Item 1. Business
Our Business
We are focused on the development, exploration and production of oil and gas in North America. Our primary focus is on oil and gas properties with proven undeveloped reserves that are economically attractive but are underserved by major independent oil and gas companies.
Garcia #3 Well
On May 23, 2012, we acquired a ten percent working interest, seven point five percent net revenue interest, from a third party interest holder of the Garcia #3 well (10.0 % WI, 7.5% NRI). For our interest, we paid $300,000 in convertible preferred shares with a conversion rate of .01 per share.
We are subject to the terms and conditions of the operating agreement established by the operator for the Garcia#3 well, Kidd Production Inc, the property developer, Progas Energy Services and the third party vendor we acquired our 10% interest from. We have been repeatedly misinformed by Kidd Production and Progas about the start date for the drilling of the Garcia #3, which is to commence when a drill rig is available and when the operator has determined to move forward with the project. When ready, Garcia #3 will be drilled to approximately 4,200 feet in depth and test the Frio Sands to identify commercial production in the prospect.
Due to our minority interest in the Garcia#3 well, we are reviewing operational alternatives to resolve our inability to control the development of this well and the field in general for any future drilling activities.
Joaquin Basin Resources, Inc.
Effective January 20, 2011, we entered into a Shared Exchange Agreement with Joaquin Basin Resources Inc., a Nevada corporation, and its stockholders (the “Agreement”). Pursuant to the provisions of the Agreement, we agreed to issue to Joaquin Basin shareholders (i) 62,000,000 shares of our common stock and (ii) 2,076,324 shares of our convertible preferred stock, in exchange for the transfer and delivery to us of their 62,000,000 shares of common stock in Joaquin Basin, which represents all of the issued and outstanding shares in Joaquin Basin. As result of the transaction, Joaquin Basin became our wholly owned subsidiary.
On November 21, 2011, Joaquin Basin entered into an amendment (the “Amendment”) to its original Asset Transfer Agreement with Xploration, Inc., a Nevada corporation. Pursuant to the Asset Transfer Agreement, Xploration assigned Joaquin Basin a 50% working interest (37.5% net revenue interest) in mineral leases of approximately 4,000 acres in the Kreyenhagen Trend and Joaquin Basin assumed all of the liabilities associated with the leases.
Pursuant to the Amendment, in consideration for a reduction in working interest from 50% to 20% and in consideration for a reduction in net revenue interest from 37.5% to 14%, Xploration will do the following as increased compensation to Joaquin:
The total expenses that Xploration will pay on behalf of Joaquin associated with the mineral leases will exceed $1,100,000. Joaquin will get a full carry on the first well drilled.
The following is a list of the expenses Xploration shall pay on behalf of Joaquin:
Pay all GG&A, estimated to be in excess of $300,000, as determined by Xploration of the leases for the period October 1, 2011 through September 30, 2012.
Pay all lease rentals, estimated to be in excess of $284,000, due for the period October 1, 2011 through September 30, 2012.
Pay all expenses through completion of the first well planned to be on a lease preselected by the geological team (but at Xploration’s election to be drilled on any of the leases), the cost of which is estimated to be in excess of $500,000 (“First Farmin Well”), such well anticipated to be commenced during the period October 1, 2011 through September 30, 2012.
In the event Xploration has not commenced drilling the First Farmin Well within the timeframe as referenced in 3. above, then the time period within which Xploration may drill the First Farmin well may be further extended for an additional twelve month period ending September 30, 2013 at Xploration’s sole discretion, by Xploration giving no less than thirty days notice to Joaquin prior to October 1, 2012 and the same conditions per the First Farmin Well only as set forth in 3. would apply to that additional twelve month period provided that the decision to drill a well pursuant to 3. above and this clause 4. rests in the sole and absolute discretion of Xploration.
As mentioned above, we issued 2,076,000 shares of convertible preferred stock in concluding the Joaquin Basin purchase agreement. The cost of the issue, $4,152,000, was based on the value of preferred stock as if converted to common stock. $4,152,000 was added to the cost of the Joaquin property.
On March 1, 2011, Joaquin Basin entered into an Operating Agreement with Solimar Energy, LLC (“Solimar”) to explore and develop the 4,000 leased acres covering extensions of the Coalinga California oil and gas field in California. The acreage is labeled as the Kreyenhagen Trend acreage is on the nose of a Coalinga anticline.
In recent months, Solimar Energy as operator has been active on the Kreyenhagen Trend Prospect. Six wells have been submitted to the State of California for permitting.
Bawden 1-24 - The well that we have a Carried Interest or Farm-in well where we will not have any expenses and we are carried 100%. Target Zone: Temblor Test
Vintage 1-17 - Temblor Test
Vintage 1-21 - Temblor Test
Den Hartog A-1 - Avenal Test
Den Hartog A-2 - Avenal Test
Den Hartog A-3 - Avenal Test
Each Drilling permit requires a Blunt Nose Lizard "study" to be conducted once in the Spring, which is currently underway by an outside service, and once again in the Fall. After the study is finalized the drilling permits can be issued and the drilling process is expected to start. We are planning to spud three exploratory wells sometime in 2013-2014.
The Geological study was conducted on the Kreyenhagen Trend as well as the Kreyenhagen Ranch. We will be provided with the information specific to the Trend acreage. This information will speak specifically to the well selection of the 6 wells listed above. We will not be charged for any expense of the study as it falls under the Amendment.
Solimar Energy is in the process of providing the finished survey to Grid Petroleum Corp imminently.
SE Jonah Prospect
Our 100% working interest in the four separate oil and gas leases no longer exists; we only have a 100% working interest in two located near the Jonah Field region, which encompasses an area of premium natural gas reserves within the Greater Green River Basin in the Rocky Mountains area of Wyoming. The Green River Basin area contains approximately 26 TCF (Trillion Cubic Feet) of natural gas, with the Jonah Field estimated to contain 7 to 10 TCF according to the Wyoming State Geological Survey. The Jonah Field currently produces from in excess of 500 wells. This well-defined region has a high success rate for drilling and completion.
We referred to our four leases in this region as the SE Jonah Prospect. These four leases were issued by the United States Department of the Interior Bureau of Land Management: #WYW158664 and #WYW158665 dated August 1, 2004, #WYW159734; and #159737 dated February 1, 2004 and we no longer have #WYW159734 and #159737. The leases covered 3,744.57 acres in the Jonah Prospect, South of the Jonah Field in the Greater Green River Basin, Wyoming. The two leases are subject to a 12.5% royalty retained by the lessor and a 5% overriding royalty retained by the seller. We acquired the leases on March 17, 2010 for $300,000 cash from a related party. We have conducted no exploration work on the properties.
The SE Jonah Prospect is located six miles southeast of the Jonah Field. The breakdown of the acreage and royalties that are owed to various parties is set forth in the table below. In June of 2012 we learned that SunCal Energy Inc. did not reinstate two leases and additionally SunCal Energy Inc. had not properly completed and submitted the assignment documentation nor paid the lease payments to the Bureau of Land Management so leases #WYW158664 and 158665 have officially been terminated and we are in the process of submitting the documentation and lease payments for #WYW158664 and 158665 so we can contain these leases.
