x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the fiscal year ended March 31,
2010
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from ________ to
_________
|
Nevada
|
30-0233726
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
|
202
Dostyk Ave, 4th
Floor
|
||
Almaty, Kazakhstan
|
050051
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Title of Each Class
|
Name of Exchange on Which
Registered
|
|
Common
- $0.001
|
NYSE
Amex
|
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of
the Securities Act.
|
Yes o
No x
|
Indicate
by check mark if the registrant is not required to file reports pursuant
to Section 13 or 15(d)
of the Exchange Act.
|
Yes
o
No x
|
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. |
Yes
x
No o
|
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 (§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 o No
o
|
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§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.
|
o
|
Indicate
by check mark whether the registrant is a large accelerated filed, an
accelerated filer, a non-accelerated filer or a smaller reporting company.
See the definitions of “large accelerated
filer,” “accelerated filer” and
“smaller reporting
company” in Rule 12b-2 of the Exchange
Act.
|
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Smaller
reporting company x
|
(Do
not check if smaller reporting company)
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act.
|
Yes o
No x
|
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common
equity was last sold as of the last business day of the registrant’s most
recently completed second fiscal quarter was
$36,237,666.
|
|
As
of June 2, 2010, the registrant had 51,865,015 shares of common stock, par
value $0.001, issued and outstanding.
|
|
Documents
Incorporated by
Reference: None
|
PART
I
|
||
Page
|
||
Item
1.
|
Business
|
5
|
Item
1A.
|
Risk
Factors
|
10
|
Item
1B.
|
Unresolved
Staff Comments
|
21
|
Item
2.
|
Properties
|
22
|
Item
3.
|
Legal
Proceedings
|
33
|
Item
4.
|
[Removed
and Reserved]
|
33
|
PART
II
|
||
Item
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
34
|
Item
6.
|
Selected
Financial Data
|
36
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
37
|
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
53
|
Item
8.
|
Financial
Statements and Supplementary Data
|
54
|
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
54
|
Item
9A.
|
Controls
and Procedures
|
54
|
Item
9B.
|
Other
Information
|
57
|
PART
III
|
||
Item
10.
|
Directors,
Executive Officers and Corporate Governance
|
57
|
Item
11.
|
Executive
Compensation
|
64
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
78
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
80
|
Item
14.
|
Principal
Accounting Fees and Services
|
82
|
Item
15.
|
Exhibits,
Financial Statement Schedules
|
83
|
PART
IV
|
||
SIGNATURES
|
88
|
•
|
require
the acquisition of a permit or other authorization before construction or
drilling commences;
|
•
|
restrict
the types, quantities and concentrations of various substances that can be
released into the environment in connection with drilling, production, and
natural gas processing activities;
|
•
|
suspend,
limit or prohibit construction, drilling and other activities in certain
lands lying within wilderness, wetlands, areas inhabited by threatened or
endangered species and other protected
areas;
|
•
|
require
remedial measures to mitigate pollution from historical and on-going
operations such as the use of pits and plugging of abandoned
wells;
|
•
|
restrict
injection of liquids into subsurface strata that may contaminate
groundwater; and
|
•
|
impose
substantial liabilities for pollution resulting from our
operations.
|
•
|
Our
ability to obtain additional financing to fund capital expenditures,
acquisitions, working capital, repay debts or for other purposes may be
impaired;
|
|
•
|
Our
ability to use operating cash flow in other areas of our business may be
limited because we must dedicate a substantial portion of these funds to
repay debt obligations;
|
|
•
|
We
may be unable to compete with others who may not be as highly leveraged;
and
|
|
•
|
Our
debt may limit our flexibility to adjust to changing market conditions,
changes in our industry and economic
downturns.
|
•
|
our
ability to obtain credit and access the capital markets may continue to be
restricted adversely affecting our financial position and our ability to
continuing exploration and drilling activities on our
territory;
|
||
•
|
the
values we are able to realize in transactions we engage in to raise
capital may be reduced, thus making these transactions more difficult to
consummate and more dilutive to our
shareholders; and
|
||
•
|
the
demand for oil and natural gas may decline due to weak international
economic conditions.
|
•
|
changes
in our reserves;
|
||
•
|
changes
in oil and gas prices;
|
||
•
|
changes
in labor and drilling costs;
|
||
•
|
our
ability to acquire, locate and produce reserves;
|
||
•
|
changes
in license acquisition costs; and
|
||
•
|
government
regulations relating to safety and the
environment.
|
•
|
our
proved reserves;
|
|
•
|
the
success or our drilling efforts;
|
|
•
|
the
level of oil and gas we are able to produce from existing
wells;
|
|
•
|
the
prices at which our oil and gas is sold; and
|
|
•
|
our
ability to acquire, locate and produce new
reserves.
|
•
|
the
domestic and foreign supply of and demand for oil and natural
gas;
|
|
•
|
the
price and level of foreign imports of oil and natural
gas;
|
|
•
|
the
level of consumer product demand;
|
|
•
|
weather
conditions;
|
|
•
|
overall
domestic and global economic conditions;
|
|
•
|
political
and economic conditions in oil and gas producing countries, including
embargoes and continued hostilities in the Middle East and other sustained
military campaigns, acts of terrorism or sabotage;
|
|
•
|
actions
of the Organization of Petroleum Exporting Countries and other
state-controlled oil companies relating to oil price and production
controls;
|
|
•
|
the
impact of the U.S. dollar exchange rates on oil and gas
prices;
|
|
•
|
technological
advances affecting energy consumption;
|
|
•
|
domestic
and foreign governmental regulations and taxation;
|
|
•
|
the
impact of energy conservation efforts;
|
|
•
|
the
costs, proximity and capacity of gas pipelines and other transportation
facilities; and
|
|
•
|
the
price and availability of alternative
fuels.
|
•
|
negatively
impact the value of our reserves because declines in oil and natural gas
prices would reduce the amount of oil and natural gas we can produce
economically;
|
|
•
|
reduce
the amount of cash flow available for capital
expenditures; and
|
|
•
|
limit
our ability to borrow money or raise additional
capital.
|
•
|
high
costs, shortages or delivery delays of drilling rigs, equipment, labor or
other services;
|
|
•
|
adverse
weather conditions;
|
|
•
|
equipment
failures or accidents;
|
|
•
|
pipe
or cement failures or casing collapses;
|
|
•
|
compliance
with environmental and other governmental requirements;
|
|
•
|
environmental
hazards, such as gas leaks, oil spills, pipeline ruptures and discharges
of toxic gases;
|
•
|
lost
or damaged oilfield drilling and service tools;
|
|
•
|
loss
of drilling fluid circulation;
|
|
•
|
unexpected
operational events and drilling conditions;
|
|
•
|
unusual
or unexpected or difficult geological formations;
|
|
•
|
natural
disasters, such as fires;
|
|
•
|
blowouts,
surface cratering and explosions; and
|
|
•
|
uncontrollable
flows of oil, gas or well fluids.
|
•
|
environmental
hazards, such as uncontrollable flows of oil, natural gas, brine, well
fluids, toxic gas or other pollution into the environment, including
groundwater contamination;
|
|
•
|
abnormally
pressured formations;
|
|
•
|
mechanical
difficulties, such as stuck oil field drilling and service tools and
casing collapse;
|
|
•
|
fires
and explosions;
|
|
•
|
personal
injuries and death; and
|
|
•
|
natural
disasters.
|
•
|
discharge
permits for drilling operations;
|
|
•
|
reports
concerning operations;
|
|
•
|
the
spacing of wells;
|
|
•
|
unitization
and pooling of properties; and
|
|
•
|
taxation.
|
•
|
our
operating performance and future prospects;
|
|
•
|
quarterly
variations in the rate of growth of our financial indicators, such as net
income per share, net income and revenues;
|
|
•
|
actual
or anticipated variations in our reserve estimates and quarterly operating
results;
|
|
•
|
fluctuations
in oil and natural gas prices;
|
|
•
|
speculation
in the press or investment community;
|
|
•
|
sales
of our common stock by large block stockholders;
|
|
•
|
short-selling
of our common stock by investors;
|
|
•
|
the
outcome of current litigation;
|
|
•
|
issuance
of a significant number of shares to raise additional capital to fund our
operations;
|
|
•
|
changes
in applicable laws or regulations;
|
|
•
|
changes
in market valuations of similar companies;
|
|
•
|
additions
or departures of key management personnel;
|
|
•
|
actions
by our creditors; and
|
|
•
|
international
economic, legal and regulatory factors unrelated to our
performance.
|
Developed
|
Undeveloped
|
Total
|
|||||||||
Gross
|
Net
|
Gross
|
Net
|
Gross
|
Net
|
||||||
ADE
Block
|
950
|
950
|
46,805
|
46,805
|
47,755
|
47,755
|
|||||
Southeast
Block
|
670
|
670
|
65,245
|
65,245
|
65,915
|
65,915
|
|||||
Northwest
Block
|
-
|
-
|
96,370
|
96,370
|
96,370
|
96,370
|
Amount
of Expenditure
|
Mandated
by Contract
|
Actually
Made
|
Prior
to July 2007
|
$40,200,000
|
$104,750,000
|
July
2007 to July 2008
|
$8,480,000
|
$115,040,000
|
July
2008 to July 2009
|
$1,845,000
|
$44,900,000
|
July
2009 to January 2010
|
$8,565,000
|
$15,970,000
|
January
2010 to January 2011
|
$21,520,000
|
$8,727,000*
|
January
2011 to January 2012
|
$27,300,000
|
$
-
|
January
2012 to January 2013
|
$14,880,000
|
$
-
|
Total
|
$122,790,000
|
$289,387,000
|
Structures
|
Aksaz
|
Dolinnoe
|
Emir
|
Kariman
|
Borly
|
Yessen
|
Northwest
Block
|
Exploratory
Wells
|
1
|
1
|
1
|
1
|
1
|
1
|
3(1)
|
Appraisal
Wells
|
2
|
2
|
2
|
2
|
2
|
2
|
*
|
Existing
Wells
|
5
|
6
|
3
|
10
|
0
|
0
|
0
|
Wells
in Progress
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Remaining
Wells to
Drill
by 2013
|
0
|
0
|
0
|
0
|
3
|
3
|
*
|
(1)
|
Addendum
No. 6 to our exploratory contract requires the drilling of three
exploratory wells. Depending upon the results of 3D seismic
studies of the Northwest Block we may need to drill additional exploratory
and appraisal wells in the Northwest
Block.
