CONTINENTAL ENERGY CORPORATION
INTERIM FINANCIAL STATEMENTS
31 December 2018
Expressed in U.S. Dollars
(Unaudited – Prepared by Management)
INTERIM FINANCIAL STATEMENTS
The financial statements included herein are management prepared, unaudited, condensed, consolidated, interim financial statements and are hereinafter referred to as the "Interim Financial Statements". These Interim Financial Statements are filed on SEDAR concurrently with Management's Discussion and Analysis ("MD&A") of the results for the same period, and may be read in conjunction with the MD&A.
NOTICE OF NO AUDITOR REVIEW
In accordance with National Instrument 51-102 Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of our Interim Financial Statements, then such statements must be accompanied by a notice indicating that they have not been reviewed by an auditor.
Neither the accompanying Interim Financial Statements as presented herein nor the accompanying MD&A have been reviewed by our auditors. Both the Interim Financial Statements and the MD&A have been prepared by and are the responsibility of the management of Continental Energy Corporation.
Continental Energy CorporationFinancial Statements
(Unaudited – Prepared by Management and expressed in US Dollars)
STATEMENTS OFFINANCIALPOSITION
Note | 31 December | 30 June | |||
ASSETS | 2018 | 2018 | |||
Current | $ | $ | |||
Cash | 305,104 | 30,887 | |||
Receivables | 8,299 | 7,606 | |||
Prepaid expenses and deposits | 32,186 | 39,456 | |||
345,589 | 77,949 | ||||
LIABILITIES | |||||
Current | |||||
Accounts payable and accrued liabilities | 7 | 301,315 | 527,125 | ||
Loans from related parties | 7 | 87,500 | 87,500 | ||
388,815 | 614,625 | ||||
Non-current assets | |||||
Promissory notes | 5 | 112,884 | - | ||
501,699 | 614,625 | ||||
DEFICIENCY | |||||
Share capital | 6 | 18,238,161 | 17,841,522 | ||
Share-based payment and other reserve | 6 | 10,442,932 | 10,277,321 | ||
Deficit | (28,837,203 | ) | (28,655,519 | ) | |
(156,110 | ) | (536,676 | ) | ||
345,589 | 77,949 | ||||
Nature of Operations and Going Concern(Note1) | |||||
Subsequent Events(Note 10) |
ON BEHALF OF THE BOARD:
“Richard L. McAdoo”, Director & CEO
“Phillip B. Garrison”, Director & Acting CFO
- See Accompanying Notes –
2
Continental Energy CorporationFinancial Statements
(Unaudited – Prepared by Management and expressed in US Dollars)
STATEMENTS OFLOSS ANDCOMPREHENSIVELOSS
For the Three | For the Three | For the Six | For the Six | ||||||
Months Ended | Months Ended | Months Ended | Months Ended | ||||||
31 December | 31 December | 31 December | 31 December | ||||||
Note | 2018 | 2017 | 2018 | 2017 | |||||
EXPENSES | $ | $ | $ | $ | |||||
Depreciation | - | 91 | - | 183 | |||||
Interest and bank charges | 5 | 3,326 | 103 | 14,242 | 8,609 | ||||
Management and consulting fees | 7 | 53,523 | 45,853 | 71,859 | 83,417 | ||||
Office and investor relations | 34,477 | 24,801 | 53,533 | 100,957 | |||||
Professional fees | 13,634 | 25,677 | 18,269 | 62,838 | |||||
Rent, maintenance and utilities | 6,354 | 1,092 | 7,392 | 2,549 | |||||
Share-based payments | - | 1,150 | - | 41,950 | |||||
Travel and accommodation | 17,629 | 17,380 | 19,741 | 38,278 | |||||
(128,943 | ) | (116,147 | ) | (185,036 | ) | (338,781 | ) | ||
Other income (expenses) | |||||||||
Interest and foreign exchange | 1,036 | (861 | ) | (1,898 | ) | (1,010 | ) | ||
Financing cost | - | - | - | (151,110 | ) | ||||
Settlement of debt | 6 | - | 103,838 | 5,250 | 178,838 | ||||
Transaction cost | - | - | - | (534,425 | ) | ||||
Net loss and comprehensive loss forthe period | (127,907 | ) | (13,170 | ) | (181,684 | ) | (846,488 | ) | |
Loss Per Share – Basic and Diluted | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.01 | ) | |
Weighted Average Number of Shares | 171,367,554 | 152,539,294 | 167,526,250 | 142,117,011 |
- See Accompanying Notes -
Continental Energy Corporation
Financial Statements
(Unaudited – Prepared by Management and expressed in US Dollars)
STATEMENTS OFCASHFLOWS
For the Six | For the Six | ||||
Months Ended | Months Ended | ||||
31 December 2018 | 31 December 2017 | ||||
Cash Resources Provided By (Used In) | Note | $ | $ | ||
Operating Activities | |||||
Loss for the period | (181,684 | ) | (846,488 | ) | |
Items not affecting cash | |||||
Depreciation | - | 183 | |||
Interest on debt | 5 | 12,884 | 7,486 | ||
Settlement of debt | 6 | (5,250 | ) | (178,838 | ) |
Financing cost | - | 151,110 | |||
Share-based payment expense | - | 41,950 | |||
Transaction cost | - | 534,425 | |||
Changes in non-cash working capital | |||||
Receivables | (693 | ) | (4,125 | ) | |
Prepaid expenses and deposits | 7,270 | (103,776 | ) | ||
Accounts payable and accrued liabilities | (108,310 | ) | 156,425 | ||
(275,783 | ) | (241,648 | ) | ||
Financing Activities | |||||
Private placement | 6 | 550,000 | 350,000 | ||
Proceeds from exercise of warrants | - | 20,000 | |||
Advances from joint venture partner | - | 74,426 | |||
Proceeds from (repayment of) loans from related parties | |||||
550,000 | 431,326 | ||||
Change in cash | 274,217 | 189,678 | |||
Cash Position – Beginning of Period | 30,887 | 25,158 | |||
Cash Position – End of Period | 305,104 | 214,836 | |||
Supplemental cash flow information(Note 8) |
- See Accompanying Notes -
4
Continental Energy Corporation
Financial Statements
(Unaudited – Prepared by Management and expressed in US Dollars)
STATEMENTS OFCHANGES INDEFICIENCY
Share Capital | ||||||||||||
Share-Based Payment | Conversion Rights | |||||||||||
Number | Amount | and Other Reserve | Reserve | Deficit | Total | |||||||
$ | $ | $ | $ | $ | ||||||||
Balance on 30 June 2017 | 123,015,381 | 16,201,630 | 9,927,687 | 92,966 | (27,942,808 | ) | (1,720,525 | ) | ||||
Acquisition of Continental Hilir Indonesia Pte. Ltd. | 14,000,000 | 700,000 | 204,400 | - | - | 904,400 | ||||||
Convertible debt settlement | 10,350,000 | 517,500 | 151,110 | - | - | 668,610 | ||||||
Reallocation of conversion right reserve on settlement of convertible debt | - | 92,966 | - | (92,966 | ) | - | - | |||||
Exercise of warrants | 2,000,000 | 20,000 | - | - | - | 20,000 | ||||||
Reallocation of share-based payment and other reserves on exercise of warrants | - | 26,200 | (26,200 | ) | - | - | - | |||||
Private placement – cash | 7,000,000 | 325,430 | 24,570 | - | - | 350,000 | ||||||
Settlement of debt | 1,000,000 | 320,000 | - | - | - | 320,000 | ||||||
Share-based payments | - | - | 41,950 | - | - | 41,950 | ||||||
Loss for the period | - | - | - | - | (846,488 | ) | (846,488 | ) | ||||
Balance on 31 December 2017 | 157,365,381 | 18,203,726 | 10,323,517 | - | (28,789,296 | ) | (262,053 | ) | ||||
Balance on 30 June 2018 | 163,365,381 | 17,841,522 | 10,277,321 | - | (28,655,519 | ) | (536,676 | ) | ||||