Schlumberger Data and Consulting Services, a leading oilfield services provider, has prepared a technical report on the SE Jonah Prospect, for analysis and development appraisal of the property. (The SE Jonah Prospect includes a portion of land in the southwestern area of the Prospect that covers roughly 1,300 acres that is not evaluated in the Schlumberger report). The report concludes that further study is needed to proceed with any drilling operations.
The report also concludes that “There is a good possibility of productive hydrocarbons being encountered in the Prospect and the surrounding area. The geological, petrophysical, and engineering conditions are similar to the Jonah Field. The one difference is the lower pressure gradient in the Prospect area, which will result in lower production rates.”
Additionally Schlumberger’s report recommends that additional seismic data should be acquired over the SE Jonah Prospect allowing for more subsurface control and better positioning of drilling locations and additional seismic should be acquired over the Prospect either by purchase or shooting.
Subsequent to this report by Schlumberger, Grid Petroleum’s Chief Geological and Geophysicist Advisor, Robert Murphy, completed an analysis of the report devising a work program to encompass the necessary additional study.
Concluding that the SE Jonah acreage can be considered as exploration rather than development/production acreage, the work program consists of eleven elements divided into two phases. The first phase comprises six elements requiring data accumulation and study. The completion of phase one will provide information as to the prospects of finding producible gas and, if so, the predicted range of gas quantity in place.
The second phase being contingent on positive results from the first phase includes well test interpretation and investigating development drilling scenarios and production forecasting.
No exploration work has been conducted by the Company on the properties. We are, however, in discussion with consulting groups to implement the first phase of the devised work program.
Competition and Marketing
We will be faced with strong competition from many other companies and individuals engaged in the oil and gas business, many are very large, well established energy companies with substantial capabilities and established earnings records. We may be at a competitive disadvantage in acquiring oil and gas prospects since we must compete with these individuals and companies, many of which have greater financial resources and larger technical staffs. It is nearly impossible to estimate the number of competitors; however, it is known that there are a large number of companies and individuals in the oil and gas business.
Exploration for and production of oil and gas are affected by the availability of pipe, casing and other tubular goods and certain other oil field equipment including drilling rigs and tools. We expect we will depend upon independent drilling contractors to furnish rigs, equipment and tools to drill wells. Higher prices for oil and gas may result in competition among operators for drilling equipment, tubular goods and drilling crews which may affect our ability expeditiously to drill, complete, recomplete and work-over wells.
The market for oil and gas is dependent upon a number of factors beyond our control, which at times cannot be accurately predicted. These factors include the proximity of wells to, and the capacity of, natural gas pipelines, the extent of competitive domestic production and imports of oil and gas, the availability of other sources of energy, fluctuations in seasonal supply and demand, and governmental regulation. In addition, there is always the possibility that new legislation may be enacted, which would impose price controls or additional excise taxes upon crude oil or natural gas, or both. Oversupplies of natural gas can be expected to recur from time to time and may result in the gas producing wells being shut-in. Imports of natural gas may adversely affect the market for domestic natural gas.
The market price for crude oil is significantly affected by policies adopted by the member nations of Organization of Petroleum Exporting Countries ("OPEC"). Members of OPEC establish prices and production quotas among themselves for petroleum products from time to time with the intent of controlling the current global supply and consequently price levels. We are unable to predict the effect, if any, that OPEC or other countries will have on the amount of, or the prices received for, crude oil and natural gas.
Gas prices, which were once effectively determined by government regulations, are now largely influenced by competition. Competitors in this market include producers, gas pipelines and their affiliated marketing companies, independent marketers, and providers of alternate energy supplies, such as residual fuel oil. Changes in government regulations relating to the production, transportation and marketing of natural gas have also resulted in significant changes in the historical marketing patterns of the industry. Generally, these changes have resulted in the abandonment by many pipelines of long-term contracts for the purchase of natural gas, the development by gas producers of their own marketing programs to take advantage of new regulations requiring pipelines to transport gas for regulated fees, and an increasing tendency to rely on short-term contracts priced at spot market prices.
Existing and Probable Governmental Regulation
We intend to monitor and comply with current government regulations that affect our activities, although our operations may be adversely affected by changes in government policy, regulations or taxation. There can be no assurance we will be able to obtain all of the necessary licenses and permits that may be required to carry out our exploration and development programs. It is not expected any of these controls or regulations will affect our operations in a manner materially different than they would affect other natural gas and oil companies operating in the areas in which we operate.
Government Regulation
The United States federal government and various state and local governments have adopted laws and regulations regarding the protection of human health and the environment. These laws and regulations may require the acquisition of a permit by operators before drilling commences, prohibit drilling activities on certain lands lying within wilderness areas, wetlands, or where pollution might cause serious harm, and impose substantial liabilities for pollution resulting from drilling operations, particularly with respect to operations in onshore and offshore waters or on submerged lands. These laws and regulations may increase the costs of drilling and operating wells. Because these laws and regulations change frequently, the costs of compliance with existing and future environmental regulations cannot be predicted with certainty.
The transportation and certain sales of natural gas in interstate commerce are heavily regulated by agencies of the federal government. Production of any oil and gas by properties in which we have an interest will be affected to some degree by state regulations. States have statutory provisions regulating the production and sale of oil and gas, including provisions regarding deliverability. Such statutes and the regulations are generally intended to prevent waste of oil and gas and to protect correlative rights to produce oil and gas between owners of a common reservoir.
State regulatory authorities may also regulate the amount of oil and gas produced by assigning allowable rates of production to each well or pro-ration unit.
Any exploration or production on Federal land will have to comply with the Federal Land Management Planning Act which has the effect generally of protecting the environment. Any exploration or production on private property whether owned or leased will have to comply with the Endangered Species Act and the Clean Water Act. The cost of complying with environmental concerns under any of these acts varies on a case by case basis. In many instances the cost can be prohibitive to development. Environmental costs associated with a particular project must be factored into the overall cost evaluation of whether to proceed with the project.
Environmental Regulation
Oil and natural gas exploration, development and production operations are subject to stringent laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. Numerous governmental agencies, such as the U.S. Environmental Protection Agency, or EPA, issue regulations which often require difficult and costly compliance measures that carry substantial administrative, civil and criminal penalties and may result in injunctive obligations for failure to comply. These laws and regulations may require the acquisition of a permit before drilling commences, restrict the types, quantities and concentrations of various substances that can be released into the environment in connection with drilling and production activities, limit or prohibit construction or drilling activities on certain lands lying within wilderness, wetlands, ecologically sensitive and other protected areas, require action to prevent or remediate pollution from current or former operations, such as plugging abandoned wells or closing pits, and impose substantial liabilities for pollution. The strict liability nature of such laws and regulations could impose liability upon us regardless of fault. Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent and costly pollution control or waste handling, storage, transport, disposal or cleanup requirements could materially adversely affect our operations and financial position, as well as the oil and natural gas industry in general.
The Comprehensive Environmental Response, Compensation and Liability Act, also known as CERCLA or the “Superfund” law, generally imposes joint and several liability, without regard to fault or legality of conduct, on classes of persons who are considered to be responsible for the release of a “hazardous substance” into the environment. These persons include the current owner or operator of a contaminated facility, a former owner or operator of the facility at the time of contamination and those persons that disposed or arranged for the disposal of the hazardous substance. Under CERCLA and comparable state statutes, such persons may be subject to strict joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies. In addition, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. Governmental agencies or third parties may seek to hold us responsible under CERCLA and comparable state statutes for all or part of the costs to clean up sites at which such “hazardous substances” have been released.
