting is effective.
Our management reviewed the results of their assessment with our Board of
Directors.
This annual report does not include an attestation report of
our company’s registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by our
company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit our company to provide only
management’s report in this annual report.
53
Inherent limitations on effectiveness of
controls
Internal control over financial reporting has inherent
limitations which include but is not limited to the use of independent
professionals for advice and guidance, interpretation of existing and/or
changing rules and principles, segregation of management duties, scale of
organization, and personnel factors. Internal control over financial reporting
is a process which involves human diligence and compliance and is subject to
lapses in judgment and breakdowns resulting from human failures. Internal
control over financial reporting also can be circumvented by collusion or
improper management override. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements on a
timely basis, however these inherent limitations are known features of the
financial reporting process and it is possible to design into the process
safeguards to reduce, though not eliminate, this risk. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation. Projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial
Reporting
There have been no changes in our internal controls over
financial reporting that occurred during the year ended December 31, 2009 that
have materially or are reasonably likely to materially affect, our internal
controls over financial reporting.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate
Governance
All directors of our company hold office until the next annual
meeting of the security holders or until their successors have been elected and
qualified. The officers of our company are appointed by our board of directors
and hold office until their death, resignation or removal from office. Our
directors and executive officers, their ages, positions held, and duration as
such, are as follows:
Name
|
Position Held
with the
Company
|
Age
|
Date First Elected or Appointed
|
|
Robert McAllister
|
President, Chief Executive Officer and Director
|
48
|
July 29, 2008
|
|
Georgina Martin
|
Secretary, Treasurer, Chief Financial Officer
and Director
|
61
|
March 5, 2004
|
|
Donald James Findlay
|
Director
|
58
|
October 19, 2009
|
Business Experience
The following is a brief account of the education and business
experience during at least the past five years of each director, executive
officer and key employee of our company, indicating the person’s principal
occupation during that period, and the name and principal business of the
organization in which such occupation and employment were carried out.
54
Robert McAllister – President, Chief Executive Officer and
Director
Mr. McAllister has been a corporate consultant since 2004. He
has also provided and written business and investment articles from 1996 to 2006
in various North American publications. Mr. McAllister is a resource investment
entrepreneur with over 20 years experience in resource sector evaluations and
commodity cycle analysis.
Mr. McAllister is the president and a director of Golden Aria
Corp.
Georgina Martin – Chief Financial Officer, Secretary,
Treasurer and Director
Ms. Martin has been in the private sector for over 35 years
starting in the insurance field and then soon changed for a brief period of time
to work in public practice.
Ms. Martin took a position with Mutual Life Insurance as an
underwriter assistant from 1965 to 1966. She then went to work for Regmil
Industries as a bookkeeper until 1971. From 1971 to 1975, she worked as an
assistant to the accountant for Westcoast Plywood. In 1975 Ms. Martin was hired
by Bartell Bros. Construction as an accountant. From 1978 to 1988, she was
employed by Brink Remanufacturing Industries Ltd. as a Comptroller, a lumber
remanufacturing company specializing in added value timber products. Ms. Martin
left Brink Remanufacturing Industries Ltd. in 1988 and joined the Jemi Group of
Companies and holds the position of Comptroller/Chief Financial Officer to the
present date, which is a group of private companies engaged in the logging and
land development industry. Ms. Martin is also a director of KOKO Petroleum Inc.,
having been appointed on October 21, 2004.
In 1986 Ms. Martin obtained her designation as a Certified
General Accountant with a focus on finance. In 1988 Ms. Martin and a business
partner incorporated a private corporation. This served as a base towards her
comptrollership of the many companies that followed over the next 16 years.
KOKO Petroleum Inc. is a company engaged in exploration and
drilling for oil and natural gas in the State of Texas. We do not view the
affiliation of Ms. Martin to KOKO Petroleum Inc. as creating any potential for
conflicts of interest with our company.
Donald James Findlay –Director
Mr. Findlay received his MSc Geology from the University of
Manitoba in 1978 and has nearly 30 yrs of experience in Western Canada. Over the
past 20 years Mr. Findlay has worked on plays from extending known oil pools to
the development of regional plays and new concepts. In 2005 he completed a
regional Bakken study in Saskatchewan Canada which led to the successful
drilling of a Bakken well in 2005.