Private placement – cash | 6 | 11,000,000 | 384,389 | 165,611 | - | - | 550,000 | |||||
Settlement of debt | 6 | 350,000 | 12,250 | - | - | - | 12,250 | |||||
Loss for the period | - | - | - | - | (181,684 | ) | (181,684 | ) | ||||
Balance on 31 December 2018 | 174,715,381 | 18,238,161 | 10,442,932 | - | (28,837,203 | ) | (156,110 | ) |
- See Accompanying Notes -
5
Continental Energy Corporation
NOTES TO THEINTERIMFINANCIALSTATEMENTS
(Unaudited – Prepared by Management and expressed in US Dollars)
31 DECEMBER 2018
1. | Nature of Operations and Going Concern |
Continental Energy Corporation (“Continental” or the “Company”) is incorporated under the laws of the Province of British Columbia, Canada. The Company’s registered address and records office is 1500-1055 West Georgia Street, Vancouver, British Columbia, Canada V6E 4N7.
The Company is a developer of modular, small-scale crude oil refineries that are co-located with smaller and/or stranded oil and gas producing fields. Each refinery will be designed to refine high demand motor fuels for supply to underserved local markets in the Republic of Indonesia. The Company operates its primary business activities through two subsidiaries in Indonesia. Each of these subsidiaries has received the necessary investment licenses to permit foreign direct investment in Indonesia and one has received the required licenses from the Indonesian Ministry of Mines and Energy to build, own, and operate a petroleum refining business. The Company is now working towards securing financing to begin construction.
These Interim Financial Statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. The Company is a development stage company and has incurred operating losses over the past several fiscal years and has no current source of operating cash flows. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the financing necessary to acquire and develop its projects as well as fund ongoing administration expenses. There are no assurances that sufficient funding will be available.
Management intends to obtain additional funding primarily by issuing common and preferred shares in private placements, and/or by joining with strategic partners and joint venture partners in its refinery developments. There can be no assurance that management’s future financing actions will be successful. Management is not able to assess the likelihood or timing of raising capital for future expenditures or acquisitions.
These uncertainties indicate the existence of material uncertainty that casts substantial doubt on the Company’s ability to continue as a going concern in the future. If the going concern assumption were not appropriate for these Interim Financial Statements, liquidation accounting would apply, and adjustments would be necessary to the carrying values and classification of assets, liabilities, the reported income and expenses, and such adjustments could be material.
2. | Basis of Preparation |
These Interim Financial Statements have been prepared in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting, and are based on the principles of International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and interpretations thereof made by the International Financial Reporting Interpretations Committee.
These Interim Financial Statements should be read in conjunction with the audited financial statements for the last fiscal year ended 30 June 2018, which were also prepared in accordance with the same methods of application and include all of the Company’s accounting policies and other required disclosures.
The Company’s Board of Directors has delegated the responsibility and authority for approving quarterly financial statements and MD&A to its Audit Committee. The Audit Committee approved these Interim Financial Statements on 27 February 2019.
These Interim Financial Statements are consolidated and include the accounts of the Company's subsidiaries as described in its annual audited financial statements for the last fiscal year ended 30 June 2018.
These Interim Financial Statements have been prepared on a historical cost basis and presented in United States (“US”) dollars, the functional currency of the Company, except where otherwise indicated.
3. | Significant Accounting Estimates and Judgments |
The preparation of these Interim Financial Statements in accordance with IFRS requires that the Company’s management make judgments and estimates and form assumptions that affect the amounts in the financial statements and related notes to those financial statements. Actual results could differ from those estimates. Judgments, estimates and assumptions are reviewed on an ongoing basis based on historical experience and other factors that are considered to be relevant under the circumstances. Revisions to judgments, estimates and assumptions are accounted for prospectively.
6
Continental Energy Corporation
NOTES TO THEINTERIMFINANCIALSTATEMENTS
(Unaudited – Prepared by Management and expressed in US Dollars)
31 DECEMBER 2018
In preparing these Interim Financial Statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the audited financial statements for the last fiscal year ended 30 June 2018.
4. | Recent Accounting Pronouncements |
Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or IFRIC.
The Company adopted the following standard on 1 July 2018.
IFRS 9 Financial Instruments
This standard and its consequential amendments have replaced IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9, except that an entity choosing to measure a financial liability at fair value will present the portion of any change in its fair value due to changes in the entity’s own credit risk in other comprehensive income, rather than within profit or loss. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39.
Due to the nature of the Company’s financial instruments, i.e. cash being the only financial asset and the loan from a related party and other accounts payable being the only financial liabilities, the adoption of the standard did not have any impact on the Company’s financial statements. The classification and measurement of the Company’s financial instruments under IAS 39 and the new measurement categories under IFRS 9 are described below:
Measurement Category | ||
Original (IAS 39) | New (IFRS 9) | |
Financial Assets: | ||
Cash | Amortized cost | Amortized cost |
Financial Liabilities: | ||
Accounts payable and accrued liabilities | Amortized cost | Amortized cost |
Loans from related parties | Amortized cost | Amortized cost |
Promissory notes | N/A | Amortized cost |
The following new standards and amendments to standards have been issued but are not effective during the Company’s current fiscal year.
