UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January
15, 2015
MNP Petroleum Corporation
(Exact name of registrant as specified in its charter)
Nevada |
333-107002 |
91-1918324 |
(State or Other Jurisdiction |
(Commission |
(I.R.S. Employer |
of Incorporation) |
File Number) |
Identification No.) |
Bahnhofstrasse 9, 6341 Baar, Switzerland
(Address of principal executive offices) (Zip Code)
+41 (44) 718 10 30
(Registrants
telephone number, including area code)
N/A
(Former name or former address, if
changed since last report)
Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of the registrant under
any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to
Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d -2(b))
[ ] Pre-commencement communications pursuant to
Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))
- 2 -
Explanatory Note
On January 15, 2015, MNP Petroleum Corporation filed a Current
Report on Form 8-K to disclose the acquisition of a 65% interest in EPA.at
Beteiligungsgesellschaft mbH (EPA), an Austria registered company, for total
consideration of US$12 million to the seller, Kavsar General Trading FZE. EPA
holds 57.42% of the equity interest in the Tajik company, Petroleum Sugd; the
remaining 42.58% equity interest in Petroleum Sugd is held by the Tajik state
oil company, Sugdneftugas. Petroleum Sugd owns ten producing oil fields.
This Amendment No. 1 on Form 8-K/A provides the financial
statements and pro forma financial information as required by Item 9.01 of Form
8-K.
Item 9.01 Financial Statements and Exhibits
(a) |
Financial statements of businesses
acquired. |
The audited financial statements of EPA
at December 31, 2013 and 2012 and for the years ended December 31, 2013 and 2012
are filed hereto as Exhibit 99.1.
The unaudited financial statements of EPA at September 30, 2014 and December 31, 2013 and for the nine month period ended September 30, 2014 and 2013 are filed as Exhibit 99.2.
(b) |
Pro forma financial
information. |
The unaudited pro forma financial statements of MNP Petroleum Corporation at September 30, 2014 and for the nine month period ended September 30, 2014 and the year ended December 31, 2013 giving effect to the acquisition of EPA are filed hereto as Exhibit 99.3.
No. |
Description |
|
|
99.1 |
Audited financial statements of EPA at December 31, 2013
and 2012 and for the years ended December 31, 2013 and 2012. |
|
|
99.2 |
Unaudited financial statements of EPA at September 30, 2014 and December 31, 2013 and for the nine month period ended September 30, 2014 and 2013. |
|
|
99.3 |
Unaudited pro forma financial statements of MNP Petroleum Corporation at September 30, 2014 and for the nine month period ended September 30, 2014 and the year ended December 31, 2013 |
- 3 -
Contents
Independent Auditors Report
Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Income
Consolidated Statements
of Shareholders Equity
Consolidated Statements of Cash Flows
Notes to
Consolidated Financial Statements
- 4 -
|
Tel.+41 44 444 35 55
Fax +41
44 444 35 35
www.bdo.ch |
BDO AG
Fabrikstrasse 50
CH-8031 Zürich |
Independent Auditors Report
Board of Directors
EPA.at Beteiligungsgesellschaft mbH
We have audited the accompanying consolidated financial
statements of EPA.at Beteiligungsgesellschaft mbH and its subsidiaries, which
comprise the consolidated balance sheets as of December 31, 2013 and 2012, and
the related consolidated statements of comprehensive income, shareholders
equity, and cash flows for the years then ended, and the related notes to the
consolidated financial statements.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair
presentation of these consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America; this
includes the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of consolidated financial
statements that are free from material misstatement, whether due to fraud or
error.
Auditors Responsibility
Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted our audits
in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors judgment, including
the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entitys
preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
entitys internal control. Accordingly, we express no such opinion. An audit
also includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial
statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit opinion.
- 5 -
Opinion
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
EPA.at Beteiligungsgesellschaft mbH and its subsidiaries as of December 31, 2013
and 2012, and the results of their operations and their cash flows for the years
then ended in accordance with accounting principles generally accepted in the
United States of America.
BDO AG |
|
|
|
April 24, 2015 Zurich |
|
|
|
/s/ Christoph Tschumi |
/s/ Julian Snow |
|
|
Christoph Tschumi |
ppa. Julian Snow |
- 6 -
EPA.at Beteiligungsgesellschaft mbH and Subsidiary
CONSOLIDATED BALANCE SHEETS
|
|
12.31.2013 |
|
|
12.31.2012 |
|
|
|
USD |
|
|
USD |
|
ASSETS |
|
|
|
|
|
|
Cash and cash equivalents |
|
2,922,774 |
|
|
818,183 |
|
Accounts receivable |
|
229,901 |
|
|
845,573 |
|
Prepaid expenses and other assets |
|
280,533 |
|
|
282,895 |
|
Inventories |
|
621,545 |
|
|
652,085 |
|
Deferred tax asset |
|
175,633 |
|
|
178,819 |
|
Total current assets |
|
4,230,386 |
|
|
2,777,555 |
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
2,275,204 |
|
|
2,361,967 |
|
Oil and gas properties |
|
5,709,394 |
|
|
5,700,544 |
|
Investment |
|
100,513 |
|
|
100,662 |
|
Deferred tax asset |
|
325,328 |
|
|
431,486 |
|
Total non-current assets |
|
8,410,439 |
|
|
8,594,659 |
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
12,640,825 |
|
|
11,372,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Loan due to related party |
|
6,045,490 |
|
|
6,049,564 |
|
Accounts payable |
|
171,544 |
|
|
251,110 |
|
Other accrued expenses and
liabilities |
|
701,059 |
|
|
771,393 |
|
Total current liabilities |
|
6,918,093 |
|
|
7,072,067 |
|
|
|
|
|
|
|
|
Asset retirement obligation |
|
3,553,695 |
|
|
3,431,971 |
|
Total non-current liabilities |
|
3,553,695 |
|
|
3,431,971 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
10,471,788 |
|
|
10,504,038 |
|
|
|
|
|
|
|
|
Common Stock (As of December
31, 2013, USD 103,588 par value, 1 share issued and outstanding) |
|
103,588 |
|
|
103,588 |
|
Other comprehensive income |
|
3,152,618 |
|
|
3,425,704 |
|
Accumulated deficit |
|
(4,594,175 |
) |
|
(5,607,155 |
) |
Total EPA shareholders' equity |
|
(1,337,969 |
) |
|
(2,077,863 |
) |
Noncontrolling interest |
|
3,507,006 |
|
|
2,946,039 |
|
TOTAL SHAREHOLDERS' EQUITY |
|
2,169,037 |
|
|
868,176 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
|
12,640,825 |
|
|
11,372,214 |
|
- 7 -
EPA.at Beteiligungsgesellschaft mbH and Subsidiary
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
12.31.2013 |
|
|
12.31.2012 |
|
|
|
USD |
|
|
USD |
|
OPERATING REVENUES |
|
|
|
|
|
|
Revenues |
|
5,713,769 |
|
|
5,373,454 |
|
Cost of sales |
|
(3,060,484 |
) |
|
(4,173,149 |
) |
Gross profit |
|
2,653,285 |
|
|
1,200,305 |
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
Administrative costs |
|
(493,125 |
)
|
|
(151,494 |
)
|
Accretion of asset retirement obligation |
|
(127,037 |
) |
|
(206,575 |
) |
Total operating expenses |
|
(620,162 |
) |
|
(358,069 |
) |
|
|
|
|
|
|
|
Total income from operations |
|
2,033,123 |
|
|
842,236 |
|
|
|
|
|
|
|
|
NON-OPERATING INCOME /
(EXPENSE) |
|
|
|
|
|
|
Other income |
|
231,043 |
|
|
1,686 |
|
Other expense |
|
(70,225 |
) |
|
(137,378 |
) |
Total non-operating income/(expense) |
|
160,818 |
|
|
(135,692 |
) |
|
|
|
|
|
|
|
Income before taxes |
|
2,193,941 |
|
|
706,544 |
|
|
|
|
|
|
|
|
Income taxes |
|
(403,319 |
) |
|
(286,459 |
) |
Net income |
|
1,790,622 |
|
|
420,085 |
|
|
|
|
|
|
|
|
Net income attributable to non-controlling interest |
|
777,642 |
|
|
190,722 |
|
Net income attributable to EPA |
|
1,012,980 |
|
|
229,363 |
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
(279,092 |
) |
|
(138,402 |
) |
Net comprehensive income |
|
1,511,530 |
|
|
281,683 |
|
|
|
|
|
|
|
|
Net comprehensive income
attributable to non-controlling interest |
|
771,636 |
|
|
186,117 |
|
Net comprehensive income attributable to EPA |
|
739,894 |
|
|
95,566 |
|
|
|
|
|
|
|
|
Weighted average number of outstanding shares
(basic) |
|
1 |
|
|
1 |
|
Weighted average number of outstanding shares (diluted)
|
|
1 |
|
|
1 |
|
|
|
|
|
|
|
|
Basic earnings per
share |
|
1,012,980
|
|
|
229,363
|
|
Diluted earnings per share |
|
1,012,980 |
|
|
229,363 |
|
- 8 -
EPA.at Beteiligungsgesellschaft mbH and Subsidiary
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
|
|
EPA
Shareholder's equity |
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY |
|
Number of
shares |
|
|
Share
capital |
|
|
Accumulated
deficit |
|
|
Accumulated other
comprehensive income |
|
|
Noncontrolling
interest |
|
|
Total
shareholders' equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2012 |
|
1 |
|
|
103,588
|
|
|
(5,836,518 |
) |
|
3,559,501
|
|
|
2,909,329
|
|
|
735,900
|
|
Currency translation |
|
- |
|
|
- |
|
|
- |
|
|
(133,797 |
) |
|
(4,605 |
) |
|
(138,402 |
) |
Net income for the year |
|
- |
|
|
- |
|
|
229,363 |
|
|
- |
|
|
190,722 |
|
|
420,085 |
|
Dividends paid to noncontrolling interest |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(149,407 |
) |
|
(149,407 |
) |
Balance December 31, 2012
|
|
1 |
|
|
103,588 |
|
|
(5,607,155 |
) |
|
3,425,704 |
|
|
2,946,039 |
|
|
868,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2013 |
|
1 |
|
|
103,588
|
|
|
(5,607,155 |
) |
|
3,425,704
|
|
|
2,946,039
|
|
|
868,176
|
|
Currency translation |
|
- |
|
|
- |
|
|
- |
|
|
(273,086 |
) |
|
(6,006 |
) |
|
(279,092 |
) |
Net income for the year |
|
- |
|
|
- |
|
|
1,012,980 |
|
|
- |
|
|
777,642 |
|
|
1,790,622 |
|
Dividends paid to noncontrolling interest |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(210,669 |
) |
|
(210,669 |
) |
Balance December 31, 2013
|
|
1 |
|
|
103,588 |
|
|
(4,594,175 |
) |
|
3,152,618 |
|
|
3,507,006 |
|
|
2,169,037 |
|
- 9 -
EPA.at Beteiligungsgesellschaft mbH and Subsidiary
CONSOLIDATED CASH FLOW STATEMENT
|
|
12.31.2013 |
|
|
12.31.2012 |
|
|
|
USD |
|
|
USD |
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
Net income including noncontrolling
interest |
|
1,790,622 |
|
|
420,085 |
|
|
|
|
|
|
|
|
To reconcile net income/(loss) to net cash
used in operating activities |
|
|
|
|
|
|
Depreciation and amortization
|
|
933,099 |
|
|
537,347 |
|
Accretion of asset retirement obligation |
|
127,037 |
|
|
206,575 |
|
Deferred income taxes |
|
109,344 |
|
|
104,916 |
|
Decrease / (increase) in inventories |
|
29,633 |
|
|
720,114 |
|
Decrease / (increase) in
accounts receivable |
|
615,596 |
|
|
(419,675 |
) |
Decrease / (increase) in prepaid expenses and
other assets |
|
2,004 |
|
|
202,600 |
|
(Decrease) / increase in
accounts payable |
|
(28,853 |
) |
|
27,170 |
|
(Decrease) / increase in other accrued expenses and other
liabilities |
|
(119,983 |
) |
|
223,536 |
|
Cash flow from operating activities |
|
3,458,499 |
|
|
2,022,668 |
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
(837,364 |
) |
|
(754,717 |
) |
Purchase of oil and gas properties |
|
(27,957 |
) |
|
(174,359 |
) |
Cash flow used in investing activities |
|
(865,321 |
) |
|
(929,076 |
) |
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
Loan due to related party |
|
(247,330 |
) |
|
(380,586 |
) |
Dividends paid |
|
(210,669 |
) |
|
(149,407 |
) |
Cash flow used in financing activities |
|
(457,999 |
) |
|
(529,993 |
) |
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
2,135,179 |
|
|
563,599 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at
the beginning of the period |
|
818,183 |
|
|
265,311 |
|
Translation effect on cash |
|
(30,588 |
) |
|
(10,727 |
) |
Cash and cash equivalents at the end of the period
|
|
2,922,774 |
|
|
818,183 |
|
- 10 -
Notes to Consolidated Financial Statements of EPA.at
Beteiligungsgesellschaft mbH and Subsidiary
1. |
Nature of Business and Significant Accounting
Policies |
Nature of business
EPA.at Beteiligungsgesellschaft mbH (EPA or the Company),
is headquartered in Vienna, Austria. The Company, through its subsidiary,
Petroleum Sugd LLC (Petroleum Sugd), is engaged in the production of crude oil
and gas in the north of Tajikistan.
