Attached files
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EX-32.1 - Gulf United Energy, Inc. | ex32-1.htm |
EX-14.1 - Gulf United Energy, Inc. | ex14-1.htm |
EX-31.1 - Gulf United Energy, Inc. | ex31-1.htm |
EX-14.2 - Gulf United Energy, Inc. | ex14-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-K
[X]
|
Annual
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
|
|
For
the fiscal year ended August 31, 2009
|
[ ]
|
Transition
Report pursuant to 13 or 15(d) of the Securities Exchange Act of
1934
|
|
For
the transition period from ___________________ to
___________________
|
Commission
File Number 000-52322
Gulf United Energy,
Inc.
(Exact
name of small Business Issuer as specified in its charter)
Nevada
|
20-5893642
|
(State
or other jurisdiction of incorporation or
|
(IRS
Employer Identification No.)
|
organization)
|
P.O Box
22165; Houston, Texas 77227-2165
(Address
of principal executive offices) (Postal or Zip Code)
Registrant's
telephone number, including area code: 713-893-3543
Securities
registered pursuant to Section 12(b) of the Act:
None
Securities
registered pursuant to section 12(g) of the Act:
None
Indicate
by check mark whether the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act
[ ]
Yes [X ] No
Indicate
by check mark whether the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act
[ ]
Yes [ X] No
Note –
Checking the box above will not relieve any registered required to file reports
pursuant to Section 13 of 15(d) of the Exchange Act from their obligations under
those Sections.
Persons
who respond to the collection of information contained in this form are not
required to respond unless the form displays a currently valid OMB control
number.
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days [X ] Yes [ ] No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
[ ]
Yes [X] No
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.[ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of “large accelerated filer”, “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer
|
[
]
|
Accelerated
filer
|
[
]
|
Non-accelerated
filer
|
[
]
|
Smaller
reporting company
|
[X]
|
Gulf
United Energy, Inc’s revenue for its most recent fiscal year was
$0.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) [ ] Yes [ X ]
No
As of
December 9, 2009 the aggregate market value of shares of common stock held by
non-affiliates (based on the closing price of $0.05 per share for the common
stock as quoted on that date) was approximately $1,217,500.
APPLICABLE
ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. [ ] Yes
[ ] No
(APPLICABLE
ONLY TO CORPORATE ISSUERS)
Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.
As
of December 9, 2009, there were 26,350,000 shares of $0.001 par value common
stock issued and outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
List
hereunder the following documents if incorporated by reference and the Part of
the Form 10-K (e.g., Part I, Part II, etc.) into which the document in
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; (3) Any prospectus filed pursuant to Rule 424(b) or (c)
under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).
(None)
GULF
UNITED ENERGY, INC.
(A
Development Stage Company)
TABLE
OF CONTENTS
Part
I
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||||
Item
1
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Business
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4
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Item
1A
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Risk
Factors
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7
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Item
1B
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Unresolved
Staff Comments
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10
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Item
2
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Properties
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10
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||
Item
3
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Legal
Proceedings
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10
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Item
4
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Submission
of Matters to a Vote of Security Holders
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10
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||
Part
II
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||||
Item
5
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Market
for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
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10
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||
Item
6
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Selected
Financial Data
|
12
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||
Item
7
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Management's
Discussion and Analysis of Financial Condition and Plan of
Operations
|
13
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Item
7A
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Quantitative
and Qualitative Disclosures About Market Risk
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15
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Item
8
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Financial
Statements and Supplementary Data
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16
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Item
9
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Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure
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27
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Item
9A
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Controls
and Procedures
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27
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||
Item
9B
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Other
Information
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28
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||
Part
III
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||||
Item
10
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Directors,
Executive Officers and Corporate Governance
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29
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Item
11
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Executive
Compensation
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30
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Item
12
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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30
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Item
13
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Certain
relationships and Related Transactions, and Director
Independence
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31
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Item
14
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Principal
Accounting Fees and Services
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31
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Part
IV
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||||
Item
15
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Exhibits,
Financial Statement Schedules
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31
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||
Signatures
|
33
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|||
GULF
UNITED ENERGY, INC.
(A
Development Stage Company)
PART
I
FORWARD
LOOKING STATEMENTS
Except
for the historical information and discussions contained herein, statements
contained in this Annual Report on Form 10-K may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements involve a number of risks, uncertainties and other
factors that could cause actual results to differ materially, as discussed
elsewhere in the Gulf United Energy, Inc ("Company" or "GUE"), filings with the
U.S. Securities and Exchange Commission ("SEC"). The statements contained in
this document that are not purely historical are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 ("Securities
Act") and Section 21E of the Securities Exchange Act of 1934 ("Exchange Act"),
including, without limitation, statements regarding our expectations, beliefs,
intentions or strategies regarding our business. This Annual Report on Form 10-K
includes forward-looking statements about our business including, but not
limited to, the level of our expenditures for various expense items and our
possible liquidity in future periods. We may identify these statements by the
use of words such as "anticipate," "believe," "continue," "could," "estimate,"
"expect," "intend," "may," "might," "plan," "potential," "predict," "project,"
"should," "will," "would" and other similar expressions. All forward-looking
statements included in this document are based on information available to us on
the date hereof, and we assume no obligation to update any such forward-looking
statements, except as may otherwise be required by law. Our actual results could
differ materially from those anticipated in these forward-looking
statements.
We are
subject to the information and periodic reporting requirements of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) and in accordance with the
Exchange Act, we file annual, quarterly and special reports, and other
information with the Securities and Exchange Commission. These
periodic reports and other information are available for inspection and copying
at the regional offices, public reference facilities and website of the
Securities and Exchange Commission referred to above.
Statements
contained in this report about the contents of any contract or any other
document that is filed as an exhibit are not necessarily complete, and we refer
you to the full text of the contract or other document filed as an
exhibit. A copy of annual, quarterly and special reports and related
exhibits and schedules may be inspected without charge at a Public Reference
Room maintained by the Securities and Exchange Commission as 100 F Street N.E.,
Washington D.C. 20549, and copies of such reports may be obtained from the
Securities and Exchange Commission upon payment of the prescribed
fee. Information regarding the operation of the Public Reference Room
may be obtained by calling the Securities and Exchange Commission at
1-800-SEC-0330. The Securities and Exchange Commission maintains a web site that
contains reports, proxy and information statements, and other information
regarding registrants that file electronically with the SEC. The
address of the site is www.sec.gov.
ITEM
1. BUSINESS
THE
COMPANY
Gulf
United Energy, Inc. is currently in the business of investing in natural gas
pipeline and liquefied natural gas projects. All references to "we,"
"our," or "us" refer to Gulf United Energy, Inc., a Nevada
corporation.
On March
22, 2006, the Company entered into a letter of intent with Cia. Mexicana de Gas
Natural, S.A. de C.V. (“CMGN”), a private Mexican corporation, whereby the
Company would acquire a 50% interest in a joint venture to be formed (the “Gulf
United/CMGN Joint Venture”). The Company contributes cash to the Gulf
United/CMGN Joint Venture and CMGN contributed its 24% equity interest in a
proposed project to design, construct, operate and maintain an open access
natural gas pipeline between Valladolid, Cancun and Punta Venado, as well as its
initial 24% equity interest in a project to build a proposed LNG storage and
regasification facility. The Company borrowed $200,000 from a stockholder to
make the initial advance required under the letter of intent. No additional
payments were made. The letter of intent was terminated on May 22, 2006 and the
investment in the joint venture was transferred to a stockholder of the Company
in full settlement of the debt.
In July
2007, we entered into a joint venture agreement with Cia. Mexicana de Gas
Natural, S.A. de C.V., a corporation organized and existing under the laws of
the United Mexican States (“CMGN”). CMGN is engaged in the pipeline business and
the terminal business in Mexico. In connection with its pipeline business, CMGN
owned 100% of the capital stock of Fermaca Gas de Cancun (“Fermaca Gas”).
Fermaca Gas owns 50% of the capital stock of Energia Yaax (“Yaax”) and CMGN owns
the remaining 50% of the capital stock of Yaax. Yaax will develop, own and
operate the pipeline between Valladolid, Cancun and Punta Venado. Pursuant to
the terms of the joint venture agreement, we acquired a 24% interest in Fermaca
Gas through which we own an indirect ownership in Yaax. In connection with its
terminal business, CMGN owned 100% of the capital stock of Fermaca LNG Cancun
(“Fermaca LNG”). Fermaca LNG owns 50% of the capital stock of SIIT Energy (“SIIT
Energy”) and CMGN owns the remaining 50% of the capital stock of SIIT Energy.
SIIT Energy will develop, own and operate the terminal located in the Port of
Punta Venado in the State of Quintana Roo. Pursuant to the terms of the joint
venture agreement, we acquired a 24% interest in Fermaca LNG through which we
have an indirect ownership in SIIT Energy. The purpose of Fermaca Gas and
Fermaca LGN is to design, construct, operate and maintain an open access natural
gas pipeline between Valladoloid, Cancun and Punta Venado, as well as a
liquefied natural gas storage and re-gasification facility.
4
The
natural gas pipeline will be bi-directional and was planned to be 16 inches in
diameter with a total length of approximately 234 kilometers. Recently,
engineering has begun to increase the diameter of the line to increase the
capacity from 183 million cubic feet of natural gas daily to 500 million cubic
feet per day should this be required within the Mexican states of Quintana Roo
and Yucatan. The pipeline is intended to address the industrial demand for
natural gas in the region, as well as the demand of power generation plants
located in the cities of Valladolid, Cancun, Nizuc and Merida.
The
proposed pipeline system has two options for natural gas provision: an
interconnection with the established Mayacan system, owned by Gaz de France, and
a re-gasification plant located on a port near Punta Venado, Quintana
Roo. We would prefer to build a re-gasification plant utilizing the
full capacity of the pipeline to transport imported gas and to become a net
provider of gas to the Mayacan pipeline; however, we intend to rely on the
existing Mayacan system if, and until all necessary permits are received to
proceed with the re-gasification plant. The supply of gas to the proposed
pipeline is currently in question because Pemex, the Mexican national oil
company, has increased gas re-injection in its oil fields in an effort to
increase oil production, thus decreasing the amount of gas available for
distribution through the Mayacan system. This action has intensified the
need for the re-gasification plant and storage facility. The joint-venture
companies are aggressively pursuing an acceptable LNG arrangement with the major
LNG supply companies around the world. The joint-venture companies
continue to work on the preparation and submission of permits, but the main
focus is working closely with the relevant government authorities to procure a
long-term LNG supply contract. The engineering and tender preparation
is performed by the joint ventures. The joint ventures will also act as the
overall project management company.
Preliminary
engineering for the pipeline project has commenced; however, because of the lack
of available natural gas noted above, procurement for the
pipeline project is not expected to commence until at least mid-2010 and
construction would then require approximately one year.
As of
August 31, 2009, we have made gross contributions of $1,951,210 to the joint
ventures made up of $1,263,985 in cash and 935,000 shares of our restricted
common stock valued at $687,225 to finance the projects. In
consideration of our ownership of a 24% interest in Fermaca Gas and Fermaca LNG,
we have agreed to pay 12% of the construction expenses incurred by Yaax and SIIT
Energy. On June 8, 2009 the Company entered into an agreement between
the Company and its joint venture partner to sell our joint venture interests,
as reported below under Sale of Joint Venture Interests, for $1,000,000 to be
paid over fifteen months without interest. The Company recorded an impairment in
the value of the investment at May 31, 2009, reducing the investment to its
estimated discounted value of $940,240. After the sale of the joint venture
interests is completed, the Company will attempt to locate new oil and gas
projects in which to participate. On November 12, 2009, the Company
was asked by its joint venture partner to extend the closing date again which
management has chosen not to do. The closing date in now uncertain,
therefore the sale may not occur.