Mr. Findlay is experienced in all aspects of oil & gas
exploration from mapping programs, log interpretation, drill stem testing,
seismic and integrating engineering data into geologic models.
Family Relationships
There are no family relationships between any of our directors,
executive officers and proposed directors or executive officers.
Involvement in Certain Legal Proceedings
None of our directors, executive officers, promoters or control
persons has been involved in any of the following events during the past five
years:
|
1.
|
any bankruptcy petition filed by or against any business
of which such person was a general partner or executive officer either at
the time of the bankruptcy or within two years prior to that
time;
|
55
|
2.
|
any conviction in a criminal proceeding or being subject
to a pending criminal proceeding, excluding traffic violations and other
minor offences;
|
|
|
|
|
3.
|
being subject to any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business, securities or
banking activities; or
|
|
|
|
|
4.
|
being found by a court of competent jurisdiction in a
civil action, the Securities and Exchange Commission or the Commodity
Futures Trading Commission to have violated federal or state securities or
commodities law, and the judgment has not been reversed, suspended, or
vacated.
|
Compliance with Section 16(a) of the Securities Exchange Act
of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
our executive officers and directors and persons who own more than 10% of our
common stock to file with the Securities and Exchange Commission initial
statements of beneficial ownership, reports of changes in ownership and annual
reports concerning their ownership of our common stock and other equity
securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and
greater than 10% shareholders are required by the SEC regulations to furnish us
with copies of all Section 16(a) reports that they file.
Based solely on our review of the copies of such forms received
by us, or written representations from certain reporting persons, we believe
that during fiscal year ended December 31, 2009, all filing requirements
applicable to our officers, directors and greater than 10% percent beneficial
owners were complied with, with the exception of the following:
Name
|
Number of Late
Reports
|
Number of
Transactions
Not Reported on
a Timely Basis
|
Failure to File
Required
Forms
|
|
Robert McAllister
|
3
(1)
|
3
(1)
|
Nil
|
|
Georgina Martin
|
1
(1)
|
1
|
Nil
|
|
1.
|
The executive officer, director or holder of 10% or more
of our common stock filed a late Form 4 – Statement of Changes in
Beneficial Ownership of Securities.
|
Code of Ethics
Effective April 6, 2005, our company’s Board of Directors
adopted a Code of Business Conduct and Ethics that applies to, among other
persons, our company’s President, Chief Executive Officer and Chief Financial
Officer (being our principal executive officer, principal financial officer and
principal accounting officer) and Secretary, as well as persons performing
similar functions. As adopted, our Code of Business Conduct and Ethics sets
forth written standards that are designed to deter wrongdoing and to
promote:
|
1.
|
honest and ethical conduct, including the ethical
handling of actual or apparent conflicts of interest between personal and
professional relationships;
|
|
|
|
|
2.
|
full, fair, accurate, timely, and understandable
disclosure in reports and documents that we file with, or submit to, the
Securities and Exchange Commission and in other public communications made
by us;
|
|
|
|
|
3.
|
compliance with applicable governmental laws, rules and
regulations;
|
56
|
4.
|
the prompt internal reporting of violations of the Code
of Business Conduct and Ethics to an appropriate person or persons
identified in the Code of Business Conduct and Ethics; and
|
|
|
|
|
5.
|
accountability for adherence to the Code of Business
Conduct and Ethics.
|
Our Code of Business Conduct and Ethics requires, among other
things, that all of our company’s senior officers commit to timely, accurate and
consistent disclosure of information; that they maintain confidential
information; and that they act with honesty and integrity.
In addition, our Code of Business Conduct and Ethics emphasizes
that all employees, and particularly senior officers, have a responsibility for
maintaining financial integrity within our company, consistent with generally
accepted accounting principles, and federal and state securities laws. Any
senior officer, who becomes aware of any incidents involving financial or
accounting manipulation or other irregularities, whether by witnessing the
incident or being told of it, must report it to our company. Any failure to
report such inappropriate or irregular conduct of others is to be treated as a
severe disciplinary matter. It is against our company policy to retaliate
against any individual who reports in good faith the violation or potential
violation of our company’s Code of Business Conduct and Ethics by another.