|
|
*
|
Unknown at this
time.
|
2008
|
2009
|
2010
|
|||||||||
Gross
|
Net
|
Gross
|
Net
|
Gross
|
Net
|
||||||
Exploratory
|
|||||||||||
Productive
|
|||||||||||
Oil
|
18
|
18
|
24
|
24
|
24
|
24
|
|||||
Gas
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||
Dry
wells
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||
Total
|
18
|
18
|
24
|
24
|
24
|
24
|
|||||
Development
|
|||||||||||
Productive
|
|||||||||||
Oil
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||
Gas
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||
Dry
wells
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||
Total
|
-
|
-
|
-
|
-
|
-
|
-
|
Well
|
Single
Interval Production
Rate for the year ended March 31, 2010 |
Average
Daily Production
Rate for the quarter ended March 31, 2010 |
Diameter
Choke Size |
|||
Aksaz
-1
|
31
- 57 bpd
|
31
- 38 bpd
|
4
mm
|
|||
Aksaz
-2
|
0 -
13 bpd(1)
|
6
bpd(1)
|
3
mm
|
|||
Aksaz-3
|
0 -
377 bpd(1)
|
226
- 296 bpd(1)
|
7
mm
|
|||
Aksaz
-4
|
50
- 57 bpd
|
50
bpd
|
4
mm
|
|||
Aksaz
-6
|
25
- 63 bpd
|
25
bpd
|
5
mm
|
|||
Dolinnoe
-1
|
0 -
157 bpd
|
63
bpd
|
5
mm
|
|||
Dolinnoe
-2
|
0 -
189 bpd(2)
|
25
– 69 bpd(2)
|
6
mm
|
|||
Dolinnoe
-3
|
0 -
176 bpd
|
0 -
176 bpd
|
14
mm
|
|||
Dolinnoe
-5
|
0
bpd
|
0
bpd
|
0
mm
|
|||
Dolinnoe
-6
|
0 -
94 bpd(2)
|
0 -
19 bpd(2)
|
0
mm
|
|||
Dolinnoe
-7
|
0 -
371 bpd(2)
|
0 -
371 bpd(2)
|
4
mm
|
|||
Emir
-1
|
0
bpd
|
0
bpd(3)
|
0
mm
|
|||
Emir
- 2
|
0 -
38 bpd
|
0
bpd(3)
|
0
mm
|
|||
Emir
-6
|
0 -
94 bpd
|
0
bpd(3)
|
0
mm
|
|||
Kariman
-1
|
0 -
63 bpd(4)
|
0 -
63 bpd(4)
|
0
mm
|
|||
Kariman
-2
|
0 -
660 bpd(4)
|
0 -
660 bpd(4)
|
14
mm
|
|||
Kariman
-3
|
0 -
50 bpd(5)
|
0 -
38 bpd(5)
|
0
mm
|
|||
Kariman
-4
|
170
- 403 bpd(4)
|
170
- 315 bpd(4)
|
10
mm
|
|||
Kariman
-5
|
0 -
132 bpd(5)
|
0 -
75 bpd(5)
|
0
mm
|
|||
Kariman
-6
|
0 -
409 bpd(4)
|
0 -
302 bpd(4)
|
9
mm
|
|||
Kariman
-7
|
0 -
415 bpd(4)
|
0 -
415 bpd(4)
|
12
mm
|
|||
Kariman
-8
|
0 -
434 bpd(4)
|
201
- 384 bpd(4)
|
12
mm
|
|||
Kariman
-10
|
0 -
321 bpd(4)
|
0 -
189 bpd(4)
|
10
mm
|
|||
Kariman-11
|
0 -
346 bpd(4)
|
126
- 239 bpd(4)
|
12
mm
|
(1)
|
We
have performed acid treatment at these
wells.
|
(2)
|
We
have performed workover at these wells and moved to new
horizons.
|
(3)
|
Emir
wells are on temporary abandonment as the Company is planning for
submission of an application for pilot development project for this
field.
|
(4)
|
We
have installed centrifugal submersible pumps at these
wells. After a brief period of testing and fine tuning,
production from this well stabilized. Stabilized production
rates are included in the table
above.
|
(5)
|
We
have installed beam pumpcentrifugal submersible pumps at these
wells. After a brief period of testing and fine tuning,
production from this well stabilized. Stabilized production
rates are included in the table
above.
|
·
|
Introduce
a new definition of oil and gas producing activities. This new definition
allows companies to include in their reserve base volumes from
unconventional resources. Such unconventional resources include bitumen
extracted from oil sands and oil and gas extracted from coal beds and
shale formations.
|
·
|
Report
oil and gas reserves using an unweighted average price using the prior
12-month period, based on the closing prices on the first day of each
month, rather than year-end prices.
|
·
|
Permit
companies to disclose their probable and possible reserves on a voluntary
basis. In the past, proved reserves were the only reserves allowed in the
disclosures. We have chosen not to make disclosure under these
categories.
|
·
|
Requires
companies to provide additional disclosure regarding the aging of proved
undeveloped reserves.
|
·
|
Permit
the use of reliable technologies to determine proved reserves if those
technologies have been demonstrated empirically to lead to reliable
conclusions about reserves volumes.
|
·
|
Replace
the existing “certainty” test for areas beyond one offsetting drilling
unit from a productive well with a “reasonable certainty”
test.
|
·
|
Require
additional disclosures regarding the qualifications of the chief technical
person who oversees the company’s overall reserve estimation process.
Additionally, disclosures regarding internal controls over reserve
estimation, as well as a report addressing the independence and
qualifications of its reserves preparer or auditor will be
mandatory.
|
Proved
reserves to be recovered
by January 9, 2013(1) |
Proved
reserves to be recovered
after January 9, 2013(1) |
||||||||
Developed(2)
|
Undeveloped(3)
|
Developed(2)
|
Undeveloped(3)
|
Total
|
|||||
Oil
and condensate (MBbls)(4)
|
5,195
|
307
|
14,960
|
2,264
|
22,726
|
||||
Natural
gas (MMcf)
|
-
|
-
|
-
|
-
|
-
|
||||
Total
BOE (MBbls)
|
5,195
|
307
|
14,960
|
2,264
|
22,726
|
||||
Standardized
Measure of discounted future net cash flows(5)
(in thousands of U.S. Dollars)
|
$ 268,322
|
(1)
|
Under
our exploration contract we have the right to sell the oil and natural gas
we produce while we undertake exploration stage activities within our
licensed territory. As discussed in more detail in “Risk
Factors” and “Properties” we have the right to engage in exploration stage
activities until January 9, 2013. To retain our rights to
produce and sell oil and natural gas after that date, we must apply for
and be granted commercial production rights by no later than January 2013
or obtain a further extension of our exploration contract. If
we are not granted commercial production rights or another extension by
that time, we would expect to lose our rights to the licensed territory
and would expect to be unable to produce reserves after January
2013.
|
(2)
|
Proved
developed reserves are proved reserves that are expected to be recovered
from existing wells with existing equipment and operating
methods.
|
(3)
|
Proved
undeveloped reserves are proved reserves which are expected to be
recovered from new wells on undrilled acreage or from existing wells where
a relatively major expenditure is required for
recompletion.
|
(4)
|
Includes
natural gas liquids.
|
(5)
|
The
standardized measure of discounted future net cash flows represents the
present value of future net cash flow net of all
taxes.
|
Oil
(Bbl)
|
Pre-Tax PV10 Value |
Standardized
Measure
of Discounted Future Net
Cash Flows
|
|||
Oil
and condensate (MBbls)(4)
|
22,726
|
$
422,121
|
$
268,322
|
||
Natural
gas (MMcf)
|
-
|
-
|
-
|
||
Total
BOE (MBbls)
|
22,726
|
$
422,121
|
$
268,322
|
Year
|
Total
BOE
|
Estimated
Development
Costs
|
||
2011
|
3,074,000
|
1,170,000
|
||
2012
|
1,175,000
|
600,000
|
||
2013
|
6,868,000
|
1,720,000
|
||
2014
|
-
|
-
|
||
2015
|
-
|
-
|
As
of March 31, 2010
|
As
of March 31, 2009
|
||
Developed
oil and natural gas properties
|
$
246,979,803
|
$
221,374,856
|
|
Unevaluated
oil and natural gas properties
|
25,924,087
|
40,580,015
|
|
Accumulated
depletion, depreciation and amortization
|
(34,302,048)
|
(23,226,458)
|
|
Net
capitalized cost
|
$
238,601,842
|
$
238,728,413
|
For
the year ended
March 31, 2010 |
For
the year ended
March 31, 2009 |
For
the year ended
March 31, 2008 |
|||
Acquisition
costs:
|
|||||
Unproved
properties
|
$ -
|
$ -
|
$ -
|
||
Proved
properties
|
-
|
-
|
-
|
||
Exploration
costs
|
-
|
2,275,021
|
3,024,386
|
||
Development
costs
|
10,949,019
|
63,727,311
|
83,950,096
|
||
Subtotal
|
10,949,019
|
66,002,332
|
86,974,482
|
||
Asset
retirement costs
|
-
|
86,438
|
1,300,576
|
||
Total
costs incurred
|
$
10,949,019
|
$
66,088,770
|
$
88,275,058
|
For
the Year Ended
March
31, 2010
|
For
the Year Ended
March
31, 2009
|
For
the Year Ended
March
31, 2008
|
|||
Production:
|
|||||
Oil
and condensate (Bbls)
|
1,016,221
|
1,080,895
|
907,823
|
||
Natural
gas liquids (Bbls)
|
-
|
-
|
-
|
||
Natural
gas (Mcf)
|
-
|
-
|
-
|
||
Barrels
of oil equivalent (BOE)
|
1,016,221
|
1,080,895
|
907,823
|
||
Sales(1)(3):
|
|||||
Oil
and condensate (Bbls)
|
1,036,070
|
1,073,754
|
896,256
|
||
Natural
gas liquids (Bbls)
|
-
|
-
|
-
|
||
Natural
gas (Mcf)
|
-
|
-
|
-
|
||
Barrels
of oil equivalent (BOE)
|
1,036,070
|
1,073,754
|
896,256
|
||
Average Sales Price(1):
|
|||||
Oil
and condensate ($ per Bbl)
|
$ 55.28
|
$ 64.84
|
$ 67.16
|
||
Natural
gas liquids ($ per Bbl)
|
$ -
|
$ -
|
$ -
|
||
Natural
gas ($ per Mcf)
|
$ -
|
$ -
|
$ -
|
||
Barrels
of Oil equivalent ($ per BOE)
|
$ 55.28
|
$ 64.84
|
$ 67.16
|
||
Average
oil and natural gas operating expenses
including
production and ad valorem taxes
($
per BOE)(2)(3)
|
$ 8.27
|
$
7.01
|
$
6.15
|
(1)
|
During
the years ended March 31, 2010, 2009 and 2008, the Company has not engaged
in any hedging activities, including
derivatives.