CORPORATE
HISTORY
The
Company was incorporated in the State of Nevada on September 19, 2003. The
Company is a development stage company as defined by Statement of Financial
Accounting Standard Codification Section 915-10-20. Initially, we were engaged
in the acquisition and exploration of mining properties. However, with the
acquisition of the joint ventures, we changed our focus to an investor in
pipeline and LNG regasification projects. On March 2, 2006, we amended our
articles of incorporation to reflect a name change from Stonechurch, Inc. to
Gulf United Energy, Inc.
GENERAL
Our
address is P.O Box 22165; Houston, Texas 77227-2165 and our telephone number is
713-893-3543. We maintain a web site at www.gulfunitedenergy.com. You may access
and read our SEC filings through the SEC's web site (http:www.sec.gov). This
site contains reports, proxy and information statements and other information
regarding registrants, including us, that file electronically with the
SEC.
5
PERMITTING
AND COMPLIANCE WITH GOVERNMENTAL REGULATION
In order
to proceed with the construction of the natural gas pipeline, the joint venture
must obtain various permits from municipal, state and federal agencies in
Mexico, as well as a right of way with respect to the properties impacted by the
pipeline. The necessary transport permit has already received approval from the
Mexican Energy Regulatory Commission.
Environmental
impact and environmental risk permit applications were submitted in September,
2007. They were approved in August, 2008. Additional permit
applications have been filed with the National Anthropology and History
Institute, the Communications and Transports Ministry, the National Water
Commission and the national railroads. These permits are expected to
be approved in time to not interfere with construction. To date, significant
effort and expense has been expended by the joint ventures in preliminary
engineering, topographic surveying, right of way certification and permit
applications. If certain permits need to be amended to better reflect
the operational nature of the project, we may incur additional fees of up to
$20,000 in payment for our share of the fees. See “Risk Factors” for
additional amounts we will have to fund with respect to the joint
ventures.
CUSTOMERS
We
anticipate that principal customers for the joint ventures will be two power
plants operated by Comisin Federal de Electricidad (“CFE”), Mexico’s state-run
power company, that are located in nearby Nizuc and Cancun. CMGN has
had extensive discussions with CFE regarding the supply of natural gas to these
power plants and CFE has indicated that they would be interested in generating
power with natural gas. Both power plants are capable of using natural gas and
fuel oil without modification.
COMPETITION
Because
of the nature of this project and the difficulty of acquiring the proper
permits, we do not expect to have direct competition with this pipeline or LNG
facility; however, we do face indirect competition for customers. In
the case of power plants, they can continue to use fuel oil even though it is
not as clean and is usually more expensive. In the case of the
hotels, they can continue to use propane even though it is usually more
expensive. It will take time for the applicable providers to build
out the infrastructure (pipelines) required to deliver natural gas.
ENVIRONMENTAL
LAWS
We are
required to obtain permits for our facilities and operations in accordance with
the applicable laws and regulations on an ongoing basis. There are no known
issues that have a significant adverse effect on the permitting process or
permit compliance status of any of our ongoing operations.
The
ultimate financial impact of environmental laws and regulations is neither
clearly known nor easily determined as new standards are enacted and new
interpretations of existing standards are rendered. Environmental
laws and regulations may have an increasing impact on our operations. In
addition, any non-compliance with such laws could subject us to material
administrative, civil or criminal penalties, or other liabilities. Potential
permitting costs are variable and directly associated with the type of facility
and its geographic location. Costs, for example, may be incurred for air
emission permits, spill contingency requirements, and discharge or injection
permits. These costs are considered a normal, recurring cost of our future
projected operations and not an extraordinary cost of compliance with government
regulations.
We are
committed to the protection of the environment throughout our operations and
believe that we are currently in compliance with applicable environmental laws
and regulations. We believe that environmental stewardship is an important part
of our business and will continue to make expenditures on a regular basis
relating to environmental compliance. We do not anticipate that it will be
required under current environmental laws and regulations to expend amounts that
will have a future material adverse effect on our financial position or our
results of operations. However, since environmental costs are inherent in our
operations and since regulatory requirements frequently become more stringent,
there can be no assurance that material costs and liabilities will not be
incurred in the future. Such costs may result in increased costs of
operations.
EMPLOYEES
As of
August 31, 2009, we have no full-time employees. We utilize
consultants to perform day-to-day operational and administrative functions and
as advisors.
RESEARCH
AND DEVELOPMENT EXPENDITURES
We have
not incurred any research or development expenditures since
inception.
6
GULF
UNITED ENERGY, INC.
(A
Development Stage Company)
ITEM
1A. RISK FACTORS
Important
risk factors that could cause results or events to differ from current
expectations are described below. These factors are not intended to
be and all-encompassing list of risks and uncertainties that may affect the
operations, performance, development and results of our business.
WE
HAVE A LIMITED OPERATING HISTORY WITH SIGNIFICANT LOSSES AND EXPECT LOSSES TO
CONTINUE FOR THE FORESEEABLE FUTURE
We have
incurred annual operating losses since our inception. As a result, at August 31,
2009, we had an accumulated deficit of $2,053,644. We have no revenue and do not
anticipate receiving revenue because we are negotiating the sale of our joint
venture interests in the pipeline and LNG companies. We expect that
our operating expenses will continue at a somewhat reduced level as the company
searches for new joint venture projects. As a result of these
continued expenses, we will need to generate revenues or will have to raise
additional funds through increased debt or equity investors. We expect continued
losses in fiscal 2010 and thereafter until projects, which have not yet been
identified or acquired, generate cash flow.
WE
HAVE A LIMITED CASH AND LIQUIDITY POSITION AND WILL NEED TO RAISE ADDITIONAL
FUNDS TO FUND OPERATIONS
As of
August 31, 2009, we had cash and cash equivalent balances of $516. The Company
has loans from shareholders and related parties which total
$2,181,274. We will need to raise substantial funds to fulfill our
commitments for fiscal year 2010. Moreover, we anticipate that we will need
additional capital in the future to expand our business operations. This amount
will depend on the particular projects in which we may invest. We
have historically financed our operations through private debt financing from
one of the Company’s shareholders. We do not have any credit
facilities available with financial institutions, shareholders or third party
investors. As such, there is no assurance that we can raise
additional debt or capital from external sources. We have new
shareholder cash in the amount of $145,000 for 14,500,000 of our unregistered,
restricted common shares. This offering has not yet closed and will
not close until the latter part of December. The failure to raise additional
funds could cause us to sell assets, curtail or cease our
operations.
IF
WE DO NOT SELL OUR JOINT VENTURE INTERESTS AS EXPECTED AND CANNOT OBTAIN
ADDITIONAL FINANCING, WE WILL NOT BE ABLE TO FUND OUR JOINT VENTURE OBLIGATIONS
AND WILL BE AT RISK OF BREACHING OUR JOINT VENTURE AGREEMENT
Our
current operating funds are less than necessary to fund our current operating
expenses or our equity participation in the Mexican pipeline and re-gasification
facility joint venture projects or any other ventures. We have
already funded $1,263,985 in cash and 935,000 shares of our common stock then
valued at $687,225, but in order to fund our continued interest in these
projects, we will need to fund an additional $16,800,000 for our portion of the
pipeline joint venture costs and significantly more funding (not yet quantified)
for the re-gasification and storage facility. The Company recorded an impairment
in the value of the investment at May 31, 2009, reducing the cost value of this
investment. We will require additional funding in order to meet these
and other commitments, including the routine costs to operate our business. We
do not currently have any arrangements for this financing. Obtaining
additional financing will be subject to a number of factors, including investor
acceptance of our business plan and general market conditions. These
factors may cause the timing, amount, terms or conditions of additional
financing to be unfavorable or unavailable to us. Failure to raise this funding
will cause us to be in breach of the joint venture agreement which may cause the
joint venture to terminate.
IF
WE DO NOT SELL OUR JOINT VENTURE INTEREST AS EXPECTED AND IF OUR JOINT VENTURE
PARTNER FAILS TO RAISE THE ADDITIONAL FUNDS REQUIRED TO FINANCE JOINT VENTURE
OPERATIONS, THE JOINT VENTURE PROJECTS WILL BE DELAYED OR COULD BE
DISCONTINUED
The
pipeline project will require an estimated $140,000,000 to complete permitting,
engineering and construction. Our joint venture partner’s share of
this is an estimated $123,200,000. The majority of these funds will
be required after the permitting process is complete through the end of the
construction period of about one year. While the joint venture has expended
funds on permitting for the re-gasification facility and storage, the amount of
funds required and the timing of this project can not yet be
estimated. The failure to raise the additional funding required would
be a breach of the joint venture agreement and would cause the joint venture to
terminate or could lead to the loss or sale of joint venture assets by our joint
venture partner.
7
IF
WE HAVE TO RAISE ADDITIONAL CASH THROUGH THE SALE OF EQUITY CAPITAL, THIS WILL
DILUTE EXISTING SHAREHOLDERS
One
possible source of future funds to the Company is through the sale of
equity. Any sale of new common shares will result in dilution of
existing shareholders, which will result in a further decrease in share value.
Subsequent to year end, the Company prepared a placement for the sale of common
shares at $0.01 per share. As of the time of this filing, we have cash for the
purchase of an additional 14,500,000 unregistered, restricted common shares for
a total of $145,000. This placement has not yet closed and could
include additional shares. The only other anticipated alternative for the
financing of our joint venture acquisition and development cost is through debt
financing; however, we do not have any commitments from third parties to provide
such financing and we do not believe that debt financing is a viable
option.
BECAUSE
WE HAVE NOT COMMENCED BUSINESS OPERATIONS, WE FACE A HIGH RISK OF BUSINESS
FAILURE
Because
we have not yet commenced operations in our business sector, it is difficult to
evaluate the likelihood that our business will be successful. Accordingly, an
investment in our Company carries a high risk of loss. There is no
history upon which to base assumptions as to the likelihood that we will prove
successful. We may not generate any operating revenues or ever achieve
profitable operations. If we are unsuccessful in mitigating these risks, our
business will very likely not succeed.
BECAUSE
OUR CONTINUATION AS A GOING CONCERN IS IN DOUBT, WE WILL BE FORCED TO CEASE
BUSINESS OPERATIONS UNLESS WE CAN GENERATE PROFITABLE OPERATIONS IN THE
FUTURE
We have
incurred losses since our inception resulting in an accumulated deficit of
$2,053,644 at August 31, 2009. Further losses are anticipated in
developing our business. As a result, our auditors have expressed substantial
doubt about our ability to continue as a going concern. Our ability to continue
as a going concern is dependent upon our ability to generate profitable
operations in the future and to obtain the necessary financing and equity to
meet our obligations and repay our liabilities arising from normal business
operations when they come due. If we cannot raise funds to meet our obligations,
we will become further insolvent and will cease business
operations.