We did not incur any costs in connection with the compliance with any federal, state, or local environmental laws. However, costs could occur at any time through industrial accident or in connection with a terrorist act or a new project. Costs could extend into the millions of dollars for which we could be totally liable. In the event of liability, we believe we would be entitled to contribution from other owners so that our percentage share of a particular project would be the percentage share of our liability on that project. However, other owners may not be willing or able to share in the cost of the liability. Even if liability is limited to our percentage share, any significant liability would wipe out our assets and resources.
Item 1A.
Item 1A. Risk Factors
A smaller reporting company is not required to provide the information required by this Item.
Item 1B.
Item 1B. Unresolved Staff Comments
A smaller reporting company is not required to provide the information required by this Item.
Item 2.
Item 2. Properties
Our principal executive offices are located at 999 18th Street, Suite 3000, Denver, CO 80202. We are committed to payments of $199 per month for shared office space and office services in Denver, Colorado until February 28, 2011. A description of our oil and gas properties is set forth above in this Annual Report under the heading “Business.”
Item 3.
Item 3. Legal Proceedings
We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
Item 4.
Item 4. Mine Safety Disclosure
N/A
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is currently quoted on the OTC Bulletin Board (“OTCBB”), which is sponsored by FINRA. The OTCBB is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current "bids" and "asks", as well as volume information. Our shares are quoted on the OTCBB under the symbol “GRPR.”
The following table sets forth the range of high and low bid quotations for our common stock for each of the periods indicated as reported by the OTCBB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those 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 acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
Holders of Our Common Stock
We are authorized to issue 1,500,000,000 shares of common stock with a par value of $0.001 per share. As at June 18, 2012 we had 222,958,643 shares of common stock outstanding. Our shares are held by approximately twelve (12) stockholders of record, not include those that hold their shares in street name. We are authorized to issue twenty million shares of preferred stock, par value $0.001 per share. We have 1,885,000 shares of preferred stock outstanding.
Dividends
There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:
1.we would not be able to pay our debts as they become due in the usual course of business, or;
2.our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.
Recent Sales of Unregistered Securities
On August 18, 2011, 500,000 shares of common stock were issued for consulting services.
Between August 29 and September 21, 2011, 9,406,149 common shares were issued in conversion of debt to stock pursuant to an agreement with Asher Enterprises, Inc. Debt of $178,982 was offset.
Between November 28 and December 8, 2011, 11,295,545 common shares were issued in conversion of debt to stock pursuant to the agreement with Asher. Debt of $55,000 was offset.
On December 2, 2011, 12,000,000 shares were issued for consulting services.
On January 1, 2012, 3,198,528 shares were returned to treasury and cancelled in a preliminary transaction further to a consulting agreement.
Between January 1 and February 8, 2012, 12,815,862 common shares were issued at $0.008, $0.009 and $0.010 per share in elimination of $115,000 notes payable. .
On January 31, 2012, 2,076,000 shares of Preferred Series A stock were issued in completion of the agreement signed January 20, 2011, wherein the Company acquired100% of the outstanding common stock of Joaquin Basin Resources, Inc., owner of an oil & gas property. There being no market for the shares, they were valued at the prevailing market price of $0.01 for the number of post-conversion shares of common stock. The value, $4,152,000, was assigned to the cost of the Joaquin Basin oil & gas property.
On February 2, 2012, 1,684,427 shares of common stock were issued at $0.01 per share for consulting.
On January 31, 2012, 22,200,000 shares of common stock were issued at $0.01 per share in converting 111,000 shares of Series A preferred stock to common stock. The value of the common stock equated to that of the preferred stock, resulting in no gain or loss on the transaction.
As at March 31, 2012, 1,500,000,000 common shares of par value $0.001 were authorized, of which 201,944,542 were issued and outstanding, (135,241,087 as at March 31, 2011).
As at March 31, 2012, 10,000,000 Series A preferred shares and 10,000,000 Series B preferred shares of par value $0.001 were authorized, of which 1,965,000 Series A were issued and outstanding, (nil as at March 31, 2011).
These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.
Securities Authorized for Issuance under Equity Compensation Plans
We do not have any equity compensation plans.
Item 6.
Item 6. Selected Financial Data
A smaller reporting company is not required to provide the information required by this Item.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Results of Operations for the Years Ended March 31, 2012 and 2011
We are in the exploration stage. We have not earned any revenues since our inception. We will not be able to earn revenue unless we are able to locate oil and gas potential on our leases and exploit any reserves we may find. There is no assurance that we will be able to accomplish our business plan to produce oil and gas from our leases.
We incurred operating expenses in the amount of $502,135 for the year ended March 31, 2012 as compared with $834,271 for the year ended March 31, 2011. The decrease was primarily due to decrease in investor relations, professional fees expenses, consulting fees and other general administrative expenses. Investor relations expenses decreased from $77,383 in 2011 to $9,200 in 2012. In 2011 purchases of a commercial advertising report and research analyst coverage to gain investment market exposure began in March 2010 and we issued announcements of all the changes that occurred with Company. We did not incur these charges in 2012. Other general administrative expense decreased from $245,546 in 2011 to $48,045 in 2012. In 2011, the increased expenses were a result of costs of changing and bringing on new management, setting up new offices and design of a new website for the Company. Professional fees have decreased from $93,698 in 2011 to $66.804 in 2012 primarily due to increased fees in 2011 associated with changes to the Company’s business. Consulting fees decreased from $391,430 in 2012to $373,144.
We incurred a net loss from operations in the amount of $502,135 for year ended March 31, 2012, as compared with $834,271for the year ended March 31, 2011.
Liquidity and Capital Resources
We had total current assets in the amount of $25,416 as of March 31, 2012. We had current liabilities of $530,216 as of March 31, 2012. We had a working capital deficit of $504,800 as of March 31, 2012.
We used net cash of $442,110 in operating activities for the year ended March 31, 2012. Our net loss was the major contributing factor to our negative operating cash flow.
We used net cash of $4,151,776 in investing activities for the year ended March 31, 2012 mainly for the purchase of our oil and gas properties.
Financing activities provided $4,604,292 for the year ended March 31, 2012, mainly as the result of the issuance of preferred stock to finance the purchase of our oil and gas properties.
We anticipate our cash requirements to increase over the course of this year as we will be more active and will incur costs for management and exploration of our oil and gas properties.
We anticipate that we will be dependent, for the immediate future, upon additional investment capital to fund operating expenses. We estimate that we will require additional financing to operate and carry out planned exploration activities over the next twelve months.
Off Balance Sheet Arrangements
As of March 31, 2011, there were no off balance sheet arrangements.
Going Concern
The Company has experienced losses since inception into an exploration stage March 31, 2009:
a.$173,275 in the exploration stage to March 31,
b.$123,849 in the development stage in the year ended March 31,
c.$834,271 in the exploration stage in the year ended March 31,
d.$621,640 in the exploration stage in the year ended March 31,
The Company has limited business operations, which raises substantial doubt about the Company’s ability to continue as going concern. The ability of the Company to meet its commitments as they become payable, including the completion of acquisitions, exploration and development of oil and gas properties and projects, is dependent on the ability of the Company to obtain necessary financing or achieving a profitable level of operations. There are no assurance the Company will be successful in achieving these goals.