|
(2)
|
Includes
transportation cost, production cost and ad valorem taxes (except for rent
export tax).
|
(3)
|
We
use sales volume rather than production volume for calculation of per unit
cost because not all volume produced is sold during the
period. The related production costs were expensed only for the
units sold, not produced based on a matching principle of
accounting. Therefore, oil and gas operating expense per BOE
was calculated by dividing oil and gas operating expenses for the year by
the volume of oil sold during the
year.
|
Fiscal
year ended March 31, 2010
|
High
|
Low
|
||
Fourth
quarter
|
$
1.45
|
$
0.94
|
||
Third
quarter
|
$
1.31
|
$
0.88
|
||
Second
quarter
|
$
1.14
|
$
0.78
|
||
First
quarter
|
$
1.79
|
$
0.56
|
||
Fiscal
year ended March 31, 2009
|
||||
Fourth
quarter
|
$
1.90
|
$
0.36
|
||
Third
quarter
|
$
3.54
|
$
0.80
|
||
Second
quarter
|
$
6.00
|
$
2.96
|
||
First
quarter
|
$
7.88
|
$
5.26
|
Name
|
Position
with Company
|
Restricted
Stock Granted
|
||
Boris
Cherdabayev
|
Chairman
of the Board of Directors
|
280,000
|
||
Gamal
Kulumbetov
|
Chief
Executive Officer
|
80,000
|
||
Askar
Tashtitov
|
President
|
230,000
|
||
Toleush
Tolmakov
|
Director
Emir Oil LLP
|
215,000
|
||
Evgeny
Ler
|
Chief
Financial Officer
|
110,000
|
||
Anuarbek
Baimoldin
|
Chief
Operating Officer
|
20,000
|
For
the year ended March 31,
|
|||||||||
2010
|
2009
|
2008
|
2007
|
2006
|
|||||
Consolidated
Statements of Operations Data:
|
|||||||||
Revenues
|
$
57,274,526
|
$
69,616,875
|
$
60,196,626
|
$
15,785,784
|
$ 5,956,731
|
||||
Oil
and gas operating expenses
|
8,568,453
|
7,530,653
|
5,515,403
|
2,272,251
|
875,319
|
||||
General
and administrative expenses
|
14,042,577
|
22,262,248
|
14,747,754
|
10,757,727
|
9,724,597
|
||||
Depletion
|
11,075,590
|
10,403,328
|
9,419,655
|
2,006,834
|
1,167,235
|
||||
Income/(loss)
from operations
|
7,888,299
|
11,595,582
|
30,020,087
|
404,843
|
(5,949,170)
|
||||
Net
income/(loss)
|
8,993,473
|
17,157,558
|
31,310,564
|
2,188,100
|
(6,192,943)
|
||||
Basic
income/(loss) per common share
|
$
0.18
|
$
0.37
|
$
0.70
|
$
0.05
|
$
(0.18)
|
||||
Diluted
income/(loss) per common share
|
$
0.18
|
$
0.37
|
$
0.70
|
$
0.05
|
$
(0.18)
|
||||
As
of March 31,
|
|||||||||
2010
|
2009
|
2008
|
2007
|
2006
|
|||||
Balance
Sheet Data:
|
|||||||||
Current
assets
|
$
16,947,713
|
$
12,891,196
|
$
26,519,810
|
$
18,276,626
|
$
57,336,327
|
||||
Oil
and gas properties, full cost method, net
|
238,601,842
|
238,728,413
|
183,042,971
|
104,187,568
|
67,497,230
|
||||
Total
assets
|
291,880,018
|
288,346,061
|
254,838,093
|
144,796,045
|
127,396,589
|
||||
Total
current liabilities
|
9,392,879
|
24,109,901
|
23,225,460
|
9,120,299
|
4,623,975
|
||||
Total
long term liabilities
|
72,224,647
|
72,111,959
|
71,808,702
|
9,814,127
|
8,992,420
|
||||
Total
Shareholders' equity
|
$
210,262,492
|
$
192,124,201
|
$
159,803,931
|
$
125,861,619
|
$
113,780,194
|
For
the year ended
March
31, 2010
|
For
the year ended
March
31, 2009
|
For
the year ended
March
31, 2008
|
||||
Revenues:
|
||||||
Oil
and gas sales
|
$
57,274,526
|
$
69,616,875
|
|
$
60,196,626
|
||
|
||||||
Expenses:
|
||||||
Rent
export tax
|
10,032,857
|
467,359
|
-
|
|||
Export
duty
|
-
|
6,783,278
|
-
|
|||
Oil
and gas operating(1)
|
8,568,453
|
7,530,653
|
5,515,403
|
|||
Depletion
|
11,075,590
|
10,403,328
|
9,419,655
|
|||
Interest
expense
|
4,604,446
|
1,138,874
|
-
|
|||
Depreciation
and amortization
|
613,953
|
324,028
|
239,155
|
|||
Accretion
|
448,351
|
449,025
|
254,572
|
|||
General
and administrative
|
14,042,577
|
22,262,248
|
14,747,754
|
|||
Net
Production Data:
|
||||||
Oil
(Bbls)
|
1,016,221
|
1,080,895
|
907,823
|
|||
Natural
gas (Mcf)
|
-
|
-
|
-
|
|||
Barrels
of Oil equivalent (BOE)
|
1,016,221
|
1,080,895
|
907,823
|
|||
Net
Sales Data(3):
|
||||||
Oil
(per Bbl)
|
1,036,070
|
1,073,754
|
896,256
|
|||
Natural
gas (Mcf)
|
-
|
-
|
-
|
|||
Barrels
of Oil equivalent
|
1,036,070
|
1,073,754
|
896,256
|
|||
Average
Sales Price:
|
||||||
Oil
(per Bbl)
|
55.28
|
64.84
|
67.16
|
|||
Natural
gas (per Mcf)
|
-
|
-
|
-
|
|||
Equivalent
price (per BOE)
|
55.28
|
64.84
|
67.16
|
|||
Expenses
($ per BOE)
(3):
|
||||||
Oil
and gas operating(1)
|
8.27
|
7.01
|
6.15
|
|||
Depreciation,
depletion and
|
||||||
amortization(2)
|
10.69
|
9.69
|
10.51
|
|||
(1)
|
Includes
transportation cost, production cost and ad valorem taxes (excluding rent
export tax).
|
(2)
|
Represents
depletion of oil and gas properties
only.
|
(3)
|
We
use sales volume rather than production volume for calculation of per unit
cost because not all volume produced is sold during the
period. The related production costs are expensed only for the
units sold, not produced, based on a matching principle of
accounting. Oil and gas operating expense per BOE is calculated
by dividing oil and gas operating expenses for the year by the volume of
oil sold during the year.
|
Year
ended
March
31, 2010
to
the year ended
March
31, 2009
|
|||||||
For
the year
|
For
the year
|
$
|
%
|
||||
Ended
|
ended
|
Increase
|
Increase
|
||||
March
31, 2010
|
March
31, 2009
|
(Decrease)
|
(Decrease)
|
||||
Production
volumes:
|
|||||||
Natural
gas (Mcf)
|
-
|
-
|
-
|
-
|
|||
Natural
gas liquids (Bbls)
|
-
|
-
|
-
|
-
|
|||
Oil
and condensate (Bbls)
|
1,016,221
|
1,080,895
|
(64,674)
|
(6%)
|
|||
Barrels
of Oil equivalent (BOE)
|
1,016,221
|
1,080,895
|
(64,674)
|
(6%)
|
|||
Sales
volumes:
|
|||||||
Natural
gas (Mcf)
|
-
|
-
|
-
|
-
|
|||
Natural
gas liquids (Bbls)
|
-
|
-
|
-
|
-
|
|||
Oil
and condensate (Bbls)
|
1,036,070
|
1,073,754
|
(37,684)
|
(4%)
|
|||
Barrels
of Oil equivalent (BOE)
|
1,036,070
|
1,073,754
|
(37,684)
|
(4%)
|
|||
Average Sales Price
(1)
|
|||||||
Natural
gas ($ per Mcf)
|
-
|
-
|
-
|
-
|
|||
Natural
gas liquids ($ per Bbl)
|
-
|
-
|
-
|
-
|
|||
Oil
and condensate ($ per Bbl)
|
$
55.28
|
$
64.84
|
$
(9.56)
|
(15%)
|
|||
Barrels
of Oil equivalent ($
per BOE)
|
$
55.28
|
$
64.84
|
$
(9.56)
|
(15%)
|
|||
Operating
Revenue:
|
|||||||
Natural
gas
|
-
|
-
|
-
|
-
|
|||
Natural
gas liquids
|
-
|
-
|
-
|
-
|
|||
Oil
and condensate
|
$
57,274,526
|
$
69,616,875
|
$ (12,342,349)
|
(18%)
|
|||
Gain
on hedging and derivatives(2)
|
-
|
-
|
-
|
-
|
(1)
|
At
times, we may produce more barrels than we sell in a given period. The
average sales price is calculated based on the average sales price per
barrel sold, not per barrel
produced.
