Notes
to the Consolidated Financial Statements
(unaudited)
1.
|
Summary of Significant Accounting Policies
|
(a)
Basis of Presentation
The
accompanying unaudited consolidated financial statements Park Place Energy Inc. (“Park Place”, “Company”,
“we” or “our”) have been prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three month and six month period ended June 30, 2018 are not necessarily indicative
of the results that may be expected for the year ended December 31, 2018.
The
consolidated balance sheet at December 31, 2017, has been derived from the audited consolidated financial statements at that date
but does not include all the information and footnotes required by generally accepted accounting principles for complete financial
statements.
For
further information, refer to the consolidated financial statements and footnotes thereto included in Park Place’s annual
report on Form 10-K for the year ended December 31, 2017.
The
Company has suffered recurring losses from operations and the Company has a significant working capital deficiency. These conditions
raise substantial doubt about the Company’s ability to continue as a going concern. The Company will need to raise funds
through either the sale of its securities, issuance of corporate bonds, joint venture agreements and/or bank financing to accomplish
its goals. If additional financing is not available when needed, the Company may need to cease operations. The Company may not
be successful in raising the capital needed to drill and/or rework existing oil wells. Any additional wells that the Company may
drill may be non-productive. Management believes that actions presently being taken to secure additional funding for the reworking
of its existing infrastructure will provide the opportunity for the Company to continue as a going concern. Since the Company
has an oil producing asset, its goal is to increase the production rate by optimizing its current infrastructure. The accompanying
financial statements have been prepared assuming the Company will continue as a going concern; no adjustments to the financial
statements have been made to account for this uncertainty.
(b)
Use of Estimates
The
preparation of consolidated financial statements 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. The Company regularly evaluates estimates and assumptions
related to the estimated useful lives and recoverability of long-lived assets, impairment of oil and gas properties, fair value
of stock-based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions
on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs
and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially
and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual
results, future results of operations will be affected.
(c)
Financial Instruments and Fair Value Measures
The
carrying amounts reported in the consolidated balance sheets for cash, receivables, loans payable, accounts payable and accrued
liabilities approximate fair value because of the immediate or short-term maturity of these financial instruments. None of these
instruments are held for trading purposes.
(d)
Loss Per Share
The
Company computes loss per share of Company stock in accordance with ASC 260 (“Earnings per Share”), which requires
presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is
computed by dividing the loss available to common shareholders (numerator) by the weighted average number of shares outstanding
(denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period
using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average
stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options
or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at June 30, 2018 and December
31, 2017, the Company had 12,090,000 and 14,210,000 potentially dilutive shares outstanding, which were excluded from the calculation
of diluted EPS, respectively.
(e)
Revenue Recognition
In
May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). The Company adopted
this standard on modified retroactive basis on January 1, 2018. No financial statement impact occurred upon adoption.
Revenue
from Contracts with Customers
We
recognize revenue when it satisfies a performance obligation by transferring control over a product to a customer. Revenue is
measured based on the consideration we expect to receive in exchange for those products.
Performance
Obligations and Significant Judgments
We
sell oil and natural gas products in Turkey. We enter into contracts that generally include one type of distinct product in variable
quantities and priced based on a specific index related to the type of product.
The
oil and natural gas are typically sold in an unprocessed state to processors and other third parties for processing and sale to
customers. We recognize revenue at a point in time when control of the oil is transferred. For oil sales, control is typically
transferred to the customer upon receipt at the wellhead or a contractually agreed upon delivery point. Under our natural gas
contracts with processors, control transfers upon delivery at the wellhead or the inlet of the processing entity’s system.
For our other natural gas contracts, control transfers upon delivery to the inlet or to a contractually agreed upon delivery point.
In the cases where we sell to a processor, we have determined that we are the principal in the arrangement and the processors
are our customers. We recognize the revenue in these contracts based on the net proceeds received from the processor.
Transfer
of control drives the presentation of transportation and gathering costs within the accompanying unaudited consolidated statements
of operations. Transportation and gathering costs incurred prior to control transfer are recorded within the transportation and
gathering expense line item on the accompanying unaudited consolidated statements of operations, while transportation and gathering
costs incurred subsequent to control transfer are recorded as a reduction to the related revenue.
A
portion of our product sales are short-term in nature. For those contracts, we use the practical expedient in ASC 606-10-50-14
exempting us from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation
is part of a contract that has an original expected duration of one year or less.