IF
WE FAIL TO SELL OUR JOINT VENTURE INTERESTS AS EXPECTED AND WE ARE UNABLE TO
OBTAIN THE NECESSARY PERMITS FOR CONSTRUCTION OF THE NATURAL GAS PIPELINE OR THE
LNG RE-GASIFICATION AND STORAGE FACILITY IN MEXICO, OUR BUSINESS PLAN WILL BE
IMPOSSIBLE TO ACHIEVE
Prior to
commencing construction of the natural gas pipeline between Valladoloid, Cancun
and Punta Venado and the LNG re-gasification plant, we must obtain various
permits from the Mexican government or Mexican governmental agencies. There is
no guarantee that we will receive these permits upon
submission. While we have obtained some approvals, if we do not
obtain all permits, the joint ventures will not be allowed to construct the
proposed pipeline or the regasification and storage
facility. Consequently, it would be likely that the joint ventures
would terminate and our investment in the projects would become
worthless.
As of
August 31, 2009, the outstanding balance of the secured loan to one shareholder
of the company is $2,154,700. To assure payment of the amounts owed to this
shareholder, we have granted a security interest in our joint venture
investments. A default on our obligations would subject us to
foreclosure by the shareholder unless we were able to repay the amount
due. Foreclosure would have a material adverse effect on our
financial condition. Further, we may not have sufficient funds to repay the
shareholder when the obligations become due. We are not required to establish a
sinking fund for the repayment of our debt; accordingly, we may be required to
obtain funds to repay the shareholder either by refinancing or through the
issuance of additional equity or debt securities. We may be unable to obtain the
funds needed to repay our obligations from any source on favorable economic
terms or at all which will result in foreclosure on our joint venture interests
by our shareholder. This debt is due December 17, 2009. At
this time, the Company does not have the resources to partially or fully pay
this note payable; therefore, management anticipates that the note will be
extended.
THE
MARKET PRICE OF OUR COMMON STOCK IS VERY VOLATILE AND THE VALUE OF YOUR
INVESTMENT IS SUBJECT TO SUDDEN DECREASES
The
trading price for our common stock has been, and we expect it to continue to be
volatile. More specifically, the closing bid price of our stock has fluctuated
between $0.04 per share and $0.20 per share since September 1, 2008. The price
at which our common stock trades depends upon a number of factors; including,
our historical and anticipated operating results and general market and economic
conditions which are beyond our control. Factors, such as fluctuations in our
financial and operating results, could also cause the market price of our common
stock to fluctuate substantially. In addition, the stock market has, from time
to time, experienced extreme price and volume fluctuations. These broad market
fluctuations may lower the market price of our common stock. Further, during
periods of stock market price volatility, share prices of many companies have
fluctuated in a manner not necessarily related to their operating performance;
accordingly, our common stock may be subject to greater price volatility than
the stock market as a whole.
8
A
LOW MARKET PRICE MAY SEVERELY LIMIT THE POTENTIAL MARKET FOR OUR COMMON
STOCK
Our
common stock is currently trading at a price below $5.00 per share, subjecting
trading in the stock to certain SEC rules requiring additional disclosures by
broker-dealers. These rules generally apply to any non-Nasdaq equity security
that has a market price of less than $5.00 per share, subject to certain
exceptions (a "penny stock"). Such rules require the delivery, prior
to any penny stock transaction, of a disclosure schedule explaining the penny
stock market and the risks associated therewith and impose various sales
practice requirements on broker-dealers who sell penny stocks to persons other
than established customers and institutional or wealthy investors. For these
types of transactions, the broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser's written
consent to the transaction prior to the sale. The broker-dealer also must
disclose the commissions payable to the broker-dealer, current bid and offer
quotations for the penny stock and, if the broker-dealer is the sole market
maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market. Such information must be provided to the
customer orally or in writing before or with the written confirmation of trade
sent to the customer.
THE
COMPANY'S REVENUE AND OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY FROM QUARTER
TO QUARTER, AND FLUCTUATIONS IN OPERATING RESULTS COULD CAUSE THE STOCK PRICE TO
DECLINE
The
Company's operating results may vary significantly from quarter to quarter due
to a number of factors. In future quarters, operating results may be below the
expectations of public market analysts or investors, and the price of our common
stock may decline. Currently, the Company does not have a source of
revenue and it is doubtful that the Company will generate any revenues in the
foreseeable future.
BECAUSE
THE CURRENT MARKET PRICE OF NATURAL GAS IS LOW BY HISTORICAL STANDARDS, THE
FINANCIAL VIABILITY OF OUR JOINT VENTURE PROJECTS IS MORE DIFFICULT TO
PROJECT
For the
joint venture projects to be economically viable and to earn a reasonable return
on the investment required, we would prefer natural gas prices to be higher
rather than lower. Higher prices obviously will lead to higher
returns and a faster payback of invested capital. However, it would
require a very low natural gas price sustained over an unusually long period for
the joint venture projects to become economically unviable.
THE
GLOBAL RECESSION MEANS THAT DEMAND MAY BE LOWER FOR NATURAL GAS AND THIS MAY
MAKE IT MORE DIFFICULT TO RAISE NEW CAPITAL TO COMPLETE
CONSTRUCTION
In
general, if economic activity is depressed, demand for natural gas will be lower
leading to potentially lower revenues for the joint venture projects upon
completion which at this time is in question. In addition, times of
economic slowdown lead to uncertainty and may lead to a reduction of potential
investors and/or difficulty in raising debt financing.
IF
THE SALE OF THE JOINT VENTURE INTERESTS IS COMPLETED, THE COMPANY WILL NEED TO
FIND OTHER INVESTMENT OPPORTUNITIES IN WHICH TO INVEST TO GENERATE REVENUE AND
INCOME.
Management
has been pursuing new upstream and downstream oil and gas opportunities, but has
not yet been able to consummate an appropriate investment. The search
for new projects will continue in earnest, but if no new projects can be found,
we may have to curtail or cease Company operations.
9
ITEM
1B. UNRESOLVED STAFF COMMENTS
None
ITEM
2. DESCRIPTION OF PROPERTY
During
the year ended August 31, 2009, our principal offices were located in Houston,
Texas, pursuant to a short-term lease believed to reflect market rates and
terms:
Location
|
Function
|
Size (square feet)
|
Approximate
Monthly lease payment
|
Houston,
TX
|
Gulf
United Energy Inc. Corporate Headquarters
|
2,948
|
$5,100
|
This
lease has expired and we are currently in the process of relocating our
executive offices.
ITEM
3. LEGAL PROCEEDINGS
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No
matters were submitted during our fiscal year to a vote of security holders,
through the solicitation of proxies or otherwise. The Company has
entered into an agreement for the sale of its joint venture interests which, if
finalized, will be subject to shareholder approval.
PART
II
BUSINESS
ISSUER PURCHASE OF EQUITY SECURITIES
MARKET
PRICE INFORMATION AND DIVIDEND POLICY
Our
common stock trades on the Nasdaq OTC Electronic Bulletin Board under the symbol
GLFE. The market for our common stock is limited, sporadic, and highly volatile.
The following table sets forth the approximate high and low closing sales prices
for our common stock for the last two fiscal years. The quotations reflect
inter-dealer prices, without retail markups, markdowns, or commissions and may
not represent actual transactions.
The
following table sets forth the high and low closing prices of our common stock
traded on the OTC Electronic Bulletin Board during the fiscal years ended August
31, 2009 and 2008:
YEAR
2009
|
High
|
Low
|
|||||||
Quarter
ended August 31, 2009
|
$ | 0.15 | $ | 0.06 | |||||
Quarter
ended May 31, 2009
|
$ | 0.14 | $ | 0.06 | |||||
Quarter
ended February 28, 2009
|
$ | 0.20 | $ | 0.06 | |||||
Quarter
ended November 30, 2008
|
$ | 0.25 | $ | 0.04 | |||||
YEAR
2008
|
|||||||||
Quarter
ended August 31, 2008
|
$ | 0.34 | $ | 0.12 | |||||
Quarter
ended May 31, 2008
|
$ | 0.56 | $ | 0.28 | |||||
Quarter
ended February 29, 2008
|
$ | 1.02 | $ | 0.30 | |||||
Quarter
ended November 30, 2007
|
$ | 0.73 | $ | 0.40 |
Additional
Information Describing Securities
For
additional information regarding our securities, you may view our Articles of
Incorporation and By-laws which are available for inspection at our offices or
which can be viewed through the EDGAR database as www.sec.gov as exhibits to the
registration statement on Form SB-2. You may also choose to review
applicable statutes of the state of Nevada for a description concerning
statutory rights and liabilities of shareholders.
10
Reports
to Shareholders
The
Company will furnish to holders of our common stock, annual reports containing
audited financial statements examined and reported upon, and with an opinion
expressed by, an independent registered public accounting firm. It
may issue other unaudited interim reports to our shareholders as it deems
appropriate.
Security
Holders
At August
31, 2009 there were 26,350,000 shares of our common stock outstanding, which
were held by 31 shareholders of record. The registration of shares by selling
shareholders is discussed in detail in our prospectus which you may view at
www.sec.gov or which you may request from the Company. The Company is
authorized to issue up to 200 million shares of common stock with a par value of
$0.001. Its stock has the following characteristics:
(i)
|
Voting
Rights – Each of our shareholders of common stock is entitled to one vote
for each share held of record on all matters submitted to the vote of
stockholders, including the election of directors. All voting is
non-cumulative, which means that the holders of fifty percent (50%) of the
shares voting for the election of the directors can elect all the
directors. The Board of Directors may issue shares of
previously authorized but unissued stock for consideration without
stockholder action.
|
(ii)
|
Dividend
Rights – The holders of outstanding shares of stock are entitled to
receive dividends out of assets legally available at such times and in
such amounts as the Board of Directors may determine to be in the best
interests of the shareholders.
|
(iii)
|
Liquidation
Rights – Upon liquidation, the holders of the common stock are entitled to
receive pro rata all of the assets available for distribution to common
shareholders.
|
(iv)
|
Preemptive
Rights – Holders of common stock are not entitled to preemptive
rights.
|
(v)
|
No
conversion rights, redemption rights of sinking fund rights exist for
holders of common stock.
|
No
material potential liabilities are anticipated to be imposed on stockholders
under state statutes. Certain Texas and/or Nevada regulations,
however, require regulation of beneficial owners of more than 5% of the voting
securities. Stockholders that fall into this category, therefore, may
be subject to state regulation and compliance requirements.
STOCKHOLDERS
As of
November 1, 2009, there were approximately 31 holders of record of our common
stock.
DIVIDENDS
While
there are no restrictions in our articles of incorporation or bylaws that
prevent us from declaring dividends, the Nevada Revised Statutes do prohibit us
from declaring dividends where, after giving effect to the distribution of the
dividend:
|
1.
|
We
would not be able to pay our debts as they become due in the usual course
of business; or
|
|
2.
|
Our
total assets would be less than the sum of our total liabilities plus the
amount that would be needed to satisfy the rights of shareholders who have
preferential rights superior to those receiving the
distribution.
|
We have
never declared or paid cash dividends on our common stock. We currently intend
to retain all available funds and any future earnings, if any, to fund the
development and growth of our business and do not anticipate declaring or paying
any cash dividends on our common stock in the foreseeable future.