|
(2)
|
We
did not engage in hedging transactions, including derivatives, during the
year ended March 31, 2010 or the year ended March 31,
2009.
|
For
the year ended
March
31, 2010
|
For
the year ended
March
31, 2009
|
||
Expenses:
|
|||
Rent
export tax
|
$ 10,032,857
|
$
467,359
|
|
Export
duty
|
-
|
6,783,278
|
|
Oil
and gas operating(1)
|
8,568,453
|
7,530,653
|
|
General
and administrative
|
14,042,577
|
22,262,248
|
|
Depletion
|
11,075,590
|
10,403,328
|
|
Interest
expense
|
4,604,446
|
1,138,874
|
|
Accretion
expenses
|
448,351
|
449,025
|
|
Amortization
and depreciation
|
613,953
|
324,028
|
|
Consulting
expenses
|
-
|
8,662,500
|
|
Total
|
$
49,386,227
|
$
58,021,293
|
|
Expenses
($ per BOE):
|
|||
Oil
and gas operating(1)
|
$
8.27
|
$
7.01
|
|
Depletion
(2)
|
$
10.69
|
$
9.69
|
(1)
|
Includes
transportation cost, production cost and ad valorem taxes (excluding rent
export tax).
|
(2)
|
Represents
depletion of oil and gas properties
only.
|
For
the year ended March 31,
|
|||||||
2010
|
2009
|
||||||
Total
|
Per
BOE
|
Total
|
Per
BOE
|
||||
Oil
and Gas Operating Expenses:
|
|||||||
Production
|
$
1,635,039
|
$
1.58
|
$
808,663
|
$
0.75
|
|||
Transportation
|
3,423,803
|
3.30
|
4,462,883
|
4.16
|
|||
Royalty
|
-
|
-
|
1,744,075
|
1.62
|
|||
Mineral
extraction tax
|
3,509,611
|
3.39
|
515,032
|
0.48
|
|||
Total
|
$
8,568,453
|
$
8.27
|
$
7,530,653
|
$
7.01
|
|
•
|
a
57% decrease in non-cash compensation expense as the price for our stock
declined and the non-cash compensation expense we incurred decreased
significantly;
|
•
|
a
53% decrease in professional services resulting from decreased legal fees
incurred in our ongoing litigation as we changed the legal firm providing
those services and decreased audit consulting expenses;
|
|
•
|
a
27% decrease in business trip and related transportation
expenses;
|
|
•
|
an
11% decrease in payroll expenses;
|
|
•
|
a
68% decrease in environmental payments for flaring of unused natural gas
resulting from production, such decrease in the amount of environmental
payments totaling $208,087 and $652,026 during the year ended March 31,
2010 and 2009, respectively; and
|
|
|
•
|
a
27% decrease in rent expenses.
|
•
|
a
$353,401 foreign exchange loss resulting from the strengthening of the
Kazakh Tenge against the U.S. Dollar during the year ended March 31, 2010
compared with the foreign exchange gain in the amount $2,592,341 realized
in year ended March 31, 2009;
|
|
•
|
the
receipt of a one-time payment for disgorgement of funds received of
$1,650,293 during the 2009 fiscal year, earned in violation of the
short-swing profit rules of Section 16(b) of the Securities Exchange Act
of 1934;
|
|
•
|
a $116,087
decrease in interest income; and
|
|
•
|
a
$268,470 increase in other expense during the fiscal year ended March 31,
2010 compared the fiscal year ended March 31,
2009.
|
Year
ended
March
31, 2009
to
the year ended
March
31, 2008
|
|||||||
For
the year
|
For
the year
|
$
|
%
|
||||
Ended
|
ended
|
Increase
|
Increase
|
||||
March
31, 2009
|
March
31, 2008
|
(Decrease)
|
(Decrease)
|
||||
Production
volumes:
|
|||||||
Natural
gas (Mcf)
|
-
|
-
|
-
|
-
|
|||
Natural
gas liquids (Bbls)
|
-
|
-
|
-
|
-
|
|||
Oil
and condensate (Bbls)
|
1,080,895
|
907,823
|
173,072
|
19%
|
|||
Barrels
of Oil equivalent (BOE)
|
1,080,895
|
907,823
|
173,072
|
19%
|
|||
Sales
volumes:
|
|||||||
Natural
gas (Mcf)
|
-
|
-
|
-
|
-
|
|||
Natural
gas liquids (Bbls)
|
-
|
-
|
-
|
-
|
|||
Oil
and condensate (Bbls)
|
1,073,754
|
896,256
|
177,498
|
20%
|
|||
Barrels
of Oil equivalent (BOE)
|
1,073,754
|
896,256
|
177,498
|
20%
|
|||
Average Sales Price
(1)
|
|||||||
Natural
gas ($ per Mcf)
|
-
|
-
|
-
|
-
|
|||
Natural
gas liquids ($ per Bbl)
|
-
|
-
|
-
|
-
|
|||
Oil
and condensate ($ per Bbl)
|
$
64.84
|
$
67.16
|
$
(2.32)
|
(3%)
|
|||
Barrels
of Oil equivalent
($
per BOE)
|
$
64.84
|
$
67.16
|
$
(2.32)
|
(3%)
|
|||
Operating
Revenue:
|
|||||||
Natural
gas
|
-
|
-
|
-
|
-
|
|||
Natural
gas liquids
|
-
|
-
|
-
|
-
|
|||
Oil
and condensate
|
$
69,616,875
|
$
60,196,626
|
$
9,420,249
|
16%
|
|||
Gain
on hedging and derivatives(2)
|
-
|
-
|
-
|
-
|
(1)
|
At
times, we may produce more barrels than we sell in a given period. The
average sales price is calculated based on the average sales price per
barrel sold, not per barrel
produced.
|
(2)
|
We
did not engage in hedging transactions, including derivatives, during the
year ended March 31, 2009 or the year ended March 31,
2008.
|
For
the year ended
March
31, 2009
|
For
the year ended
March
31, 2008
|
||
Expenses:
|
|||
Rent
export tax
|
$
467,359
|
$ -
|
|
Export
duty
|
6,783,278
|
-
|
|
Oil
and gas operating(1)
|
7,530,653
|
5,515,403
|
|
General
and administrative
|
22,262,248
|
14,747,754
|
|
Depletion
|
10,403,328
|
9,419,655
|
|
Interest
expense
|
1,138,874
|
-
|
|
Accretion
expenses
|
449,025
|
254,572
|
|
Amortization
and depreciation
|
324,028
|
239,155
|
|
Consulting
expenses
|
8,662,500
|
-
|
|
Total
|
$
58,021,293
|
$
30,176,539
|
|
Expenses
($ per BOE):
|
|||
Oil
and gas operating(1)
|
7.01
|
6.15
|
|
Depletion
(2)
|
9.69
|
10.51
|
|
|
(1)
|
Includes
transportation cost, production cost and ad valorem taxes (excluding rent
export tax).
|
(2)
|
Represents
depletion of oil and gas properties
only.
|
|
•
|
a
35% increase in rent expense from renting special equipment, apartments
and additional vehicles;
|
•
|
a
32% increase in payroll and related costs as we hired additional
administrative personnel to fulfill business needs, increased employee pay
rates for existing employees;
|
|
|
•
|
a
30% increase in professional services resulting from legal fees incurred
in our ongoing litigation.
|
Year
ended
|
Year
ended
|
Year
ended
|
|||
March
31,
|
March
31,
|
March
31,
|
|||
2010
|
2009
|
2008
|
|||
Net
cash provided by operating activities
|
$
14,094,980
|
$
53,383,138
|
$
49,981,194
|
||
Net
cash used in investing activities
|
$
(11,410,131)
|
$
(63,916,431)
|
$ (101,454,730)
|
||
Net
cash (used in)/provided by financing activities
|
$
(3,000,000)
|
$
50,001
|
$
56,539,433
|
||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
$
(315,151)
|
$
(10,483,292)
|
$
5,065,897
|
Payments
Due By Period
|
|||||
Contractual
obligations
|
Total
|
Less
than 1 year
|
2-3
years
|
4-5
years
|
After
5 years
|
Capital
Expenditure Commitment(1)
|
$ 54,973,000
|
$ 19,618,000
|
$ 35,355,000
|
$ -
|
$ -
|
Due
to the Government of
the
Republic of Kazakhstan(2)
|
17,141,956
|
250,000
|
592,924
|
3,343,391
|
12,955,641
|
Liquidation
Fund
|
4,712,345
|
-
|
4,712,345
|
-
|
-
|
Convertible
Notes with Interest(3)
|
71,823,785
|
3,000,000
|
68,823,785
|
-
|
-
|
Total
|
$ 148,651,086
|
$ 22,868,000
|
$ 109,484,054
|
$ 3,343,391
|
$
12,955,641
|
(1)
|
Under
the terms of our subsurface exploration contract we are required to spend
a total of $55 million in exploration activities on our properties,
including a minimum of $12.8 million by January 2011, $27.3 million by
January 2012 and $14.9 million by January 2013. The rules of
the MOG provide a process whereby capital expenditures in excess of the
minimum required expenditure in any period may be carried forward to meet
the minimum obligations of future periods. Our capital
expenditures in prior periods have exceeded our minimum required
expenditures by more than $200
million.
|
(2)
|
In
connection with our acquisition of the oil and gas contract covering the
ADE Block, the Southeast Block and the Northwest Block, we are required to
repay the ROK for historical costs incurred by it in undertaking
geological and geophysical studies and infrastructure
improvements. Our repayment obligation for the ADE Block is
$5,994,200, for the Southeast Block is $5,350,680 and our repayment
obligation for the Northwest Block is $5,372,076. The terms of
repayment of these obligations, however, will not be determined until such
time as we apply for and are granted commercial production rights by the
ROK. Should we decide not to pursue commercial production
rights, we can relinquish the ADE Block, the Southeast Block and/or the
Northwest Block to the ROK in satisfaction of their associated
obligations. The recent addenda to our exploration contract which granted
us with the extension of exploration period and the rights to the
Northwest Block also require us to:
|
·
|
make
additional payments to the liquidation fund, stipulated by the
Contract;
|
·
|
make
a one-time payment in the amount of $200,000 to the Astana Fund by the end
of 2010; and
|
·
|
make
annual payments to social projects of the Mangistau Oblast in the amount
of $100,000 from 2010 to 2012.
|
(3)
|
On
July 16, 2007 the Company completed the private placement of $60 million
in principal amount of 5.0% convertible senior notes due 2012 (“Notes”).