For
our product sales that have a contract term greater than one year, we have utilized the practical expedient in ASC 606-10-50-14(a)
which states we are not required to disclose the transaction price allocated to remaining performance obligations if the variable
consideration is allocated entirely to an unsatisfied performance obligation. Under these sales contracts, each unit of product
represents a separate performance obligation; therefore, future volumes are unsatisfied, and disclosure of the transaction price
allocated to remaining performance obligations is not required. We have no unsatisfied performance obligations at the end of each
reporting period.
We
do not believe that significant judgments are required with respect to the determination of the transaction price, including any
variable consideration identified. There is a low level of uncertainty due to the precision of measurement and use of index-based
pricing with predictable differentials. Additionally, any variable consideration identified is not constrained.
(f)
Statement of Cash Flows
In
November 2016, the FASB issued ASU No. 2016-18, (“ASU 2016-18”) Statement of Cash Flows (Topic 230): Restricted Cash.
This ASU is intended to provide guidance on the presentation of restricted cash or restricted cash equivalents and reduce the
diversity in practice. This ASU requires amounts generally described as restricted cash and restricted cash equivalents to be
included with cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts on the statement
of cash flows. Adopted retrospectively as of January 1, 2018 and have applied to all periods presented herein. The adoption of
ASU 2016-18 did not have a material impact to our unaudited condensed consolidated financial statements. The effect of the adoption
of ASU 2016-18 on our condensed consolidated statements of cash flows was to include restricted cash balances in the beginning
and end of period balances of cash and cash equivalent and restricted cash. The change in restricted cash was previously disclosed
in operating activities and financing activities in the condensed consolidated statements of cash flows.
(g)
Recently Issued Accounting Pronouncements
Applicable
for fiscal years beginning after December 15, 2018:
In
February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” This accounting standard seeks to increase transparency
and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key
information about leasing arrangements. Current US GAAP does not require lessees to recognize assets and liabilities arising from
operating leases on the balance sheet. This standard also provides guidance from the lessees’ perspective on how to determine
if a lease is an operating lease or a financing lease and the differences in accounting for each. In January 2018, the FASB issued
ASU No. 2018-01, which allows for an entity to elect an optional transition practical expedient for land easements that exist
or expired before adoption of Topic 842. The adoption of this standard is required for interim and fiscal periods beginning after
December 15, 2018 and it is required to be applied using the modified retrospective approach. Early adoption is permitted.
The
Company has evaluated the impact of the above standards on their consolidated financial statements. Other recent accounting pronouncements
issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the
Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s
present or future consolidated financial statements.
2.
|
Oil and Gas Properties
|
|
|
Unproven
properties
|
|
|
Proven
properties
|
|
|
|
|
|
|
Bulgaria
|
|
|
Turkey
|
|
|
Total
|
|
January
1, 2016
|
|
$
|
2,939,829
|
|
|
$
|
-
|
|
|
$
|
2,939,829
|
|
Expenditures
|
|
|
144,002
|
|
|
|
-
|
|
|
|
144,002
|
|
Acquisition
|
|
|
-
|
|
|
|
3,414,110
|
|
|
|
3,414,110
|
|
Depletion
|
|
|
-
|
|
|
|
(774,547
|
)
|
|
|
(774,547
|
)
|
December
31, 2017
|
|
$
|
3,083,831
|
|
|
$
|
2,639,563
|
|
|
$
|
5,723,394
|
|
Foreign
currency translation change
|
|
|
(1,534
|
)
|
|
|
-
|
|
|
|
(1,534
|
)
|
Depletion
|
|
|
-
|
|
|
|
(353,394
|
)
|
|
|
(353,394
|
)
|
Asset
retirement cost addition
|
|
|
-
|
|
|
|
1,127,344
|
|
|
|
1,127,344
|
|
Addition
|
|
|
-
|
|
|
|
467,015
|
|
|
|
467,015
|
|
June
30, 2018
|
|
$
|
3,082,297
|
|
|
$
|
3,880,528
|
|
|
$
|
6,962,825
|
|
Bulgaria
The
Company holds a 98,205-acre oil and gas exploration claim in the Dobrudja Basin located in northeast Bulgaria. The Company intends
to conduct exploration for natural gas and test production activities over a five-year period in accordance with or exceeding
its minimum work program obligation. The Company’s commitment is to perform geological and geophysical exploration activities
in the first 3 years of the initial term (the “Exploration and Geophysical Work Stage”), followed by drilling activities
in years 4 and 5 of the initial term (the “Data Evaluation and Drilling Stage”). The Company is required to drill
10,000 meters (approximately 32,800 feet) of new wellbore (which may be vertical, horizontal or diagonal) and conduct other exploration
activities during the initial term. The Company intends to commence its work program efforts once it receives all regular regulatory
approvals of its work programs.