Operating environment
In recent years Tajikistan has undergone substantial political,
economic and social change. As in any emerging market Tajikistan does not
possess overly sophisticated and efficient business, regulatory, power and
transportation infrastructure as generally exists in more developed market
economies. Management cannot predict what economic, political, legal or other
changes may occur in these or other emerging markets, but such changes could
adversely affect the Companys ability to carry out exploration, development or
production activities. Particularly the legal system of Tajikistan is less
developed than those of more established jurisdictions, which may result in
risks such as: the lack of effective legal redress in the courts, whether in
respect to a breach of law or regulation, or, in an ownership dispute, a higher
degree of discretion from the governmental authorities, delays caused by
extensive bureaucracy and the lack of judicial or administrative guidance on
interpreting applicable laws and regulations, inconsistencies or conflicts
between various laws, regulations, decrees, order and resolutions.
2. |
Summary of significant accounting
policies |
Basis of Presentation and Preparation
The Companys Consolidated Financial Statements are prepared in
accordance with accounting principles generally accepted in the United States of
America (US GAAP). The preparation of financial statements in conformity with US
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities and disclosures, if any, of contingent
assets and liabilities at the date of the financial statements. Actual results
could differ from these estimates.
Theses financial statements are prepared on a going concern
bases and reflect the Company managements assessment of the impact of the Tajik
business environment on the operations and the financial position of the
company.
Scope and methods of consolidation
The accompanying consolidated financial statements include the
accounts of the Company, EPA.at Beteiligungsgesellschaft mbH, and all companies
which EPA directly or indirectly controls (over 50% of voting interest). The
sole subsidiary included in the consolidation is Petroleum Sugd, of which the
Company owns 57.42% . Intercompany accounts and transactions have been
eliminated.
Investments in which the Company exercises significant
influence, but not control (generally 20% to 50% ownership) are accounted for
using the equity method. The Groups share of earnings or losses is included in
consolidated net loss and the Groups share of the net assets is included in
long-term assets. Investments where the Company holds less than 20% ownership
are accounted for using the cost method.
Concentrations of risk
Financial instruments that potentially subject the Company to
concentrations of credit risk are primarily cash and cash equivalents. Cash and
cash equivalents are maintained with several financial institutions. Deposits
held with banks may exceed the amount of insurance provided on such deposits.
Generally these deposits may be redeemed upon demand. Cash and cash equivalents
are subject to currency exchange rate fluctuations.
- 11 -
Cash and cash equivalents
Cash and cash equivalents are comprised of cash on hand, cash
at banks and other short term highly liquid investments that are readily
convertible into known amounts of cash and which are subject to an insignificant
risk of change in value with original maturities of three months or less.
Accounts receivable and allowance for doubtful accounts
We carry accounts receivable at sales value less an allowance
for doubtful accounts. We periodically evaluate accounts receivable and
establish an allowance for doubtful accounts based on a combination of specific
customer circumstances, credit conditions and the history of write-offs and
collections. We evaluate items on an individual basis when determining accounts
receivable write-offs. In general, our policy is to not charge interest on trade
receivables after the invoice becomes past due. A receivable is considered past
due if payment has not been received within agreed upon invoice terms.
Property, plant and equipment
Tangible fixed assets are recorded at cost and are depreciated
on a straight-line basis over the following estimated useful lives:
|
Years |
|
|
Buildings |
10 - 20 years
|
Machinery and equipment |
1 - 10 years |
Vehicles |
4 - 10 years
|
Office equipment |
1 - 7 years |
Materials and spare parts |
2 - 3 years
|
Impairment of property, plant and equipment
Tangible fixed assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable. The carrying value of a long-lived asset or asset
group is considered to be impaired when the undiscounted expected cash flows
from the asset or asset group are less than its carrying amount. In that event,
an impairment loss is recognized to the extent that the carrying value exceeds
its fair value. Fair value is determined based on quoted market prices, where
available, or is estimated as the present value of the expected future cash
flows from the asset or asset group discounted at a rate commensurate with the
risk involved.
Oil and gas properties
Oil and gas properties consists of rigs and equipment in use to
produce oil and gas as well as any asset retirement cost and is depreciated
using the unit of production method. Unit of production depreciation is a
critical accounting estimate that measures the depreciation of oil and gas
assets. It is the ratio of actual volumes produced to total proved reserves or
proved developed reserves (those proved reserves recoverable through existing
wells with existing equipment and operating methods), applied to the asset cost.
The volumes produced and asset cost are known and, while proved reserves have a
high probability of recoverability, they are based on estimates that are subject
to some variability.
Investment in OJSC Rogun Dam
For the years ended December 31, 2013 and 2012, the Company
recorded its investment in OJSC Rogun Dam (OJSC) at cost since the company
holds less than 20% in voting and capital interest in OJSC.
- 12 -
Current liabilities
Current liabilities include current or renewable liabilities
due within a maximum period of one year. Current liabilities are carried at
their nominal value, which approximates fair market value.
Fair value of financial instruments
The Companys financial instruments consist of cash and cash
equivalents, accounts receivable, investments, accounts payable and a loan from
a related party. The fair value of these financial instruments approximate their
carrying value due to the short maturities of these instruments, unless
otherwise noted.
Non-current liabilities
Non-current liabilities include all known liabilities as per
year end, which can reliably be quantified with a due date of at least one year
after the date of the balance sheet.
Income taxes
Taxes on income are accrued in the same period as the revenues
and expenses to which they relate.
Deferred taxes are calculated on the temporary differences that
arise between the tax base of an asset or liability and its carrying value in
the balance sheet of the Company prepared for consolidation purposes, with the
exception of temporary differences arising on investments in foreign
subsidiaries where the Company has plans to permanently reinvest profits into
the foreign subsidiaries.
Deferred tax assets on tax loss carry-forwards are only
recognized to the extent that it is more likely than not, that future profits
will be available and the tax loss carry-forward can be utilized.
Changes to tax laws or tax rates enacted at the balance sheet
date are taken into account in the determination of the applicable tax rate
provided that they are likely to be applicable in the period when the deferred
tax assets or tax liabilities are realized.
The Company is required to pay income taxes in Austria and the
Republic of Tajikistan. Significant judgment is required in determining income
tax provisions and in evaluating tax positions.
The Company recognizes the benefit of uncertain tax positions
in the financial statements when it is more likely than not that the position
will be sustained on examination by the tax authorities. The benefit recognized
is the largest amount of tax benefit that is greater than 50 percent likely of
being realized on settlement with the tax authority, assuming full knowledge of
the position and all relevant facts. The Company adjusts its recognition of
these uncertain tax benefits in the period in which new information is available
impacting either the recognition of measurement of its uncertain tax positions.
Interest and penalties related to uncertain tax positions are recognized as
income tax expense.
Revenue recognition
Revenues are recognized when products are delivered or services
are provided to customers, title is transferred, the sales price is fixed or
determinable and collectability is reasonably assured. Revenues are recorded net
of discounts granted to customers. Shipping and other transportation costs
billed to customers are presented on a gross basis in revenues and cost of
sales. Revenue is measured at the fair value of the consideration received or
receivable, and represents amounts receivable for goods supplied, services
rendered stated net of discounts, returns and value added taxes.
- 13 -
Exploration and development costs
The Company uses the successful efforts method of accounting
for oil and natural gas producing activities. Under this method, acquisition
costs for proved and unproved properties are capitalized when incurred.
Exploration costs, including geological and geophysical costs, the costs of
carrying and retaining unproved properties and exploratory dry hole drilling
costs, are expensed. Development costs, including the costs to drill and equip
development wells and successful exploratory drilling costs to locate proved
reserves, are capitalized. Upon sale or retirement of a proved property, the
cost and accumulated depreciation, depletion and amortization are eliminated
from property accounts and the resultant gain or loss is recognized.