The Notes carry a 5% coupon and have a yield to maturity of
6.25%. Interest will be paid at a rate of 5.0% per annum on the
principal amount, payable semiannually. The Notes are callable
and subject to early redemption in July 2010. Unless previously
redeemed, converted or purchased and cancelled, the Notes will be redeemed
by the Company at a price equal to 107.2% of the principal amount thereof
on July 13, 2012. The Notes constitute direct, unsubordinated and
unsecured, interest bearing obligations of the Company. For
additional details regarding the terms of the Notes, see Note 11 – Convertible Notes
Payable to the notes to our consolidated financial
statements.
|
|
a)
|
the
present value of estimated future net revenues computed by applying
current prices of oil and gas reserves to estimated future production of
proved oil and gas reserves, less estimated future expenditures (based on
current costs) to be incurred in developing and producing the proved
reserves computed using a discount factor of ten percent and assuming
continuation of existing economic
conditions;
|
|
b)
|
plus
the cost of properties not being
amortized;
|
|
c)
|
plus
the lower of cost or estimated fair value of unproven properties included
in the costs being amortized;
|
|
d)
|
less
income tax effects related to differences between the book and tax basis
of the properties.
|
Average
Price
Per
Barrel
|
Barrels
of Oil Sold
|
Approximate
Revenue from Oil Sold
(in
thousands)
|
Reduction
in
Revenue
(in
thousands)
|
|||||
Actual
sales for the year ended March 31, 2010
|
$55.281
|
1,036,070
|
$57,275
|
|||||
Assuming
a $5.00 per barrel reduction in average price per barrel
|
$50.281
|
1,036,070
|
$52,094
|
$
5,181
|
||||
Assuming
a $10.00 per barrel reduction in average price per barrel
|
$45.281
|
1,036,070
|
$46,914
|
$10,361
|
•
|
pertain
to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the
Company;
|
•
|
provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company
are being made only in accordance with authorizations of management and
directors of the Company; and
|
•
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s assets that
could have a material effect on the financial
statements.
|
HANSEN, BARNETT & MAXWELL,
P.C.
|
|
A
Professional Corporation
|
|
CERTIFIED
PUBLIC ACCOUNTANTS
|
|
5
Triad Center, Suite 750
|
|
Salt
Lake City, UT 84180-1128
|
|
Phone:
(801) 532-2200
|
|
Fax:
(801) 532-7944
|
|
www.hbmcpas.com
|
Name
of Director or
Executive
Officer
|
Age
|
Positions
with
the
Company
|
Director
Since
|
Officer
Since
|
||||
Gamal
Kulumbetov
|
34
|
Chief
Executive Officer
|
August
2007
|
|||||
Askar
Tashtitov
|
31
|
President
and Director
|
May
2008
|
May
2006
|
||||
Evgeniy
Ler
|
27
|
Chief
Financial Officer
|
April
2009
|
|||||
Anuarbek
Baimoldin
|
32
|
Chief
Operating Officer
|
April
2009
|
|||||
Boris
Cherdabayev
|
56
|
Chairman
of the Board of Directors
|
November
2003
|
|||||
Jason
Kerr
|
39
|
Independent
Director
|
May
2008
|
|||||
Troy
Nilson
|
44
|
Independent
Director
|
December
2004
|
|||||
Daymon
Smith
|
32
|
Independent
Director
|
September
2009
|
|||||
Leonard
Stillman
|
67
|
Independent
Director
|
October
2006
|
|||||
Valery
Tolkachev
|
44
|
Independent
Director
|
December
2003
|
(i) Acting
as a futures commission merchant, introducing broker, commodity trading
advisor, commodity poll operator, floor broker, leverage transaction
merchant, and other person regulated by the Commodity Futures Trading
Commission (“CFTC”), or an
associated person of any of the foregoing, or as an investment adviser,
underwriter, broker or dealer in securities, or as an affiliate person,
director or employee of any investment company, bank savings and loan
association or insurance company, or engaging in or continuing any conduct
or practice in connection with such activity;
|
|
(ii) Engaging
in any type of business practice; or
|
|
(iii)
Engaging in any activity in connection with the purchase or sale of any
security or commodity or in connection with any violation of Federal or
State securities laws or Federal commodities
laws.
|
(i) Any
Federal or State securities or commodities law or regulations;
or
|
|
(ii)
Any law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity;
or
|
●
|
assist
the board in the selection, review and oversight of our independent
registered public accounting firm;
|
|
|
●
|
approve
all audit, review and attest services provided by the independent
registered public accounting firm;
|
|
●
|
assess
the integrity of our reporting practices and evaluate of our internal
controls and accounting procedures; and
|
|
●
|
resolve
disagreements between management and the independent registered public
accountants regarding financial
reporting.
|
●
|
attract,
retain and motivate skilled and knowledgeable executive
talent;
|
||
●
|
ensure
that executive compensation is aligned with our corporate strategies and
business objectives;
|
||
●
|
promote
the achievement of key strategic and financial performance measures by
linking short-term and long-term cash and equity incentives to the
achievement of measurable corporate and individual performance goals;
and
|
||
●
|
align
executives’ incentives with the creation of stockholder
value.
|
●
|
base
salaries;
|
||
●
|
nonequity
incentive compensation;
|
||
●
|
bonuses;
|
||
●
|
equity
incentive awards; and
|
||
●
|
benefits
and other compensation.
|
Name
and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards(4)
($)
|
All
Other
Compen-
sation ($)
|
Total
($)
|
Boris Cherdabayev
|
2010
|
192,000
|
-0-
|
319,200
|
59,309
|
570,509
|
Chairman
|
2009
|
228,000
|
20,000
|
1,659,000
|
67,054
|
1,974,054
|
2008
|
263,184
|
20,000
|
-0-
|
73,123
|
356,307
|
|
Gamal
Kulumbetov
|
2010
|
96,873
|
-0-
|
91,200
|
31,448
|
219,521
|
CEO
|
2009
|
147,581
|
13,000
|
553,000
|
48,705
|
762,286
|
2008
|
148,066
|
10,000
|
-0-
|
48,162
|
206,228
|
|
Evgeny
Ler
|
2010
|
89,309
|
-0-
|
125,400
|
29,927
|
244,636
|
CFO(1)
|
2009
|
73,117
|
5,000
|
442,400
|
30,762
|
551,279
|
2008
|
59,773
|
5,000
|
-0-
|
28,145
|
92,918
|
|
Leonard
Stillman
|
2010
|
4,500
|
-0-
|
-0-
|
38,351
|
42,851
|
Former
Interim
|
2009
|
138,290
|
-0-
|
-0-
|
9,547
|
147,837
|
CFO(2)
|
2008
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
Askar
Tashtitov
|
2010
|
115,200
|
-0-
|
262,200
|
37,417
|
414,817
|
President
|
2009
|
130,255
|
10,000
|
774,200
|
44,570
|
959,025
|
2008
|
138,153
|
10,000
|
-0-
|
44,292
|
192,445
|
|
Toleush
Tolmakov
|
2010
|
108,473
|
-0-
|
245,100
|
27,608
|
381,181
|
General
Director of
|
2009
|
127,841
|
-0-
|
829,500
|
32,550
|
989,891
|
Emir
Oil LLP
|
2008
|
137,508
|
-0-
|
-0-
|
27,580
|
165,088
|
Anuarbek
Baimoldin
|
2010
|
84,731
|
-0-
|
22,800
|
29,869
|
137,400
|
COO(3)
|
2009
|
60,000
|
5,000
|
-0-
|
21,081
|
86,081
|
2008
|
27,273
|
5,000
|
-0-
|
10,519
|
42,792
|
(1)
|
In
April 2009 Mr. Ler was appointed CFO of the
Company.
|
(2)
|
Mr.
Stillman served as the Company’s interim CFO from June 17, 2008 to April
13, 2009. Mr. Stillman’s compensation for the 2009 fiscal year
presented in the chart above is for the period from June 17, 2008 to March
31, 2009.
|
(3)
|
In
April 2009 Mr. Baimoldin was appointed COO of the
Company.
|
(4)
|
For
details regarding the assumptions made in the valuation of stock award,
please see “Valuation of
Stock Awards” below.
|
(5)
|
For
details regarding the assumptions made in the valuation of option awards,
please see “Valuation of
Option Awards” below.
|
Name
|
Year
|
Income
Tax
|
Social
Tax |
Health
Insurance |
Pension
Fund |
Fitness
Club
Membership
|
Non-Employee
Director
Fees
|
Boris
Cherdabayev
|
2010
|
$27,119
|
$23,885
|
$912
|
$7,393
|
$-0-
|
$-0-
|
2009
|
35,093
|
22,834
|
466
|
8,661
|
-0-
|
-0-
|
|
2008
|
38,900
|
26,024
|
-0-
|
7,457
|
742
|
-0-
|
|
Gamal
Kulumbetov
|
2010
|
$11,254
|
$12,066
|
$735
|
$7,393
|
$-0-
|
$-0-
|
2009
|
22,898
|
14,612
|
375
|
8,661
|
2,159
|
-0-
|
|
2008
|
22,861
|
15,161
|
283
|
7,457
|
2,400
|
-0-
|
|
Evgeny
Ler
|
2010
|
$10,530
|
$11,269
|
$735
|
$7,393
|
$-0-
|
$-0-
|
2009
|
11,765
|
7,802
|
375
|
8,661
|
2,159
|
-0-
|
|
2008
|
9,967
|
8,038
|
283
|
7,457
|
2,400
|
-0-
|
|
Len
Stillman
|
2010
|
$-0-
|
$-0-
|
$-0-
|
$-0-
|
$-0-
|
$38,351
|
2009
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
9,547(1)
|
|
Askar
Tashtitov
|
2010
|
$14,776
|
$14,513
|
$735
|
$7,393
|
$-0-
|
$-0-
|
2009
|
20,380
|
12,995
|
375
|
8,661
|
2,159
|
-0-
|
|
2008
|
19,931
|
14,221
|
283
|
7,457
|
2,400
|
-0-
|
|
Toleush
Tolmakov
|
2010
|
$9,881
|
$9,197
|
$-0-
|
$8,530
|
$-0-
|
$-0-
|
2009
|
14,112
|
9,777
|
-0-
|
8,661
|
-0-
|
-0-
|
|
2008
|
10,267
|
9,181
|
-0-
|
8,132
|
-0-
|
-0-
|
|
Anuarbek
Baimoldin
|
2010
|
$10,616
|
$11,125
|
$735
|
$7,393
|
$-0-
|
$-0-
|
2009
|
7,682
|
5,687
|
333
|
7,379
|
-0-
|
-0-
|
|
2008
|
3,595
|
3,677
|
126
|
3,121
|
-0-
|
-0-
|
(1)
|
Mr.