IFRS 16, Leases
This standard and its consequential amendments have replaced IAS 17 – Leases and its associated interpretative guidance. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customer controls the asset being leased. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, on-balance sheet accounting model that is similar to current finance lease accounting, with limited exceptions for short-term leases or leases of low value assets. Lessor accounting remains similar to current accounting practice. IFRS 16 is effective for annual periods beginning on or after January 1, 2019. The Company is currently evaluating the impact of this standard and will apply it from 1 July 2019.
5. | Promissory Notes |
On 1 September 2018 the Company issued three promissory notes to unrelated arms-length parties for an aggregate principal amount of $100,000 in respect of unpaid accounts payable and accrued liabilities of Continental Hilir Indonesia Pte. Ltd. assumed by the Company on closure of the CHI Transaction during the fiscal year ended 30 June 2018. The notes each have a term of two years and bear non-compounding simple interest at a rate of nine (9%) per year on the unpaid balance commencing from 1 September 2017.
During the six months ended 31 December 2018, the Company accrued interest of $12,884 in connection with these promissory notes.
7
Continental Energy Corporation
NOTES TO THEINTERIMFINANCIALSTATEMENTS
(Unaudited – Prepared by Management and expressed in US Dollars)
31 DECEMBER 2018
6. | Share Capital |
Authorized Share Capital
500,000,000 common shares without par value and without special rights or restrictions attached. 500,000,000 preferred shares without par value and with special rights or restrictions attached.
Shares issued
On 26 September 2018, pursuant to a private placement, the Company issued 7,000,000 units of the Company at $0.05 per unit, for proceeds of $350,000. Each unit consisted of one common share of the Company and one warrant to purchase an additional common share at a fixed price of $0.05 per common share for a term expiring on 30 June 2021. The Company allocated $228,545 to common shares and $121,455 to the share purchase warrants based on management’s estimate of relative fair values. The fair value of the share purchase warrants was estimated using the Black-Scholes option pricing model with the following assumptions: expected dividend yield: 0%, expected stock price volatility: 100%, risk-free interest rate: 2.18%, expected life of warrants: 2.76 years.
On 26 September 2018, the Company also issued 350,000 common shares to settle a payable to an officer of $17,500. These common shares had a fair value of $0.035 per share on the date of issuance for a total value of $12,250, resulting in a gain on settlement of debt of $5,250.
On 16 December 2018, pursuant to a private placement, the Company issued 4,000,000 units of the Company at $0.05 per unit, for proceeds of $200,000. Each unit consisted of one common share of the Company and one warrant to purchase an additional common share at a fixed price of $0.05 per common share for a term expiring on 30 June 2021. The Company allocated $155,844 to common shares and $44,156 to the share purchase warrants based on management’s estimate of relative fair values. The fair value of the share purchase warrants was estimated using the Black-Scholes option pricing model with the following assumptions: expected dividend yield: 0%, expected stock price volatility: 100%, risk-free interest rate: 1.95%, expected life of warrants: 2.54 years.
Stock options
The Company has an approved incentive stock option plan under which the Board of Directors may, from time to time, grant options to directors, officers, employees or consultants. Options granted must be exercised within a period as determined by the board. Options vest on the grant date unless otherwise determined by the board. The aggregate number of common shares which may be reserved as outstanding options shall not exceed 25,000,000, and the maximum number of options held by any one individual at any one time shall not exceed 7.5% of the total number of the Company's issued and outstanding common shares and 15% of same for all related parties (officers, directors, and insiders) as a group.
A reconciliation of the Company’s stock options outstanding on 31 December 2018 is as follows:
Weighted Average | ||||
Number of | Exercise Price | |||
Options | $ per Share | |||
Outstanding on 30 June 2018 | 4,500,000 | 0.15 | ||
Expired | (4,500,000 | ) | 0.15 | |
Outstanding on 31 December 2018 | - | - |
8
Continental Energy Corporation
NOTES TO THEINTERIMFINANCIALSTATEMENTS
(Unaudited – Prepared by Management and expressed in US Dollars)
31 DECEMBER 2018
Warrants
A reconciliation of the Company’s warrants outstanding is as follows:
Weighted Average | ||||
Number of | Exercise Price | |||
Warrants | $ per Share | |||
Outstanding on 30 June 2018 | 31,350,000 | 0.10 | ||
Issued | 11,000,000 | 0.05 | ||
Expired | (10,350,000 | ) | 0.10 | |
Outstanding on 31 December 2018 | 32,000,000 | 0.05 |
During the period ended 31 December 2018, the term and exercise price of 21,000,000 outstanding and unexercised share purchase warrants were amended to reflect a reduction in exercise price from $0.10 each to $0.05 each and an extension of their term and expiry date from 31 August 2018 (14,000,000) and 8 September 2018 (1,000,000) until a new expiry date on 30 June 2020, and from 28 November 2018 (6,000,000) until a new expiry date on 30 June 2021. As the share purchase warrants were issued originally to investors the modification of the terms was a transaction with the Company’s shareholders and therefore the incremental value resulting from such amendment did not result in any impact on the Company’s statement of loss.
A summary of the Company’s warrants outstanding on 31 December 2018 is as follows:
Number of Shares | Price Per Share | Expiry Date |
14,000,000 | $0.05 | 30 June 2020 |
1,000,000 | $0.05 | 30 June 2020 |
6,000,000 | $0.05 | 30 June 2021 |
7,000,000 | $0.05 | 30 June 2021 |
4,000,000 | $0.05 | 30 June 2021 |
32,000,000 |
7. | Related Party Transactions |
Key management personnel include persons having the authority and responsibility for planning, directing and controlling the activities of the Company as a whole, and includes the Company’s CEO, CFO, VP of Business Development, and its directors.
As at 31 December 2018, $183,361 (30 June 2018 - $320,951) was payable to the directors and officers of the Company as salary, fees, or other compensation. These amounts are included in accounts payable and accrued liabilities and are unsecured and non-interest bearing.
During the six months ended 31 December 2018, the Company paid or accrued salary, fees, or other compensation to the directors and officers of the Company in the amount of $65,272 (2017 - $69,804).
During the six months ended 31 December 2018, the Company’s VP of Business Development agreed to convert $17,500 in accrued and unpaid salaries into 350,000 common shares of the Company (Note 6).
During the six months ended 31 December 2017, the CEO of the Company forgave $75,000 in accrued and unpaid salary. The Company’s CEO also agreed to convert $150,000 in accrued and unpaid salaries into 3,000,000 common shares of the Company.
During the six months ended 31 December 2017, the previous CFO of the Company forgave $72,494 in accrued and unpaid salary and expenses and agreed to convert $200,000 in accrued and unpaid salaries into 4,000,000 common shares of the Company.