Turkey
Cendere
oil field
The
primary asset of the PPE Turkey Companies is the Cendere onshore oil field, which is a profitable oil field located in South East
Turkey having a total of 25 wells. The Cendere Field was first discovered in 1988. Oil production commenced during 1990. The operator
of the Cendere Field is TPAO. The Company’s interest is 19.6% for all wells except for wells C-13, C-15 and C-16, for which
its interest is 9.8%. The produced oil has a gravity of 27.5o API.
The
Cendere Field is a long term low decline oil reserve. The Company has a 19.6% interest in the Cendere oil field located in Southeast
Turkey. This mature oilfield consistently produces between 110 and 123 bopd (barrels oil per day) net to the Company. During August
2018, the Company’s average net oil was 135 bopd at 96% water cut.
At
December 31, 2016, the gross oil production rate for the producing wells in Cendre was 675 MMbbls; the average daily 2017 gross
production rate for the field was 715 bbls. At the end of June 2018, oil is currently sold at a price of approximately US$ 71
per barrel for a netback per barrel of approximately US$38.
At
December 31, 2017, the Cendere field was producing 669 barrels of oil per day, net to the PPE Turkey Companies; and averaged 118
barrels per day during 2017 net to the PPE Turkey CompaniesAfter the initial development of the Cendere Field, oil production
was approximately 2,000 bopd from three wells and which peaked at approximately 7,000 bopd in 1992, when additional wells were
put into production. The field started to produce water during the first year of production. To date approximately 20.1 MMbbls
of oil have been produced from the Cendere Field.
A
description of the Cendere Field geological and reservoir characteristics is as follows. The reservoirs are located in the South
East Anatolian Basin and within the Middle Cretaceous period. The carbonated Derdere Formation is the main reservoir in Cendere
Field and has dolomitization and fracturing, which enhance its production characteristics. There are also four additional oil
reservoirs contained within Cendere Field. The Cendere Field is covered by 54 km2 of 3D seismic that was acquired in 2004.
The
field was developed using a collection of dispersed oil wells from which production is collected and exported to the Cendere gathering
station. The produced oil is exported to the TPAO Karakus processing facility which then is transported onwards to the BOTAS-operated
oil pipeline. There are 20 well pads which currently house 16 producing wells spread over an area of approximately 15 square kilometers.
A field gathering station, located to the southwest of the Cendere Field collects the oil and produced water from a collection
of flowlines and manifolds.
The
oil produced from the Centere Field is exported from Karakus via a TPAO operated oil pipeline to the town of Saril, where the
export oil pipeline ties into the BOTAS operated pipeline to the Ceyhan region. The oil is sold at market prices (less a processing
and transportation fee) to Tupras in Ceyhan.
The
South Akcakoca Sub-Basin (“SASB”).
The
Company owns offshore production licenses called the South Akcakoca Sub-Basin (“SASB”). The Company now owns a 49%
working interest in SASB, 12.5% which was obtained during January 2018. The additional interest was acquired with cash of $309,515,
1,000,000 shares issued on November 22, 2017 fair valued at $90,000 and a further share issuance of 500,000 shares on January
30, 2018 fair valued at $67,500 for total consideration of $467,015. During the year ending December 31, 2017, the Company owned
a 37.5% interest. SASB has four producing fields, each with a production platform plus subsea pipelines that connect the fields
to an onshore gas plant. The four SASB fields are located off the north coast of Turkey towards the western end of the Black Sea
in water depths ranging from 60 to100 meters. Gas is produced from Eocene age sandstone reservoirs at subsea depths ranging from
1,100 to1,800 meters.
Bakuk
gas field
Park
Place also owns a 50% operated interest in the Bakuk gas field located near the Syrian border. The Bakuk field is shut-in with
no plans to revive production in the near term.