RECENT
SALES OF UNREGISTERED SECURITIES
There
were no sales or issuances of common shares fiscal 2009. The Company did not
make any common stock repurchases during fiscal 2009. Subsequent to
year-end, an offering was prepared for the sale of new common shares at $0.01
per share. To date, we have cash for 14,500,000 unregistered,
restricted common shares; additional shares could be sold and the placement will
not close until after the date of this filing.
11
ITEM
6. SELECTED FINANCIAL DATA
YEAR
ENDED AUGUST 31, 2009, COMPARED TO YEAR ENDED AUGUST 31, 2008
($
in Thousands)
|
||||||||
2009
|
2008
|
|||||||
Revenue
|
$ | - | $ | - | ||||
Office
and other
|
5 | 10 | ||||||
Professional
fees
|
86 | 137 | ||||||
Consulting
|
- | - | ||||||
Rent
and lease expense
|
51 | 60 | ||||||
Travel
|
- | - | ||||||
Shareholder
loan and other interest
|
201 | 171 | ||||||
Impairment
loss
|
1,011 | - | ||||||
1,354 | 378 | |||||||
Net(Loss)
for the year
|
$ | (1,354 | ) | $ | (378 | ) | ||
The
Company incurred a net loss of $1,354,000 for the year ended August 31, 2009
which is $976,000 higher than the net loss of $378,000 in 2008. The
higher loss was due primarily to the significant impairment loss as well as
increased interest expense associated with greater borrowings in fiscal
2009.
OPERATING
EXPENSES
The
following table sets forth summarized operating expense information for the
years ended August 31, 2009 and 2008:
($
in Thousands)
|
||||||||||||
2009
|
2008
|
$
Change
|
||||||||||
Office
and other
|
$ | 5 | $ | 10 | $ | (5 | ) | |||||
Professional
fees
|
86 | 137 | (51 | ) | ||||||||
Consulting
|
- | - | - | |||||||||
Rent
and lease expense
|
51 | 60 | (9 | ) | ||||||||
Travel
|
- | - | - | |||||||||
Total
Operating Expenses
|
$ | 142 | $ | 207 | $ | (65 | ) | |||||
For the
year ended August 31, 2009, operating expenses decreased $65,000 or 31%, as
compared to the year ended August 31, 2008. The decrease occurred primarily due
to: (i) the $51,000 decrease in professional fees which includes accounting and
legal fees and a $9,000 decrease in rent and lease expense.
NET
LOSS
For the
twelve months ended August 31, 2009, our net loss was $1,354,000 compared to a
loss of $378,000 for the twelve months ended August 31, 2008. The increase in
the loss for the twelve months ended August 31, 2009 as compared to the twelve
months ended August 31, 2008 was attributable to a significant impairment loss
amounting to $1,011,000, the $30,000 increase for interest expense to a
shareholder related to financing the joint ventures and operating costs as well
as the changes in operating expenses noted above.
NET
LOSS APPLICABLE TO COMMON SHAREHOLDERS
For the
twelve months ended August 31, 2009, our net loss per share was $0.05 compared
to a loss of $0.01 for the twelve months ended August 31, 2008.
12
CASH
FLOWS
The
Company's operating activities decreased net cash used by operating activities
to $70,875 in the year ended August 31, 2009, compared to net cash used of
$160,835 in the year ended August 31, 2008.
The
Company's financing activities provided net cash proceeds of $69,200 in the year
ended August 31, 2009, compared to $161,000 cash provided in the year ended
August 31, 2008. The cash provided in the twelve months ended August 31, 2009
and 2008, was provided by shareholder advances.
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS
This
Management Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the other sections of this annual
report on Form 10-K, including the financial statements.
Plan
of Operation – (See Financial Statement Note 1 – Sale of joint venture
interest)
On June
8, 2009, the Company entered into an agreement with its joint venture partner to
sell its interest in the joint venture projects to the partner for $1,000,000
that will be paid over a period of 15 months beginning at the closing, which was
scheduled for mid- to late-August 2009 (See Financial Statement Note 1 – Sale of
Joint Venture Interests). The proceeds from this possible sale may be
used to pay accounts payable, reduce the Company’s debt and for other
investments and other operating expenses. Due to delays in completing
transaction paperwork, the closing has been extended several times and the
timing is now uncertain. On November 12, the Company was
asked to sign an additional extension of the time to close the sale
transaction. Management has chosen not to sign in the hope that we
can either: 1) force the transaction to close, 2) improve the terms of the
transaction, or 3) possibly keep the ownership interest which management
believes could have a higher value than what has been agreed.
We have
recently entered into a tentative letter agreement in which the Company would
own a 25% interest in the development of Block CPO-4 in the Llanos Basin of
Colombia. If a definitive agreement is signed, the Company would be
liable for a share of an unknown amount of expenses proportionate with its
ownership interest. The Company may issue additional shares in
support of this investment. In addition, the Company has offered new
shares at $0.01 per share to potential new investors and has received funds in
the amount of $145,000 to date; however, there has been no closing on new shares
and a closing will not occur until as least the latter part of
December.
As of
August 31, 2009, we have contributed $1,951,210 to the joint ventures made up of
$1,263,985 in cash and 935,000 shares of our restricted common stock then valued
at $687,225 to finance the projects. In consideration for acquiring a
24% interest in Fermaca Gas and Fermaca LNG, we agreed to pay 12% of the costs
incurred by Yaax and SIIT Energy (Yaax and SIIT Energy are the operating
companies that will build and operate the proposed pipeline and LNG projects,
respectively).
We have
not earned any revenues during the period from inception through August 31,
2009. The design of the proposed open access natural gas pipeline between
Valladolid, Cancun and Punta Venado and a proposed LNG regasification and
storage facility are not yet completed as construction has not yet commenced;
accordingly, we currently do not have any revenue generating operations. The
Company has been unable to obtain updated detailed information related to the
completion of the joint venture projects; however, based on the audited
financial statements of the joint venture entities, it appear that little
activity has occurred over the past 12 to 15 months. We have not
attained profitable operations and are, therefore, dependent upon obtaining
additional debt or equity financing. If we are unable to sell our joint venture
interests or obtain additional financing, there is substantial doubt that we
will be able to continue as a going concern.
Liquidity
and Capital Resources
At August
31, 2009, the Company has current assets of $516, current liabilities of
$2,282,225, and a working capital deficit of $2,281,709. Other than a
stockholder loan totaling $2,154,700, which is secured by substantially all of
the Company’s assets and $26,574 in loans payable to related parties, the
Company has no other credit facilities. To date, we have cash of
$145,000 for the sale of our unregistered, restricted common shares in a private
placement. The Company has no other sources of financing and will
continue to rely on borrowings from its stockholder and other third parties best
efforts financings. However, there are no commitments from this stockholder or
assurance that its stockholder or other third parties can or will continue to
fund our cash needs. In the event that the Company does not sell its
joint venture interests and fails to extend the stockholder loan and/or to
borrow additional funds thereunder, these events will likely result in the
Company transferring the investment in the joint venture projects to repay this
debt or forfeiting its interests in the projects to its joint venture
partner. Our auditors have issued a going concern opinion for our
financial statements due to their substantial doubt about our ability to
continue as a going concern.
13
CONTRACTUAL
OBLIGATIONS
The
Company’s contractual obligations as of August 31, 2009 (assuming that the sale
of joint venture interests is not consummated) consist of obligations under our
joint venture agreement amounting to approximately $16,800,000 for the pipeline
project and a greater amount for the LNG re-gasification and storage facility
which are uncertain as to the exact amount and timing, but are estimated to be
less than $20,000 for the fiscal year ending August 31, 2010 unless permitting
is completed and a long-term LNG supply contract is signed. Under
those circumstances, we could be called on to contribute significant funds, for
which we have no sources, to cover our share of costs.
OFF-BALANCE
SHEET ARRANGEMENTS
As of
August 31, 2009 and 2008, the Company did not have any off-balance-sheet
arrangements.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
GENERAL
We have
adopted various accounting policies to prepare our financial statements in
accordance with U.S. generally accepted accounting principles (GAAP). Our most
significant accounting policies are described in Note 2 to our financial
statements included elsewhere in this report. The preparation of our financial
statements in conformity with U.S. GAAP requires us to make estimates and
assumptions that affect the amounts reported in our financial statements and
accompanying notes. Our estimates and assumptions are updated as
appropriate.
USE
OF ESTIMATES
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
COMPUTER
EQUIPMENT
Computer
Equipment is stated at cost. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets. The costs associated with
normal maintenance, repair, and refurbishment of equipment are charged to
expense as incurred. When assets are retired or otherwise disposed of, the costs
and related accumulated depreciation are removed from the accounts, and any
resulting gain or loss is recognized as income for the period. The cost of
maintenance and repairs is charged to income as incurred; significant renewals
and betterments are capitalized. Deductions are made for retirements resulting
from renewals or betterments.
We review
our long-lived assets, to include intangible assets subject to amortization, for
recoverability whenever events or changes in circumstances indicate that the
carrying amount of such long-lived asset or group of long-lived assets
(collectively referred to as "the asset") may not be recoverable. Such
circumstances include, but are not limited to:
·
|
impairment
in value of joint venture investments,
|
·
|
a
significant decrease in the market price of the assets;
|
14
·
|
a
significant change in the extent or manner in which the assets are being
used;
|
·
|
a
significant change in the business climate that could affect the value of
the assets;
|
·
|
continuing
losses associated with funding of the assets;
|
·
|
a
current expectation that, more likely than not, the assets will be sold or
otherwise disposed of before the end of its previously estimated useful
life;
|
·
|
terrorist
acts;
|
·
|
failure
to raise adequate capital;
|
·
|
failure
to obtain all required permits.
|
We
continually evaluate whether such events and circumstances have occurred. When
such events or circumstances exist, the recoverability of the asset's carrying
value shall be determined by estimating the undiscounted future cash flows (cash
inflows less associated cash outflows) that are directly associated with and
that are expected to arise as a direct result of the use and eventual
disposition of the asset. To the extent such events or circumstances occur that
could affect the recoverability of long-lived assets, we may incur charges for
impairment in the future.
COMPREHENSIVE
LOSS
FASB
Codification Section 220-10-15 establishes standards for the reporting and
display of comprehensive loss and its components in the financial statements. At
August 31, 2009 and 2008, and the years then ended, the Company has no items
that represent a comprehensive loss and, therefore, has not included a schedule
of comprehensive loss in the financial statements.
ASSET
RETIREMENT OBLIGATIONS
The
Company has adopted FASB Codification Section 410-20-15, “Accounting for Asset
Retirement Obligations”, which requires that an asset retirement obligation
(“ARO”) associated with the retirement of a tangible long-lived asset be
recognized as a liability in the period which it is incurred and becomes
determinable, with an offsetting increase in the carrying amount of the
associated asset. The cost of the tangible
asset, including the initially recognized ARO, is depreciated, such that the
cost of the ARO is recognized over the useful life of the asset. The ARO is
recorded at fair value, and expense is recognized over time as the discounted
liability is accreted to its expected settlement value. The fair value of the
ARO is measured using expected future cash flow, discounted at the Company’s
credit-adjusted risk-free interest rate. To date, no significant asset
retirement obligation exists. Accordingly, no liability has been
recorded.
INFLATION
The
Company's results of operations have not been affected by inflation and
management does not expect inflation to have a significant effect on its
operations in the future.