Exploratory drilling costs are capitalized when incurred
pending the determination of whether a well has found proved reserves. If a well
is determined to be successful, the capitalized drilling costs will be
reclassified as part of the cost of the well. If a well is determined to be
unsuccessful, the capitalized drilling costs will be charged to expense in the
period the determination is made.
Development costs of proved oil and natural gas properties,
including estimated dismantlement, restoration, abandonment costs and
acquisition costs, are depreciated and depleted on a well by well basis by the
units-of-production method using estimated proved developed reserves.
We perform annual assessments of unproved oil properties for
impairment on a field basis, and recognize a loss at the time of impairment by
recording an expense to exploration costs. In determining whether an unproved
property is impaired we consider numerous factors including, but not limited to,
dry holes drilled, current exploration plans, favorable or unfavorable
exploratory activity on adjacent areas and our geologists' evaluation.
Loans payable
Loans payable are recognized initially at fair value, net of
transaction costs incurred. Loans payable are subsequently carried at amortized
costs; any difference between the proceeds (net of transaction costs) and the
redemption value is recognized in the income statement over the period of the
borrowings using the effective interest method.
Related parties
Parties are considered to be related if one party directly or
indirectly controls, is controlled by, or is under common control with the other
party, if it has an interest in the other party that gives it significant
influence over the party, if it has joint control over the party, or if it is an
associate or a joint venture. Senior management of the company and close family
members are also deemed to be related parties.
Foreign Currency Translation and Transactions
The consolidated financial statements of the Company are
presented in US Dollars (USD). The financial position and results of operations
of our foreign subsidiaries are determined using the currency of the environment
in which an entity primarily generates and expends cash as the functional
currency. Assets and liabilities of these subsidiaries are translated at the
exchange rate in effect at each year-end. Statement of comprehensive income
accounts are translated at the average rate of exchange prevailing during the
year. Translation adjustments arising from the use of differing exchange rates
from period to period are included in accumulated other comprehensive
income/(loss) in shareholders equity. Gains and losses resulting from foreign
currency transactions are included in other income and expenses (exchange
differences), except intercompany foreign currency transactions that are of a
long-term-investment nature which are included in accumulated other
comprehensive income/(loss) in shareholders equity.
Contingent liabilities and gains
A loss contingency is recognized when it is probable that an
asset has been impaired or a liability has been incurred and the amount of the
loss can be reasonably estimated. Gain contingencies are not reflected in
financial statements.
- 14 -
Asset retirement obligation
Recognition and measurement:
Any liability for an asset
retirement obligation (ARO) is recognized at fair value in the period in which
it is incurred if a reasonable estimate of fair value can be made. If a
reasonable estimate of the fair value of the liability cannot be made in the
period the obligation is incurred, a liability shall be recognized when a
reasonable estimate of fair value can be made.
Subsequent measurement:
Changes in the liability for the
ARO that are due to changes in the timing or amount of the original estimated
cash flows are added to or deducted from the liability and the cost of the
asset. Downward revisions in the amount of undiscounted cash flows are
discounted using the credit-adjusted risk-free rate used on initial recognition.
Upward revisions in the amount of undiscounted cash flows are discounted using
the current credit-adjusted risk-free rate.
Changes in the liability for the asset retirement obligation
that are due to the passage of time are recognized in the statement of
comprehensive income.
Employee benefits and social insurance contributions
The Company pays social tax in the territory of the Republic of
Tajikistan. These contributions are recorded on an accrual basis. Social tax
comprises contributions to the state budget in respect of the Companys
employees. These expenses are recognized as incurred and are included in staff
costs. The Company does not have pension arrangements separate from the state
pension system of the Republic of Tajikistan. Wages, salaries, contributions to
the Republic of Tajikistan state budget, paid annual leaves and paid sick
leaves, bonuses and non-monetary benefits are accrued as the Companys employees
render the related service.
Inventories
Inventories are initially recognized at cost, and subsequently
at the lower of cost or market value. Costs comprise of all costs of purchase,
costs of conversion and other costs incurred in bringing the inventories to
their present location and condition. Weighted average cost is used to determine
the value of inventory.
Dividends
Dividends are recorded in equity in the period in which they
are declared at the Annual General Meeting (AGM). Dividends declared after the
balance sheet date and before the financial statements are authorized for issue
are disclosed in the subsequent events note.
3. |
Cash and cash
equivalents |
Cash and cash equivalents (in USD)
|
|
Dec 31, 2013 |
|
|
Dec 31, 2012 |
|
Cash in bank |
|
2,873,161
|
|
|
808,243
|
|
Cash
on hand |
|
49,613 |
|
|
9,940 |
|
Total cash and cash
equivalents |
|
2,922,774 |
|
|
818,183 |
|
Inventories (in USD) |
|
Dec 31, 2013 |
|
|
Dec 31, 2012 |
|
Work in progress1 |
|
340,367
|
|
|
447,619
|
|
Finished goods |
|
250,714 |
|
|
127,443 |
|
Fuel |
|
21,142 |
|
|
72,369 |
|
Other
|
|
9,322 |
|
|
4,654 |
|
Total inventories |
|
621,545 |
|
|
652,085 |
|
1 Work in progress represents crude oil which needs
additional processing to be available for sale.
- 15 -
Investment represents shares acquired in the company OJSC Rogun
Dam. The Company holds 85 shares of OJSC which is less than 1% of total
outstanding shares of OJSC. The nominal value of each share is different and
ranges from USD 21 to USD 4,191 (TJS 100 to 20,000). The value of the investment
as at December 31, 2013 and 2012 was USD 100,513 (TJS 479,800) and USD 100,662
(TJS 479,800), respectively.
6. |
Property, plant and
equipment |
Year 2013 (in USD) |
|
Buildings |
|
|
Materials and
spares |
|
|
Vehicles |
|
|
Office
equipment |
|
|
Other |
|
|
Total |
|
Cost at Jan 1, 2013 |
|
398,002 |
|
|
1,595,180 |
|
|
716,856 |
|
|
10,203 |
|
|
164,805 |
|
|
2,885,046 |
|
Additions |
|
1,015 |
|
|
772,503 |
|
|
49,379 |
|
|
2,083 |
|
|
12,384 |
|
|
837,364 |
|
Cost at Dec 31, 2013 |
|
399,017
|
|
|
2,367,683
|
|
|
766,235
|
|
|
12,286 |
|
|
177,189
|
|
|
3,722,410
|
|
Accumulated depreciation at Dec 31, 2013 |
|
(57,137 |
) |
|
(1,196,793 |
) |
|
(139,775 |
) |
|
(4,173 |
) |
|
(49,328 |
) |
|
(1,447,206 |
) |
Net book value at Dec 31,
2013 |
|
341,880 |
|
|
1,170,890 |
|
|
626,460 |
|
|
8,113 |
|
|
127,861 |
|
|
2,275,204 |
|
Year 2012 (in USD) |
|
Buildings |
|
|
Materials and
spares |
|
|
Vehicles |
|
|
Office
equipment |
|
|
Other |
|
|
Total |
|
Cost at Jan 1, 2012 |
|
398,590 |
|
|
908,755 |
|
|
654,090 |
|
|
8,114 |
|
|
165,049 |
|
|
2,134,598 |
|
Additions |
|
- |
|
|
688,785 |
|
|
63,827 |
|
|
2,105 |
|
|
- |
|
|
754,717 |
|
Cost at Dec 31, 2012 |
|
398,590
|
|
|
1,597,540
|
|
|
717,917
|
|
|
10,219 |
|
|
165,049
|
|
|
2,889,315
|
|
Accumulated depreciation at Dec 31, 2012 |
|
(28,575 |
) |
|
(405,410 |
) |
|
(67,661 |
) |
|
(1,896 |
) |
|
(23,806 |
) |
|
(527,348 |
) |
Net book value at Dec 31,
2012 |
|
370,015 |
|
|
1,192,130 |
|
|
650,256 |
|
|
8,323 |
|
|
141,243 |
|
|
2,361,967 |
|
Depreciation expense of property, plant and equipment for the
years ended December 31, 2013 and 2012 was USD 922,395 and USD 527,706,
respectively.
7. |
Oil and gas properties |
Oil and gas properties (in USD) |
|
Dec 31, 2013 |
|
|
Dec 31, 2012 |
|
Cost |
|
5,729,705
|
|
|
5,710,185
|
|
Accumulated depletion |
|
(20,311 |
) |
|
(9,641 |
) |
Total oil and gas
properties |
|
5,709,394 |
|
|
5,700,544 |
|
The oil and gas properties held by the company consists of
drilling costs, rigs and equipment that is in place to allow the production of
oil and gas. During 2013, the company capitalized pumps with a value of USD
27,957.
8. |
Asset retirement
obligation |
The Company incurs retirement obligations for certain assets.
The fair values of these obligations are recorded as liabilities on a discounted
basis, which is typically at the time the assets are installed. In the
estimation of fair value, assumptions and judgments are used regarding such
factors as the existence of a legal obligation for an asset retirement
obligation, technical assessments of the assets, estimated amounts and timing of
settlements, discount rates and inflation rates. Asset retirement obligations
incurred in the current period were Level 3 fair value measurements. The costs
associated with these liabilities are capitalized as part of the related assets
and depreciated as the reserves are produced. Over time, the liabilities are
accreted for the change in their present value.
- 16 -
The following table shows the changes in asset retirement
obligation for the years ended December 31, 2013 and 2012:
ARO (in USD) |
|
Dec 31, 2013 |
|
|
Dec 31, 2012 |
|
Balance at beginning of year |
|
3,431,971 |
|
|
3,230,456 |
|
Accretion |
|
127,037 |
|
|
206,575 |
|
Translation adjustment |
|
(5,313 |
) |
|
(5,060 |
) |
Balance at end of year |
|
3,553,695 |
|
|
3,431,971 |
|
The Company generates revenue primarily from the sale of oil
and gas and additional revenue from other activities such as providing repair
and maintenance services to independent third parties. In 2012, the Company used
its own electricity distribution infrastructure in Neftabod, in the Sugd region,
to provide electricity within the city. A tariff was charged on this electricity
received from Barki Tajik, a state owned company, calculated based on the
electricity usage.
The major customers of the Company that purchased oil and gas
are local companies, registered in Tajikistan. In 2013, the Company sold 11,167
tons (2012: 10,264 tons) of oil at an average price of USD 490 (TJS 2,338) per
ton (2012: USD 481 (TJS 2,290)) and 1,116 thousand m3 (2012: 1,224 thousand
m3) of gas at an average price of USD 210 (TJS 1,002) for 1 thousand
m3 (2012: USD 176 (TJS 836)).