As at 31 December 2018, the Company has a loan payable to its CEO to $87,500, which was originally provided to the Company for assistance with working capital. The Loan is interest free with no fixed repayment terms.
9
Continental Energy Corporation
NOTES TO THEINTERIMFINANCIALSTATEMENTS
(Unaudited – Prepared by Management and expressed in US Dollars)
31 DECEMBER 2018
8. | Supplemental cash flow information |
Six Months Ended | Six Months Ended | |||||
Non-Cash Investing and | Note | 31 December 2018 | 31 December 2017 | |||
Financing Activities | $ | $ | ||||
Acquisition of CHI | - | 904,400 | ||||
Convertible debt settlement | - | 668,610 | ||||
Conversion of accounts payable into long-term promissory notes | 100,000 | - | ||||
Common shares issued in settlement of accrued and unpaid salaries | 7 | 12,250 | 320,000 | |||
Reallocation of conversion rights reserve on settlement of convertible debt | - | 92,966 | ||||
Reallocation of share-based payment and other reserve on warrant exercise | - | 26,200 |
9. | Segmented Information |
The Company currently operates in only one segment which is geographically concentrated within the Republic of Indonesia.
10. | Subsequent Events |
1. | In a letter to the Company dated 21 February 2018 the Canadian Securities Exchange ("CSE") approved the Company for listing subject to the Company a) providing acceptable emerging markets issues disclosure, b) confirmation of its audit committee composition, c) completion of financing sufficient to meet 12 month objectives (approximately $1 million, and d) completion of any and all outstanding CSE application documentation and payment of fees pursuant to the CSE's policies. A date for trading is to be determined upon confirmation of the conditions being met. As at the date of these Interim Financial Statements the Company is making arrangements to satisfy the conditions and complete the CSE listing. | |
2. | On 11 February 2019, the Company granted a total of 7,500,000 stock options to directors and officers of the Company, with and exercise price of $0.05 and term expiring 30 June 2021. |
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10
CONTINENTAL ENERGY CORPORATION
FORM 51-102F1
Management’s Discussion and Analysis
For the Quarter Ended on 31 December 2018
The End of the Second Quarter and Six (6) Months Period of Fiscal 2019
This Management Discussion and Analysis (“MD&A”) has been prepared by the management of Continental Energy Corporation (the "Company") as of 28 February 2019 (the "Report Date").
This MD&A is intended to supplement and complement the unaudited, condensed, interim, consolidated quarterly financial statements (the "Interim Financial Statements") that are also prepared by management and filed herewith. The Interim Financial Statements are consolidated and include the accounts of the Company's two Indonesia domiciled operating subsidiaries, PT Kilang Kaltim Continental and PT Continental Hilir Indonesia.
This MD&A, and the Interim Financial Statements filed herewith, pertain to the three (3) months and fiscal quarter ended 31 December 2018, a period of time hereinafter referred to as "This Quarter".
The end of This Quarter completes the "Second Quarter" and first six (6) months period of the Company's fiscal year ending 30 June 2019 ("Fiscal 2019").
All financial information presented herein, and in the Interim Financial Statements, has been prepared in accordance with accounting policies consistent with International Financial Reporting Standards (“IFRS”) promulgated by the International Accounting Standards Board. All amounts disclosed are in United States dollars unless otherwise stated.
PART - 1 : NATURE OF BUSINESS
The Company is a developer of small-scale crude oil refineries that are purposefully located near existing crude oil feedstock production in order to cost efficiently refine and deliver fuels directly to under-served local markets in the rapidly growing and emerging economy of Indonesia.
Why Indonesia? Already a G20 member, Indonesia is predicted by the World Bank to grow to the 4thlargest economy in the world by 2045.
PART- 2 : HIGHLIGHT EVENTS DURING THIS QUARTER
Significant events which may have a material effect on the business affairs of the Company that have occurred during This Quarter are summarized below:
Subsidiary Engages Advisor
In a news release dated 9 October 2018 the Company announced its Indonesian subsidiary PT Kilang Kaltim Continental ("KKC") has engaged a specialist in arranging commercial trade contracts and structuring project finance to assist and advise KKC with the development and realization of KKC's Maloy Refinery. Buck Hill Capital Partners, LLC is a Houston based firm whose partners have over 45 years of combined experience in arranging guaranteed energy commodity trading contracts and the structuring of finance for energy infrastructure projects.
Annual General Meeting for Fiscal 2018
In a news release dated 5 November 2018 the Company announced that its Fiscal 2018 Annual General Meeting would be held on 7 December 2018 at the Company's registered offices in Vancouver. All holders of the Company's shares as of the 26 October 2018 record date for the meeting will be entitled to receive a package of proxy related materials including an Information Circular containing details of matters to be voted on at the meeting. The notice, agenda, and information circular have been posted on SEDAR.
Audited Annual Financial Statements Posted for Fiscal 2018
In a news release dated 5 November 2018 the Company announced the posting its audited annual consolidated financial statements and annual reports on both SEDAR and on Form-20F on EDGAR for the Fiscal year ended 30 June 2018.
New Director Appointed
In a news release and a material change report both dated 7 November 2018 the Company announced the appointment of a new independent director, Mr. Glenn S. Klein, to the Company's board of directors. He has also been appointed to serve on the Audit, Governance, and Compensation board committees.
Mr. Klein is a resident of North Saanich, BC, Canada. He is a career banker with over 44 years’ experience and is an expert in international corporate debt restructuring and banking in emerging economies. He began his career and worked for 30 years (1966 – 1996) at the Royal Bank of Canada (RBC) in various roles at Canadian branches in Vancouver, Regina, and Montreal.
Mr. Klein rose to the position of Regional General Manager for RBC based in Dubai, with responsibility for RBC’s interests in the Middle East during the first Gulf War. During his tenure, the RBC Dubai office produced the highest financial results, return on capital and productivity for European units for five consecutive years.
Since leaving RBC, Mr. Klein has held several executive level banking roles including serving as the Executive Vice President and General Manager of Banco De La Paz based in Bolivia, and as Senior Vice President of Dubai based Emirates NBD, by assets the largest bank in the Middle East. At Emirates NBD he was responsible for the problem corporate debt portfolio. Under his management, the bank achieved significant recoveries in excess of USD 300 million over a 12-year period.
Officer Changes
In a news release and a material change report both dated 7 November 2018 the Company announced two changes in corporate officers. Mr. Byron Tsokas, currently the company's Vice President, has been appointed to also serve as corporate Secretary. Mr. Phillip B. Garrison, currently an independent director of the company, has been appointed to chair the company's Audit Committee and also to serve as the company's Acting and Interim Chief Financial Officer until such time as a full time Chief Financial Officer is appointed.