Market
risk represents the risk of loss that may impact our financial position due to
adverse changes in financial market prices and rates. Our market risk exposure
results from fluctuations in foreign exchange rates. The Company is
exposed to foreign exchange risk based on the Company’s investment in two joint
venture entities based in Mexico. The Company funds the joint venture
and reports the joint venture investment in US dollars, but the financial
statements of the entities are prepared in Mexican pesos and are converted to US
dollars. Fluctuations in the value of the United States dollar
relative to the value of the Mexican peso could affect the value of our
investment. We don’t expect that this risk will have a material
impact on future financial statements. The Company is not exposed to
market risks related to fluctuations in interest rates. The interest
rate on the Company’s debt is fixed. We do not currently own
marketable securities, use interest rate swaps, futures contracts or options on
futures or other types of derivative financial instruments. We do not hold or
issue financial instruments for trading purposes.
15
GULF
UNITED ENERGY, INC.
(A
Development Stage Company)
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders
of Gulf United Energy Inc.
We have
audited the accompanying balance sheets of Gulf United Energy, Inc. (A
Development Stage Enterprise) as of August 31, 2009 and 2008 and the related
statements of operations, changes in shareholders' equity (deficiency), and cash
flows for the years ended August 31, 2009 and 2008, and the cumulative period
September 1, 2006 through August 31, 2009 as reflected on the accompanying
financial statements in the cumulative period from inception (September 19,
2003) to August 31, 2009. The cumulative period from September 19, 2003 through
August 31, 2006 was audited by other auditors who expressed an unqualified
opinion on the Company’s financial statements and on the cumulative period
September 19, 2003 through August 31, 2006, and expressed substantial doubt
regarding the Company’s ability to remain a going concern. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Gulf United Energy, Inc. (a
Development Stage Enterprise) at August 31, 2009 and 2008, and the results of
its operations, changes in shareholders’ equity (deficiency) and cash flows for
each of the years ended August 31, 2009 and 2008, and the period from inception
to August 31, 2009 in conformity with generally accepted accounting principles
in the United States.
As more
fully described in Note 1 to the accompanying financial statements (Sale of
Joint Venture Interests), the Company during fiscal 2009 entered into an
agreement with its joint venture partner to sell to the partner the Company’s
investment in joint venture projects which at the time had a cost basis of
$1,951,210. Because the contemplated sales price of this asset was
substantially below the cost basis reflected on the Company’s balance sheet, the
Company recorded an impairment of this investment by writing off to expense
$1,010,970 of its value to reflect management’s estimate of the discounted fair
value of this asset. As more fully discussed in Note 1, the sale may
not occur. Should the sale not occur, the Company does not have the
resources to continue to fund its share of required advances and, therefore, may
lose its investment in the joint venture projects and may not receive anything
in return.
As more
fully described in Note 6 to the accompanying financial statements (Loans
Payable), the Company is obligated to one of its shareholders in the amount of
$2,154,700 for which full payment is due December 17, 2009. Because the Company
does not have the resources to partially or fully pay this obligation, it is
anticipated that the due date will again be extended on or prior to its December
due date. Should the note not be extended or liquidated, the Company can fully
liquidate the obligation by assigning its ownership rights in its investment in
joint venture projects to the shareholder.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As reflected in the accompanying
financial statements and as further discussed in Note 1 to the financial
statements, the Company has incurred substantial losses during its development
stage and is experiencing liquidity problems associated with its lack of
operations and working capital, which raises substantial doubt about its ability
to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
//S// HARPER
& PEARSON COMPANY, P.C.
Houston,
Texas
December
14, 2009
16
GULF
UNITED ENERGY, INC.
(A
Development Stage Company)
BALANCE
SHEETS
August
31,
|
August
31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
|
$ | 516 | $ | 2,191 | ||||
Pre-paid
expenses
|
- | 4,968 | ||||||
Deposits
|
- | 7,500 | ||||||
Total
Current Assets
|
516 | 14,659 | ||||||
Computer
Equipment at cost
|
3,300 | 3,300 | ||||||
Less: Accumulated
Depreciation
|
(2,200 | ) | (1,100 | ) | ||||
Net
computer equipment
|
1,100 | 2,200 | ||||||
Advances
to and investment in joint venture projects (Note 3)
|
940,240 | 1,951,210 | ||||||
Total
Assets
|
$ | 941,856 | $ | 1,968,069 | ||||
LIABILITIES
|
||||||||
Current
|
||||||||
Accounts
payable and accrued liabilities
|
$ | 100,951 | $ | 43,824 | ||||
Loans
payable related parties (Note 6)
|
26,574 | 26,574 | ||||||
Stockholder
loan payable and accrued interest (Note 6)
|
2,154,700 | 1,884,274 | ||||||
Total
Liabilities
|
2,282,225 | 1,954,672 | ||||||
STOCKHOLDERS'
EQUITY (DEFICIENCY)
|
||||||||
Common
Stock
|
||||||||
Authorized:
|
||||||||
200,000,000
shares with a par value of $0.001
|
||||||||
Issued
and Outstanding:
|
||||||||
26,350,000
shares as of August 31, 2009 and August 31, 2008
|
26,350 | 26,350 | ||||||
Additional
paid-in capital
|
686,925 | 686,925 | ||||||
Deficit
Accumulated During The Development Stage
|
(2,053,644 | ) | (699,878 | ) | ||||
Total
Stockholders' Equity (Deficiency)
|
(1,340,369 | ) | 13,397 | |||||
Total
Liabilities and Stockholders' Equity (Deficiency)
|
$ | 941,856 | $ | 1,968,069 |
The
accompanying notes are an integral part of these financial
statements.
17
GULF UNITED ENERGY,
INC.
(A
Development Stage Company)
STATEMENTS
OF OPERATIONS
FOR
THE YEARS ENDED AUGUST 31, 2009 AND 2008
AND
FOR THE PERIOD FROM INCEPTION TO AUGUST 31, 2009
Years
Ended
August
31,
|
Period
From
Inception
Through
|
|||||||||||
2009
|
2008
|
August
31, 2009
|
||||||||||
Revenue
|
$ | - | $ | - | $ | - | ||||||
Expenses:
|
||||||||||||
Office
and sundry
|
183 | 383 | 15,383 | |||||||||
Depreciation
Expense
|
1,100 | 1,100 | 2,200 | |||||||||
Professional
fees
|
86,270 | 136,757 | 326,224 | |||||||||
Consulting
|
- | - | 10,455 | |||||||||
Rent
and lease expense
|
51,295 | 60,380 | 129,696 | |||||||||
Public
relations
|
320 | - | 1,265 | |||||||||
Travel
|
- | - | 14,213 | |||||||||
Utilities
|
2,350 | 8,790 | 14,871 | |||||||||
Stockholder
loan and other interest
|
201,278 | 170,629 | 516,193 | |||||||||
Total
expenses
|
342,796 | 378,039 | 1,030,500 | |||||||||
Operating
Loss
|
(342,796 | ) | (378,039 | ) | (1,030,500 | ) | ||||||
Other
Income and Expense
|
||||||||||||
Impairment
loss
|
1,010,970 | - | 1,010,970 | |||||||||
Gain
on settlement of debt
|
- | - | (3,333 | ) | ||||||||
Loss
from continuing operations
|
(1,353,766 | ) | (378,039 | ) | (2,038,137 | ) | ||||||
Loss
from discontinued operations
|
- | - | (15,507 | ) | ||||||||
Net
Loss
|
$ | (1,353,766 | ) | $ | (378,039 | ) | $ | (2,053,644 | ) | |||
Basic
And Diluted Loss per share
|
||||||||||||
from
continuing operations
|
$ | (0.05 | ) | $ | (0.01 | ) | $ | (0.08 | ) | |||
Basic
And Diluted Loss per share
|
||||||||||||
from
discontinued operations
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |||
Basic
And Diluted Net Loss per share
|
$ | (0.05 | ) | $ | (0.01 | ) | $ | (0.08 | ) | |||
Weighted
Average Number of Shares Outstanding
|
26,350,000 | 26,350,000 | 24,957,519 | |||||||||
The
accompanying notes are an integral part of these financial
statements.
18
GULF UNITED ENERGY,
INC.
(A
Development Stage Company)
STATEMENTS
OF CASH FLOWS
FOR
THE YEARS ENDED AUGUST 31, 2009 AND 2008
AND
FOR THE PERIOD FROM INCEPTION THROUGH AUGUST 31, 2009
Period
From
|
||||||||||||
Inception
|
||||||||||||
Twelve
Months Ended
|
(September
19, 2003)
|
|||||||||||
August
31,
|
August
31,
|
Through
|
||||||||||
2009
|
2008
|
August
31, 2009
|
||||||||||
Cash
Flows From Operating Activities
|
||||||||||||
Net
loss for the period
|
$ | (1,353,766 | ) | $ | (378,039 | ) | $ | (2,053,644 | ) | |||
Depreciation
Expense
|
1,100 | 1,100 | 2,200 | |||||||||
Accrued
interest added to stockholder loan
|
201,226 | 170,374 | 515,515 | |||||||||
Non-cash
portion of interest expense
|
- | - | 3,333 | |||||||||
Gain
on settlement of debt
|
- | - | (3,333 | ) | ||||||||
Impairment
of investment in joint venture projects
|
1,010,970 | - | 1,010,970 | |||||||||
Adjustments
to reconcile net loss to net cash used by
|
||||||||||||
operating
activities:
|
||||||||||||
Pre-paid
expenses
|
4,968 | 4,985 | - | |||||||||
(Increase)
decrease in deposits
|
7,500 | 15,000 | - | |||||||||
Accounts
payable and accrued liabilities
|
57,127 | 25,745 | 100,951 | |||||||||
Net
Cash Used By Operating Activities
|
(70,875 | ) | (160,835 | ) | (424,008 | ) | ||||||
Cash
Flows From Investment Activities
|
||||||||||||
Capital
Expenditures
|
- | (300 | ) | (3,300 | ) | |||||||
Advances
to and investment in joint venture projects
|
- | - | (250,000 | ) | ||||||||
Net
cash used by investing activities
|
- | (300 | ) | (253,300 | ) | |||||||
Cash
Flows From Financing Activities
|
||||||||||||
Capital
stock issued
|
- | - | 26,050 | |||||||||
Increase
in loans payable to related parties
|
- | - | 226,574 | |||||||||
Proceeds
from stockholder loan payable
|
69,200 | 161,000 | 425,200 | |||||||||
Net
cash provided by financing activities
|
69,200 | 161,000 | 677,824 | |||||||||
Increase/(Decrease) In
Cash During The Period
|
(1,675 | ) | (135 | ) | 516 | |||||||
Cash,
Beginning Of Period
|
2,191 | 2,326 | - | |||||||||
Cash,
End Of Period
|
$ | 516 | $ | 2,191 | $ | 516 | ||||||
Non-Cash
Investing and Financing Activities:
|
||||||||||||
Investment
advances paid from stockholder loan
|
$ | - | $ | - | $ | 1,263,985 | ||||||
Capital
stock issued for investment acquisition
|
$ | - | $ | - | $ | 687,225 | ||||||
Settlement
of loan payable by assignment of investment:
|
||||||||||||
Loan
payable
|
$ | - | $ | - | $ | (200,000 | ) | |||||
Investment
|
$ | - | $ | - | $ | 200,000 | ||||||
Supplementary
Disclosure Of Cash Flow Information:
|
||||||||||||
Cash
paid for:
|
||||||||||||
Interest
|
$ | 52 | $ | - | $ | 475 | ||||||
Income
taxes
|
$ | - | $ | - | $ | - |
19
GULF UNITED ENERGY,
INC.