The following table shows the sales of the Company for the
years ended December 31, 2013 and 2012:
|
|
Year ended |
|
|
Year ended |
|
Revenue (in USD) |
|
Dec 31, 2013 |
|
|
Dec 31, 2012 |
|
Oil |
|
5,482,457 |
|
|
4,932,878 |
|
Gas
|
|
231,312 |
|
|
182,065 |
|
Electricity distribution |
|
- |
|
|
37,853 |
|
Repair and maintenance for third parties |
|
- |
|
|
161,765 |
|
Other |
|
- |
|
|
58,893 |
|
Total revenue |
|
5,713,769 |
|
|
5,373,454 |
|
The following table shows the cost of sales incurred by the
Company for the years ended December 31, 2013 and 2012:
|
|
Year ended |
|
|
Year ended |
|
Cost of sales (in USD) |
|
Dec 31, 2013 |
|
|
Dec 31, 2012 |
|
Staff salaries and related taxes |
|
743,605 |
|
|
735,722 |
|
Repair of oil well and technical services |
|
305,196 |
|
|
584,530 |
|
Depreciation and amortization |
|
884,207 |
|
|
494,698 |
|
Losses and own consumption of oil |
|
205,896 |
|
|
1,153,065 |
|
Other taxes |
|
400,266 |
|
|
354,088 |
|
Social costs |
|
61,967 |
|
|
183,931 |
|
Transportation |
|
6,576 |
|
|
205,260 |
|
Costs
for oil treatment |
|
57,309 |
|
|
168,171 |
|
Electricity |
|
218,328 |
|
|
137,321 |
|
Reservoir pressure cost |
|
16,665 |
|
|
48,922 |
|
Communication |
|
36,366 |
|
|
37,296 |
|
Others |
|
124,103 |
|
|
70,145 |
|
Total cost of sales |
|
3,060,484 |
|
|
4,173,149 |
|
- 17 -
The Company and its subsidiary is duly registered with the tax
authorities of Austria and the Republic of Tajikistan, respectively, and is
subject to periodic reviews by the tax authorities.
The Company provides for taxes based on the tax accounts
maintained and prepared in accordance with the tax regulations of Austria and
the Republic of Tajikistan, which may differ from US GAAP standards. For the
years ended December 31, 2013 and 2012, no taxes were paid in Austria. The
income tax rate in the Republic of Tajikistan for the years ended December 31,
2013 and 2012 was 15%, excluding other taxes such as road tax, etc.
The Company does not intend to repatriate any of its earnings
to Austria since all funding is managed through an intercompany loan and is
therefore considered permanently invested. If earnings were to be repatriated
they would be subject to a withholding tax of 5% pursuant to the double tax
treaty between Austria and Tajikistan if the Company holds at least 15% of the
capital of the Company.
The components of income from continuing operations before
income taxes are as follows:
Pre-tax income/(loss) (in USD) |
|
Year ended Dec
31, 2013 |
|
|
Year ended Dec
31, 2012 |
|
Domestic (Austria) |
|
(34,191 |
) |
|
(25,580 |
) |
Foreign (Tajikistan) |
|
2,228,132 |
|
|
732,124 |
|
Income from operations before
income tax |
|
2,193,941 |
|
|
706,544 |
|
Income taxes at the Tajikistan statutory rate compared to the
Companys income tax expenses as reported are as follows:
Income taxes at the
Tajik statutory rate (in USD) |
|
Year
ended Dec 31, 2013 |
|
|
Year
ended Dec 31, 2012 |
|
Net income before income
tax |
|
2,193,941
|
|
|
706,544
|
|
Statutory tax rate |
|
15% |
|
|
15% |
|
Expected income tax
expense |
|
(329,091 |
) |
|
(105,982 |
) |
Impact on income tax
expense of the following: |
|
|
|
|
|
|
Permanent differences: |
|
|
|
|
|
|
Expenses on asset retirement
obligation and non tax deductible depreciations |
|
(74,228 |
) |
|
(180,477 |
) |
Income tax expense |
|
(403,319 |
) |
|
(286,459 |
) |
As at December 31, 2013, the Company had deferred tax assets
arising from deductible temporary differences between the tax basis and carrying
value of the inventory and property, plant and equipment. In addition, during
2013 there were permanent differences in relation to the asset retirement
obligation. These deductions were not permitted by the tax authority of
Tajikistan and therefore resulted in an increase in the effective tax rate.
The Company assesses the recoverability of its deferred tax
assets and, to the extent recoverability does not satisfy the more likely than
not recognition criterion under ASC 740, records a valuation allowance against
its deferred tax assets if necessary. The Company considered its recent
operating results and anticipated future taxable income in assessing the need
for its valuation allowance.
The Companys deferred tax assets and liabilities as at
December 31, 2013 and 2012 consist of the following:
Deferred tax assets and liabilities (in
USD) |
|
Dec 31, 2013 |
|
|
Dec 31, 2012 |
|
Deferred tax
assets |
|
|
|
|
|
|
Inventory short term |
|
175,633 |
|
|
178,819 |
|
Property, plant and equipment
long term |
|
325,328 |
|
|
431,486 |
|
Valuation allowance |
|
- |
|
|
- |
|
Deferred tax assets |
|
500,961 |
|
|
610,305 |
|
- 18 -
The Companys income tax expense for the years ended December
31, 2013 and 2012 consists of the following:
Income tax (in USD) |
|
Year ended Dec
31, 2013 |
|
|
Year ended Dec
31, 2012 |
|
Income tax expense current
|
|
(293,975 |
) |
|
(181,543 |
) |
Income tax expense deferred |
|
(109,344 |
) |
|
(104,916 |
) |
Total income tax expense |
|
(403,319 |
) |
|
(286,459 |
) |
The following tax years remain subject to examination:
Significant Jurisdictions |
Open Years |
Austria |
2014 |
Tajikistan |
2014
|
12. |
Noncontrolling interest |
The shareholders of Petroleum Sugd as at December 31, 2013 are
EPA.at Beteiligungsgesellschaft mbH and Sugdneftugas, a Tajik state owned
company, with 57.42% and 42.58%, respectively. These ownership percentages
remained unchanged from December 31, 2012 with EPA and Sugdneftugas holding
57.42% and 42.58% respectively.
Parties are considered related when one has the power, through
ownership, contractual right, family relationship, or otherwise, to directly or
indirectly control or significantly influence the other. Parties are also
related when they are under the common control or significant influence of a
third party.
Kavsar General Trading FZE (Kavsar), is the owner of EPA with
100% control as at December 31, 2013 and December 31, 2012.
The following table shows the outstanding related party
balances as at December 31, 2013 and 2012:
Related party (in USD) |
|
Dec 31, 2013 |
|
|
Dec 31, 2012 |
|
Loan due to Kavsar |
|
6,045,490
|
|
|
6,049,564
|
|
Balance at end of year |
|
6,045,490 |
|
|
6,049,564 |
|
The outstanding balance is a short term loan and bears no
interest. The Company had insufficient funds on hand to repay this balance
during the year.
14. |
Fair value measurement |
ASC 820 establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value. These tiers include: Level
1, defined as observable inputs such as quoted prices in active markets; Level
2, defined as inputs other than quoted prices in active markets that are either
directly or indirectly observable; and Level 3, defined as unobservable inputs
in which little or no market data exists, therefore requiring an entity to
develop its own assumptions.
Fair Value of Financial Instruments
In addition to the methods and assumptions we use to record the
fair value of financial instruments as discussed in the Fair Value Measurements
section above, we used the following methods and assumptions to estimate the
fair value of our financial instruments.
- 19 -
|
Cash and cash equivalents carrying
amount approximated fair value. |
|
Accounts receivable carrying amount
approximated fair value. |
|
Investment shares acquired at cost in
OJSC, a state owned company with a value determined by the government.
|
|
Loan from related party carrying
amount approximated fair value due to the short term nature of the loan.
|
|
Accounts payable carrying amount
approximated fair value. |
The fair value of our financial instruments is presented in the
table below (in USD):
|
|
December 31, 2013 |
|
|
December 31, 2012 |
|
|
Fair Value
Levels |
|
|
Reference |
|
|
|
Carrying Amount |
|
|
Fair Value |
|
|
Carrying Amount |
|
|
Fair Value |
|
|
|
|
|
Cash and cash equivalents |
|
2,922,774 |
|
|
2,922,774 |
|
|
818,183 |
|
|
818,183 |
|
|
1 |
|
|
Note 3 |
|
Accounts receivable |
|
229,901 |
|
|
229,901 |
|
|
845,573 |
|
|
845,573 |
|
|
1 |
|
|
|
|
Investment |
|
100,513 |
|
|
100,513 |
|
|
100,662 |
|
|
100,662 |
|
|
3 |
|
|
Note 5 |
|
Loan from related party |
|
6,045,490 |
|
|
6,045,490 |
|
|
6,049,564 |
|
|
6,049,564 |
|
|
3 |
|
|
Note 13 |
|
Accounts payable |
|
171,544 |
|
|
171,544 |
|
|
251,110 |
|
|
251,110 |
|
|
1 |
|
|
|
|
15. |
Contingencies and
commitments |
The oil and gas industry is affected by numerous laws and
regulations, including discharge permit for drilling operations, drilling and
abandonment bonds, reports concerning operations, the spacing of wells, pooling
of properties, taxation and other laws and regulations. Changes in any of these
laws and regulations or the denial or vacating of permits and licenses could
have a material adverse effect on the Company's business. Generally, legal
structures, codes and regulations in emerging markets are not as well defined as
they can be in more developed markets and they are therefore more likely to
change rapidly. In view of the many uncertainties with respect to current and
future laws and regulations, including their applicability to the Company, we
cannot predict the overall effect of such laws and regulations on future
business operations of the Company. Management believes that the Company's
operations currently comply in all material aspects with applicable laws and
regulations. There are no pending or threatened enforcement actions related to
any such laws or regulations.
There are no pending legal proceedings to which the Company is
a party or to which any of the Company's properties are subject. In addition,
Management does not know of any such proceedings contemplated by a governmental
institution.
16. |
Environmental matters |
The Company is subject to national and local environmental law
and regulations relating to water, air, hazardous substances and wastes, and
threatened or endangered species that restrict or limit the Company's business
activities or purposes of protecting human health and environment. Compliance
with the multitude of regulations issued by the appropriate administrative
agencies can be burdensome and costly. Management believes that Company's
operations currently comply in all material respects with applicable national
and local environmental laws and regulations.