Our Code of Business Conduct and Ethics was filed with the
Securities and Exchange Commission on April 8, 2005 as Exhibit 14.1 to our
annual report. We will provide a copy of the Code of Business Conduct and Ethics
to any person without charge, upon request. Requests can be sent to: Cheetah Oil
& Gas Ltd., 17 Victoria Road, Nanaimo, British Columbia, Canada V9R 4N9.
Board and Committee Meetings
Our board of directors held no formal meetings during the year
ended December 31, 2009. All proceedings of the board of directors were
conducted by resolutions consented to in writing by all the directors and filed
with the minutes of the proceedings of the directors. Such resolutions consented
to in writing by the directors entitled to vote on that resolution at a meeting
of the directors are, according to the Nevada General Corporate Law and our
Bylaws, as valid and effective as if they had been passed at a meeting of the
directors duly called and held.
For the year ended December 31, 2009 our only standing
committee of the board of directors was our audit committee.
Nomination Process
As of December 31, 2009, we did not effect any material changes
to the procedures by which our shareholders may recommend nominees to our board
of directors. Our board of directors does not have a policy with regards to the
consideration of any director candidates recommended by our shareholders. Our
board of directors has determined that it is in the best position to evaluate
our company’s requirements as well as the qualifications of each candidate when
the board considers a nominee for a position on our board of directors. If
shareholders wish to recommend candidates directly to our board, they may do so
by sending communications to the president of our company at the address on the
cover of this annual report.
Audit Committee
Currently our audit committee consists of our entire board of
directors. We currently do not have nominating, compensation committees or
committees performing similar functions. There has not been any defined policy
or procedure requirements for shareholders to submit recommendations or
nomination for directors.
During fiscal 2009, aside from quarterly review
teleconferences, there were no meetings held by this committee. The business of
the audit committee was conducted though these teleconferences and by
resolutions consented to in writing by all the members and filed with the
minutes of the proceedings of the audit committee.
57
Audit Committee Financial Expert
Our board of directors has determined that it does have a
member of its audit committee that qualifies as an “audit committee financial
expert” as defined in Item 407(d)(5)(ii) of Regulation S-K.
Item 11. Executive Compensation
The particulars of the compensation paid to the following
persons:
|
|
(a)
|
our principal executive officer;
|
|
|
|
|
|
|
(b)
|
each of our two most highly compensated executive
officers who were serving as executive officers at the end of the years
ended December 31, 2009 and 2008; and
|
|
|
|
|
|
|
(c)
|
up to two additional individuals for whom disclosure
would have been provided under (b) but for the fact that the individual
was not serving as our executive officer at the end of the years ended
December 31, 2009 and 2008,
|
who we will collectively refer to as the named executive
officers of our company, are set out in the following summary compensation
table, except that no disclosure is provided for any named executive officer,
other than our principal executive officers, whose total compensation did not
exceed $100,000 for the respective fiscal year:
Name
and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
Robert McAllister
(1)
President, Chief
Executive Officer and
Director
|
2009
2008
|
60,000
30,000
|
Nil
Nil
|
Nil
Nil
|
14,667
85,833
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
74,667
115,833
|
Georgina Martin
(2)
Chief Financial
Officer, Secretary,
Treasurer and
Director
|
2009
2008
|
60,000
66,068
|
Nil
Nil
|
Nil
Nil
|
13,000
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
73,000
66,068
|
Ian McKinnon
(3)
Former Chairman and
Director; Former
President, Chief
Executive Officer and
Director
|
2009
2008
|
N/A
Nil
|
N/A
Nil
|
N/A
Nil
|
N/A
Nil
|
N/A
Nil
|
N/A
Nil
|
N/A
Nil
|
N/A
Nil
|
Isaac Moss
(4)
President, Chief
Executive
Officer and
Chief Financial
Officer; Former
Senior Vice
President
|
2009
2008
|
N/A
33,044
|
N/A
Nil
|
N/A
Nil
|
N/A
Nil
|
N/A
Nil
|
N/A
Nil
|
N/A
Nil
|
N/A
33,044
|
|
(1)
|
Mr. McAllister was appointed as the President Chief
Executive Officer and director of our company on July 29, 2008.Mr.