(A
Development Stage Company)
STATEMENTS
OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)
PERIOD
FROM INCEPTION (SEPTEMBER 19, 2003) TO AUGUST 31, 2009
DEFICIT
|
||||||||||||||||||||
ACCUMULATED
|
||||||||||||||||||||
COMMON
SHARES
|
ADDITIONAL
|
DURING
THE
|
||||||||||||||||||
PAR
|
PAID-IN
|
DEVELOPMENT
|
||||||||||||||||||
NUMBER
|
VALUE
|
CAPITAL
|
STAGE
|
TOTAL
|
||||||||||||||||
Balance,
September 19,
|
||||||||||||||||||||
2003
(date of inception)
|
- | $ | - | $ | - | $ | - | $ | - | |||||||||||
Capital
stock issued for cash:
|
||||||||||||||||||||
October
2003 at $0.001
|
2,500,000 | 2,500 | - | - | 2,500 | |||||||||||||||
November
2003 at $0.005
|
160,000 | 160 | 640 | - | 800 | |||||||||||||||
December
2003 at $0.005
|
1,400,000 | 1,400 | 5,600 | - | 7,000 | |||||||||||||||
June
2004 at $0.01
|
1,000,000 | 1,000 | 9,000 | - | 10,000 | |||||||||||||||
July
2004 at $0.25
|
23,000 | 23 | 5,727 | - | 5,750 | |||||||||||||||
Net
loss for the period
|
- | - | - | (15,880 | ) | (15,880 | ) | |||||||||||||
Balance,
August 31, 2004
|
5,083,000 | 5,083 | 20,967 | (15,880 | ) | 10,170 | ||||||||||||||
Net
loss for the year
|
- | - | - | (16,578 | ) | (16,578 | ) | |||||||||||||
Balance,
August 31, 2005
|
5,083,000 | 5,083 | 20,967 | (32,458 | ) | (6,408 | ) | |||||||||||||
November
10, 2005 Stock
|
||||||||||||||||||||
Split
Adjustment
|
20,332,000 | 20,332 | (20,332 | ) | - | - | ||||||||||||||
Net
loss for the year
|
- | - | - | (31,577 | ) | (31,577 | ) | |||||||||||||
Balance,
August 31, 2006
|
25,415,000 | 25,415 | 635 | (64,035 | ) | (37,985 | ) | |||||||||||||
Capital
stock issued for investment:
|
||||||||||||||||||||
January
2007 at $0.735 per share
|
185,000 | 185 | 135,790 | - | 135,975 | |||||||||||||||
July
2007 at $0.735 per share
|
750,000 | 750 | 550,500 | - | 551,250 | |||||||||||||||
Net
loss for the year
|
- | - | - | (257,804 | ) | (257,804 | ) | |||||||||||||
Balance,
August 31, 2007
|
26,350,000 | 26,350 | 686,925 | (321,839 | ) | 391,436 | ||||||||||||||
Net
loss for the year
|
- | - | - | (378,039 | ) | (378,039 | ) | |||||||||||||
Balance,
August 31, 2008
|
26,350,000 | 26,350 | 686,925 | (699,878 | ) | 13,397 | ||||||||||||||
Net
loss for the period
|
- | - | - | (1,353,766 | ) | (1,353,766 | ) | |||||||||||||
Balance,
August 31, 2009
|
26,350,000 | $ | 26,350 | $ | 686,925 | $ | (2,053,644 | ) | $ | (1,340,369 | ) |
The accompanying notes are an integral part of these financial statements
20
GULF UNITED ENERGY,
INC.
(A
Development Stage Company)
NOTES
TO THE FINANCIAL STATEMENTS
August
31, 2009
The
financial information furnished herein reflects all adjustments, which in the
opinion of management are necessary to fairly state the Company’s financial
position and the results of its operations for the periods
presented.
1.
|
NATURE
AND CONTINUANCE OF OPERATIONS
|
Gulf
United Energy, Inc. (“the Company”) was incorporated in the State of Nevada,
U.S.A., on September 19, 2003. The Company currently has limited
operations. The Company is a development stage company as defined by
Statement of Financial Accounting Standards Codification Section
915-10-20. The Company acquired joint venture interests with a
private Mexican company in a proposed natural gas pipeline project and a
proposed liquefied natural gas (LNG) regasification and storage facility in
Mexico.
These
financial statements have been prepared on a going concern basis. The Company
has incurred losses since inception resulting in an accumulated deficit of
$2,053,644 and further losses are anticipated in the development of its business
raising substantial doubt about the Company’s ability to continue as a going
concern. Its ability to continue as a going concern is dependent upon the
ability of the Company to generate profitable operations in the future and/or to
obtain the necessary financing to meet its obligations and repay its liabilities
arising from normal business operations when they come due. Subsequent to August
31, 2009, management prepared a private placement offering of its
unregistered, restricted common stock at $0.01 per share. Through December 14,
2009 the Company has sold 14,500,000 shares of unregistered, restricted common
stock and has received $145,000 cash for the purchase of shares. We
have not yet closed on the placement. We are attempting to raise additional
capital, however, there are no assurances that the Company will be successful.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts of and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
SALE
OF JOINT VENTURE INTERESTS
As
reported on the 8K filed June 11, 2009, on June 8, 2009, the Company entered
into an agreement with its joint venture partner, Cia. Mexicana de Gas Natural,
S.A. de C.V., to sell all of the Company’s shares in Fermaca LNG de Cancun ,
S.A. de C.V. and Fermaca Gas de Cancun, S.A. de C.V. for a total amount of
$1,000,000. The transaction was expected to close within thirty days
with the purchase price paid in six payments: $200,000 at the close
of the transaction, four installments of $150,000 payable three, six, nine and
twelve months after the close and a final payment of $200,000 payable at fifteen
months after the close of the purchase transaction. As a result of
this anticipated sale, the Company at August 31, 2009 has impaired its advances
to and investment in joint venture projects by $1,010,970 to $940,240 to reflect
the estimated present value of the anticipated sales price, discounted at
10%. The closing date of the transaction has been extended several
times due to delays in getting transaction documents completed. On
November 12, 2009, the Company was asked to extend the closing date again which
management has chosen not to do. The closing date is now uncertain;
therefore, the sale may not occur as discussed herein, and may not occur at
all.
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis
of Accounting
The
Company maintains its accounts on the accrual method of accounting in accordance
with accounting principles generally accepted in the United States of America.
The accompanying financial statements of Gulf United Energy, Inc., have been
prepared in accordance with accounting principles generally accepted in the
United States of America and the rules of the United States Securities and
Exchange Commission (SEC). In the opinion of management, all adjustments
necessary for a fair presentation of financial position and the results of
operations have been reflected herein.
21
GULF
UNITED ENERGY, INC.
(A
Development Stage Company)
NOTES
TO THE FINANCIAL STATEMENTS
August
31, 2009
Use
of Estimates and Assumptions
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that directly 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. Actual results could differ from those
estimates.
Cash
Cash
includes cash in a demand deposit account with a Houston
bank.
Fair
Value of Financial Instruments
The
Company’s financial instruments consist of cash and accounts payable, accrued
liabilities and debt. It is management’s opinion that the Company is
not exposed to significant interest or credit risks arising from these financial
instruments. The fair value of these financial instruments approximates their
carrying values. The carrying amount of these financial instruments
approximates fair value due either to length of maturity or interest rates that
approximate prevailing market rates.
Impairment
of Long-lived Assets
The
Company evaluates impairment when events or circumstances indicate that a
long-lived asset’s carrying value may not be recovered. These events
include market declines, decisions to sell an asset and adverse changes in the
legal or business environment. If events or circumstances indicate
that a long-lived asset’s carrying value may not be recoverable, the Company
estimates the future undiscounted cash flows from the asset for which the lowest
level of separate cash flows may be determined, to determined if the asset is
impaired. If the total undiscounted future cash flows are less than
the carrying amount for the asset, the Company estimates the fair value of the
asset through reference to sales data for similar assets, or by using a
discounted cash flow approach. The asset’s carrying value is then
adjusted downward to the estimated fair value. These cash flow
estimates and assumptions could change significantly either positively or
negatively. Effective May 31, 2009, the Company recorded an
impairment of $1,010,970 in the value for its investment in and advances to
joint venture projects to reflect the present value of the expected cash to be
recovered in the possible sale of the joint venture interests (see Note 1 – Sale
of Joint Venture Interests).
Basic
Loss Per Share
The
Company is required to provide basic and diluted earnings (loss) per common
share information.
The basic
net loss per common share is computed by dividing the net loss applicable to
common stockholders by the weighted average number of common shares
outstanding.
Diluted
net loss per common share is computed by dividing the net loss applicable to
common stockholders, adjusted on an "as if converted" basis, by the weighted
average number of common shares outstanding plus potential dilutive securities.
For the years ended August 31, 2009 and 2008, there were no potentially dilutive
securities issued so diluted net loss per common share equals basic net loss per
share.
Concentration
All of
the shareholder loan and accrued interest is payable to one
shareholder. This shareholder loan is secured by the Company’s
advances to and investment in the joint venture projects.
22
GULF
UNITED ENERGY, INC.
(A
Development Stage Company)
NOTES
TO THE FINANCIAL STATEMENTS
August
31, 2009
Recent
Accounting Pronouncements
In May
2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 165, Subsequent Events, now FASB
Accounting Standard Codification 855-10-20. This statement
establishes general standards for and disclosure of events that occur after the
balance sheet date but before the financial statements are issued or are
available to be issued. In particular, this statement sets forth (1)
the period after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements; (2) the circumstances
under which an entity should recognize events or transactions occurring after
the balance sheet date in its financial statements; and (3) the disclosures that
an entity should make about events or transactions that occurred after the
balance sheet date. This statement is effective for interim or annual
periods ending after June 15, 2009, and we adopted it on that
date. This statement is not expected to have any impact on our
financial position or results of operations (see note 8).
In June
2009, the FASB issued SFAS No. 166 (now FASB Accounting Standards Codification
Section 860-20), Accounting for Transfers of Financial Assets an amendment of
FASB SFAS No. 140, which amends the derecognition guidance in SFAS No. 140 and
eliminates the exemption from consolidation for qualifying special purpose
entities. This statement has not yet been codified and is effective
for financial asset transfers occurring after the beginning of an entity’s first
fiscal year that begins on or after November 15, 2009. This statement
is not expected to have any impact on our financial position or results of
operations.
In June
2009, the FASB issued SFAS No. 167 (now FASB Accounting Standards Codification
Section 810-10), Amendments to FASB Interpretation No. 46(R), which amends the
consolidation guidance applicable to variable interest entities. The
amendments will significantly affect overall consolidation analysis under FASB
Interpretation No. 46(R). This statement is effective as of the
beginning of the first fiscal year that begins after November 15,
2009. This statement is not expected to have any impact on our
financial position or results of operations.