The Company has evaluated subsequent events through April 24,
2015, which is the date of issuance of this Form 8-K/A and has determined that
the following events require additional disclosure.
- 20 -
Work Program:
In the fourth quarter of 2014, Petroleum Sugd
completed its 2015 work program budget. EPA, as a 57.42% owner of Petroleum Sugd
has a funding obligation that amounts to USD 14.9 million relating to its
portion of this 2015 work program for Petroleum Sugd in Tajikistan.
Social Responsibility Project:
On June 10, 2014, the
governor of the Farkhor district of Tajikistan decreed that the Petroleum Sugd
has a two year funding obligation related to a social responsibility project
concerning the construction of a secondary school in this district.
- 21 -
[THIS PAGE IS INTENTIONALLY LEFT BLANK]
- 22 -
EPA.at Beteiligungsgesellschaft mbH and Subsidiary
CONSOLIDATED BALANCE SHEETS
|
|
(Unaudited) |
|
|
|
|
|
|
09.30.2014 |
|
|
12.31.2013 |
|
|
|
USD |
|
|
USD |
|
ASSETS |
|
|
|
|
|
|
Cash and cash equivalents |
|
2,511,264 |
|
|
2,922,774 |
|
Accounts receivable |
|
1,560,188 |
|
|
229,901 |
|
Prepaid expenses and other
assets |
|
330,543 |
|
|
280,533 |
|
Inventories |
|
718,756 |
|
|
621,545 |
|
Deferred tax asset |
|
176,666 |
|
|
175,633 |
|
Total current assets |
|
5,297,417 |
|
|
4,230,386 |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
2,166,048 |
|
|
2,275,204 |
|
Oil and gas properties |
|
5,485,755 |
|
|
5,709,394 |
|
Investment |
|
96,104 |
|
|
100,513 |
|
Deferred tax asset |
|
194,683 |
|
|
325,328 |
|
Total non-current assets |
|
7,942,590 |
|
|
8,410,439 |
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
13,240,007 |
|
|
12,640,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Loan due to related party |
|
4,958,732 |
|
|
6,045,490 |
|
Accounts payable |
|
30,857 |
|
|
171,544 |
|
Other accrued expenses and liabilities |
|
996,849 |
|
|
701,059 |
|
Total current liabilities |
|
5,986,438 |
|
|
6,918,093 |
|
|
|
|
|
|
|
|
Asset retirement obligation |
|
3,499,734 |
|
|
3,553,695 |
|
Total non-current liabilities |
|
3,499,734 |
|
|
3,553,695 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
9,486,172 |
|
|
10,471,788 |
|
|
|
|
|
|
|
|
Common Stock (As of September 30, 2014, USD
103,588 par value, 1 share issued and outstanding) |
|
103,588 |
|
|
103,588 |
|
Other comprehensive income
|
|
3,433,910 |
|
|
3,152,618 |
|
Accumulated deficit |
|
(3,756,883 |
) |
|
(4,594,175 |
) |
Total EPA shareholders' equity |
|
(219,385 |
) |
|
(1,337,969 |
) |
Noncontrolling interest |
|
3,973,220 |
|
|
3,507,006 |
|
TOTAL SHAREHOLDERS' EQUITY |
|
3,753,835 |
|
|
2,169,037 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
|
13,240,007 |
|
|
12,640,825 |
|
- 23 -
EPA.at Beteiligungsgesellschaft mbH and Subsidiary
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME -
UNAUDITED
|
|
09.30.2014 |
|
|
09.30.2013 |
|
|
|
USD |
|
|
USD |
|
OPERATING REVENUES |
|
|
|
|
|
|
Revenues |
|
4,778,574 |
|
|
4,029,548 |
|
Cost
of sales |
|
(2,576,797 |
) |
|
(2,278,954 |
) |
Gross profit |
|
2,201,777 |
|
|
1,750,594 |
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
Administrative costs |
|
(357,654 |
) |
|
(510,166 |
) |
Accretion of asset retirement obligation |
|
(104,244 |
) |
|
(127,100 |
) |
Total operating expenses |
|
(461,898 |
) |
|
(637,266 |
) |
|
|
|
|
|
|
|
Total income from operations |
|
1,739,879 |
|
|
1,113,328 |
|
|
|
|
|
|
|
|
NON-OPERATING INCOME / (EXPENSE) |
|
|
|
|
|
|
Other income |
|
56,534 |
|
|
23,740 |
|
Other expense |
|
(32,123 |
) |
|
(25,645 |
) |
Total non-operating income/(expense) |
|
24,411 |
|
|
(1,905 |
) |
|
|
|
|
|
|
|
Income before taxes |
|
1,764,290 |
|
|
1,111,423 |
|
|
|
|
|
|
|
|
Income taxes |
|
(282,280 |
) |
|
(86,309 |
) |
Net income |
|
1,482,010 |
|
|
1,025,114 |
|
|
|
|
|
|
|
|
Net
income attributable to non-controlling interest |
|
644,718 |
|
|
447,890 |
|
Net income attributable to EPA |
|
837,292 |
|
|
577,224 |
|
|
|
|
|
|
|
|
Other comprehensive income/(loss) |
|
102,788 |
|
|
(209,319 |
) |
Net comprehensive income |
|
1,584,798 |
|
|
815,795 |
|
|
|
|
|
|
|
|
Net
comprehensive income attributable to non-controlling interest |
|
466,214 |
|
|
443,385 |
|
Net comprehensive income attributable to EPA |
|
1,118,584 |
|
|
372,410 |
|
|
|
|
|
|
|
|
Weighted average number of
outstanding shares (basic) |
|
1 |
|
|
1 |
|
Weighted average number of outstanding shares
(diluted) |
|
1 |
|
|
1 |
|
|
|
|
|
|
|
|
Basic earnings per share |
|
837,292 |
|
|
577,224 |
|
Diluted earnings per
share |
|
837,292
|
|
|
577,224
|
|
- 24 -
EPA.at Beteiligungsgesellschaft mbH and Subsidiary
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY -
UNAUDITED
|
|
EPA
Shareholder's equity |
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY |
|
Number of |
|
|
Share |
|
|
Accumulated |
|
|
Accumulated other |
|
|
Noncontrolling |
|
|
Total
shareholders' |
|
|
|
shares |
|
|
capital |
|
|
deficit |
|
|
comprehensive |
|
|
interest |
|
|
equity |
|
|
|
|
|
|
|
|
|
|
|
|
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2014 |
|
1 |
|
|
103,588 |
|
|
(4,594,175 |
) |
|
3,152,618 |
|
|
3,507,006 |
|
|
2,169,037 |
|
Currency translation |
|
- |
|
|
- |
|
|
- |
|
|
281,292 |
|
|
(178,504 |
) |
|
102,788 |
|
Net income for the period |
|
- |
|
|
- |
|
|
837,292 |
|
|
- |
|
|
644,718 |
|
|
1,482,010 |
|
Balance September 30, 2014 |
|
1 |
|
|
103,588 |
|
|
(3,756,883 |
) |
|
3,433,910 |
|
|
3,973,220 |
|
|
3,753,835 |
|
- 25 -
EPA.at Beteiligungsgesellschaft mbH and Subsidiary
CONSOLIDATED CASH FLOW STATEMENT - UNAUDITED
|
|
09.30.2014 |
|
|
09.30.2013 |
|
|
|
USD |
|
|
USD |
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
Net income including noncontrolling interest |
|
1,482,010 |
|
|
1,025,114 |
|
|
|
|
|
|
|
|
To reconcile net
income/(loss) to net cash used in operating
activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
817,785 |
|
|
777,583 |
|
Accretion of asset retirement obligation |
|
104,244 |
|
|
127,037 |
|
Deferred income taxes |
|
129,612 |
|
|
60,139 |
|
Decrease / (increase) in inventories |
|
(127,298 |
) |
|
21,378 |
|
Decrease / (increase) in
accounts receivable |
|
(1,370,753 |
) |
|
376,871 |
|
Decrease / (increase) in prepaid expenses and
other assets |
|
(63,868 |
) |
|
162,703 |
|
(Decrease) / increase in
accounts payable |
|
1,063 |
|
|
(99,458 |
) |
(Decrease) / increase in other accrued expenses and other
liabilities |
|
196,919 |
|
|
76,329 |
|
Cash flow from operating activities |
|
1,169,714 |
|
|
2,527,696 |
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
(783,610 |
) |
|
(797,015 |
) |
Purchase of oil and gas properties |
|
(33,526 |
) |
|
(24,509 |
) |
Cash flow used in investing activities |
|
(817,136 |
) |
|
(821,524 |
) |
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
Loan due to related party |
|
(654,390 |
) |
|
(11,815 |
) |
Cash flow used in financing activities |
|
(654,390 |
) |
|
(11,815 |
) |
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
(301,812 |
) |
|
1,694,357 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at the beginning of
the period |
|
2,922,774 |
|
|
818,183 |
|
Effect of translation on cash flow |
|
(109,698 |
) |
|
(23,541 |
) |
Cash and cash equivalents at the end of the period |
|
2,511,264 |
|
|
2,488,999 |
|
- 26 -
Notes to Consolidated Financial Statements of EPA.at
Beteiligungsgesellschaft mbH and Subsidiary
The financial statements presented here comprise EPA.at
Beteiligungsgesellschaft mbH (EPA or the Company) and its subsidiary
Petroleum Sugd LLC (Petroleum Sugd). The unaudited interim Consolidated
Financial Statements included have been prepared in accordance with accounting
principles generally accepted in the United States of America (US GAAP) and
present our financial position, results of operations, cash flows and changes in
shareholders equity. These financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto, included in
the Companys Annual Report on Form 8-K/A for the year ended December 31, 2013.
The Company is engaged in the production of crude oil and gas
in the north of Tajikistan.
The consolidated interim financial statements included herein
are unaudited and do not include all of the information and footnotes required
by US GAAP for complete financial statements. The preparation of financial
statements in conformity with US GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities and
disclosures, if any, of contingent assets and liabilities at the date of the
financial statements. Actual results could differ from these estimates.
These statements reflect all normal recurring adjustments that,
in the opinion of management, are necessary for fair presentation of the
information contained herein. The consolidated balance sheet as of September 30,
2014 has been derived from the Companys audited balance sheet as of that date.
It is recommended that the interim financial statements be read in conjunction
with the Company's audited financial statements for the year ended December 31,
2013. The Company adheres to the same accounting policies in preparation of its
interim financial statements. As permitted under US GAAP, interim accounting for
certain expenses, including income taxes are based on full year assumptions.