The Company does not have sufficient cash to fund its desired exploration for the next twelve months. The Company has arranged financing as described in the Company’s financial statements and intends to draw upon this financing arrangement to fund administration and exploration. This financing may be insufficient to fund expenditures or other cash requirements required to find, develop and exploit oil and reserves to the point of profitable operations. These can be no assurance the Company will be successful in finding oil and gas reserves. The Company plans to seek additional financing if necessary in private or public equity offering to secure future funding for operations. There can be no assurance the Company will be successful in raising additional funding. If the Company is not able to secure additional funding, the implementation of the Company’s business plan will be impaired. There can be no assurance that such additional financing will be available to the Company on acceptable terms or at all.
These financial statements do not give effect to adjustments to the amounts and classification to assets and liabilities that would be necessary should the Company be unable to continue as a going concern.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information required by this Item.
Item 8.
Item 8. Financial Statements and Supplementary Data
Audited Financial Statements:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of March 31, 2012 and 2011;
Consolidated Statements of Operations for the Three Months Ended March 31, 2012, the Years Ended March 31, 2012 and 2011 and for the Period from March 31, 2009 to March 31, 2012 (cumulative exploration stages from inception);
Consolidated Statement of Stockholders’ Deficit as of March 31, 2012;
Consolidated Statements of Cash Flows for the Years Ended March 31, 2012 and 2011 and for the Period from March 31, 2009 to March 31, 2012 (cumulative exploration stages from inception);
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Board of Directors
Grid Petroleum Corporation
I have audited the accompanying consolidated balance sheet of Grid Petroleum Corporation (an Exploration Stage Company) and Subsidiaries as of March 31, 2012 and March 31, 2011, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years then ended, and for the period from inception March 31, 2009 through March 31, 2012. These financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor was I engaged to perform an audit of its internal control over financial reporting. My 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, I express no such opinion. An audit also includes assessing the accounting principles used and significant estimated made by management, as well as evaluating the overall financial statement presentation. I believe my audits provide a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Grid Petroleum Corporation and Subsidiaries as of March 31, 2012 and March 31, 2011 and the results of its operations, stockholders’ deficit, and cash flows for the years then ended, and for the period since inception March 31, 2009 through March 31, 2012, in conformity with accounting principles generally accepted in United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as going concern. As disclosed in Note 2 to the consolidated financial statements, the Company has experienced losses in the exploration stages and development stage, and has limited business operations which raise substantial doubt about its ability to continue as going concern. Management’s plans in regard to this matter are also discussed in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainly.
/ s / John Kinross-Kennedy, CPA
John Kinross-Kennedy, CPA
Irvine, California
June 25, 2012
GRID PETROLEUM CORP.
(formerly SUNBERTA RESOURCES INC.)
(An Exploration Stage Company)
Consolidated Balance Sheet
as at March 31, 2011 and 2012
GRID PETROLEUM CORP. (formerly SUBERTA RESOURCES INC.)
(An Exploration Stage Company)
Consolidated Statement of Operations and Comprehensive Loss
GRID PETROLEUM CORP.
( formerly SUNBERTA RESOURCES INC.)
(An Exploration Stage Company) Consolidated Statement of Stockholders' Equity
For the period from formation, (September 19, 2006), to March 31, 2012
GRID PETROLEUM CORP. ( formerly SUNBERTA RESOURCES INC.)
(An Exploration Stage Company)
Consolidated Statement of Cash Flows
GRID PETROLEUM CORP.
(formerly SUNBERTA RESOURCES, INC.)
(A development Stage Company)
Notes to Consolidated Financial Statements
March 31, 2012
(Expressed in US Dollars)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of Business
Grid Petroleum Corp. (the “Company”) was incorporated in the State of Nevada with the name Sunberta Resources Inc. on November 15, 2006. The Company moved through the exploration stage and the development stage and is currently in the exploration stage once more. Its principal business is the acquisition and exploration of mineral claims and oil & gas properties.
On November 16, 2006 the Company acquired all the issued and outstanding shares of Sunberta Resources Inc. (“Sunberta Alberta”) an inactive corporation incorporated in the province of Alberta, Canada on September 19, 2006. The consideration for the acquisition of Sunberta Alberta was 2,000 shares (on a post-split basis) of the Company.
In January, 2007 Sunberta Alberta acquired seven placer claim tenures on southern Vancouver Island, British Columbia, Canada. During the year ended March 31, 2009 the Company abandoned three of the placer claim tenures and decided to abandon the remaining four properties. Between May 31, 2009 and June 14, 2009, the remaining four placer claim tenures expired. The carrying cost of the properties was written off and the operations associated with the properties were treated in the financial statements as discontinued operations in the year ended March 31, 2009. The Company entered the development stage on March 31, 2009 to seek other opportunities. See also note 2.
On November 18, 2009 the Company changed its name to Grid Petroleum Corp.
The Company’s activities to December 31, 2009 were carried on in Alberta and British Columbia, Canada. In February, 2010 operations were carried on in England. In mid-2010 the Company began to focus on its mineral properties in the United States, and activities of the Company thenceforth were controlled from the United States.
On March 17, 2010, the Company acquired oil and gas leases in Wyoming for consideration of $300,000.00 cash. See also note 4. The Company intends to explore for oil and gas on these properties. The Company entered an exploration stage on March 31, 2010.
On May 14, 2010, the Company acquired from the CEO for nominal consideration all the issued shares of Grid Petroleum Ltd. (“Grid UK”), a company incorporated in January 27, 2010 under the laws of England. The purpose of Grid UK is to maintain bank accounts in the UK as nominee for the Company. Grid UK does not have any assets, liabilities or operations of its own.
On January 20, 2011, the Company entered into a Share Exchange Agreement (the “Agreement”) with a Nevada corporation, Joaquin Basin Resources Inc.,( “Seller”), and its stockholders, (“Selling Shareholders”). Pursuant to the provisions of the Agreement, the Company issued to the Selling Shareholders (i) 62,000,000 shares of Company common stock and (ii) 2,076,324 shares of convertible preferred stock, in exchange for the transfer and delivery to the Company by the Selling Shareholders of the 62,000,000 shares of common stock issued by the Seller, which were all of the issued and outstanding securities of the Seller. As a result of the related transaction on February 1, 2011, the Seller became a wholly owned subsidiary of the Company. The issue of preferred stock was delayed until February 2012. None of the parties to the Agreement is a related person.
Principles of Consolidation
The consolidated financial statements include accounts of the Company and its wholly-owned subsidiaries, Sunberta Alberta, Grid Petroleum Ltd. (“Grid UK”) and Joaquin Basin Resources, Inc. All significant inter-company balances and transactions are eliminated.
Cash and Cash Equivalents
As at March 31, 2012 the Company had $25,416 in cash, ($15,010 in 2011). “Cash Equivalents” comprise certain highly liquid instruments with maturity of three months or less when purchased. As at March 31, 2012 and 2011, the Company did not have any cash equivalents.
Mineral Properties and Exploration Expenses
Mineral properties purchased are capitalized and carried at cost. Exploration and development cost are charged to operations as incurred until such time that proven or probable ore reserves are discovered. From that time forward, the Company will capitalize all costs to the extent that future cash flow from reserves equals or exceeds the cost deferred. The deferred cost will be amortized using the unit-of-production method when a property reaches commercial production.