Stillman served as the Company’s interim CFO from June 17, 2008 to April
13, 2009. Prior to June 17, 2008, Mr. Stillman served as a
non-employee member of our board of directors and received non-employee
director fees for his services.
|
Name
|
Termination
Scenario
|
Cash
Benefit
|
Equity
Awards
|
|||
Gamal
Kulumbetov
|
For
Good Reason(1)
|
$ 64,502
|
$ 0
|
|||
For
Cause(2)
|
$ 0
|
$ 0
|
||||
Disability(3)
|
$ 64,502
|
$ 0
|
||||
Death(4)
|
$ 0
|
$ 0
|
||||
Extraordinary
Event(5)
|
$ 385,722
|
$ 76,800(6)
|
||||
Askar
Tashtitov
|
For
Good Reason(1)
|
$ 76,589
|
$ 0
|
|||
For
Cause(2)
|
$ 0
|
$ 0
|
||||
Disability(3)
|
$
76,589
|
$ 0
|
||||
Death(4)
|
$ 0
|
$ 0
|
||||
Extraordinary
Event(5)
|
$ 3,000,000
|
$ 220,800(6)
|
||||
Evgeny
Ler
|
For
Good Reason(1)
|
$ 60,722
|
$ 0
|
|||
For
Cause(2)
|
$ 0
|
$ 0
|
||||
Disability(3)
|
$ 60,722
|
$ 0
|
||||
Death(4)
|
$ 0
|
$ 0
|
||||
Extraordinary
Event(5)
|
$ 363,118
|
$ 105,600(6)
|
||||
Anuarbek
Baimoldin
|
For
Good Reason(1)
|
$ 60,722
|
$ 0
|
|||
For
Cause(2)
|
$ 0
|
$ 0
|
||||
Disability(3)
|
$ 60,722
|
$ 0
|
||||
Death(4)
|
$ 0
|
$ 0
|
||||
Extraordinary
Event(5)
|
$ 363,118
|
$ 19,200(6)
|
||||
Toleush
Tolmakov
|
Termination
for Any Reason
|
$ 7,000
|
$ 206,400
|
(1)
|
In
the event of termination for good reason by the officer, the Company will
pay the officer the remainder of his salary for the calendar month in
which the termination is effective and for six consecutive calendar months
thereafter. The officer shall also be entitled to any portion
of incentive compensation for the year, prorated to the date of
termination. Notwithstanding the foregoing, if the officer
obtains other employment prior to the end of the six-month period, salary
payments by the Company after he begins employment with a new employer
shall be reduced by the amount of the cash compensation received from the
new employer.
|
(2)
|
If
the officer is terminated for cause, he will receive salary only through
the date of termination and will not be entitled to any incentive
compensation for the year in which his employment is
terminated.
|
(3)
|
If
the termination is the result of a disability, the Company will pay salary
for the rest of the month during which termination is effective and for
the shorter of six consecutive months thereafter or until disability
insurance benefits commence.
|
(4)
|
If
employment is terminated as a result of the death of the officer, his
heirs shall be entitled to salary through the month in which his death
occurs and to incentive compensation prorated through the month of his
death.
|
(5)
|
If
the employment is terminated as a result of an extraordinary event, the
officer shall be entitled to severance pay as
follows:
|
Completed
Years of Employment
|
|
Service with the Employer
|
Severance
Amount
|
Less
than one (1) year
|
10%
of Basic Compensation Salary
|
At
least one (1) year but less than two (2) years
|
150%
of Basic Compensation Salary
|
More
than two years
|
299%
of Basic Compensation Salary
|
(6)
|
This
column reflects the dollar value of additional shares (if any) that would
vest at such time as the occurrence of an extraordinary event, calculated
at $0.96 per share, which was the closing price of the Company’s common
stock on March 31, 2010.
|
Name
|
Grant
Date
|
All
Other Stock Awards: Number of Shares or Units of
Stock(#)
|
Grant Date Fair Value of
Stock Awards(1)
|
Boris
Cherdabayev
|
01/01/2010
|
280,000
|
319,200
|
Gamal
Kulumbetov
|
01/01/2010
|
80,000
|
91,200
|
Askar
Tashtitov
|
01/01/2010
|
230,000
|
262,200
|
Evgeny
Ler
|
01/01/2010
|
110,000
|
125,400
|
Toleush
Tolmakov
|
01/01/2010
|
215,000
|
245,100
|
Anuarbek
Baimoldin
|
01/01/2010
|
20,000
|
22,800
|
(1)
|
For
details regarding the assumptions made in the valuation of stock award,
please see “Valuation of
Stock Awards” on page 71.
|
Option
awards
|
Stock
awards
|
||||
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Option
exercise price
|
Option
expiration date
|
Number
of Shares or Units of Stock That Have Not Vested
(#)
|
Market
Value of Shares or Units of Stock That Have Not Vested
($)
|
Boris
Cherdabayev
|
410,256
(1)
|
4.75
|
07/18/2010
|
150,000(2)
|
$
807,000
|
Boris
Cherdabayev
|
-0-
|
-0-
|
-
|
280,000(2)
|
319,200
|
Gamal
Kulumbetov
|
-0-
|
-0-
|
-
|
80,000(2)
|
91,200
|
Askar
Tashtitov
|
-0-
|
-0-
|
-
|
230,000(2)
|
262,200
|
Evgeny
Ler
|
-0-
|
-0-
|
-
|
110,000(2)
|
125,400
|
Toleush
Tolmakov
|
-0-
|
-0-
|
-
|
215,000(2)
|
245,100
|
Anuarbek
Baimoldin
|
-0-
|
-0-
|
-
|
20,000(2)
|
22,800
|
(1)
|
Option
awards vested at the date they were granted. The options to
acquire 150,000 shares at an exercise price of $7.00 expired unexercised
on June 20, 2009.
|
(2)
|
The
stock grants will vest on January 1,
2011.
|
Name
|
Number
of Shares
Acquired
on Vesting
(#)
|
Value
Realized
On
Vesting
($)
|
||
Boris
Cherdabayev
|
150,000
|
127,500(1)
|
||
Boris
Cherdabayev
|
300,000
|
258,000(2)
|
||
Gamal
Kulumbetov
|
100,000
|
85,000(1)
|
||
Gamal
Kulumbetov
|
100,000
|
86,000(2)
|
||
Askar
Tashtitov
|
100,000
|
85,000(1)
|
||
Askar
Tashtitov
|
140,000
|
120,400(2)
|
||
Evgeny
Ler
|
80,000
|
68,800(2)
|
||
Toleush
Tolmakov
|
100,000
|
85,000(1)
|
||
Toleush
Tolmakov
|
150,000
|
129,000(2)
|
(1)
|
These
shares vested on July 9, 2009. Value realized on vesting was
calculated based on a closing market price of $0.85 per share, which was
the closing market price of the Company’s common stock on the date the
shares vested.
|
(2)
|
These
shares vested on July 17, 2009. Value realized on vesting was
calculated based on a closing market price of $0.86 per share, which was
the closing market price of the Company’s common stock on the date the
shares vested.
|
Name
|
Fees
Earned
or Paid in Cash ($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensation ($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compen-
sation ($)
|
Total
($)
|
Jason
Kerr
|
40,000
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
40,000
|
Troy
Nilson
|
40,000
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
40,000
|
Stephen
Smoot(2)
|
16,739
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
16,739
|
Leonard
Stillman
|
38,355
|
-0-
|
-0-
|
-0-
|
-0-
|
4,500(1)
|
42,855
|
Valery
Tolkachev
|
40,000
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
40,000
|
Daymon
Smith(2)
|
23,261
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
23,261
|
Boris
Cherdabayev(3)
|
-0-
|
319,200
|
-0-
|
-0-
|
-0-
|
251,309
|
570,509
|
Askar
Tashtitov(3)
|
-0-
|
262,200
|
-0-
|
-0-
|
-0-
|
152,617
|
414,817
|
(1)
|
Mr.
Stillman served as interim CFO of the Company from June 2008 to April
2009. The amount disclosed in this table represents salary paid
to Mr. Stillman as interim CFO during our 2010 fiscal year. For
additional information regarding compensation paid to Mr. Stillman during
the period he served as interim CFO, please see the “Summary Compensation
Table” on page 69.
|
(2)
|
Mr.