McKinnon became our Chairman and a director of our company on October 16,
2006.
|
|
|
|
|
(2)
|
Ms. Martin became our Secretary, Treasurer and a director
of our company on March 5, 2004 and was appointed as our Chief Financial
Officer on July 29, 2008.
|
58
|
(3)
|
Mr. McKinnon was our President and Chief Executive
Officer from October 16, 2006 to February 5, 2008. Mr. McKinnon resigned
as our Chairman and director on July 29, 2008.
|
|
|
|
|
(4)
|
Mr. Moss became our Chief Financial Officer of our
company on October 30, 2006 and our President and Chief Executive Officer
on February 5, 2008. Mr. Moss was our Senior Vice President from October
30, 2006 to February 5, 2008. Mr. Moss resigned as our President, Chief
Financial Officer and director on July 29, 2008.
|
On July 31, 2008, we entered into a consulting agreement with
Robert McAllister, our president, chief executive officer and director. We pay
remuneration for his services at five thousand United States Dollars (US$5,000)
per month beginning August 1, 2008, together with any such increments thereto as
the Board of Directors of our company determine after six months from signing.
We also agreed to grant a stock option package of two million options
(2,000,000) exercisable at 15 cents per share and valid for five (5 yrs),
vesting at 500,000 upon signing of the agreement; 500,000 – 90 days after
signing the agreement; and 1,000,000 – 180 days after signing the agreement.
On July 15, 2009 our company had a 10 for 1 share
consolidation. The 2,000,000 options granted to a director was reduced to
200,000 options. On September 14, 2009 our company re-priced the 200,000 options
previously issued at $0.15 to $0.10.
On September 14, 2009 our company granted 150,000 stock options
to Georgina Martin vesting immediately at an exercise price of $0.10.
On November 27, 2009 our company granted 100,000 stock options
each to Robert McAllister, Georgina Martin and Donald Findlay vesting
immediately at an exercise price of $0.10.
2009 Grants of Plan-Based Awards
The following table provides information about equity and
non-equity awards granted to the named executives in 2009
59
|
GRANTS OF
PLAN-BASED AWARDS
|
Name
|
Grant
Date
|
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
|
Estimated Future Payouts
Under Equity Incentive Plan
Awards
|
All
Other
Stock
Awards:
Number
of
Shares
of
Stocks
or Units
(#)
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
|
Exercise
or
Base
Price of
Option
Awards
($/Sh)
|
Grant
Date
Fair
Value
of
Stock
and
Option
Awards
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Georgina Martin
Chief Financial Officer, Secretary,
Treasurer and Director
|
Sept 14
Nov 27
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
150,000
100,000
|
$0.10
$0.10
|
Nil
|
Robert McAllister
President, Chief Executive Officer
and Director
|
Nov 27
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
100,000
|
$0.10
|
|
Outstanding Equity Awards at Fiscal Year End
The particulars of unexercised options, stock that has not
vested and equity incentive plan awards for our named executive officers are set
out in the following table:
|
|
Options Awards
|
Stock Awards
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
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
($)
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
($)
|
Georgina Martin
Chief Financial Officer, Secretary,
Treasurer and Director
|
250,000
|
Nil
|
Nil
|
$0.10
|
2014
|
Nil
|
Nil
|
Nil
|
Nil
|
60
|
|
Options Awards
|
Stock Awards
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
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
($)
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
($)
|
|
Robert McAllister President, Chief Executive Officer and
Director
|
200,000(1)
100,000
|
Nil
|
Nil
|
$0.10
|
2013
2014
|
Nil
|
Nil
|
Nil
|
Nil
|
(1) This number represents a post consolidation amount
Option Exercises
During our Fiscal year ended December 31, 2009, there were no
options exercised by our named officers.
Compensation of Directors
We do not have any agreements for compensating our directors
for their services in their capacity as directors, although such directors are
expected in the future to receive stock options to purchase shares of our common
stock as awarded by our board of directors.