Oil and Gas Properties and Exploration Expenses
Oil and gas property acquisition costs are capitalized and carried at cost. Exploration and development costs are accounted for on the successful-efforts method, whereby the costs related to successful projects are capitalized and all costs incurred as a result of unsuccessful projects are expensed when it is determined that the exploration efforts on that property are unsuccessful. As at March 31, 2012, the Company has not incurred any exploration or development costs on its oil and gas properties. The Company will periodically analyze exploration efforts, once exploration on its oil and gas properties has commenced, to determine which projects have been unsuccessful in establishing proved reserves. The costs of unsuccessful project will be expensed.
Impairment of Long-Lived Assets
The Company periodically analyzes its long-lived assets for potential impairment, assessing the appropriateness of lives and recoverability of unamortized balances through measurement of undiscounted operation cash flows in accordance with ASC No. 144, Property, Plant and Equipment. If impairment is deemed to exist, it will be written down to its fair value. Fair Value is generally determined using a discounted cash flow analysis. As at March 31, 2012, the Company does not believe any adjustment for impairment is required.
Asset Retirement Obligations
The Company has adopted FASB Accounting Standards Codification Topic (“ASC”) No. 410, Asset Retirement and Environmental Obligations which requires that the fair value of liability for an asset retirement obligation be recognized in the period in which it is incurred. ASC No. 410 requires a liability to be recorded for the present value of the estimated site restoration costs in corresponding increase to the carrying amount of the related long-lived asset. The liability will be accreted and the asset will be depreciated over the life of the related assets. Adjustments for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation will be made. The Company has not incurred any asset retirement obligations as at March 31, 2012.
Fixed Assets
Fixed assets are carried at cost less a provision for depreciation on a straight-line basis over their estimated useful lives as follows:
Computer equipment years
Foreign Currency
The operations of the company were located in Canada until February 2010. Management of the Company was then carried on in England until the focus of the Company switched to its mineral leases in Wyoming, and later in California, in mid-2010. Operations are now controlled from the United States. The Company maintains US Dollar, UK Pound Sterling (“GBP”) and Canadian Dollar bank accounts. The functional currency was the Canadian Dollar until February 2010. Effective February 2010 the functional currency has been the US Dollar. Transaction in foreign currencies other than the functional currency, if any, are remeasured into the functional currency at the rate in effect at the time of the transaction. Remeasurement gains and losses that arise from exchange rate fluctuations are included in income or loss from operations. Monetary assets and liabilities denominated in the functional currency are translated at the average exchange rate. Other comprehensive income includes the foreign exchange gains and losses that arise from translating from the functional currency into US Dollars.
Advertising Expenses
Advertising costs are expensed as incurred. The Company has not incurred any advertising costs in the years ended March 31, 2012 and 2011.
Use of Estimates
The preparation of the Company’s consolidated financial statements in conformity with generally accepted accounting principles of United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Actual results could differ from those estimates.
Loss Per Share
Basic earning (loss) per share of common stock is computed by dividing the net earning (loss) by the weighted average number of common shares outstanding during the period after giving retroactive effect to the forward stock split effected on January 14, 2008 (see Note 12.) Diluted earnings (loss) per share is equal to the basic per share for the years ended March 31, 2012 and 2011. Common stock equivalents are not computed since they are anti-dilutive, the company being in a loss position.
Fair Value of Financial Instruments
The carrying value of cash, demand loan, accounts payable and accrued liabilities at March 31, 2012 reflected in these financial statements approximates their fair value due to the short-term maturity of the instruments.
Income Taxes
The Company records deferred taxes in accordance with FASB ASC No. 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry-forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.
Comprehensive Income
The Company has adopted ASC No. 220, Comprehensive Income. Comprehensive income includes net income and all changes in equity during a period that arises from non-owner sources, such as foreign currency items and unrealized gains and losses on certain investments in equity securities.
Concentrations
The Company is dependent on its Chief Executive Officer and business consultants for its operations. The loss any of these individuals could impact the Company’s ability to carry on operations.
Exploration Stage
The Company entered the exploration stage upon its inception. The Company exited the exploration stage and entered the development stage on March 31, 2009 when the Company’s mineral claims tenures in British Columbia were abandoned and the Company started seeking new business. The Company exited the development stage and entered a new exploration stage on March 31, 2010 after the Company had acquired oil and gas properties in Wyoming and started planning to explore the properties.
Recent Accounting Pronouncements
ASU 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment is applicable to fiscal years beginning after December 15, 2011. Early application is permitted. The Company does not expect this ASU has a material impact on its financial position or carrying value of its intangible assets at this time.
The Company has reviewed issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have a material impact on its results of operations or financial position.
2. BASIS OF PRESENTATION- GOING CONCERN
These consolidated financial statements have been prepared on a going-concern basis which assumes the Company will be able to realize assets and discharge liabilities in the normal course of business for the foreseeable future.
The Company has experienced losses since inception into an exploration stage March 31, 2009:
a.$173,275 in the exploration stage to March 31,
b.$123,849 in the development stage in the year ended March 31,
c.$834,271 in the exploration stage in the year ended March 31,
d.$621,640 in the exploration stage in the year ended March 31,
The Company has limited business operations, which raises substantial doubt about the Company’s ability to continue as going concern. The ability of the Company to meet its commitments as they become payable, including the completion of acquisitions, exploration and development of oil and gas properties and projects, is dependent on the ability of the Company to obtain necessary financing or achieving a profitable level of operations. There are no assurance the Company will be successful in achieving these goals.
The Company does not have sufficient cash to fund its desired exploration for the next twelve months. The Company has arranged financing as described in note 7 and intends to draw upon this financing arrangement to fund administration and exploration. This financing may be insufficient to fund expenditures or other cash requirements required to find, develop and exploit oil and reserves to the point of profitable operations. These can be no assurance the Company will be successful in finding oil and gas reserves. The Company plans to seek additional financing if necessary in private or public equity offering to secure future funding for operations. There can be no assurance the Company will be successful in raising additional funding. If the Company is not able to secure additional funding, the implementation of the Company’s business plan will be impaired. There can be no assurance that such additional financing will be available to the Company on acceptable terms or at all.
These financial statements do not give effect to adjustments to the amounts and classification to assets and liabilities that would be necessary should the Company be unable to continue as a going concern.
3. FIXED ASSETS
Fixed assets consist of the following:
4. OIL AND GAS PROPERTIES
The Company has oil and gas properties in Wyoming and California.
Wyoming.
Oil and gas properties in Wyoming that cost $85,334 consist of four leases issued by the United States Department of the Interior Bureau of Land Management, #WYW158664 and #WYW158665 dated August 1, 2004, #WYW159734 and #159737 dated February 1, 2004. These leases cover 3,744.57 acres in the Jonah Prospect, South of the Jonah Field in the Greater Green River Basin, Wyoming. These leases are subject to a 12.5% royalty retained by the lessor and 5% overriding royalty retainer by the seller. The leases were acquired by the Company March 17, 2010 for $300,000 cash from a related party. The related party had paid $80,000 to paid-in capital by the remaining $220,000. No exploration work has been conducted by the Company on the properties to March 31, 2012. In June 2012 we just learned that the seller had not properly completed and submitted the assignment documentation nor paid the lease payments to the Bureau of Land Management so leases #WYW159734 and 159737 have officially been terminated and we are in the process of submitting the documentation and lease payments for #WYW158664 and 158665 so we can contain these.