Stephen Smoot resigned as a Company director on August 31,
2009. On September 3, 2009 Mr. Daymon Smith was appointed to
fill the vacancy created on the board of directors by Mr. Smoot’s
resignation.
|
(3)
|
In
addition to serving on the Company’s board of directors, Mr. Cherdabayev
and Mr. Tashtitov are also employed by the Company. All
compensation paid to these individual, as reflected in the above table,
was paid in connection with their employment with the
Company. For additional information regarding compensation paid
to Mr. Cherdabayev and Mr. Tashtitov please see the “Summary Compensation
Table” on page 69.
|
Type of Security
|
Name and Address
|
Amount
& Nature of
Beneficial Ownership |
%
of Class(5)
|
Common
|
Anuarbek
Baimoldin
|
20,000(4)
|
*
|
202
Dostyk Ave., 4th
Floor
|
|||
Almaty,
Kazakhstan 050051
|
|||
Common
|
Boris
Cherdabayev
|
6,658,983(1)(4)
|
12.7%
|
202
Dostyk Ave, 4th
Floor
|
|||
Almaty,
Kazakhstan 050051
|
|||
Common
|
JSC
Compass Asset Management
|
4,423,494
|
8.5%
|
240
V Furmanov Street
|
|||
Almaty,
Kazakhstan 050059
|
|||
Common
|
Jason
Kerr
|
-0-
|
*
|
1038
South 750 East
|
|||
Kaysville,
Utah 84037
|
|||
Common
|
Gamal
Kulumbetov
|
280,000(4)
|
*
|
202
Dostyk Ave, 4th
Floor
|
|||
Almaty,
Kazakhstan 050051
|
|||
Common
|
Evgeniy
Ler
|
190,000(4)
|
*
|
202
Dostyk Ave, 4th Floor
|
|||
Almaty,
Kazakh
|
|||
Common
|
Troy
Nilson
|
-0-
|
*
|
533
West 2600 South #250
|
|||
Bountiful,
Utah 84010
|
|||
Common
|
Daymon
M. Smith
|
-0-
|
*
|
352
East 426 North
|
|||
Alpine,
Utah 84004
|
|||
Common
|
Leonard
M. Stillman
|
-0-
|
*
|
5794
West Poll
|
|||
Mountain
Green, Utah 84050
|
|||
Common
|
Askar
Tashtitov
|
480,000(4)
|
*
|
202
Dostyk Ave, 4th
Floor
|
|||
Almaty,
Kazakhstan 050051
|
|||
Common
|
Valery
Tolkachev
|
150,000(2)
|
*
|
92
Vernadskogo ave., app. 427
|
|||
Moscow,
Russia 119571
|
|||
Common
|
Toleush
Tolmakov(3)
|
6,036,960(4)
|
12.1%
|
Daulet
village, oil storage depot
|
|||
Aktau,
Kazakhstan 466200
|
|||
Officers,
Directors and Nominees
|
7,778,983(4)
|
14.9%
|
|
as
a Group: (10 persons)
|
|||
Total | 18,239,437(4) | 34.8% |
(1) |
The
shares attributed to Mr. Cherdabayev include 4,128,601 shares held of
record by Mr. Cherdabayev, 2,106,126 shares held of record by or for the
benefit of Westfall Group Limited, 14,000 shares held of record by Asael
T. Sorensen for the benefit of Boris Cherdabayev and immediately
exercisable options held by Mr. Cherdabayev to acquire 410,256 shares of
our common stock at an exercise price of $4.75. This option
expires on July 18, 2010. Mr. Cherdabayev is the sole owner of
Westfall Group Limited.
|
(2) | The shares attributed to Mr. Tolkachev include 81,579 shares of common stock held of record by Mr. Tolkachev and immediately exercisable options to acquire 68,421 shares of our common stock at an exercise price of $4.75. This option expires on July 18, 2010. |
(3) | The shares attributed to Mr. Tolmakov include 3,265,365 shares held of record by Mr. Tolmakov and 2,986,595 shares held of record by Simage Limited. Simage Limited is a company owned by Mr. Tolmakov. Mr. Tolmakov is the General Director of our wholly-owned subsidiary Emir Oil LLP. |
(4) | This includes shares awarded as restricted stock grants on January 1, 2010. Please see the Recent Sales of Unregistered Securities section of Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities on page 34 of this report for details regarding the amount, terms and conditions of such grants. |
(5) | The percentages reflect the increase in the number of common shares that would be issued in connection with the exercise of outstanding options held by the individual. |
Plan
category
|
Number
of securities
to
be issued upon
exercise
of
outstanding
options,
warrants
and rights
(a)
|
Weighted-average
exercise
price of
outstanding
options,
warrants
and
rights
(b)
|
Number
of securities
remaining
available for future issuance under equity
compensation
plans
(excluding
securities
reflected in columns (a)) (c)
|
Equity
compensation plans approved by security holders
|
920,783
|
$5.04
|
4,025,000
|
Equity
compensation plans not approved by security holders
|
-0-
|
n/a
|
n/a
|
Total
|
920,783
|
$5.04
|
4,025,000
|
Name
|
Positions
with Company
|
Options
Granted
|
||
Boris
Cherdabayev
|
Director
|
410,256
|
||
Valery
Tolkachev
|
Director
|
68,421
|
Fiscal
2010
|
Fiscal
2009
|
||
Audit
|
$
231,949
|
$ 164,221
|
|
Audit
related
|
37,225
|
13,585
|
|
Tax
|
34,444
|
2,777
|
|
All
other
|
-
|
-
|
|
Total
|
$
303,618
|
$
180,583
|
Exhibit
No.
|
Exhibit
Description
|
|
2.1
|
Certificate
of Merger dated February 15, 1994(1)
|
|
2.2
|
Plan
and Agreement of Merger dated February 15, 1994(2)
|
|
2.3
|
Plan
and Agreement of Merger(7)
|
|
3.1
|
Certificate
of Incorporation of AU ‘N AUG dated February 15, 1994(1)
|
|
3.2
|
Certificate
of Amendment to Certificate of Incorporation of AU ‘N AUG dated April 11,
1994(1)
|
|
3.3
|
Certificate
of Amendment to Certificate of Incorporation of InterUnion Financial
Corporation dated October 17, 1994(1)
|
|
3.4
|
Amended
Certificate of Incorporation(8)
|
|
3.5
|
Articles
of Incorporation of BMB Munai, Inc.(13)
|
|
3.6
|
Amendment
to Articles of Incorporation of BMB Munai, Inc.(16)
|
|
3.7
|
Bylaws
of InterUnion Financial Corporation(1)
|
|
3.8
|
Amended
By-Laws(11)
|
|
3.9
|
By-Laws
of BMB Munai, Inc. (as amended through January 13, 2005)(13)
|
|
3.10
|
By-Laws
of BMB Munai, Inc. (as amended through June 23, 2006)(16)
|
|
3.11
|
Certificate
of Amendment of By-Laws of BMB Munai, Inc. (as amended through March 26,
2008)
(22)
|
|
4.1
|
Instruments
Defining the Rights of Security Holders Including Indentures(2)
|
|
4.2
|
BMB
Munai, Inc. 2004 Stock Incentive Plan(12)
|
|
4.3
|
Registration
Rights Agreement dated December 2005(15)
|
|
4.4
|
Trust
Deed Relating to U.S. $60,000,000 5.0 per cent Convertible Notes due
2012(19)
|
|
4.5
|
Registration
Rights Agreement dated July 13, 2007(19)
|
|
4.6
|
Paying
and Conversion Agency Agreement dated July 13, 2007(19)
|
|
4.7
|
Form
of 5.0% Convertible Notes due 2012(19)
|
|
4.8
|
Indenture
dated September 19, 2007(20)
|
|
4.9
|
Form
of 5.0% Convertible Senior Note due 2012(20)
|
|
4.10
|
BMB
Munai, Inc. 2009 Equity Incentive Plan(23)
|
|
10.1
|
ITM
Software Development Agreement(2)
|
|
10.2
|
Letter
of Understanding dated November 30, 1995(2)
|
|
10.3
|
Investment
Management Agreement dated December 20, 1995(3)
|
|
10.4
|
Agreement
between Havensight Holdings Ltd. and InterUnion Financial Corporation
dated January 19, 1995(3)
|
|
10.5
|
Letter
of Understanding dated September 26, 1996(4)
|
|
10.6
|
Letter
Agreement dated January 7, 1997(4)
|
|
10.7
|
Amendment
to Letter of Understanding dated April 16, 1997(5)
|
|
10.8
|
Services
Agreement dated July 5, 2002(6)
|
|
10.9
|
Agency
Agreement dated November 26, 2003(7)
|
|
10.10
|
Share
Purchase and Sale Agreement dated May 24, 2004(9)
|
|
10.11
|
Addendum
No.3 to Emir Oil Contract(14)
|
|
10.12
|
Form
Restricted Stock Agreement of BMB Munai, Inc. dated March 30, 2007 (17)
|
|
10.13
|
Form
Employment Agreement(18)
|
|
10.14
|
Placement
Agreement dated July 13, 2007(19)
|
10.15
|
Indenture
dated September 19, 2007(20)
|
|
10.16
|
Consulting
Agreement dated November 19, 2007(21)
|
|
10.17
|
Addendum
No. 5 to Emir Oil Contract(24)
|
|
10.18
|
Form
Restricted Stock Agreement of BMB Munai, Inc. dated July 17, 2008 (25)
|
|
10.19
|
Employment
Agreement – Leonard Stillman(25)
|
|
10.20
|
Revised
Consulting Agreement dated September 16, 2008(26)
|
|
10.21
|
Addendum
No. 6 to Emir Oil Contract(27)
|
|
10.22
|
Addendum
No. 7 to Emir Oil Contract(28)
|
|
10.23
|
Contract
No. EO-EAO/30-12 for the Sales and Purchase of Crude Oil (export)
(29)
|
|
10.24
|
Additional
Agreement #9A to the Contract No. EO-EAO/30-12(29)
|
|
10.25
|
Enclosure
#1 to the Contract No. EO-EAO/30-12(29)
|
|
10.26
|
Additional
Agreement #27A to the Contract No. EO-EAO/30-12(29)
|
|
10.27
|
Debt
Purchase Agreement, dated June 26, 2009, between BMB Munai, Inc. and
Simage Limited(30)
|
|
10.28
|
Form
of BMB Munai, Inc. Restricted Stock Agreement dated January 1, 2010(31)
|
|
10.29
|
Form
of Employment Agreement dated December 31, 2009(31)
|
|
10.30
|
Consulting
Agreement, dated December 31, 2009, between BMB Munai, Inc. and Boris
Cherdabayev(31)
|
|
10.31
|
Conduction
of 3D Seismic Survey, dated March 31, 2010, between “Geo Seismic Services”
LLP and “Emir-Oil” LLP(32)
|
|
10.32
|
Supplemental
Indenture No. 1, dated June 1, 2010, between BMB Munai, Inc. and The Bank
of New York Mellon, as trustee(33)
|
|
12.1
|
Computation
of Earnings to Fixed Charges
|
|
14.1
|
Code
of Ethics(10)
|
|
21.1
|
Subsidiaries
|
|
23.1
|
Consent
of Chapman Petroleum Engineering Ltd., Independent Petroleum
Engineers*
|
|
23.2
|
Consent
of Hansen, Barnett & Maxwell, P.C., Independent Registered Public
Accounting Firm*
|
|
31.1
|
Certification
of Principal Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002*
|
|
31.2
|
Certification
of Principal Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002*
|
|
32.1
|
Certification
of Principal Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*
|
|
32.2
|
Certification
of Principal Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*
|
|
99.1
|
Chapman
Petroleum Engineering Ltd. Letter on its estimation of our proved oil and
gas reserves at March 31, 2010*
|
BMB
MUNAI, INC.