Quarterly Results Posted
The Company filed its interim financial statements and management discussion and analysis for the quarter ended 30 September 2018, the first quarter of Fiscal 2019 year, with SEDAR on 26 November 2018.
AGM Held
The Company held its Annual General Meeting ("AGM") on 7 December 2018. The shareholders voted to fix the number of directors of the Company at four (4) and incumbent directors Mr. McAdoo, Mr. Garrison, Mr. Aulia, and Mr. Klein were each reelected to serve as directors until next year's AGM. Davidson and Co. were reappointed as the Company's auditors for Fiscal 2019.
Closing of $ 550,000 Private Placement
In a news release dated 17 December 2018 the Company announced that had closed private placements with a Dubai based group of investors and raised an aggregate of US$ 550,000 for working capital purposes.
In accordance with the terms of the placements the Company has issued a total of 11,000,000 "Units" at a value of US$ 0.05 per Unit. Each one Unit consists of one common share of the Company and one warrant to purchase an additional common share at a fixed price of US$ 0.05 per common share for a term expiring on 30 June 2021. No commissions or fees of any kind were paid with respect to this transaction. The subscribers are all arms-length accredited investors and unrelated parties to the Company.
Subsidiary Wound Up and Struck Off
During This Quarter the Company caused its Singapore domiciled subsidiary, Continental Hilir Indonesia Pte. Ltd. ("CHI") to be wound up and struck off the register of active Singapore companies. CHI was no longer required after incorporation of the Company's Indonesian subsidiaries in 2017.
2.1 | Share Purchase Warrants Activity During This Quarter |
During This Quarter, the following activity involving the Company’s share purchase warrants occurred:
Exercises- No outstanding share purchase warrants were exercised.
New Issues- A total of 4,000,000 new share purchase warrants were issued during this quarter pursuant to a series of private placements of units of the Company's securities consisting of one share and one common share purchase warrant with an exercise price of $0.05 with an expiry date of 30 June 2021, bringing the aggregate placement to 11,000,00 warrants (7,000,000 of which were issued during the previous quarter).
Expiry- No outstanding share purchase warrants were exercised.
Amendments- The term and exercise price of 6,000,000 outstanding and unexercised share purchase warrants were amended to reflect a reduction in exercise price from $0.10 each to $0.05 each and an extension of their term and expiry date from 28 November 2018 until a new expiry date on 30 June 2020.
2.2 | Incentive Stock Options Activity During This Quarter |
During This Quarter, the following activity involving the Company’s incentive stock options occurred:
Exercises- No outstanding incentive stock options were exercised.
New Grants- No new incentive stock options were granted.
Expiry- A total of 500,000 outstanding and unexercised incentive stock options expired on 17 October 2018.
Amendments- No amendments were made to the terms of any outstanding incentive stock options.
2.3 | New Shares Issues During This Quarter |
During This Quarter, the following activity involving the Company’s share capital occurred:
New Issues of Common Shares- A total of 4,000,000 new common shares were issued during this quarter pursuant to a series of private placements, bringing the aggregate placement issue to 11,000,00 common shares (7,000,000 of which were issued during the previous quarter).
Preferred Shares- No new preferred shares were issued.
PART- 3 : SHAREHOLDING AT THE END OF THIS QUARTER
As at the end of This Quarter, the Company’s share capital was issued or held in reserve as follows:
174,715,381 | common shares were issued and outstanding. | |
32,000,000 | unexercised warrants were issued and outstanding. | |
Nil | unexercised stock options were issued and outstanding. | |
Nil | preferred shares were issued and outstanding. |
PART - 4 :SUBSEQUENT EVENTS TO THE REPORT DATE |
Significant events which may have a material effect on the business affairs of the Company that have occurred subsequent to the end of This Quarter and up to the Report Date are summarized below: |
4.1 | Share Purchase Warrants Activity: Since This Quarter End and Up to the Report Date |
Exercises- No outstanding share purchase warrants were exercised.
New Issues- No new share purchase warrants were issued.
Expiry- No outstanding and unexercised share purchase warrants expired.
Amendments- No amendments were made to the terms of any outstanding share purchase warrants.
4.2 | Incentive Stock Options Activity: Since This Quarter End and Up to the Report Date |
Exercises- No outstanding incentive stock options were exercised.
New Grants- A total of 7,500,000 new incentive stock options were granted, each one of which have an exercise price of five US cents ($0.05) and a fixed term expiring on 30 June 2021.
Expiry- No outstanding and unexercised incentive stock options expired.
Amendments- No amendments were made to the terms of any outstanding incentive stock options.
4.3 | Conversion Rights Activity: Since This Quarter End and Up to the Report Date |
Exercises- There were no exercises of outstanding common share conversion rights.
New Issues- There were no new common shares conversion rights issued.
Expiry- No outstanding common shares conversion rights expired.
Amendments- No amendments were made to the terms of any outstanding common share conversion rights.
4.4 | New Shares Issues: Since This Quarter End and Up to the Report Date |
No new common shares were issued.
No new preferred shares were issued.
PART- 5 : SHAREHOLDING AT THE REPORT DATE
As at the Report Date of this MD&A, the Company’s share capital is issued or held in reserve as follows:
174,715,381 | common shares were issued and outstanding. | |
32,000,000 | unexercised warrants were issued and outstanding. | |
7,500,000 | unexercised stock options were issued and outstanding. | |
Nil | preferred shares were issued and outstanding. |
PART - 6 : FINANCIAL RESULTS OF OPERATIONS
Summary of Quarterly Results for the Last Eight Quarters
The following table sets out selected and unaudited quarterly financial information for the Company for its last eight quarters and is derived from Interim Financial Statements prepared by management in accordance with accounting policies consistent with IFRS.