Lease #WYW158664 covers property legally described as ALL Township 28N Range 110 West 6th Meridian Sublette County, Wyoming Section 6-lots 1-7; S2NE; SENW; E2SW; N2SE Section 7 Lots 1-4; E2W2 Section 17 N2 Section 19 Lots 3 & 4; E2SW Section 30 Lots 1-4; E2W2; SE. The annual rent on this property is $3,296 and was paid by the seller up to August 1, 2010.
Lease #WYW158665 covers property legally described as All Township 28N Range 110 West 6th Meridian Sublette County, Wyoming Section 28 SW Section 29 S2 Section 31 Lots 1-4; S2NE; E2W2; SE. The annual rent on this property is $2,038 and was paid by the seller up to August 1, 2010.
California.
On January 20, 2011 the Company purchased, through its subsidiary Joaquin Basin Resources Inc., a 50% working interest (37% net revenue interest) in a mineral lease on 4,000 acres in Kings and Fresno counties in California. The lease was initially recorded at the cost of issuing 62,000,000 common shares. The agreement also required an issue of 2,076,334 preferred shares.
On November 21, 2011 a portion of the interest in the lease was swapped for a future “carry’ of exploration costs and administration of the lease. Grid’s 50% working interest (37.5% net revenue interest) was reduced to 30% and 14% respectively. The co-lessee, is the obligor under the agreement. Future exploration costs include the operating “carry” costs of the lease and drilling costs of the first well, named “First Farmin Well”. The exploration costs were valued based on the percentage reduction in net revenue interest. A reduction of $4,825,334 in the value of the Joaquin Basin property was recorded.
On January 20, 2011, 2,076,000 shares of convertible preferred stock were issued in concluding the Joaquin Basin purchase agreement. The cost of the issue, $4,152,000, was based on the value of preferred stock as if converted to common stock. $4,152,000 was added to the cost of the Joaquin property. The total cost, $7,026,666, was reflected in a volumetric analysis.
Volumetric calculations of the 30% lease (14% net revenue) were conducted by a geologist and valuation determined using a “P10” factor, i.e. a 10% recovery rate, at a value for oil of $100 per barrel, which equated to net revenue of approximately $20,000,000, ($15,800,000 after landowner’s share). The P factor was further reduced by management by approximately 50%, based on company estimates of recoverability, resulting in an approximate value of $7,700,000.
Impairment of the properties from their recorded acquisition values was considered at March 31, 2012. Management considered that there were no changes in circumstances that would warrant impairment from the estimated values indicated by geological reports.
5. ACCOUNTS PAYABLE
Accounts Payable at March 31, 2012 consists of:
Syndication is a consortium of consultants under a contract described in Note 14.
Xploration Inc. is an oil & gas consultant that provided services associated with the purchase of the Joaquin Basin property.
6. NOTE PAYABLE
Asher Note. On February 24, 2011 the Company entered into a Securities Purchase Agreement with Asher Enterprises Inc., an accredited investor, for the sale of Convertible Promissory Notes in the aggregate principal amount of $65,000 at 8% interest. The proceeds were to be used for general working capital purposes. The notes were convertible into shares of common stock beginning 180 days from the date of the note at a conversion price of 61% of the average of the lowest three trading prices of Company common stock during the ten trading days of the OTCBB preceding the conversion date. The notes were eliminated by conversion to common stock in August and September of 2011.
A further $252,000 was advanced during the year in a series of notes having similar characteristics. $40,000 was eliminated in a debt swap and the balance eliminated by conversion to common stock. In eliminating the notes, a total of 33,517,556 shares was issued, and a loss of $119,505 was recorded.
Special Situation Fund One Note. On March 12, 2012 the Company arranged a debt swap under which an Asher Enterprises note for $40,000 was swapped to Special Situations Fund One for the Asher note plus $21,490.90, total $61,490.90. The notes have the same characteristics as the Asher note described above.
7. SECURITIES PURCHASE AGREEMENT
On April 23, 2010, the Company entered into an agreement with an investor whereby the investor committed to purchase up to $5,000,000 of units, consisting of shares of the Company’s common stock and share purchase warrants, until April 22, 2013. The Company may draw on the facility from time to time, as and when it determines appropriates in accordance with the terms and conditions of the agreement. Each advance shall be in an aggregate amount of not more than $1,000,000 and in integral multiples of $100,000. The Company will use the advances to fund operating expenses, acquisitions, exploration and general corporate activities. The investor also has an option to subscribe up to a further $2,500,000.
Each unit consists of one share of the Company’s common stock and one share purchase warrant. The unit price will be the price to the higher of either: (a) $0.75; or (b) 90% of the volume weighted average of the closing price of common stock, for the five banking days immediately preceding the date of the notice of advance. Each warrant shall entitle the investor to purchase one additional share of common stock at an exercise price equal to 150% of the unit price at which the unit containing the warrant being exercised was issued.
The company issued 401,067 shares under the agreement during the fiscal year ended March 31, 2011, realizing $400,000.
8. RELATED PARTY TRANSACTIONS
Related party transaction not disclosed elsewhere in the consolidated financial statements are as follows:
On March 8, 2010 the Company entered an employment agreement with the newly-appointed President, James Powell. Pursuant to terms of the terms of the agreement, the President will receive a base salary of $5,000 per month. The employment agreement will continue indefinitely subject to termination by either party without cause on 30 days’ notice.
On March 8, 2010 the Company entered an employment agreement with the newly-appointed, Chairman of the Board Tim DeHerrera. Pursuant to terms of the terms of the agreement, Mr. DeHerrera will receive a base salary of $8,000 per month with an incremental rise of $500 per quarter until an amount of $10,000 per month is achieved. The employment agreement will continue indefinitely subject to termination by either party without cause on 30 days’ notice.
On March 8 2010 the Company’s new Chairman of the Board, Tim DeHerrera, agreed to acquire 6,000,000 shares of the former CEO’s shares at $0.02 per share. The new CEO’s shares were be held in escrow in the form of eight certificates each representing 750,000 shares and were released between April 30, 2010 and March 5, 2012 ( a minimum of twenty-one months from the first release date).
On December 2, 2011 pursuant to an employment and consulting agreement, the Chairman of the Board Tim DeHerrera was issued 12,000,000 restricted common shares.
The Company is indebted to its officers as follows:
The amounts consist of unpaid salary and advances made on behalf of the Company. There have been no repayments. The loans carry no interest, are unsecured, are due on demand and have no maturity.
9. FINANCIAL STATEMENT PRESENTATION
Deficits have been aggregated in the past according to time period rather than by development/exploration periods. The statement of equity has been revised to show separate aggregations of development stage and exploration stage deficits. The aggregations are reflected on the balance sheet and statement of operations. Prior year nomenclature and aggregations are modified accordingly.
10. MANAGEMENT CHANGES
On December 2, 2011 the President of the Company, James Powell, approved Tim DeHerrera as Chairman of the Board and sole director.
11. PREFERRED STOCK
On January 25, 2011 the Company filed an amendment to its Nevada Certificate of Designation to create two new series of stock:
Ten million Preferred Series A par value $0.001 and;
Ten million Preferred Series B par value $0.001.
The preferred stock may be converted at will to common stock in the ratio of 0.005 preferred to one common.