Such amounts are expensed in full in the year incurred. For interim financial
reporting purposes, income taxes are recorded based upon estimated annual income
tax rates. Interim results are not necessarily indicative of the operating
results expected for later quarters or the full fiscal year.
3. |
Cash and cash
equivalents |
Cash and cash equivalents (in USD) |
|
Sept 30, 2014 |
|
|
Dec 31, 2013 |
|
Cash in bank |
|
2,425,231 |
|
|
2,873,161 |
|
Cash on hand |
|
86,033 |
|
|
49,613 |
|
Total cash and cash equivalents |
|
2,511,264 |
|
|
2,922,774 |
|
Inventories (in USD) |
|
Sept 30, 2014 |
|
|
Dec 31, 2013 |
|
Work in progress1
|
|
610,583 |
|
|
340,367 |
|
Finished goods |
|
68,836 |
|
|
250,714 |
|
Fuel |
|
35,054 |
|
|
21,142 |
|
Other |
|
4,283 |
|
|
9,322 |
|
Total inventories |
|
718,756 |
|
|
621,545 |
|
1 Work in progress represents crude oil which needs
additional processing to be available for sale.
Investment represents shares acquired in the company OJSC Rogun
Dam. The Company holds 85 shares of OJSC which is less than 1% of total
outstanding shares of OJSC. The nominal value of each share is different and
ranges from USD 21 to USD 4,191 (TJS 100 to 20,000). The value of the investment
as at September 30, 2014 and December 31, 2013 was USD 96,104 (TJS 479,800) and
USD 100,513 (TJS 479,800), respectively.
- 27 -
6. |
Property, plant and
equipment |
Nine months of |
|
Buildings |
|
|
Materials |
|
|
Vehicles |
|
|
Office |
|
|
Other |
|
|
Total |
|
2014 (in USD) |
|
|
|
|
and spares |
|
|
|
|
|
equipment |
|
|
|
|
|
|
|
Cost at Jan 1, 2014 |
|
381,512 |
|
|
2,263,816 |
|
|
732,621 |
|
|
11,747 |
|
|
169,416 |
|
|
3,559,112 |
|
Additions |
|
971 |
|
|
721,594 |
|
|
47,213 |
|
|
1,991 |
|
|
11,841 |
|
|
783,610 |
|
Cost at Sep 30, 2014 |
|
382,483 |
|
|
2,985,410 |
|
|
779,834 |
|
|
13,738 |
|
|
181,257 |
|
|
4,342,722 |
|
Accumulated depreciation at Sep 30,
2014 |
|
(82,051 |
) |
|
(1,807,639 |
) |
|
(207,139 |
) |
|
(6,538 |
) |
|
(73,307 |
) |
|
(2,176,674 |
) |
Net book value at Sep 30, 2014 |
|
300,432 |
|
|
1,177,771 |
|
|
572,695 |
|
|
7,200 |
|
|
107,950 |
|
|
2,166,048 |
|
Depreciation expense of property, plant and equipment for the
nine month period ended September 30, 2014 and 2013 was USD 810,930 and USD
645,676 respectively.
7. |
Oil and gas properties |
Oil and gas properties (in USD) |
|
Sep 30, 2014 |
|
|
Dec 31, 2013 |
|
Cost |
|
5,511,878 |
|
|
5,729,705 |
|
Accumulated depletion |
|
(26,123 |
) |
|
(20,311 |
) |
Total oil and gas properties |
|
5,485,755 |
|
|
5,709,394 |
|
The oil and gas properties held by the company consists of
drilling costs, rigs and equipment that is in place to allow the production of
oil and gas. During the first nine months of 2014, the company capitalized pumps
and pipelines with a value of USD 33,526.
8. |
Asset retirement
obligation |
The Company incurs retirement obligations for certain assets.
The fair values of these obligations are recorded as liabilities on a discounted
basis, which is typically at the time the assets are installed. In the
estimation of fair value, assumptions and judgments are used regarding such
factors as the existence of a legal obligation for an asset retirement
obligation, technical assessments of the assets, estimated amounts and timing of
settlements, discount rates and inflation rates. Asset retirement obligations
incurred in the current period were Level 3 fair value measurements. The costs
associated with these liabilities are capitalized as part of the related assets
and depreciated as the reserves are produced. Over time, the liabilities are
accreted for the change in their present value.
The following table shows the changes in asset retirement
obligation for the nine months ended September 30, 2014 and year ended December
31, 2013:
ARO (in USD) |
|
Sep 30, 2014 |
|
|
Dec 31, 2013 |
|
Balance at beginning of
year |
|
3,553,695
|
|
|
3,431,971
|
|
Accretion |
|
104,244 |
|
|
127,037 |
|
Translation adjustment |
|
(158,205 |
) |
|
(5,313 |
) |
Balance at end of period |
|
3,499,734 |
|
|
3,553,695 |
|
The Company generates revenue from the sale of oil and gas.
- 28 -
The following table shows the sales of the Company for the nine
month periods ended September 30, 2014 and 2013:
|
|
Nine months ended |
|
|
Nine months ended |
|
Revenue (in USD) |
|
Sept 30, 2014 |
|
|
Sept 30, 2013 |
|
Oil |
|
4,660,628 |
|
|
3,853,432 |
|
Gas |
|
117,946 |
|
|
176,116 |
|
Total revenue |
|
4,778,574 |
|
|
4,029,548 |
|
The following table shows the cost of sales incurred by the
Company for the nine month periods ended September 30, 2014 and 2013:
|
|
Nine months ended |
|
|
Nine months ended |
|
Cost of sales (in USD) |
|
Sept 30, 2014 |
|
|
Sept 30, 2013 |
|
Staff salaries and related
taxes |
|
567,989 |
|
|
509,545 |
|
Repair of oil well and technical services |
|
255,359 |
|
|
229,009 |
|
Depreciation and amortization
|
|
781,587 |
|
|
668,989 |
|
Losses and own consumption of oil |
|
118,063 |
|
|
105,880 |
|
Other taxes |
|
268,627 |
|
|
240,908 |
|
Social costs |
|
141,997 |
|
|
127,178 |
|
Transportation |
|
191,989 |
|
|
172,178 |
|
Costs for oil treatment |
|
2,816 |
|
|
2,526 |
|
Electricity |
|
15,736 |
|
|
163,827 |
|
Reservoir pressure cost |
|
182,677 |
|
|
14,112 |
|
Communication |
|
18,407 |
|
|
16,508 |
|
Others |
|
31,550 |
|
|
28,294 |
|
Total cost of sales |
|
2,576,797 |
|
|
2,278,954 |
|
11. |
Noncontrolling interest |
The shareholders of Petroleum Sugd as at September 30, 2014 are
EPA.at Beteiligungsgesellschaft mbH and Sugdneftugas, a Tajik state owned
company, with 57.42% and 42.58%, respectively. These ownership percentages
remained unchanged from December 31, 2013 with EPA and Sugdneftugas holding
57.42% and 42.58% respectively.
Parties are considered related when one has the power, through
ownership, contractual right, family relationship, or otherwise, to directly or
indirectly control or significantly influence the other. Parties are also
related when they are under the common control or significant influence of a
third party.
Kavsar General Trading FZE (Kavsar), is the owner of EPA with
100% control as at September 30, 2014 and December 31, 2014.
The following table shows the outstanding related party
balances as at September 30, 2014 and December 31, 2013:
Related party (in USD) |
|
Sept 30, 2014 |
|
|
Dec 31, 2013 |
|
Loan due to Kavsar |
|
4,958,732 |
|
|
6,045,490 |
|
Balance at end of period |
|
4,958,732 |
|
|
6,045,490 |
|
The outstanding balance is a short term loan and bears no
interest. The Company had insufficient funds on hand to repay this balance
during the nine month period.
- 29 -
13. |
Fair value measurement |
ASC 820 establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value. These tiers include: Level
1, defined as observable inputs such as quoted prices in active markets; Level
2, defined as inputs other than quoted prices in active markets that are either
directly or indirectly observable; and Level 3, defined as unobservable inputs
in which little or no market data exists, therefore requiring an entity to
develop its own assumptions.
Fair Value of Financial Instruments
In addition to the methods and assumptions we use to record the
fair value of financial instruments as discussed in the Fair Value Measurements
section above, we used the following methods and assumptions to estimate the
fair value of our financial instruments.
|
Cash and cash equivalents carrying
amount approximated fair value. |
|
Accounts receivable carrying amount
approximated fair value. |
|
Investment shares acquired at cost in
OJSC, a state owned company with a value determined by the government. |
|
Loan from related party carrying
amount approximated fair value due to the short term nature of the loan. |
|
Accounts payable carrying amount
approximated fair value. |
The fair value of our financial instruments is presented in the
table below (in USD):
|
|
September 30, 2014 |
|
|
December 31, 2013 |
|
|
Fair Value |
|
|
|
|
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair Value |
|
|
Levels |
|
|
Reference
|
|
|
|
Amount |
|
|
Value |
|
|
Amount |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
2,511,264 |
|
|
2,511,264 |
|
|
2,922,774 |
|
|
2,922,774 |
|
|
1 |
|
|
Note 3 |
|
Accounts receivable |
|
1,560,188 |
|
|
1,560,188 |
|
|
229,901 |
|
|
229,901 |
|
|
1 |
|
|
|
|
Investment |
|
96,104 |
|
|
96,104 |
|
|
100,513 |
|
|
100,513 |
|
|
3 |
|
|
Note 5 |
|
Loan from related party |
|
4,958,732 |
|
|
4,958,732 |
|
|
6,045,490 |
|
|
6,045,490 |
|
|
3 |
|
|
Note 12 |
|
Accounts payable |
|
30,857 |
|
|
30,857 |
|
|
171,544 |
|
|
171,544 |
|
|
1 |
|
|
|
|
14. |
Contingencies and
commitments |
The oil and gas industry is affected by numerous laws and
regulations, including discharge permit for drilling operations, drilling and
abandonment bonds, reports concerning operations, the spacing of wells, pooling
of properties, taxation and other laws and regulations. Changes in any of these
laws and regulations or the denial or vacating of permits and licenses could
have a material adverse effect on the Company's business. Generally, legal
structures, codes and regulations in emerging markets are not as well defined as
they can be in more developed markets and they are therefore more likely to
change rapidly. In view of the many uncertainties with respect to current and
future laws and regulations, including their applicability to the Company, we
cannot predict the overall effect of such laws and regulations on future
business operations of the Company. Management believes that the Company's
operations currently comply in all material aspects with applicable laws and
regulations. There are no pending or threatened enforcement actions related to
any such laws or regulations.