In June
2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles – a replacement of
SFAS No. 162. The Accounting Standards Codification (the
“Codification”) will become the source of authoritative U. S. generally accepted
accounting principles recognized by the FASB to be applied to nongovernmental
entities. Rules and interpretive releases of the Securities and
Exchange Commission under authority of federal securities laws are also sources
of authoritative GAAP for SEC registrants. On the effective date of
this Statement, the Codification will supersede all then-existing non-SEC
accounting and reporting standards. All other non-grandfathered
non-SEC accounting literature not included in the Codification will become
non-authoritative. This statement is effective for financial
statements issued for interim and annual periods ending after September 15,
2009. The Company does not expect the adoption of the Codification to
have an impact on the Company’s results of operations, financial position or
cash flows.
3. INVESTMENTS (See
Note 1 – Sale of Joint Venture Interests)
On March
22, 2006, the Company entered into a letter of intent with Cia. Mexicana de Gas
Natural, S.A. de C.V. (“CMGN”), a private Mexican corporation, whereby the
Company would acquire a 50% interest in a joint venture to be formed (the “Gulf
United/CMGN Joint Venture”). The Company contributes cash to the Gulf
United/CMGN Joint Venture and CMGN contributed its 24% equity interest in a
proposed project to design, construct, operate and maintain an open access
natural gas pipeline between Valladolid, Cancun and Punta Venado, as well as its
initial 24% equity interest in a project to build a proposed LNG storage and
regasification facility. The Company borrowed $200,000 from a stockholder to
make the initial advance required under the letter of intent. No additional
payments were made. The letter of intent was terminated on May 22, 2006 and the
investment in the joint venture was transferred to a stockholder of the Company
in full settlement of the debt.
Subsequent
to August 31, 2006, the Company entered into an amended letter of intent with
CMGN whereby the general terms of the initial letter of intent were reinstated.
The amended letter of intent acknowledged $1,013,985 had been advanced to CMGN
on behalf of the Company, by a Company stockholder, (including the initial
advance of $200,000) pursuant to the original letter of intent. In order to earn
its 50% in the Gulf United/CMGN Joint Venture, the Company paid an additional
$250,000 to CMGN and issued
23
GULF
UNITED ENERGY, INC.
(A
Development Stage Company)
NOTES
TO THE FINANCIAL STATEMENTS
AUGUST
31, 2009
935,000
shares of the Company’s restricted stock to CMGN valued at $687,225 following
the execution of the joint venture agreements.
The
Company has entered into a loan agreement with a stockholder regarding funds
advanced on its behalf. The loan is secured by the Company’s equity interest in
the joint venture entities, bears interest at a rate of 10% per annum,
compounded monthly, and is due in full on December 17, 2009. At this
time, the Company does not have the resources to partially or fully pay this
note payable; therefore, management anticipates that the note due date will be
extended on or before December 17, 2009. The Company may, at any time, satisfy
the loan in its entirety by transferring its interest in the joint venture
entities to the lending stockholder. In connection with the loan
agreement, the Company has agreed to pay a finder’s fee to the lending
stockholder equal to 8.5% of any revenues the Company receives from the
operations of the joint venture projects.
The value
of the joint venture investment was impaired in the amount of $1,010,970 and
adjusted as of August 31, 2009 to reflect the present value of the agreed sale
amount of $1,000,000 as discussed in Note 1 – Sale of Joint Venture Interests.
The valuation was completed using level 3 inputs, using a 10% discount rate on
funds to be received after closing.
Condensed
audited balance sheets for the joint venture entities as of August 31, 2009 are
included below and were audited by other auditors:
Fermaca
Gas de Cancun, S.A. de C.V.
|
Fermaca
LNG de Cancun, S.A. de C.V.
|
|||||||
Cash
|
$ | 798 | $ | 1,533 | ||||
Receivables
|
- | 8 | ||||||
Capitilized
value added tax
|
64,992 | 128,052 | ||||||
Projects
in process
|
5,168,311 | 2,958,834 | ||||||
Other
assets
|
8,497 | 3,395 | ||||||
Total
Assets
|
$ | 5,242,598 | $ | 3,091,822 | ||||
Accounts
payable
|
$ | 6,218 | $ | 1,595 | ||||
Income
tax withholding
|
433 | 396 | ||||||
Minority
interest
|
2,625,601 | 1,559,881 | ||||||
Total
liabilities
|
2,632,252 | 1,561,872 | ||||||
Total
stockholders' equity
|
2,610,346 | 1,529,950 | ||||||
Total
Liabilities and Stockholders' Equity
|
$ | 5,242,598 | $ | 3,091,822 |
The joint
venture balance sheets reflected above are consolidated with their subsidiaries,
Energia YAAX, S.A de C.V (the company that will construct and own the proposed
natural gas pipeline) and SIIT Energy, S.A. de C.V. (the company that will
construct and own the proposed LNG plant), which are the operating companies in
which the joint venture companies hold a 50% interest. Because all
costs incurred by the joint ventures and the underlying entities relate to the
proposed development of the pipeline and LNG terminal, the joint venture
companies have capitalized all costs and there are no revenues or expenses
during the construction phase. The minority interest shown in these
balance sheets is the investment of the other 50% owner in the operating
companies that will own
24
GULF
UNITED ENERGY, INC.
(A
Development Stage Company)
NOTES
TO THE FINANCIAL STATEMENTS
AUGUST
31, 2009
the
natural gas pipeline and the LNG storage and regasification
plant. The Company owns a 24% interest in the joint venture companies
and a 12% net interest in the proposed projects shown in the above condensed
balance sheets.
As of
August 31, 2009, the joint venture partner owned 1,135,00 shares or
approximately 4.31% of the Company’s outstanding common shares.
4. COMMON
STOCK
The total
number of common shares of stock which the Company shall have the authority to
issue is two hundred million (200,000,000) shares with a par value of one tenth
of one cent ($.001) per share.
As of
August 31, 2009 and 2008, the Company had 26,350,000 shares of its $.001 par
value common stock issued and outstanding.
5. INCOME
TAXES
Potential
benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has incurred net
operating losses totaling $2,053,644 which commence expiring in 2023 if not
previously utilized. Pursuant to Accounting Standards Codification Section
740-10, the Company is required to compute tax asset benefits for net operating
losses carried forward. The potential benefit of net operating losses has been
offset by a valuation allowance in these financial statements because the
Company cannot be assured it is more likely than not it will utilize the net
operating losses carried forward in future years. The valuation of the tax loss
carryforward and the valuation allowance thereon were as follows:
August 31, 2009
|
August 31, 2008
|
|||||||
Tax
benefit carry forward
|
$ | 354,509 | $ | 237,959 | ||||
Valuation
allowance
|
(354,509 | ) | (237,959 | ) | ||||
$ | - | $ | - |
6.
|
LOANS
PAYABLE
|
Loans
payable consist of the following as of August 31, 2009 and 2008:
Short-term
|
||||
Unsecured
loans to related parties
|
$ | 26,574 | ||
Secured
loan and interest payable to stockholder
|
$ | 2,154,700 |
Two
stockholders and former directors of the Company provided loans totalling
$26,574. The loans are non-interest bearing, unsecured and payable
upon demand.
The
Company has received loans from one stockholder totaling $2,154,700. This amount
includes accumulated and unpaid interest of $515,515 as of August 31,
2009. These funds have been used primarily to purchase an interest in
the Mexican joint ventures. That total loan amount is comprised of:
$1,263,985 of advances to the joint ventures, $375,200 used for operating costs
and $515,515 of interest. The loan is secured by the Company’s equity
interest in the joint ventures. The loan bears interest at a rate of
10% per annum and is due December 17, 2009. At this time, this
Company does not have the resources to partially or fully pay this note payable;
therefore, management anticipates that the note due will be extended on or
before December 17, 2009. The Company may, at any time, satisfy the loan in its
entirety by transferring its interest in the joint ventures to the
stockholder.
25
GULF
UNITED ENERGY, INC.
(A
Development Stage Company)
NOTES
TO THE FINANCIAL STATEMENTS
AUGUST
31, 2009
7.
|
COMMITMENTS
AND CONTRACTUAL OBLIGATIONS
|
JOINT
VENTURE COMMITMENTS (See Note 1 – Sale of Joint Venture Interests)
As
reflected herein, the Company has entered into a joint venture agreement to
provide funding currently estimated to be approximately $16,800,000 with respect
to the Company's 12% interest in the proposed pipeline
project. Additional amounts will be required to fund the Company’s
12% interest in the proposed LNG storage and re-gasification project. At this
time, the Company does not know, and cannot reasonably estimate, its portion of
the costs associated with the proposed LNG storage and re-gasification project.
Because the Company is solely an investor in the joint ventures and not the
operator, management of the Company is currently unable to determine precisely
when the funding amounts will become due or the amounts that will be required.
However, it is anticipated by management that the amounts due will be paid during
the next three fiscal years for the proposed pipeline project and during the
next five fiscal years for the proposed LNG storage and re-gasification
project. The Company currently does not have adequate resources
available to meet its funding requirements. Should the Company be
unable to fund the required amounts on a timely basis, the joint venture
interests may revert to the stockholder who has provided the funding reflected
in the accompanying balance sheets as of August 31, 2009 and 2008; or the joint
venture interests may be forfeited to the Company’s joint venture
partner.
Due to
the current state of the world economy, the difficulties of the financial
markets and relatively low oil and gas prices, among other things, there are no
assurances that either of these projects will be constructed. Because
construction of these proposed projects
has not
commenced, and because the Company lacks the resources to fund its share of
construction costs coupled with the current state of the world economy, it is
possible that these projects will not be built according to schedule or may not
be built at all. In the event that the projects are postponed for a
lengthy period of time, or are cancelled altogether, the value of the Company’s
advances and interest in the joint venture projects will decline precipitously
and may not retain any value.
8. SUBSEQUENT
EVENTS
Sale
of unregistered, restricted shares of common stock
Since the
end of fiscal 2009, the Company has received additional capital of about
$145,000 (and is attempting to sell additional unregistered, restricted common
shares) based on a potential closing and issuance of 14,500,000 unregistered,
restricted common shares at $0.01 per share. This transaction will
not close until at least the latter part of December, 2009.
Entry
into tentative letter agreement
On
October 30, 2009, the Company entered into a tentative letter of intent with SK
Energy Co., Ltd to acquire a 25% interest in Block CPO-4 in the Llanos Basin of
Colombia. This agreement is subject to completion of a definitive
agreement which is currently being negotiated. If a definitive
agreement is completed, the Company will be required to fund 25% of expenses
already incurred (our amount approximately $64,000) and future expenses for
drilling new oil and gas wells. The Company may attempt to issue
additional shares to fund some or all of this investment.
Subsequent
events through December 14, 2009 have been considered in this
report.
26
GULF
UNITED ENERGY, INC.