On January 31, 2012, 2,076,000 shares of Preferred Series A stock were issued in completion of the agreement signed January 20, 2011, wherein the Company acquired100% of the outstanding common stock of Joaquin Basin Resources, Inc., owner of an oil & gas property. There being no market for the shares, they were valued at the prevailing market price of $0.01 for the number of post-conversion shares of common stock. The value, $4,152,000, was assigned to the cost of the Joaquin Basin oil & gas property.
On January 31, 2012 111,000 shares of Series A Preferred Stock were converted to 22,200,000 shares of common stock at the conversion ratio of .005 preferred to 1 common. The stocks exchanged had equal value, resulting in no gain or loss on the transaction.
As at March 31, 2012, 10,000,000 Series A preferred shares and 10,000,000 Series B preferred shares of par value $0.001 were authorized, of which 1,965,000 Series A were issued and outstanding, (nil as at March 31, 2011).
12. COMMON STOCK
Effective January 14, 2008, the Company split its common stock on a twenty-for-one basis. All shareholders as of the record date of January 14, 2008 receive twenty shares of common stock in exchange for each one common share of their currently issued common stock. The authorized, issued and per share information presented is on a post-split basis. On January 14, 2008 the Company’s total paid-in capital was less than the product of the par value per share multiplied by the number of post-split shares outstanding. As a result, the shareholders my have an obligation to make up the shortfall of $7,735 should the shortfall not be otherwise eliminated.
On March 9, 2010 the Company issued 1,250,000 shares pursuant to a subscription at a price of $0.40 per share for total proceeds of $500,000.
On April 5, 2010 the Company cancelled 18,002,000 shares surrendered for cancellation by the former CEO and majority shareholder of the Company pursuant to an agreement effective March 17, 2010, (Note 8).
On May 14 and September 28, 2010, 134,420 and 266,667 shares respectively were issued at $0.48 pursuant to a securities purchase agreement. $400,000 cash was realized.
Pursuant to consulting agreements with two advisors, common stock was issued for services:
On January 3, 2011, 6,000,000 shares of restricted common stock were issued for services at $0.02 per share. An expense of $93,000 was recorded.
On February 1, 2011, 1,300,000 shares of common stock were issued at $0.05 per share in retirement of debt of $63,471. The loss on the transaction was de minimus.
On February 1, 2011, 62,000,000 shares of common stock were issued at $0.12 per share in exchange for stock of a subsidiary, acquiring an oil and gas property of 7,368,900. See Note 1.
On August 18, 2011, 500,000 shares of common stock were issued at $0.10 per share for consulting. An expense of $15,000 was recorded.
Between August 29 and September 21, 2011, 9,406,149 common shares were issued at $0.01, $0.02 and $0.03 per share in elimination of $55,000 notes payable. A loss of $32,814 was recorded.
Between November 28 and December 8, 2011, 11,295,545 common shares were issued at $0.10, $0.006 and $0.008 per share in elimination of $55,000 notes payable. A loss of $32,814 was recorded.
On December 2, 2011, 12,000,000 shares were issued for consulting at $0.008 per share. An expense of $96,000 was recorded.
On January 1, 2012, 3,198,528 shares were returned to Treasury and cancelled in a preliminary transaction further to a consulting agreement.
Between January 1 and February 8, 2012, 12,815,862 common shares were issued at $0.008, $0.009 and $0.010 per share in elimination of $115,000 notes payable. A loss of $2,803 was recorded.
On February 2, 2012, 1,684,427 shares of common stock were issued at $0.01 per share for consulting. An expense of $16,845 was recorded.
On January 31, 2012, 22,200,000 shares of common stock were issued at $0.01 per share in converting 111,000 shares of Series A preferred stock to common stock. The value of the common stock equated to that of the preferred stock, resulting in no gain or loss on the transaction.
As at March 31, 2012, 1,500,000,000 common shares of par value $0.001 were authorized, of which 201,944,542 were issued and outstanding, (135,241,087 as at March 31, 2011).
13. INCOME TAXES
The Company is subject to United States income taxes, Canadian income taxes (to the extent of its operations in Canada) and UK income taxes (to the extent of its operations in the UK). The Company has no income tax expense during the reported period due to net operating losses.
A reconciliation of income tax expense to the amount computed at the statutory rates is as follows:
Significant components of deferred income tax assets are as follows:
The increase in valuation allowance for the year ended March 31, 2012 was $217,650 because there is no assurance the Company will be able to utilize the losses carried forward.
The Company has net operating losses carried forward of approximately $1,749,000 for tax purposes which will expire beginning in 2028 unless utilized earlier.
The fiscal years ended March 31, 2012, 2010, 2009 and 2008 are open for audit.
14. COMMITMENTS
Effective March 31, 2010, the Company was committed to payment of 100,000 shares per year to each of two consultants, payable in quarterly installments of 25,000 shares, the first installment due June 30, 2010. The advisors will also be paid $1,000 per day for attending meetings of the Company’s committee of advisors and $1,000 per day for services to be provided as needed. The agreements may be terminated by either party without notice.
15. LOSS CONTINGENCIES, LEGAL PROCEEDINGS
There were no loss contingencies or legal proceedings against the Company with respect to matters arising in the ordinary course of business. Neither the Company nor any of its officers or directors is involved in any other litigation either as plaintiffs or defendants, and have no knowledge of any threatened or pending litigation against them or any of the officers or directors.
16. SUBSEQUENT EVENTS
Events subsequent to June 23, 2011 have been evaluated through June 25, 2012, the date these statements were available to be issued, to determine whether they should be disclosed to keep the financial statements from being misleading. Management found no subsequent events to be disclosed.
Item 9.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
No events occurred requiring disclosure under Item 307 and 308 of Regulation S-K during the fiscal year ending March 31, 2011.
Item 9A.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act, our principal executive officer and principal financial officer evaluated our company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this annual report on Form 10-K. Based on this evaluation, our sole chief executive officer and principal financial officer concluded that as of March 31, 2012, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and include controls and procedures designed to ensure that such information is accumulated and communicated to our company’s management, including our company’s principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
The conclusion that our disclosure controls and procedures were not effective was due to the presence of material weaknesses in internal control over financial reporting as identified below under the heading “Management’s Report on Internal Control Over Financial Reporting.” Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated. Our company intends to remediate the material weaknesses as set out below.
Management’s Report on Internal Control Over Financial Reporting
Our company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) for our company. Our company’s internal control over financial reporting is designed to provide reasonable assurance, not absolute assurance, regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that our company’s receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.
Our Management, including our principal executive officer and principal financial officer, conducted an evaluation of the design and operation of our internal control over financial reporting as of March 31, 2012 based on the criteria set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, our management concluded our internal control over financial reporting was not effective as at March 31, 2012 due to the following material weaknesses which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both United States generally accepted accounting principles and Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.
Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending March 31, 2013, subject to obtaining additional financing: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out above are largely dependent upon our company securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely effected in a material manner.
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our internal control over financial reporting was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Changes in Internal Control Over Financial Reporting.
There were no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B.
Item 9B. Other Information
None
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
Our executive officers and director and their ages are as follows:
Set forth below is a brief description of the background and business experience of our executive officer and Directors.
James Powell On January 6, 2011, James Powell was appointed as the President of the Company. From September 2006 to the present, Mr. Powell has been the owner and operator of JP Commercial, a commercial real estate company located in San Diego, California, and which specializes in the sale and acquisition of investment properties, which properties include multi-family, retail, and commercial office buildings. Mr. Powell is a fully licensed real estate broker in California. From June 2002 through September 2006, Mr. Powell worked for CB Richaerd Ellis, Inc. in San Diego, California, where his duties included responsibility for bringing in new transactions involving the sale and acquisition of multi-family investment properties.