Attributable to Shareholders of the Company | ||||||||||
Income (loss) | Basic & | |||||||||
From | Diluted | |||||||||
Total Net | Income | Continued | Per Share | |||||||
Period | Revenue | Income (loss) | (loss) | Operations | Income (loss) | |||||
Quarter-2 of Fiscal 2019 | Nil | (127,907 | ) | (127,907 | ) | (127,907 | ) | (0.00 | ) | |
Quarter-1 of Fiscal 2019 | Nil | (53,777 | ) | (53,777 | ) | (53,777 | ) | (0.00 | ) | |
Quarter-4 of Fiscal 2018 | Nil | (10,974 | ) | (10,974 | ) | (10,974 | ) | (0.00 | ) | |
Quarter-3 of Fiscal 2018 | Nil | 144,751 | 144,751 | 144,751 | 0.00 | |||||
Quarter-2 of Fiscal 2018 | Nil | (13,170 | ) | (13,170 | ) | (13,170 | ) | (0.00 | ) | |
Quarter-1 of Fiscal 2018 | Nil | (833,318 | ) | (833,318 | ) | (833,318 | ) | (0.01 | ) | |
Quarter-4 of Fiscal 2017 | Nil | (153,772 | ) | (153,772 | ) | (153,772 | ) | (0.00 | ) | |
Quarter-3 of Fiscal 2017 | Nil | (102,285 | ) | (102,285 | ) | (102,285 | ) | (0.00 | ) |
Quarterly results will vary in accordance with the Company’s business and financing activities. The Company’s primary source of funding is through the issuance of share capital. When the capital markets are depressed, the Company’s activity level normally declines accordingly. As capital markets strengthen and the Company is able to secure equity financing with favorable terms, the Company’s business activity levels increase.
Non-cash costs such as those attributable to calculated valuations of share-based payments expenses also affect the size of the Company’s quarterly income (loss).
The loss incurred by the Company during Quarter-1 of Fiscal 2018 was primarily due to the non-cash costs incurred for the acquisition of Continental Hilir Indonesia Pte. Ltd. and the settlement of convertible promissory note by issue of shares, as described below.
The loss during Quarter-2 of Fiscal 2018 as well as net income during Quarter-3 of Fiscal 2018 resulted from the Company’s settlement of debt through forgiveness or issuance of the common shares of the Company in an amount of $307,838 during the periods, reducing the overall expenditures incurred by the Company.
PART- 7 : COMPARATIVE RESULTS OF OPERATIONS
Current and Comparative Quarters
This Quarter and the three (3) months period ended 31 December 2018 (the “Current Quarter”) and thesame quarter and three (3) months period ended 31 December 2017 (the “Comparative Quarter”). |
a) | Overall, the Company incurred a net loss during the Current Quarter of $127,907 compared to a loss of $13,170 for the Comparative Quarter, an increase of $114,737. |
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b) | On a per share basis, the Company's net loss was 0.00 during both the Current Quarter and the Comparative Quarter. |
c) | Interest expense during the Current Quarter was $3,326 compared to $103 during the Comparative Quarter. The interest expense during the Current Quarter reflected the interest cost on the Company’s outstanding promissory notes. |
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d) | The Company’s cash administrative costs during the Current Quarter totaled $125,617 compared to $114,803 during the Comparative Quarter, an increase of $10,814, primarily due to higher management fees and other office expenses, due to the Company’s increased activity during the Current Quarter. |
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e) | The total share-based payments expenses during the Current Quarter were $nil compared to $1,150 during the Comparative Quarter. |
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f) | During the Comparative Quarter, the Company recognized a gain of $103,838 on settlement of debt resulting from the forgiveness of debt by the Company’s officers and other suppliers of $73,838. The Company issued 1,000,000 common shares valued at $20,000 to settle debt owing to related parties of $50,000, resulting in an additional gain of $30,000. |
Current and Comparative Periods
This Quarter and the six (6) months fiscal period ended 31 December 2018 (the “Current Period”); and thesame six (6) months fiscal period ended 31 December 2017 last year (the “Comparative Period”). |
a) | Overall, the Company incurred net loss from operations during the Current Period of $181,684 compared to a loss of $846,488 for the Comparative Period, a decrease of $664,804, largely attributable to the transaction and non-cash fair value costs described in paragraph f) below. |
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b) | The Company incurred a loss per share of $0.00 during the Current Period and $0.01 during the Comparative Period. |
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c) | Interest expense during the Current Period was $14,242 compared to $8,609 during the Comparative Period. |
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d) | The Company’s cash administrative costs were $170,794 during the Current Period compared to $288,039 during the Comparative Period, a decrease of $117,245 as a result of reduced professional fees incurred during the Current Period compared to the Comparative Period. |
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e) | Share-based payments expense were $nil during the Current Period compared to $41,950 during the Comparative Period. |
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f) | The loss incurred by the Company during the Comparative Period was primarily due to transaction costs of $534,425 relating to the acquisition of Continental Hilir Indonesia Pte. Ltd. (“CHI”) and the loss on settlement of convertible note of $151,110. The Company issued 14,000,000 units to the shareholders of CHI in exchange for shares they held in CHI and obtained majority control of CHI. Total fair value of the units issued amounted to $904,400, in return for the net liabilities of CHI worth $6,441 and the settlement of the previous cash advances received from CHI of $376,416, resulting in cost of acquisition of $534,425. The loss on settlement of convertible note pertained to the calculated fair value of the warrants included in the 10,350,000 units issued upon conversion of the note to the common shares of the Company. |
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g) | During the Comparative Period, the Company recognized a gain of $178,838 on settlement of debt resulting from forgiveness of debt by the Company’s officers and other suppliers of $148,838. The Company issued 1,000,000 common shares valued at $20,000 to settle debt owing to related parties of $50,000, resulting in an additional gain of $30,000. During the Current Period, the Company’s gain on settlement of debt to an officer amounted to $5,250, resulting from issuance of 350,000 commons shares valued at $12,250 to settle unpaid salaries of $17,500. |
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h) | Cash utilized in operating activities during the Current Period amounted to $275,783 compared to $241,648 used in the Comparative Period. |
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i) | Net cash raised from financing activities during the Current Period was $550,000 compared to $431,326 raised during the Comparative Period. |
PART- 8 : LIQUIDITY AND CAPITAL MANAGEMENT
As at the end of This Quarter, the Company’s Interim Financial Statements reflected a decrease in the working capital deficiency of $493,450 from 30 June 2018, the end of the previous fiscal year. The working capital deficiency of $536,676 as at 30 June 2018 was reduced to $43,226 at the end of This Quarter.
During The Current Period, the Company spent $275,783 on its operations and raised $550,000 from private placements. The Company did not enter into any other cash investing or financing activities during This Quarter.
The Company has no significant operations that generate cash flow and its long term financial success is dependent on management’s ability to develop new business opportunities which become profitable. These undertakings can take many years and are subject to factors that are beyond the Company’s control.
In order to finance the Company’s growth and develop new business opportunities and to cover administrative and overhead expenses, the Company raises money through equity sales and from the exercise of convertible securities. Many factors influence the Company’s ability to raise such funds, including the health of the capital markets, the climate for investment in the sectors the Company is considering, the Company’s track record, and the experience and caliber of its management.
The Company does not have sufficient funds to meet its administrative requirements and business development objectives over the next twelve months. Actual funding requirements may vary from those planned due to a number of factors, including providing for new opportunities as they arise. The Company believes it will be able to raise the necessary capital it requires, but recognizes there will be risks involved that may be beyond its control. The Company is actively sourcing new capital.