The following table sets forth a summary of the compensation
paid to our non-employee directors in 2009:
|
DIRECTOR COMPENSATION
|
Name
|
Fees
Earned or
Paid in
Cash
($)
|
Stock
Awards
($)
|
Option
Awards
(#)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|
Donald James Findlay
|
Nil
|
Nil
|
100,000
|
Nil
|
Nil
|
Nil
|
Nil
|
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers. We have no
material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to our directors or executive officers, except
that stock options may be granted at the discretion of the board of directors or
a committee thereof.
61
Indebtedness of Directors, Senior Officers, Executive
Officers and Other Management
None of our directors or executive officers or any associate or
affiliate of our company during the last two fiscal years is or has been
indebted to our company by way of guarantee, support agreement, letter of credit
or other similar agreement or understanding currently outstanding.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
The following table sets forth, as of March 19, 2010, certain
information with respect to the beneficial ownership of our common shares by
each shareholder known by us to be the beneficial owner of more than 5% of our
common shares, as well as by each of our current directors and executive
officers as a group. Each person has sole voting and investment power with
respect to the shares of common stock, except as otherwise indicated. Beneficial
ownership consists of a direct interest in the shares of common stock, except as
otherwise indicated. Numbers below are after post consolidation of 1 for 10.
Name and Address of Beneficial Owner
|
Amount and Nature of
Beneficial Ownership
|
Percentage
of
Class
(1)
|
Georgina Martin
(3)
Box 172, Station A
Nanaimo, BC V9R 5K9
|
154,727
|
1%
|
Robert McAllister
(3)
483 Holbrook Rd E.
Kelowna, BC V1X 7H9
|
1,304,930
|
12%
|
Donald James Findlay
(3)
#2700 500 4th Avenue
SW
Calgary, Alberta T2P 2V6
|
400,000
|
4%
|
|
Directors and Executive Officers as a
Group
(1)
|
1,859,657 Common Shares
|
17%
|
|
(1)
|
Under Rule 13d-3, a beneficial owner of a security
includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship, or otherwise has or shares: (i)
voting power, which includes the power to vote, or to direct the voting of
shares; and (ii) investment power, which includes the power to dispose or
direct the disposition of shares. Certain shares may be deemed to be
beneficially owned by more than one person (if, for example, persons share
the power to vote or the power to dispose of the shares). In addition,
shares are deemed to be beneficially owned by a person if the person has
the right to acquire the shares (for example, upon exercise of an option)
within 60 days of the date as of which the information is provided. In
computing the percentage ownership of any person, the amount of shares
outstanding is deemed to include the amount of shares beneficially owned
by such person (and only such person) by reason of these acquisition
rights. As a result, the percentage of outstanding shares of any person as
shown in this table does not necessarily reflect the person’s actual
ownership or voting power with respect to the number of shares of common
stock actually outstanding on March 19, 2010. As of March 19, 2010, there
were 10,728,674 shares of our company’s common stock issued and
outstanding.
|
|
|
(2)
|
Mr. McAllister holds 300,000 stock options, 1,304,930
shares and 100,000 warrants.
|
|
|
|
|
|
|
(3)
|
Ms. Martin holds 250,000 stock options and 154,727 common
shares.
|
|
|
|
|
|
|
(4)
|
Mr. Findlay holds 100,000 stock options, 400,000 common
shares and 400,000 warrants.
|
Changes in Control
We are unaware of any contract or other arrangement the
operation of which may at a subsequent date result in a change in control of our
company.
62
Item 13. Certain Relationships and Related Transactions, and
Director Independence
Except as disclosed herein, no director, executive officer,
shareholder holding at least 5% of shares of our common stock, or any family
member thereof, had any material interest, direct or indirect, in any
transaction, or proposed transaction since the year ended December 31, 2009, in
which the amount involved in the transaction exceeded or exceeds the lesser of
$120,000 or one percent of the average of our total assets at the year-end for
the last three completed fiscal years.
Director Independence
We currently act with three (3) directors, consisting of Robert
McAllister, Georgina Martin and Donald James Findlay. We have determined that
none of our directors is an “independent director” as defined in NASDAQ
Marketplace Rule 4200(a)(15).