There are no pending legal proceedings to which the Company is
a party or to which any of the Company's properties are subject. In addition,
Management does not know of any such proceedings contemplated by a governmental
institution.
15. |
Environmental matters |
The Company is subject to national and local environmental law
and regulations relating to water, air, hazardous substances and wastes, and
threatened or endangered species that restrict or limit the Company's business
activities or purposes of protecting human health and environment. Compliance
with the multitude of regulations issued by the appropriate administrative
agencies can be burdensome and costly. Management believes that Company's
operations currently comply in all material respects with applicable national
and local environmental laws and regulations.
- 30 -
The Company has evaluated subsequent events through April 24,
2015, which is the date of issuance of this Form 8-K/A and has determined that
the following events require additional disclosure.
Work Program:
In the fourth quarter of 2014, Petroleum Sugd
completed its 2015 work program budget. EPA, as a 57.42% owner of Petroleum Sugd
has a funding obligation that amounts to USD 14.9 million relating to its
portion of this 2015 work program for Petroleum Sugd in Tajikistan.
Social Responsibility Project:
On June 10, 2014, the
governor of the Farkhor district of Tajikistan decreed that the Petroleum Sugd
has a two year funding obligation related to a social responsibility project
concerning the construction of a secondary school in this district.
- 31 -
[THIS PAGE IS INTENTIONALLY LEFT BLANK]
- 32 -
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
On January 15, 2015, MNP Petroleum Corporation (the Company)
acquired all of the outstanding common stock of EPA.at Beteiligungsgesellschaft
mbH (EPA) for the purpose of diversifying its portfolio of oil and gas
exploration and production assets. Total consideration paid was USD 12,000,000
for a 65% equity interest in EPA. The purchase price was partially funded
through available cash resources as well as from the proceeds from the sale of a
separate investment.
EPA, a company registered in Vienna, Austria, holds a 57.42%
interest in the company Petroleum Sugd LLC, which owns 10 producing oil and gas
fields in the north of Tajikistan. Through its equity investment, EPA
participates directly in the profits from the sale of oil and gas.
Set forth below is the Companys unaudited pro forma
consolidated balance sheet as of September 30, 2014, reflecting the transaction
as if it had taken place on September 30, 2014. The Companys unaudited pro
forma consolidated statements of comprehensive loss for the nine months ended
September 30, 2014 and the audited consolidated statements of comprehensive loss
for the year ended December 31, 2013 are included, reflecting the transaction as
if it had taken place on January 1, 2013.
The historical consolidated financial information of EPA has
been adjusted in the unaudited pro forma consolidated financial statements to
give effect to pro forma events that are (1) directly attributable to the
transaction, (2) factually supportable, and (3) with respect to the statement of
income, expected to have a continuing impact on the consolidated results. There
were no material transactions between the Company and EPA during the periods
presented in the unaudited pro forma consolidated financial statements that
needed to be eliminated.
The unaudited pro forma consolidated financial information
should be read in conjunction with the accompanying notes thereto. In addition,
the unaudited pro forma consolidated financial information was based on and
should be read in conjunction with the:
|
Separate historical financial statements of EPA as of and
for the period ended September 30, 2014 and the related notes and the
separate historical financial statements of EPA for the year ended
December 31, 2013 and related notes, included as an exhibit to this
Current Report on Form 8-K/A; and |
|
Separate historical financial statements of the Company
as of and for the nine months ended September 30, 2014 and the related
notes included in its Quarterly Report on Form 10-Q and separate
historical financial statements of the Company for the year ended December
31, 2013 and the related notes included in its Annual Report on Form 10-K;
|
The unaudited pro forma consolidated financial information has
been prepared using the acquisition method of accounting under U.S. generally
accepted accounting principles. The unaudited pro forma consolidated financial
information will differ from the final acquisition accounting for a number of
reasons, including the fact that the Companys estimates of fair value are
preliminary and subject to change when the formal valuation and other studies
are finalized. The adjustments that may occur to the preliminary estimates could
have a material impact on the accompanying unaudited pro forma consolidated
financial information.
The unaudited pro forma consolidated financial information is
presented for information purposes only. It has been prepared in accordance with
the regulations of the Securities and Exchange Commission and is not necessarily
indicative of what the Companys financial position or results of operations
actually would have been had it completed the acquisition at the dates
indicated, nor does it purport to project the future financial position or
operating results of the consolidated company.
The finalization of the Companys accounting assessment may
result in changes in the valuation of assets which could be material. The
Company will finalize the allocation as soon as practicable within the
measurement period in accordance with Accounting Standards Codification (ASC)
323-10, InvestmentsEquity Method and Joint Ventures, but in no event
later than one year following the acquisition date. The actual adjustments
described herein were made as of the closing date of the acquisition and may
change based upon the finalization of appraisals and other valuation studies the
Company will obtain.
- 33 -
The unaudited pro forma consolidated financial information does
not reflect any cost savings, operating synergies or revenue enhancements that
the consolidated company may achieve as a result of the merger; any costs to
combine the operations of the Company and EPA; or any costs necessary to achieve
these cost savings, operating synergies and potential revenue enhancements.
MNP PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEET - UNAUDITED
|
|
09.30.2014 |
|
|
09.30.2014 |
|
|
Pro Forma |
|
|
|
|
|
|
MNP |
|
|
EPA.at Beteiligungs- |
|
|
Adjustments |
|
|
Pro Forma |
|
|
|
Petroleum Corp. |
|
|
gesellschaft mbH |
|
|
(Note 1 & 2) |
|
|
Consolidated |
|
|
|
USD |
|
|
USD |
|
|
USD |
|
|
USD |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
5,054,630 |
|
|
2,511,264 |
|
|
(4,511,264 |
) |
|
3,054,630 |
|
Restricted cash |
|
210,959 |
|
|
- |
|
|
- |
|
|
210,959 |
|
Accounts receivable |
|
17,723 |
|
|
1,560,188 |
|
|
(1,560,188 |
) |
|
17,723 |
|
Investment in associate (Petromanas) |
|
1,577,276 |
|
|
- |
|
|
- |
|
|
1,577,276 |
|
Other prepaid expenses |
|
395,545 |
|
|
330,543 |
|
|
(330,543 |
) |
|
395,545 |
|
Inventories |
|
- |
|
|
718,756 |
|
|
(718,756 |
) |
|
- |
|
Deferred tax asset |
|
- |
|
|
176,666 |
|
|
(176,666 |
) |
|
- |
|
Total current assets |
|
7,256,133 |
|
|
5,297,417 |
|
|
(7,297,417 |
) |
|
5,256,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible fixed assets |
|
109,812 |
|
|
2,166,048 |
|
|
(2,166,048 |
) |
|
109,812 |
|
Oil and gas properties
(unproved) |
|
947,458 |
|
|
5,485,755 |
|
|
(5,485,755 |
) |
|
947,458 |
|
Investment |
|
- |
|
|
96,104 |
|
|
2,984,471 |
|
|
3,080,575 |
|
Goodwill |
|
|
|
|
- |
|
|
8,919,425 |
|
|
8,919,425 |
|
Transaction prepayment |
|
10,000,000 |
|
|
- |
|
|
(10,000,000 |
) |
|
- |
|
Deferred tax asset |
|
- |
|
|
194,683 |
|
|
(194,683 |
) |
|
- |
|
Total non-current assets |
|
11,057,270 |
|
|
7,942,590 |
|
|
(5,942,590 |
) |
|
13,057,270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
18,313,403 |
|
|
13,240,007 |
|
|
(13,240,007 |
) |
|
18,313,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Loan due to related party |
|
- |
|
|
4,958,732 |
|
|
(4,958,732 |
) |
|
- |
|
Accounts payable |
|
819,141 |
|
|
30,857 |
|
|
(30,857 |
) |
|
819,141 |
|
Other accrued expenses |
|
93,445 |
|
|
996,849 |
|
|
(996,849 |
) |
|
93,445 |
|
Total current liabilities |
|
912,586 |
|
|
5,986,438 |
|
|
(5,986,438 |
) |
|
912,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset retirement obligation
|
|
- |
|
|
3,499,734 |
|
|
(3,499,734 |
) |
|
- |
|
Pension liabilities |
|
142,271 |
|
|
- |
|
|
- |
|
|
142,271 |
|
Total non-current liabilities |
|
142,271 |
|
|
3,499,734 |
|
|
(3,499,734 |
) |
|
142,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
1,054,857 |
|
|
9,486,172 |
|
|
(9,486,172 |
) |
|
1,054,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock (600,000,000
shares authorized as of September 30, 2014, USD 0.001 par value,
166,987,792 and 172,592,292 shares, respectively, issued and
outstanding) |
|
172,592 |
|
|
103,588 |
|
|
(103,588 |
) |
|
172,592 |
|
Additional paid-in capital |
|
78,593,604 |
|
|
- |
|
|
- |
|
|
78,593,604 |
|
Treasury stock |
|
(452,403 |
) |
|
- |
|
|
- |
|
|
(452,403 |
) |
Other comprehensive income |
|
- |
|
|
3,433,910 |
|
|
(3,433,910 |
) |
|
- |
|
Accumulated deficit |
|
(61,106,248 |
) |
|
(3,756,883 |
) |
|
3,756,883 |
|
|
(61,106,248 |
) |
Currency translation adjustment |
|
51,001 |
|
|
- |
|
|
- |
|
|
51,001 |
|
Total EPA shareholders' equity |
|
17,258,546 |
|
|
(219,385 |
) |
|
219,385 |
|
|
17,258,546 |
|
Noncontrolling interest |
|
- |
|
|
3,973,220 |