Steve Olsen From 2005 to the present, Mr. Olsen has been with Cheapeake Energy as a completion workover consultant where he coordinated and supervised wellsite operations.
Tim DeHerrera On December 3, 2010, Mr. Tim DeHerrera was appointed as our Chairman and as a member of the Company’s Board of Directors. Mr. DeHerrera was President of Bonfire Productions Inc. from September 2009 until May 2010. Mr. DeHerrera was President and Chairman of the Intervision Network Corporation from January 2008 until January 2010. Intervision Network was a technology business in IPTV broadcasting and related live Internet-based multimedia transmission technologies, including a global content delivery network.
Mr. DeHerrera is currently, the President and a director of Force Energy Corp., a publicly traded oil and gas exploration company. Prior to that, from January 2005, Mr. DeHerrera was President and Chairman of the Board of Directors of Future Quest Incorporated, an oil and gas exploration company.
From May 2006 until December 2007, Mr. DeHerrera was President of Atlantis Technology Group, a technology based company.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past ten years, none of the following occurred with respect to our present or former director, executive officer, or employee: (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; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (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 or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Committees of the Board
Our company currently does not have nominating, compensation or audit committees or committees performing similar functions nor does our company have a written nominating, compensation or audit committee charter. Our directors believe that it is not necessary to have such committees, at this time, because the functions of such committees can be adequately performed by the board of directors.
Our company does not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for directors. The board of directors believes that, given the stage of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. Our company does not currently have any specific or minimum criteria for the election of nominees to the board of directors and we do not have any specific process or procedure for evaluating such nominees. The board of directors will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment.
A shareholder who wishes to communicate with our board of directors may do so by directing a written request addressed to our President and director, Mr. James Powell, at the address appearing on the first page of this annual report.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent beneficial shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To the best of our knowledge based solely on a review of Forms 3, 4, and 5 (and any amendments thereof) received by us during or with respect to the year ended March 31, 2011, the following persons have failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act during fiscal year ended March 31, 2011:
Code of Ethics
As of March 31, 2011, we had not adopted a Code of Ethics for Financial Executives, which would include our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
Item 11.
Item 11. Executive Compensation
Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to both to our officers and to our directors for all services rendered in all capacities to us for our fiscal years ended March 31, 2012 and 2011.
Narrative Disclosure to the Summary Compensation Table
On March 8, 2010 the Company entered an employment agreement with the newly-appointed President, James Powell. Pursuant to terms of the terms of the agreement, the President will receive a base salary of $5,000 per month. The employment agreement will continue indefinitely subject to termination by either party without cause on 30 days’ notice.
On March 8, 2010 the Company entered an employment agreement with the newly-appointed, Chairman of the Board Tim DeHerrera. Pursuant to terms of the terms of the agreement, Mr. DeHerrera will receive a base salary of $8,000 per month with an incremental rise of $500 per quarter until an amount of $10,000 per month is achieved. The employment agreement will continue indefinitely subject to termination by either party without cause on 30 days’ notice.
On December 2, 2011 pursuant to an employment and consulting agreement, the Chairman of the Board Tim DeHerrera was issued 12,000,000 restricted common shares.
The Company is indebted to its officers as follows:
The amounts consist of unpaid salary and advances made on behalf of the Company. There have been no repayments. The loans carry no interest, are unsecured, are due on demand and have no maturity.
Outstanding Equity Awards at Fiscal Year-End
The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of March 31, 2012.
Stock Option Grants
We have not granted any stock options to the executive officers or directors since our inception.
Director Compensation
We do not pay any compensation to our directors at this time. However, we reserve the right to compensate our directors in the future with cash, stock, options, or some combination of the above.
We have not reimbursed our directors for expenses incurred in connection with attending board meetings nor have we paid any directors fees or other cash compensation for services rendered as a director in the year ended March 31, 2012.
Stock Option Plans
We did not have a stock option plan as of March 31, 2012.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of June 18, 2012, certain information as to shares of our common stock owned by (i) each person known by us to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, and (iii) all of our executive officers and directors as a group:
1.As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have "beneficial ownership" of any security that such person has the right to acquire within days after such date.
2.The percentage shown is based on denominator of 222,958,643 shares of common stock issued and outstanding for the company as of June 18, 2012.
Changes in Control
We are unaware of any contract, or other arrangement or provision of our Articles of Incorporation or Bylaws, the operation of which may at a subsequent date result in a change of control of our company.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Other than the transactions described under the heading “Executive Compensation” (or with respect to which such information is omitted in accordance with SEC regulations), and in the footnotes to the Company’s financial statements for the year ended March 31, 2012 and 2011, since March 31, 2011 there have not been, and there is not currently proposed, any transaction or series of similar transactions to which we were or will be a participant in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any director, executive officer, holder of 5% or more of any class of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.
Item 14.
Item 14. Principal Accounting Fees and Services
Below is the table of Audit Fees (amounts in US$) billed by our auditor in connection with the audit of the Company’s annual financial statements for the years ended:
PART IV
Item 15.
Item 15. Exhibits, Financial Statements Schedules
(a) Financial Statements and Schedules
The following financial statements and schedules listed below are included in this Form 10-K.
Financial Statements (See Item 8)
(b) Exhibits
Exhibit Number Description
3.1 Articles of Incorporation, as amended (1)
3.2 Bylaws, as amended (1)
10.1 Separation Agreement, dated December 3, 2010(2)
10.2 Share Exchange Agreement by and among Grid Petroleum Corp., on the one hand, and Joaquin Basin Resources Inc. and its shareholders, on the other hand(3)
10.3 Loan Agreement dated March 26, 2008 with Green Shoe Inc.(4)
10.4 Agreement for Conversion of Indebtedness to Common Stock dated January 28, 2011 with Syndication Capital LLC(4)
10.5 Form of Securities Purchase Agreement(5)
10.6 Form of Convertible Promissory Note(5)
31.1 Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1 Schlumberger report(6)
99.2 Initial Technical Review(7)
101** The following materials from the Company’s Annual Report on Form 10-K for the year ended March 31, 2012 formatted in Extensible Business Reporting Language (XBRL).
1Incorporated by reference to the Registration Statement on Form S-1 filed on March 27, 2008.
2Incorporated by reference to the Form 8-K filed on December 7,
3Incorporated by reference to the Form 8-K filed on January 25,
4Incorporated by reference to the Form 8-K filed on February 4,
5Incorporated by reference to the Form 8-K filed on March 10,
6Incorporated by reference to the Current Report on Form 8-K/A filed on April 19, 2010.
7Incorporated by reference to the Current Report on Form 8-K/A filed on June 2, 2010.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Grid Petroleum Corp.
By: /s/ James Powell
James Powell
President, Principal Executive Officer,
Chief Financial Officer, Principal Financial Officer,
Principal Accounting Officer and Director
June 27, 2012
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/ James Powell
James Powell
President, Principal Executive Officer,
Chief Financial Officer, Principal Financial Officer,
Principal Accounting Officer and Director
June 27, 2012
By: /s/ Tim DeHerrera
Tim DeHerrera
Chairman and Director
June 27, 2012