Currently our audit committee consists of our entire board of
directors. We currently do not have nominating, compensation committees or
committees performing similar functions. There has not been any defined policy
or procedure requirements for shareholders to submit recommendations or
nomination for directors.
Our board of directors has determined that it does not have a
member of its audit committee who qualifies as an “audit committee financial
expert” as defined in as defined in Item 407(d)(5)(ii) of Regulation S-K.
From inception to present date, we believe that the members of
our audit committee and the board of directors have been and are collectively
capable of analyzing and evaluating our financial statements and understanding
internal controls and procedures for financial reporting.
Item 14. Principal Accounting Fees and Services
The aggregate fees billed for the most recently completed
fiscal year ended December 31, 2009 and for fiscal year ended December 31, 2008
for professional services rendered by the principal accountant for the audit of
our annual financial statements and review of the financial statements included
in our quarterly reports on Form 10-Q and services that are normally provided by
the accountant in connection with statutory and regulatory filings or
engagements for these fiscal periods were as follows:
|
|
Year Ended
|
|
|
December 31, 2009
$
|
December 31, 2008
$
|
|
Audit Fees
|
31,555
|
20,484
|
|
Audit Related Fees
|
Nil
|
17,047
|
|
Tax Fees
|
Nil
|
8,907
|
|
All Other Fees
|
15,887
|
28,292
|
|
Total
|
47,442
|
74,730
|
Effective May 6, 2003, the Securities and Exchange Commission
adopted rules that require that before our independent auditors are engaged by
us to render any auditing or permitted non-audit related service, the engagement
be:
-
approved by our audit committee (which consists of our entire board of
directors); or
-
entered into pursuant to pre-approval policies and procedures established
by the board of directors, provided the policies and procedures are detailed
as to the particular service, the board of directors is informed of each service, and such policies and procedures do
not include delegation of the board of directors' responsibilities to
management.
63
Our board of directors pre-approves all services provided by
our independent auditors. All of the above services and fees were reviewed and
approved by the board of directors either before or after the respective
services were rendered.
Our board of directors has considered the nature and amount of
fees billed by our independent auditors and believes that the provision of
services for activities unrelated to the audit is compatible with maintaining
our independent auditors’ independence.
PART IV
Item 15. Exhibits, Financial Statement Schedules
|
(a)
|
Financial Statements
|
|
|
|
|
|
|
(1)
|
Financial statements for our company are listed in the
index under Item 8 of this document
|
|
|
|
|
|
|
(2)
|
All financial statement schedules are omitted because
they are not applicable, not material or the required information is shown
in the financial statements or notes thereto.
|
|
|
|
|
|
(b)
|
Exhibits
|
|
Exhibit
|
|
|
Number
|
Description
|
|
(3)
|
(i) Articles of
Incorporation; and (ii) Bylaws
|
|
3.1
|
Articles of Incorporation (incorporated by reference from
our Form 10-SB filed on August 2, 1999)
|
|
3.2
|
Certificate of Amendment (incorporated by reference from
our Form 10-SB filed on August 2, 1999)
|
|
3.3
|
Certificate of Amendment dated February 19, 2004
(incorporated by reference from our Registration Statement on Form SB-2/A
filed on August 15, 2005)
|
|
3.4
|
Certificate of Amendment dated May 25, 2004 (incorporated
by reference from our Registration Statement on Form SB-2/A filed on
August 15, 2005)
|
|
3.5
|
Bylaws (incorporated by reference from our Form 10-SB
filed on August 2, 1999)
|
|
3.6
|
Certificate of Change(incorporated by reference from our
Current Report on Form 8-K filed on August 19, 2009)
|
|
3.7
|
Certificate of Correction (incorporated by reference from
our Current Report on Form 8-K filed on August 19, 2009)
|
|
(4)
|
Instruments Defining the Rights of Security
Holders
|
|
4.1
|
2004 Equity Performance Plan (incorporated by reference