In
April 2015, the Company loaned $38,570 to a Bulgarian company pursuant to a revolving credit facility, enabling such Bulgarian
company to buy and manage land in Bulgaria to be leased by the Company for future well sites. The credit facility has a maximum
loan obligation of BGN 1,000,000 ($597,500 USD at June 30, 2018) bears interest at 6.32%, has a five-year term and is secured
by the land the Bulgarian company buys. Payment on the facility is due the earlier of the end of the five-year term (April 6,
2020) or demand by the Company. As of June 30, 2018, the outstanding balance on the loan obligation was $47,655 (December 31,
2017: $46,109). The change in balance was due to changes in foreign currency translations.
As
at
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
Interest
bearing loans
|
|
$
|
603,826
|
|
|
$
|
903,262
|
|
Non-interest-bearing
loans
|
|
|
27,000
|
|
|
|
62,025
|
|
Total
|
|
$
|
630,826
|
|
|
$
|
965,287
|
|
Loans
bearing interest, accrue at 10% per annum are all unsecured. All loans are due on demand. No interest has been inputted on the
non-interest-bearing loans as it would be immaterial to the financial statements.
5.
|
Asset Retirement Obligations
|
Asset
retirement obligations (“AROs”) associated with the retirement of tangible long-lived assets are recognized as liabilities
with an increase to the carrying amounts of the related long-lived assets in the period incurred. The fair value of AROs is recognized
as of the acquisition date. The cost of the tangible asset, including the asset retirement cost, is depleted over the life of
the asset. AROs are recorded at estimated fair value, measured by reference to the expected future cash outflows required to satisfy
the retirement obligations discounted at the Company’s credit-adjusted risk-free interest rate. Accretion expense is recognized
over time as the discounted liabilities are accreted to their expected settlement value. If estimated future costs of AROs change,
an adjustment is recorded to both the ARO and the long-lived asset. Revisions to estimated AROs can result from changes in retirement
cost estimates, revisions to estimated inflation rates and changes in the estimated timing of abandonment. Our ARO is measured
using primarily Level 3 inputs. The significant unobservable inputs to this fair value measurement include estimates of plugging
costs, remediation costs, inflation rate and well life. The inputs are calculated based on historical data as well as current
estimated costs.
The
Company estimated an ARO for the addition of 12.25% of the South Akcakoca Sub Basin as disclosed in Note 2. For the current period
addition, the Company used 2.5% as inflation rate and used a risk-free rate of 10% to present value the obligation.
The
following is a description of the Company’s asset retirement obligations:
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
|
|
|
|
|
|
Asset
retirement obligations at beginning of period
|
|
$
|
2,527,259
|
|
|
$
|
-
|
|
Additions
|
|
|
1,127,344
|
|
|
|
2,302,500
|
|
Accretion
expense
|
|
|
177,525
|
|
|
|
224,759
|
|
Asset
retirement obligations at end of period
|
|
$
|
3,832,128
|
|
|
$
|
2,527,259
|
|
During
the six months ending June 30, 2018, the Company closed several private placements with the issuance of 6,750,000 shares of common
stock, at $0.10 per share for gross proceeds of $675,000. Each common share having ½ of one share purchase warrant attached,
resulting in the issuance of 3,375,000 warrants. Each whole share purchase warrant is exercisable for a period of 24 months at
an exercise price of $0.30 per share of common stock.
The
Company received a further $210,000 in subscriptions, which were closed subsequent to period end.
During
the six months ended, the Company issued 670,000 shares to management and a consultant valued at $80,400, which were outstanding
at December 31, 2017.
On
a private placement, a broker fee of $7,250 was paid and offset against paid up capital.
On
February 21, 2018, the Company issued 500,000 shares of the company’s common stock as partial consideration of an additional
12.25% of the South Akcakoca Sub Basin (“SASB”) gas field. The common shares were fair valued at $67,500 based on
the closing price of the stock on the date of issuance.
On
March 5, 2018 the Company settled note payables of $250,000 for 2,500,000. The market price of the stock on the date of settlement
was $0.141 and loss of $102,500 was recorded.