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue new business development and to maintain a flexible capital structure for its projects for the benefits of its stakeholders. The Company's principal source of funds is from the issuance of common shares. In the management of capital, the Company includes the components of shareholders’ equity as well as cash and receivables.
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, enter into joint venture arrangements, acquire or dispose of assets, or adjust the amount of cash and short-term investments. The Company’s investment policy is to invest its cash in liquid short-term interest-bearing investments selected with regard to the expected timing of expenditures from continuing operations. The Company is not subject to any externally imposed capital requirements and there was no change in the Company’s capital management during This Quarter.
PART- 9 : RISKS AND UNCERTAINTIES
The Company has no history of profitable operations and is currently in the early stages of its development. As such, the Company is subject to many risks common to such enterprises, including under-capitalization, cash shortages and limitations with respect to personnel, financial and other resources and the lack of revenues. There is no assurance that the Company will be successful in achieving a return on shareholders' investment and the likelihood of success must be considered in light of its early stage of operations.
The Company has no source of operating cash flow and no assurance that additional funding will be available to it to take advantage of further growth and development of new opportunities and projects when required. Although the Company has been successful in the past in obtaining financing through the sale of equity securities or joint ventures, there can be no assurance that the Company will be able to obtain adequate financing in the future or that the terms of such financing will be favorable. Failure to obtain such additional financing could result in the delay or indefinite postponement of further growth or new opportunity development.
The Company is very dependent upon the personal efforts and commitment of its existing management. To the extent that management's services would be unavailable for any reason, a disruption to the operations of the Company could result, and other persons would be required to manage and operate the Company.
PART- 10 : RELATED PARTY TRANSACTIONS
10.1 | Related Party Balances |
At the end of This Quarter, a total of $183,361 (30 June 2018 - $320,951) was payable to the Company's CEO, CEO of its subsidiary, Acting CFO, and Vice President, for unpaid salary and/or fees. These amounts are included in accounts payable and accrued liabilities and are unsecured and non-interest bearing.
As at the end of This Quarter, the Company owed the CEO a total loan payable in the amount of $87,500 to repay working capital loans made by the CEO to the Company during Fiscal 2016 and Fiscal 2017. This loan is interest free with no fixed repayment terms.
10.2 | Compensation Of Key Management Personnel |
a) | During the six (6) months ended 31 December 2018, the Company paid or accrued salary, fees, or other compensation to the CEO, CEO of its subsidiary, Acting CFO, and its Vice President in the amounts of $15,208, $20,208, $7,000, and $22,856, respectively (2017 - $nil, $nil, $63,647, and $nil respectively). |
b) | The CEO of the Company voluntarily suspended and terminated payment and accrual of his salary as CEO of the Company effective on 1 July 2017 and continuing until such time as the Company's financial condition permits a resumption and such resumption is approved by the Board of Directors. During the six (6) months ended This Quarter the Company's subsidiary paid salary to the CEO as compensation for work performed for the subsidiary. |
c) | A former CFO of the Company resigned effective 31 December 2017, and accordingly, the Company terminated accrual of salary upon his resignation date. Commencing from 1 January 2018, the CFO agreed to continue as "Acting CFO" without additional compensation, and did so until his replacement as Acting CFO on 7 November 2018. Accordingly, during the six (6) months ended This Quarter, the Company did not pay or accrue salary for the former CFO. At the end of This Quarter the Company owed the former CFO a total amount of $75,000 in accrued but unpaid compensation earned prior to his resignation date, and at the Report Date the balance due the former CFO has been reduced to $50,000. |
10.3 | Transactions With Related Parties |
Except for the compensation and balances owed to the related parties elsewhere described in this Part-10 above, the Company did not enter into any other transaction with related parties during This Quarter.
PART - 11 : MATERIAL CONTRACTS AND EVENTS
11.1 | Off - Balance Sheet Arrangements |
At the end of This Quarter, the Company does not have any off-balance sheet arrangements not already disclosed elsewhere in this MD&A or in the Interim Financial Statements.
11.2 | Material Contracts & Commitments |
During This Quarter, no new material contracts or commitments were undertaken, not elsewhere disclosed in this MD&A or in the Interim Financial Statements.
11.3 | Investor Relations, Publicity and Promotion |
During This Quarter, no material new arrangements, or modifications to existing agreements, were made by the Company for investor relations services, publicity, promotion or advertising agreements which are not otherwise already disclosed in this MD&A or the Interim Financial Statements.
11.4 | Financial Advice, New Business Consulting, Finder's Agreements, & Fund Raising |
During This Quarter, no material new arrangements, or modifications to existing agreements, were made by the Company for investor relations services, publicity, promotion or advertising agreements which are not otherwise already disclosed in this MD&A or the Interim Financial Statements.
11.5 | Claims, Contingencies & Litigation |
Except for any contingencies elsewhere disclosed herein, or in the Interim Financial Statements for This Quarter published herewith, the Company knows of no material, active or pending claims or legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation that might materially adversely affect the Company or a property interest of the Company.
PART - 12 : CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance with IFRS requires that the Company’s management make judgments and estimates and form assumptions that affect the amounts in the financial statements and the related notes to those financial statements. Actual results could differ from those estimates. The Company reviews its judgments, estimates, and assumptions on an ongoing basis based on historical experience and other factors that are considered to be relevant under the circumstances. The Company’s critical accounting policies and estimates applied in the preparation of its Interim Financial Statements are the same as those applied to the audited financial statements for the last fiscal year ended 30 June 2018.
PART - 13 : FINANCIAL INSTRUMENTS
The Company’s financial instruments as at the end of This Quarter, consist of cash, accounts payable and accrued liabilities, the loan payable to its CEO, and the promissory notes. The fair value of these instruments approximates their carrying value due to their relative short-term maturity. There were no off-balance sheet financial instruments.
Cash, other than minor amounts of Indonesian Rupiahs, consist solely of cash deposits with major Canadian and Indonesian banks. The Company therefore considers its credit risk to be low. The Company does not use derivative or hedging instruments to reduce its exposure to fluctuations in foreign currency exchange rates involving Canadian dollar and Indonesian Rupiah. However, as the Company holds its funds primarily in US dollars, the risk of foreign exchange loss is considered low by the Company’s management.