from our Registration Statement on Form S-8 filed on February 25, 2004)
|
|
4.2
|
2005 Stock Option Plan (incorporated by reference from
our Registration Statement on Form S-8 filed on June 10, 2005)
|
64
|
Exhibit
|
|
|
Number
|
Description
|
|
(10)
|
Material Contracts
|
|
10.1
|
Acquisition Agreement with Georgina Martin dated March 5,
2004 (incorporated by reference from our Current Report on Form 8-K filed
on March 18, 2004)
|
|
10.2
|
Letter Agreement dated May 23, 2007 (incorporated by
reference from our Current Report on Form 8-K filed on May 31, 2007)
|
|
10.3
|
Unanimous Shareholders’ Agreement with an effective date
of November 22, 2007 (incorporated by reference from our Current Report on
Form 8-K filed on November 27, 2007)
|
|
10.4
|
Loan Agreement dated March 12, 2008 with Invicta Oil
& Gas Ltd. (incorporated by reference from our Current Report on Form
8-K filed on March 20, 2008)
|
|
10.5
|
Mutual Release (incorporated by reference from our
Current Report on Form 8-K filed on July 15, 2008)
|
|
10.6
|
Share Purchase Agreement dated November 25, 2008
(incorporated by reference from our Current Report on Form 8-K filed on
December 4, 2008)
|
|
10.7
|
Warrant Cancellation Agreement dated November 28, 2008
(incorporated by reference from our Current Report on Form 8-K filed on
December 4, 2008)
|
|
10.8
|
Assignment Agreement dated August 28, 2009 with Golden
Aria Corp. (incorporated by reference from our Current Report on Form 8-K
filed on August 4, 2009)
|
|
10.9
|
Assignment Agreement dated August 28, 2009 with David
DeMartini (incorporated by reference from our Current Report on Form 8-K
filed on August 4, 2009)
|
|
10.10
|
Partial Release and Acknowledgement Agreement dated
August 29, 2009 with Sage Investments Ltd. incorporated by reference from
our Current Report on Form 8-K filed on September 4, 2009)
|
|
10.11
|
Subscription Agreement - Debt Settlement with RGM
Holdings Ltd. (incorporated by reference from our Current Report on Form
8-K filed on September 16, 2009)
|
|
10.12
|
Subscription Agreement - Debt Settlement with Robert
McAllister (incorporated by reference from our Current Report on Form 8-K
filed on September 16, 2009)
|
|
10.13
|
Form of Stock Option Agreement (incorporated by reference
from our Current Report on Form 8-K filed on December 23, 2009)
|
|
10.14
|
Form of Stock Option Agreement (incorporated by reference
from our Current Report on Form 8-K filed on December 30, 2009)
|
|
10.15
|
Debt Settlement and Subscription Agreement with Michael
D. Jenks dated October 17, 2009 (incorporated by reference from our
Current Report on Form 8-K filed on December 30, 2009)
|
|
10.16
|
Debt Settlement and Subscription Agreement with Sage
Investments Ltd. dated October 17, 2009 (incorporated by reference from
our Current Report on Form 8-K filed on December 30, 2009)
|
65
* Filed herewith.
66
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CHEETAH OIL & GAS LTD.
|
By:
|
/s/
Robert McAllister
|
|
|
|
Robert McAllister
|
|
|
|
President, Chief Executive Officer
|
|
|
|
and Director
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
Date: March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
Georgina Martin
|
|
|
|
Georgina Martin
|
|
|
|
Chief Financial Officer, Secretary, Treasurer
and Director
|
|
|
|
(Principal Financial Officer and Principal
Accounting Officer)
|
|
|
|
|
|
|
|
Date: March 31, 2010
|
|
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
|
By:
|
/s/
Robert McAllister
|
|
|
|
Robert McAllister
|
|
|
|
President, Chief Executive Officer
|
|
|
|
and Director
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
Date: March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
Georgina Martin
|
|
|
|
Georgina Martin
|
|
|
|
Chief Financial Officer, Secretary, Treasurer
and Director
|
|
|
|
(Principal Financial Officer and Principal
Accounting Officer)
|
|
|
|
|
|
|
|
Date: March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
Donald James Findlay
|
|
|
|
Donald James Findlay
|
|
|
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Director
|
|
|
|
|
|
|
|
Date: March 31, 2010
|
|
67
Cheetah Oil and Gas (CE) (USOTC:COHG)
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Cheetah Oil and Gas (CE) (USOTC:COHG)
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