The
following table summarizes the continuity of the Company’s stock options:
Outstanding,
December 31, 2017
|
|
|
3,315,000
|
|
Granted
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
Expired
|
|
|
(100,000
|
)
|
Outstanding,
June 30, 2018
|
|
|
3,215,000
|
|
As
at June 30, 2018, all stock options have fully vested. The weighted average remaining life of the stock options are 2.58 years
(December 31, 2017: 2.99). The weighted average exercise price at the period ended June 30, 2018 is $0.14 (December 31, 2017:
$0.14). The aggregate intrinsic value of the stock options at June 30, 2018 is $48,600 (December 31, 2017: $103,050).
There
was no compensation expense related to stock options recognized during the six months ended June 30, 2018 and $23,787 recorded
for the comparative six months ended June 30, 2017. At June 30, 2018, the Company has no unrecognized compensation expense related
to stock options and for the six months ended June 30, 2017 the Company had $277,874 in unrecognized compensation expense related
to stock options. There was no restricted stock expense for the six months ended June 30, 2018 and June 30, 2017.
During
the period, the Company closed several private placements with the issuance of 6,550,000 shares of common stock. Each common share
having ½ of one share purchase warrant attached, resulting in the issuance of 3,375,000 warrants. Each whole share purchase
warrant is exercisable for a period of 24 months at an exercise price of $0.30 per share of common stock.
The
fair values for warrants issued have been estimated using the Black-Scholes option pricing model assuming no expected dividends
and the following weighted average assumptions:
|
|
2018
|
|
Risk-free
interest rate
|
|
|
2.17-2.58
|
%
|
Expected
life (in years)
|
|
|
2.0
|
|
Expected
volatility
|
|
|
216-227
|
%
|
Weighted average
fair value per share
|
|
$
|
0.26
|
|
The
fair value of the warrants issued was $426,081. The fair value is allocated to additional paid-in capital.
The
following table summarizes the share purchase warrants:
Outstanding, December 31, 2017
|
|
|
10,895,000
|
|
Expired
|
|
|
(5,395,000
|
)
|
Issued
|
|
|
3,375,000
|
|
Outstanding, June 30, 2018
|
|
|
8,875,000
|
|
The
weighted average remaining life of the warrants are 0.71 years (December 31, 2017: 0.35). The weighted average exercise price
at the period ended June 30, 2018 is $0.30 (December 31, 2017: $0.35).
During
2018 and 2017, the Company’s operations were in the resource industry in Bulgaria, and Turkey with head offices in the United
States, Canada and a satellite office in Sofia, Bulgaria. The Company’s primary operations are the oil and gas operations
in Turkey. Additionally, the Company has a petroleum exploration license in Bulgaria.
For the period ended June 30, 2018
|
|
Bulgaria
|
|
|
North America
|
|
|
Turkey
|
|
|
Total
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas sales
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,089,575
|
|
|
$
|
2,089,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production
|
|
|
-
|
|
|
|
-
|
|
|
|
1,440,894
|
|
|
|
1,440,894
|
|
Depletion
|
|
|
-
|
|
|
|
-
|
|
|
|
353,394
|
|
|
|
353,394
|
|
Depreciation
|
|
|
-
|
|
|
|
-
|
|
|
|
15,239
|
|
|
|
15,239
|
|
Accretion of asset retirement obligation
|
|
|
-
|
|
|
|
-
|
|
|
|
177,525
|
|
|
|
177,525
|
|
General and administrative
|
|
|
1,115
|
|
|
|
327,745
|
|
|
|
534,826
|
|
|
|
863,686
|
|
Total expenses
|
|
$
|
1,115
|
|
|
$
|
327,745
|
|
|
$
|
2,521,878
|
|
|
$
|
2,850,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before other income (expenses)
|
|
$
|
(1,115
|
)
|
|
$
|
(327,745
|
)
|
|
$
|
(432,303
|
)
|
|
$
|
(761,163
|
)
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
-
|
|
|
|
-
|
|
|
|
5,582
|
|
|
|
5,582
|
|
Interest expense
|
|
|
-
|
|
|
|
(37,098
|
)
|
|
|
-
|
|
|
|
(37,098
|
)
|
Foreign exchange gain (loss)
|
|
|
-
|
|
|
|
4,082
|
|
|
|
(30,246
|
)
|
|
|
(26,164
|
)
|
Other income
|
|
|
-
|
|
|
|
-
|
|
|
|
332,239
|
|
|
|
332,239
|
|
Loss on debt settlement
|
|
|
-
|
|
|
|
(102,500
|
)
|
|
|
-
|
|
|
|
(102,500
|
)
|
Total other income (expense)
|
|
$
|
-
|
|
|
$
|
(135,516
|
)
|
|
$
|
307,575
|
|
|
$
|
172,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss)
|
|
$
|
(1,115
|
)
|
|
$
|
(463,261
|
)
|
|
$
|
(124,728
|
)
|
|
$
|
(589,104
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Lived Assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,039,068
|
|
|
$
|
4,039,068
|
|
The
Company is subject to United States federal and state income taxes at a rate of 21%. The reconciliation of the provision for income
taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:
|
|
Six months Ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Benefit at statutory rate
|
|
$
|
(123,712
|
)
|
|
$
|
(194,283
|
)
|
Permanent differences and other:
|
|
|
-
|
|
|
|
154
|
|
Valuation allowance change
|
|
|
123,712
|
|
|
|
194,129
|
|
Income tax provision
|
|
$
|
-
|
|
|
$
|
-
|
|
11.