|
|
(3,973,220 |
) |
|
- |
|
TOTAL SHAREHOLDERS' EQUITY |
|
17,258,546 |
|
|
3,753,835 |
|
|
(3,753,835 |
) |
|
17,258,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
|
18,313,403 |
|
|
13,240,007 |
|
|
(13,240,007 |
) |
|
18,313,403 |
|
- 34 -
MNP PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS -
UNAUDITED
|
|
For the nine months ended |
|
|
|
|
|
|
|
|
|
09.30.2014 |
|
|
09.30.2014 |
|
|
Pro Forma |
|
|
|
|
|
|
MNP |
|
|
EPA.at Beteiligungs- |
|
|
Adjustments |
|
|
Pro Forma |
|
|
|
Petroleum Corp. |
|
|
gesellschaft mbH |
|
|
(Note 3) |
|
|
Consolidated |
|
|
|
USD |
|
|
USD |
|
|
USD |
|
|
USD |
|
OPERATING REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
- |
|
|
4,778,574 |
|
|
(4,778,574 |
) |
|
- |
|
Cost of sales |
|
- |
|
|
(2,576,797 |
) |
|
2,576,797 |
|
|
- |
|
Gross profit |
|
- |
|
|
2,201,777 |
|
|
(2,201,777 |
) |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
Personnel costs |
|
(1,180,666 |
) |
|
- |
|
|
- |
|
|
(1,180,666 |
) |
Exploration costs |
|
(1,178,469 |
) |
|
- |
|
|
- |
|
|
(1,178,469 |
) |
Depreciation and amortization |
|
(36,757 |
) |
|
- |
|
|
- |
|
|
(36,757 |
) |
Consulting fees |
|
(1,132,519 |
) |
|
- |
|
|
- |
|
|
(1,132,519 |
) |
Administrative costs |
|
(1,048,395 |
) |
|
(357,654 |
) |
|
357,654 |
|
|
(1,048,395 |
) |
Accretion of asset retirement obligation |
|
- |
|
|
(104,244 |
) |
|
104,244 |
|
|
- |
|
Total operating
expenses |
|
(4,576,806 |
) |
|
(461,898 |
) |
|
461,898 |
|
|
(4,576,806 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
income/(loss) from operations |
|
(4,576,806 |
) |
|
1,739,879 |
|
|
(1,739,879 |
) |
|
(4,576,806 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-OPERATING INCOME / (EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
|
Exchange differences |
|
(189,384 |
) |
|
- |
|
|
- |
|
|
(189,384 |
) |
Earnings in equity investment |
|
- |
|
|
- |
|
|
544,240 |
|
|
544,240 |
|
Change in fair value of investment in
associate |
|
1,714,684 |
|
|
- |
|
|
- |
|
|
1,714,684 |
|
Interest and other income |
|
- |
|
|
56,534 |
|
|
(56,534 |
) |
|
- |
|
Interest and other expense |
|
(350 |
) |
|
(32,123 |
) |
|
32,123 |
|
|
(350 |
) |
Total
non-operating expenses |
|
1,524,950 |
|
|
24,411 |
|
|
519,829 |
|
|
2,069,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before taxes |
|
(3,051,856 |
) |
|
1,764,290 |
|
|
(1,220,050 |
) |
|
(2,507,616 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
(9,557 |
) |
|
(282,280 |
) |
|
282,280 |
|
|
(9,557 |
) |
Net income/(loss) |
|
(3,061,413 |
) |
|
1,482,010 |
|
|
(937,770 |
) |
|
(2,517,173 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) attributable to non-controlling interest |
|
- |
|
|
644,718 |
|
|
(644,718 |
) |
|
- |
|
Net
income/(loss) attributable to the shareholders |
|
(3,061,413 |
) |
|
837,292 |
|
|
(293,052 |
) |
|
(2,517,173 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income |
|
- |
|
|
102,788 |
|
|
80,052 |
|
|
182,840 |
|
Net comprehensive income/(loss) |
|
(3,061,413 |
) |
|
1,584,798 |
|
|
(857,718 |
) |
|
(2,334,333 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net comprehensive income attributable to non-controlling
interest |
|
- |
|
|
466,214 |
|
|
(466,214 |
) |
|
- |
|
Net
comprehensive income/(loss) attributable to shareholders |
|
(3,061,413 |
) |
|
1,118,584 |
|
|
(391,504 |
) |
|
(2,334,333 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of outstanding shares (basic) |
|
171,371,039 |
|
|
1 |
|
|
|
|
|
171,371,039 |
|
Weighted average number of outstanding shares (diluted) |
|
171,371,039 |
|
|
1 |
|
|
|
|
|
171,371,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings/(loss) per share |
|
(0.02 |
) |
|
837,292 |
|
|
|
|
|
(0.01 |
) |
Diluted earnings/(loss) per share |
|
(0.02 |
) |
|
837,292 |
|
|
|
|
|
(0.01 |
) |
- 35 -
MNP PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS -
UNAUDITED
|
|
12.31.2013 |
|
|
12.31.2013 |
|
|
Pro Forma |
|
|
|
|
|
|
MNP |
|
|
EPA.at
Beteiligungs- |
|
|
Adjustments |
|
|
Pro Forma |
|
|
|
Petroleum Corp.
|
|
|
gesellschaft mbH
|
|
|
(Note 3) |
|
|
Consolidated |
|
|
|
USD |
|
|
USD |
|
|
USD |
|
|
USD |
|
OPERATING REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
- |
|
|
5,713,769 |
|
|
(5,713,769 |
)
|
|
- |
|
Cost
of sales |
|
- |
|
|
(3,060,484 |
) |
|
3,060,484 |
|
|
- |
|
Gross profit |
|
- |
|
|
2,653,285 |
|
|
(2,653,285 |
) |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
Personnel costs |
|
(2,301,938 |
) |
|
- |
|
|
- |
|
|
(2,301,938 |
) |
Exploration costs |
|
(1,146,948 |
)
|
|
- |
|
|
- |
|
|
(1,146,948 |
)
|
Depreciation and amortization |
|
(52,986 |
) |
|
- |
|
|
- |
|
|
(52,986 |
) |
Consulting fees |
|
(1,838,909 |
)
|
|
- |
|
|
- |
|
|
(1,838,909 |
)
|
Administrative costs |
|
(1,201,888 |
) |
|
(493,125 |
) |
|
493,125 |
|
|
(1,201,888 |
) |
Accretion of asset retirement obligation |
|
- |
|
|
(127,037 |
) |
|
127,037 |
|
|
- |
|
Total operating expenses |
|
(6,542,669 |
) |
|
(620,162 |
) |
|
620,162 |
|
|
(6,542,669 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income/(loss) from operations |
|
(6,542,669 |
) |
|
2,033,123 |
|
|
(2,033,123 |
) |
|
(6,542,669 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-OPERATING INCOME / (EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
|
Exchange differences |
|
(37,137 |
)
|
|
- |
|
|
- |
|
|
(37,137 |
)
|
Earnings in equity investment |
|
- |
|
|
- |
|
|
658,437 |
|
|
658,437 |
|
Change in fair value of
investment in associate |
|
(4,247,067 |
)
|
|
- |
|
|
- |
|
|
(4,247,067 |
)
|
Interest and other income |
|
1,391 |
|
|
231,043 |
|
|
(231,043 |
) |
|
1,391 |
|
Interest and other expense |
|
(613 |
) |
|
(70,225 |
) |
|
70,225 |
|
|
(613 |
) |
Total non-operating expenses |
|
(4,283,426 |
) |
|
160,818 |
|
|
497,619 |
|
|
(3,624,989 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss) before taxes |
|
(10,826,095 |
) |
|
2,193,941 |
|
|
(1,535,504 |
) |
|
(10,167,658 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
(135,018 |
) |
|
(403,319 |
) |
|
403,319 |
|
|
(135,018 |
) |
Net income/(loss) |
|
(10,961,113 |
) |
|
1,790,622 |
|
|
(1,132,185 |
) |
|
(10,302,676 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) attributable to non-controlling interest |
|
- |
|
|
777,642 |
|
|
(777,642 |
) |
|
- |
|
Net income/(loss) attributable to the shareholders |
|
(10,961,113 |
) |
|
1,012,980 |
|
|
(354,543 |
) |
|
(10,302,676 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
- |
|
|
(279,092 |
) |
|
101,586 |
|
|
(177,506 |
) |
Net comprehensive income/(loss) |
|
(10,961,113 |
) |
|
1,511,530 |
|
|
(1,030,599 |
) |
|
(10,480,182 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net comprehensive income attributable to non-controlling
interest |
|
- |
|
|
771,636 |
|
|
(771,636 |
) |
|
- |
|
Net comprehensive income/(loss) attributable to
shareholders |
|
(10,961,113 |
) |
|
739,894 |
|
|
(258,963 |
) |
|
(10,480,182 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of outstanding shares
(basic) |
|
172,592,292 |
|
|
1 |
|
|
|
|
|
172,592,292 |
|
Weighted average number of outstanding shares (diluted) |
|
172,592,292 |
|
|
1 |
|
|
|
|
|
172,592,292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings/(loss) per
share |
|
(0.06 |
) |
|
1,012,980
|
|
|
|
|
|
(0.06 |
) |
Diluted earnings/(loss) per share |
|
(0.06 |
) |
|
1,012,980 |
|
|
|
|
|
(0.06 |
)
|
- 36 -
Note 1 Purchase consideration allocation
|
The final purchase consideration was USD 12,000,000. The
allocation of the purchase consideration to the asset acquired is based on 65%
of EPA shareholders equity after adjusting for the conversion of the related
party loan to equity which happened prior to the closing of the transaction. The
excess of the purchase consideration over the asset value is reflected as
goodwill.
The following summarizes the allocation of the consideration if
the acquisition had taken place on September 30, 2014:
Purchase consideration allocation (in USD)
|
|
Sep 30, 2014 |
|
Investment |
|
3,080,575 |
|
Goodwill |
|
8,919,425 |
|
Total consideration |
|
12,000,000 |
|
Note 2 Adjustments to the Unaudited Pro Forma
Consolidated Balance Sheet |
The acquired company will be accounted for under the equity
method. Therefore, EPA has been deconsolidated through the pro forma
adjustments. In addition to the deconsolidating entries, the following
adjustments were made to the September 30, 2014 consolidated balance sheet to
fully reflect the completion of the transaction as at September 30, 2014:
i) |
The USD 2,000,000 consideration outstanding as at
September 30, 2014 has been deducted from cash; |
ii) |
The USD 10,000,000 transaction prepayment has been
deducted from Transaction prepayment; and |
iii) |
The total consideration paid of USD 12,000,000 has been
allocated between Investment and Goodwill as shown in Note
1. |
Note 3 Adjustments to the Unaudited Pro Forma
Consolidated Statements of Comprehensive Loss |
In addition to the deconsolidating entries, the following
adjustment was made to the nine month September 30, 2014 and year ended December
31, 2013 consolidated statements of comprehensive loss to reflect the completion
of the transaction as at January 1, 2013:
i) |
Earnings in equity investment is now presented as such.
This consists of 65% of the income of EPA, attributable to MNP, from the
respective periods. |
ii) |
Other comprehensive income/(loss) is now presented as
such. This consists of 65% of the other comprehensive income of EPA,
attributable to MNP, from the respective
periods. |
- 37 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
MNP PETROLEUM CORPORATION
By:
/s/ Peter-Mark Vogel
Peter-Mark Vogel
Chief Financial Officer, Treasurer and Secretary
Date:
April 24, 2015
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