PART- 14 : CONTINUOUS DISCLOSURE AND FILINGS
14.1 | Additional Disclosure for Venture Issuers without Significant Revenue |
The Company is a "Venture Issuer" as defined in Section-1.1 of NI 51-102 and in Section-1.1 of NI 52-110. The Company prepares its financial statements and accounts in US dollars currency using IFRS as issued by IASB. All dollar values are in US$ unless otherwise indicated. Additional disclosure concerning the Company’s general and administrative expenses is provided in the Company’s statement of loss and comprehensive loss contained in the Interim Financial Statements that are published and filed herewith.
14.2 | Continuous Disclosure & Filings - Canada |
Additional disclosure is made on a continuous basis in accordance with applicable laws and in compliance with securities rules and regulations of the British Columbia Securities Commission (“BCSC”). This disclosure and filings includes annual audited consolidated financial statements and quarterly unaudited interim financial statement. It also includes press releases, material change reports, and disclosure of new or changed circumstances regarding the Company. Shareholders and interested parties may obtain downloadable copies of these mandatory filings made by the Company on "SEDAR" (the System for Electronic Document Archiving and Retrieval at websitewww.sedar.com). The Company began filing on SEDAR in 1997. All Company filings made on SEDAR during the year and up to the date of this filing are incorporated herein by this reference.
14.3 | Continuous Disclosure & Filings - USA |
The Company is also a full reporting issuer and filer with the US Securities and Exchange Commission (“SEC”), making the Company a "SEC Issuer" as defined in Section-1.1 of NI 51-102. The Company is required to file an annual report with the SEC in the format of a Form 20F annual report which includes audited annual consolidated financial statements. The Company files interim unaudited quarterly financial reports, press releases, material change reports, and disclosure of new or changed circumstances regarding the Company on a periodic basis under Form-6K. The Company has filed electronically on the SEC’s EDGAR database (websitewww.sec.gov/edgar) commencing with the Company’s Form 20F at its fiscal year end 2004. Prior to 2004 the Company filed Form 20F annual reports with the SEC in paper form. All Company filings made to US-SEC during the past fiscal year and up to the date of this filing are incorporated herein by this reference.
14.4 | Form 20F Annual Report and Annual Information Form |
As a SEC Issuer, the Company is obliged to file an "Annual Report on Form 20F" with the SEC. As a Canadian Venture Issuer the Company is permitted to file the same Annual Report on Form 20F on SEDAR in satisfaction of the Canadian obligation to file an "Annual Information Form" on Form 51-102F2 or "AIF".
14.5 | Statement of Executive Compensation - Venture Issuer |
As a Venture Issuer in Canada, the Company discloses executive compensation on Form 51-102F6V which is included in the Company's annual information circular filed on SEDAR and provided to shareholders as part of the proxy materials in advance of the Company's annual general meeting.
14.6 | Additional Disclosure for Emerging Markets Issuers |
A substantial component of the Company's business activities are conducted in the Republic of Indonesia and the Company considers itself to be an "Emerging Market Issuer" as defined in the Issuer Guide for Companies Operating in Emerging Markets (the "EMI Guide") published by the Ontario Securities Commission as Staff Notice 51-720. The EMI Guide identifies eight matters as worthy of additional disclosure that Emerging Market Issuer's consider. These are: 1) the local business and operating environment, 2) language and cultural differences, 3) corporate structure, 4) related parties, 5) risk management and disclosure, 6) internal controls, 7) use of and reliance on experts, and 8) oversight of the external auditor and how the effect on the Company's operations of these eight matters may differ in the emerging market from what may be expected if the Company's same business activities were conducted in Canada. The Company provides such disclosure annually in its Annual Report on Form 20F.
PART- 15 : FORWARD - LOOKING STATEMENTS
Forward-looking statements relate to future events or future performance and reflect management's expectations or beliefs regarding future events and include, but are not limited to, statements with respect to the estimation of reserves and resources, projections of anticipated revenue, the realization of reserve estimates, the timing and amount of estimated future production, cost, work schedules, capital requirements, success of resource exploration operations, environmental risks, permitting risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage for the Company's upstream oil and gas projects; and to capital cost estimation, operating costs forecasts, and sales and revenue projections for the construction of the Company's downstream oil and gas projects.
15.1 | Forward Looking Words and Phrases |
In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "projections", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" or the negative of these terms or comparable terminology.
15.2 | Risks and Uncertainties |
By their very nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, risks related to actual results of the Company's upstream or downstream oil and gas projects or new project development activities; changes in project parameters as plans continue to be refined; cash flow projections; future prices of resources; possible variations in resource reserves; accidents, labor disputes and other risks of the oil, gas, and energy industries; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; as well as other factors detailed from time to time in the Company's periodic filings on EDGAR and SEDAR.
15.3 | No Assurance all Risks Anticipated |
Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.
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Form 52-109FV2
Certification of interim filings
Venture Issuer Basic Certificate
I, Richard L. McAdoo,Chief Executive Officerof Continental Energy Corporation, certify the following:
1. | Review:I have reviewed the interim financial report and interim management discussion and analysis (together, the “interim filings”) of Continental Energy Corporation (the “issuer”) for the interim period ended December 31, 2018. |
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2. | No misrepresentations:Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the interim filings. |
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3. | Fair presentation:Based on my knowledge, having exercised reasonable diligence, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the Issuer, as of the date of and for the periods presented in the interim filings |
Date:28 February 2019
signed// “Richard L. McAdoo” |
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Name: Richard L. McAdoo |
Title: Chief Executive Officer |
NOTE TO READER | |
In contrast to the certificate required for non-venture issuers under National Instrument 52-109Certification of Disclosure inIssuers’ Annual and Interim Filings(NI 52-109), this OTC reporting issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of | |
i) | controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
ii) | a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s generally accepted accounting practices. |
The Issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation. | |
Form 52-109FV2
Certification of interim filings
Venture Issuer Basic Certificate
I, Phillip B. Garrison,Chief Financial Officerof Continental Energy Corporation, certify the following:
1. | Review:I have reviewed the interim financial report and interim management discussion and analysis (together, the “interim filings”) of Continental Energy Corporation (the “issuer”) for the interim period ended December 31, 2018. |
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2. | No misrepresentations:Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the interim filings. |
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3. | Fair presentation:Based on my knowledge, having exercised reasonable diligence, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the Issuer, as of the date of and for the periods presented in the interim filings |
Date:28 February 2019
signed// “Phillip B. Garrison” |
____________________ |
Name: Phillip B. Garrison |
Title: Acting and Interim Chief Financial Officer |
NOTE TO READER | |
In contrast to the certificate required for non-venture issuers under National Instrument 52-109Certification of Disclosure inIssuers’ Annual and Interim Filings(NI 52-109), this OTC reporting issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of | |
i) | controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
ii) | a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s generally accepted accounting practices. |
The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation. | |