|
Related party transactions
|
At
June 30, 2018, $105,722 (December 31, 2017: $132,249) of accounts payable were to related parties. The amounts owed, and owing
are unsecured, non-interest bearing, and due on demand.
12.
|
Supplementary cash flow
|
The
following table provides a reconciliation of cash and restricted cash reported within the statement of financial position that
sum to the total of the same such amounts shown in the statement of cash flows.
|
|
Six Months Ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Cash
|
|
$
|
231,451
|
|
|
$
|
314,900
|
|
Restricted cash
|
|
|
122,823
|
|
|
|
132,084
|
|
Total cash and restricted cash shown in the statement of cash flows
|
|
$
|
354,274
|
|
|
$
|
446,984
|
|
The
restricted cash is related to the drilling bonds provided to GDPA (General Directorate of Petroleum Affairs) for the exploration
licenses due to Turkish Petroleum Law. The amounts are for 2% of the annual work budget of the different licenses which is submitted
to GDPA on annual basis.
The
Company received $332,239 in other income from the government. This amount relates to the settlement of a legal and tax dispute
with General Directorate of Petroleum Affairs (GDPA) relating to a taxation liability that the Company was assessed for training
costs commencing 2008. The Company disputed the assessment, but was previously unsuccessful in its application. In 2018, the Company
was successful in negotiating a non-legal settlement, overturning the training cost obligation.
The
“training obligation” was imposed by GDPA in relation to SASB Project pursuant to former Turkish Petroleum Law no.
6326. Because of the 2008 assessment, the Company was forced to follow the amounts and percentages set in 2008. The Law states
that petroleum right holders in Turkey are obliged to train Turkish citizens against each foreign citizen recruited in petroleum
activities. This obligation is determined by taking 25% of the total number of the days the foreigners worked for the petroleum
activity.
July
2, 2018, the Company closed a private placement with the issuance of 2,000,000 units at $0.10 per unit for gross proceeds of $200,000.
$10,000 of the proceeds were received during the quarter ended March 31, 2018.
On
August 20, 2018, the Company closed a private placement with the issuance of 650,000 units at $0.10 per unit for gross proceeds
of $65,000.
On
August 21, 2018, the Company closed a private placement with the issuance of 321,061 units at $0.10 per unit for gross proceeds
of $32,106.
Each
unit was comprised of one common stock and ½ of one share purchase warrant attached, resulting in the issuance of 1,585,531
warrants. Each whole share purchase warrant is exercisable for a period of 24 months at an exercise price of $0.30 per share of
common stock.
On
October 1, 2018 the Company entered into an agreement to grant to a consultant of the Company a 2% (two percent) gross overriding
royalty on petroleum substances produced from certain of its exploration properties, namely: Block 1-11 Vranino situated in Dobrich
District, Bulgaria and seven contiguous exploration licences in the province of Hakkari Yuksekova Semdiali Derecik, Turkey. The
Grant of the royalty agreement was for services involving technical and corporate advice services.
On
October 1, 2018 the Company entered into an agreement to grant to the CEO of the Company a .5% (one half of one percent) gross
overriding royalty on petroleum substances produced from certain of its exploration properties, namely: Block 1-11 Vranino situated
in Dobrich District, Bulgaria and seven contiguous exploration licences in the province of Hakkari Yuksekova Semdiali Derecik,
Turkey. The Grant of the royalty agreement was for services involving technical and corporate advice services.