(A
Development Stage Company)
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM
9A. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls
Management
is responsible for establishing and maintaining adequate control over financial
reporting as defined in Rule 13a-15(f) under the Securities Exchange Act, as
amended. Management assessed the effectiveness of its internal control over
financial reporting as of August 31, 2009. In making this assessment, our
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated
Framework. A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the company’s annual or
interim financial statements will not be prevented or detected on a timely
basis. Our Principal Executive Officer and Principal Financial
Officer, after evaluating the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this report, have identified
the following material weaknesses:
1)
|
As
of August 31, 2009, effective controls over the control environment were
not maintained. Specifically, a formally adopted written code
of business conduct and ethics that governs the Company’s employees,
officers and director was not in place. In addition, management
has not developed and effectively communicated it accounting policies and
procedures. This has resulted in some inconsistent
practices. Further, the Board of Directors does not have any
independent members and no director qualifies as an audit committee
financial expert as defined in Item 407(d)(5)(ii) of Regulation
S-B. Since these entity-level programs have a potentially
pervasive effect across the organization, management has determined that
those circumstances constitute a material weakness.
|
2)
|
As
of August 31, 2009, effective controls over financial statement
disclosures were not maintained. Specifically, controls were
not designed and in place to ensure that all disclosures required were
originally addressed in our financial
statements.
|
Accordingly,
management has determined that these control deficiencies constitute material
weaknesses. Because of these material weaknesses, management has
concluded that the Company did not maintain effective internal control over
financial reporting as of August 31, 2009 based on the criteria established in
“Internal Control-Integrated Framework” issued by the COSO. These material
weaknesses have been disclosed to our Board of Directors and we are continuing
our efforts to improve and strengthen our control processes and
procedures. Our management and director will continue to work with
our auditors to ensure that our controls and procedures are adequate and
effective.
Changes
in Internal Control Over Financial Reporting
No
changes in the Company’s internal control over financial reporting occurred
during our most recently completed fiscal quarter that materially affected, or
are reasonably likely to materially affect, the Company’s internal control over
financial reporting.
Limitations
on the Effectiveness of Controls
Our
management does not expect that our disclosure controls or our internal controls
over financial reporting will prevent all errors and fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, but not
absolute, assurance that the objectives of a control system are met. Further,
any control system reflects limitations on resources, and the benefits of a
control system must be considered relative to its costs. These limitations also
include the realities that judgments in decision-making can be faulty and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people or by management override of a control. A design of a control
system is also based upon certain assumptions about potential future conditions;
over time, controls may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and may not be
detected.
27
ITEM
9B. OTHER INFORMATION
None
28
(A
Development Stage Company)
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT
Our
director and executive officers and their ages as of August 31, 2009, are shown
below.
Name
|
Age
|
Position
|
Don
W. Wilson
|
62
|
CEO
and Director
|
David
Pomerantz
|
49
|
CFO,
Treasurer, Secretary
|
Our
director will hold office until the next annual meeting of our shareholders or
until his successors is duly elected and qualified. Our executive
officers serve at the pleasure of the Board of Directors.
Mr. Don W. Wilson has acted as
our president, chief executive officer and as a sole director since November
2006. Since October 2001, he has owned and operated a cattle ranch in
Crockett, Texas. From March 1998 to October 2001, Mr. Wilson acted as
president and chief operating officer of Odyssea Marine, Inc., a private
Houston-based company involved in marine transportation and independent power
generation. From April 1998 to July 2001, he acted as Chairman of the
Board of Grant Geophysical, Inc., a public company involved in domestic and
international geophysical surveying. Mr. Wilson is a graduate of Sam
Houston State University with a Bachelor of Science degree and a Master of
Science degree.
Mr. David C. Pomerantz has
served as the Company's chief financial officer, treasurer and secretary since
April 2007. From March 2005 to present, Mr. Pomerantz has served as a
partner with Clear Financial Solutions, Inc., a company providing financial
consulting and CFO services. From February 2003 to March 2005, Mr. Pomerantz
served as chief financial officer and then chief operating officer for General
Solutions, Ltd., an electronics manufacturing and software development company.
From March 2000 to February 2003, Mr. Pomerantz held a senior manager role in
the consulting group of UHY Advisors, a CPA and professional services firm. From
1999-2000, Mr. Pomerantz was a director of strategic planning and then president
of PRS International, Inc. From 1988-1999, Mr. Pomerantz was controller and then
operations manager for a division of Tyco International, Inc. Mr.
Pomerantz attended Emory University and received his Business Administration
degree in accounting from the University of Texas at Austin. Mr. Pomerantz is a
member of The Houston Technology Center and the MIT Enterprise Forum and is
active on boards and executive boards of several non-profit
organizations.
AUDIT
COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT; NOMINATING
DIRECTORS
Our sole
director is not independent as defined by Rule 10A-3 of the Exchange
Act. The entire board compromises the Company’s Audit and Nominating
Committee. The Company does not have an “Audit Committee Financial Expert” as a
member of its audit committee. The Company does not have available any person
with the requisite background and experience, nor has the Company been able to
attract anyone to its Board with the requisite background. We have
not adopted any procedures regarding security holders’ nominating
directors.
The Audit
Committee of the Board currently consists of the entire Board, but it is
expected that the Audit Committee will be constituted to consist of at least two
non-employee directors. The Audit Committee selects an independent public
accounting firm to be engaged to audit our financial statements, discusses with
the independent auditors their independence, reviews and discusses the audited
financial statements with the independent auditors and management and recommends
to our Board of Directors whether the audited financials should be included in
our Annual Reports to be filed with the SEC.
Upon the
constitution of the Audit Committee, it is expected that all of the members of
the Audit Committee will be non-employee directors who: (1) meet the criteria
for independence set forth in Rule 10A-3(b)(1) under the Exchange Act; (2) did
not participate in the preparation of our financial statements or the financial
statements of the Company; and (3) are able to read and understand fundamental
financial statements, including a balance sheet, income statement and cash flow
statement. The board has determined that its sole director does not qualify as
an audit committee financial expert as defined in Item 407(d) of Regulation
S-B.
29
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires our executive officers and director, and
persons who beneficially own more than 10% of our equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, director and greater than 10% shareholders are required by
SEC regulation to furnish us with copies of all Section 16(a) forms they
file.
Based on
our review of the copies of such forms we received, we believe that during the
fiscal year ended August 31, 2009 all such filing requirements applicable to our
officers and director were complied with, except we failed to file Form 3’s for
Don Wilson.
CODE
OF ETHICS
As of the
end of fiscal year 2009, the Company had not established a Code of Business
Conduct and Ethics; however, we have adopted a Code of Ethics and Whistleblower
policy as of December 14, 2009 with this filing (See Exhibit 14.1 and Exhibit
14.2).
ITEM
11. EXECUTIVE COMPENSATION
Summary
Compensation Table
|
||||||||||||||
Name
and
Principal
Position
|
Year
|
Salary
And
Consulting
Payments
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Stock
Option
Awards
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|||||||
Don
Wilson
|
2009
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|||||||
CEO
|
2008
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|||||||
David
Pomerantz
|
2009
|
25,388
|
-0-
|
-0-
|
-0-
|
-0-
|
25,388
|
|||||||
CFO,
Treasurer Secretary
|
2008
|
36,016
|
-0-
|
-0-
|
-0-
|
-0-
|
36,016
|
|||||||
Our chief
executive officer and director is not currently compensated for his services
other than through reimbursement for expenses. Our chief financial
officer is compensated through a contract with Clear Financial Solutions, Inc.
(CFS). In fiscal 2009 and 2008, CFS billed a total of $25,388 and
$36,016, respectively, for contract CFO services. We do not have any
employment agreements with our officers.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The
following table sets forth information regarding the beneficial ownership of our
shares of common stock at December 4, 2009 by (i) each person known by us to be
the beneficial owner of more than 5% of our outstanding shares of common stock,
(ii) our director, (iii) our executive officers, and (iv) by our director and
executive officers as a group. Each person named in the table, has sole voting
and investment power with respect to all shares shown as beneficially owned by
such person and can be contacted at our executive office address.
|
|||
Don
Wilson
|
2,000,000
|
7.59%
|
|
David
Pomerantz
|
-0-
|
-0-
|
|
All
directors & executive officers
as
a group (2 persons)
|
2,000,000
|
7.59%
|
30
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Two
shareholders and former directors, Brian McKay and Bruno Fruscalzo, have loaned
$15,172 and $11,402 to us respectively. These loans are unsecured, non-interest
bearing, have no fixed terms of repayment and are due upon
demand. One shareholder has loaned the company $2,154,700, including
accrued interest, secured by the Company’s interest in the joint ventures as
noted above.
Other
than the shareholder loans described above, neither our director nor officers,
nor any proposed nominee for election as a director, nor any person who
beneficially owns, directly or indirectly, shares carrying more than 10% of the
voting rights attached to all of our outstanding shares, nor any promoter, nor
any relative or spouse of any of the foregoing persons has any material
interest, direct or indirect, in any transaction since our incorporation or in
any presently proposed transaction which, in either case, has or will materially
affect us.
Our
management is involved in other business activities and may, in the future
become involved in other business opportunities. If a specific business
opportunity becomes available, such persons may face a conflict in selecting
between our business and their other business interests. In the event that a
conflict of interest arises at a meeting of our director, a director who has
such a conflict will disclose his interest in a proposed transaction and will
abstain from voting for or against the approval of such transaction.
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES
During
the fiscal years ended August 31, 2009, and August 31, 2008, the aggregate fees
billed by our principal accountants, Harper Pearson Company, P.C. for the audit
of year-end financials and review of our quarterly financials and required SEC
filings and by Solloa, Tello de Meneses y Cia, S.C. for the audit of our joint
venture companies were as follows:
Fiscal
year ended
|
Fiscal
year ended
|
|||||||
August
31, 2009
|
August
31, 2008
|
|||||||
Audit
fees
|
$ | 44,347 | $ | 85,898 | ||||
Audit-related
fees
|
-0- | -0- | ||||||
Tax
fees
|
2,322 | 5,439 | ||||||
All
other fees
|
-0- | -0- |
Audit
fees consist of fees related to professional services rendered in connection
with the audit of our annual financial statements and the review of the
financial statements included in each of our quarterly reports on Form
10-Q. Tax fees consist of fees for professional services rendered in
connection with preparation and filing of our federal income tax
returns.
Our
policy is to pre-approve all audit and permissible non-audit services performed
by the independent accountants. These services may include audit services,
audit-related services, tax services and other services. Under our audit
committee’s policy, pre-approval is provided for particular services or
categories of services, including planned services, project based services and
routine consultations. In addition, we may also pre-approve particular services
on a case-by-case basis. We approved all services that our independent
accountants provided to us in the past two fiscal years.
Part
IV
Item
15. EXHIBITS
*3.1
|
Articles
of Incorporation
|
*3.2
|
Amendments
to Articles of Incorporation
|
*3.3
|
Bylaws
|
**10.1
|
Amended
Loan Agreement
|
***10.2
|
Letter
agreement between Gulf United Energy, Inc. and Cia. Mexicana de Gas
Natural, S.A. de C.V.
|
****10.3
|
Joint
Venture Agreement
|
31
14.1
|
Code
of Ethics
|
14.2
|
Whistleblower
Policy
|
31.1
|
Certifications
pursuant to Rule 13a-14(a) under the Securities Exchange Act of
1934
|
32.1
|
Certifications
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
|
*Incorporated by reference to
Form SB-2 filed on December 23, 2004.
**Incorporated by reference to
Form 8K filed on December 3, 2009.
***
Incorporated by reference to Form 8K filed on June 11, 2009.
****
Incorporated by reference to our Form 8-K filed on July 18, 2007
32
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Gulf
United Energy, Inc.
/S/ DON
WILSON
___________________________
Don
Wilson, President and C.E.O.
(Principal
Executive Officer)
DATED: December
14, 2009
/S/ DAVID
POMERANTZ
___________________________
David
Pomerantz, CFO
Principal
Financial Officer and
Principal
Accounting Officer
DATED: December
14, 2009
33