|
|||
Date: June
23, 2010
|
By:
|
/s/ Gamal Kulumbetov | |
Gamal
Kulumbetov
|
|||
Chief
Executive Officer
|
|||
(Duly
Authorized Representative)
|
Signatures
|
Title
|
Date
|
||
/s/ Gamal Kulumbetov |
Chief
Executive Officer
|
June
23, 2010
|
||
Gamal
Kulumbetov
|
||||
/s/ Evgeny Ler |
Chief
Financial Officer
|
June
23, 2010
|
||
Evgeny
Ler
|
||||
/s/ Boris Cherdabayev |
Chairman
of the Board of Directors
|
June
23, 2010
|
||
Boris
Cherdabayev
|
||||
/s/ Jason Kerr |
Director
|
June
23, 2010
|
||
Jason
Kerr
|
||||
/s/ Troy Nilson |
Director
|
June
23, 2010
|
||
Troy
Nilson
|
||||
/s/ Daymon Smith |
Director
|
June
23, 2010
|
||
Daymon
Smith
|
||||
/s/ Leonard Stillman | Director | June 23, 2010 | ||
Leonard Stillman | ||||
/s/ Askar Tashtitov |
Director
|
June
23, 2010
|
||
Askar
Tashtitov
|
||||
/s/ Valery Tolkachev |
Director
|
June
23, 2010
|
||
Valery
Tolkachev
|
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
|
FOR
THE YEARS ENDED MARCH 31, 2010, 2009 AND
2008
|
Page
|
|
Report
of Independent Registered Public Accounting Firm – Hansen, Barnett &
Maxwell P.C.
|
F-1
|
Consolidated
Balance Sheets as of March 31, 2010 and 2009
|
F-2
|
Consolidated
Statements of Operations for the years ended March 31, 2010, 2009 and
2008
|
F-3
|
Consolidated
Statements of Shareholders’ Equity for the years ended March 31, 2010,
2009 and 2008
|
F-4
|
Consolidated
Statements of Cash Flows for the years ended March 31, 2010, 2009 and
2008
|
F-5
|
Notes
to the Consolidated Financial Statements
|
F-7
|
Supplementary
Financial Information on Oil and Natural Gas Exploration, Development, and
Production Activities (unaudited)
|
F-49
|
HANSEN, BARNETT & MAXWELL,
P.C.
|
|
A
Professional Corporation
|
|
CERTIFIED
PUBLIC ACCOUNTANTS
|
|
5
Triad Center, Suite 750
|
|
Salt
Lake City, UT 84180-1128
|
|
Phone:
(801) 532-2200
|
|
Fax:
(801) 532-7944
|
|
www.hbmcpas.com
|
Notes
|
March
31, 2010
|
March
31, 2009
|
||
ASSETS
|
||||
CURRENT
ASSETS
|
||||
Cash
and cash equivalents
|
3
|
$
6,440,394
|
$
6,755,545
|
|
Trade
accounts receivable
|
6,423,402
|
3,081,573
|
||
Prepaid
expenses and other assets, net
|
4
|
4,083,917
|
3,054,078
|
|
Total
current assets
|
16,947,713
|
12,891,196
|
||
LONG
TERM ASSETS
|
||||
Oil
and gas properties, full cost method, net
|
5
|
238,601,842
|
238,728,413
|
|
Gas
utilization facility
|
6
|
13,569,738
|
13,470,631
|
|
Inventories
for oil and gas projects
|
7
|
13,717,847
|
14,002,146
|
|
Prepayments
for materials used in oil and gas projects
|
141,312
|
122,040
|
||
Other
fixed assets, net
|
8
|
3,815,422
|
3,629,108
|
|
Long
term VAT recoverable
|
9
|
3,113,939
|
2,423,940
|
|
Convertible
notes issue cost
|
1,201,652
|
2,490,370
|
||
Restricted
cash
|
10
|
770,553
|
588,217
|
|
Total
long term assets
|
274,932,305
|
275,454,865
|
||
TOTAL
ASSETS
|
$
291,880,018
|
$
288,346,061
|
||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||
CURRENT
LIABILITIES
|
||||
Accounts
payable
|
$
3,948,851
|
$
21,771,137
|
||
Accrued
coupon payment
|
11
|
641,667
|
641,667
|
|
Taxes
Payable, Accrued liabilities and other payables
|
4,802,361
|
1,697,097
|
||
Total
current liabilities
|
9,392,879
|
24,109,901
|
||
LONG
TERM LIABILITIES
|
||||
Convertible
notes issued, net
|
11
|
62,178,119
|
61,331,521
|
|
Liquidation
fund
|
12
|
4,712,345
|
4,263,994
|
|
Deferred
taxes
|
13
|
4,964,382
|
6,516,444
|
|
Capital
lease liability
|
14
|
369,801
|
-
|
|
Total
long term liabilities
|
72,224,647
|
72,111,959
|
||
COMMITMENTS
AND CONTINGENCIES
|
23
|
-
|
-
|
|
SHAREHOLDERS’
EQUITY
|
||||
Preferred
stock - $0.001 par value; 20,000,000 shares authorized; no shares issued
or outstanding
|
15
|
-
|
-
|
|
Common
stock - $0.001 par value; 500,000,000 shares authorized, 51,865,015 and
47,378,420
shares outstanding, respectively |
15
|
51,865
|
47,378
|
|
Additional
paid in capital
|
15
|
160,653,969
|
151,513,638
|
|
Retained
earnings
|
49,556,658
|
40,563,185
|
||
Total
shareholders’ equity
|
210,262,492
|
192,124,201
|
||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
291,880,018
|
$
288,346,061
|
Notes
|
Year
ended
March
31, 2010
|
Year
ended
March
31, 2009
|
Year
ended
March
31, 2008
|
|||
REVENUES
|
16
|
$
57,274,526
|
$
69,616,875
|
$
60,196,626
|
||
COSTS
AND OPERATING EXPENSES
|
||||||
Rent
export tax
|
17
|
10,032,857
|
467,359
|
-
|
||
Export
duty
|
17
|
-
|
6,783,278
|
-
|
||
Oil
and gas operating
|
8,568,453
|
7,530,653
|
5,515,403
|
|||
General
and administrative
|
14,042,577
|
22,262,248
|
14,747,754
|
|||
Consulting
expenses
|
18
|
-
|
8,662,500
|
-
|
||
Depletion
|
5
|
11,075,590
|
10,403,328
|
9,419,655
|
||
Interest
expense
|
11
|
4,604,446
|
1,138,874
|
-
|
||
Amortization
and depreciation
|
613,953
|
324,028
|
239,155
|
|||
Accretion
expense
|
12
|
448,351
|
449,025
|
254,572
|
||
Total
costs and operating expenses
|
49,386,227
|
58,021,293
|
30,176,539
|
|||
INCOME
FROM OPERATIONS
|
7,888,299
|
11,595,582
|
30,020,087
|
|||
OTHER
INCOME / (EXPENSE)
|
||||||
Foreign
exchange (loss)/gain, net
|
19
|
(353,401)
|
2,592,341
|
47,362
|
||
Disgorgement
funds received
|
20
|
-
|
1,650,293
|
-
|
||
Interest
income
|
275,136
|
391,223
|
1,257,666
|
|||
Other
expense, net
|
(368,623)
|
(100,153)
|
(118,133)
|
|||
Total
other (expense)/income
|
(446,888)
|
4,533,704
|
1,186,895
|
|||
INCOME
BEFORE INCOME TAXES
|
7,441,411
|
16,129,286
|
31,206,982
|
|||
INCOME
TAX BENEFIT
|
13
|
1,552,062
|
1,028,272
|
103,582
|
||
NET
INCOME
|
$
8,993,473
|
$
17,157,558
|
$
31,310,564
|
|||
BASIC
NET INCOME PER COMMON SHARE
|
21
|
$
0.18
|
$
0.37
|
$
0.70
|
||
DILUTED
NET INCOME PER COMMON SHARE
|
21
|
$
0.18
|
$
0.37
|
$
0.70
|
Notes
|
Common
Stock
|
Additional
paid-in capital
|
(Accumulated
deficit)/ Retained earnings
|
Total
|
||||||
Shares
|
Amount
|
|||||||||
At
March 31, 2007
|
44,690,657
|
$
44,691
|
$
133,721,865
|
$
(7,904,937)
|
$
125,861,619
|
|||||
Options
and warrants exercised
|
93,477
|
93
|
328,577
|
-
|
328,670
|
|||||
Expense
related to vesting stock - based
compensation |
-
|
-
|
2,303,078
|
-
|
2,303,078
|
|||||
Net
income for the year
|
-
|
-
|
-
|
31,310,564
|
31,310,564
|
|||||
At
March 31, 2008
|
44,784,134
|
44,784
|
136,353,520
|
23,405,627
|
159,803,931
|
|||||
Options
and warrants exercised
|
14,286
|
14
|
49,987
|
-
|
50,001
|
|||||
Expense
related to vesting stock-based compensation
|
-
|
-
|
2,271,556
|
-
|
2,271,556
|
|||||
Stock
grants and stock options issued to employees
|
1,330,000
|
1,330
|
5,177,325
|
-
|
5,178,655
|
|||||
Stock
grants and stock options issued
to non-employees
|
1,250,000
|
1,250
|
7,661,250
|
-
|
7,662,500
|
|||||
Net
income for the year
|
-
|
-
|
-
|
17,157,558
|
17,157,558
|
|||||
At
March 31, 2009
|
47,378,420
|
47,378
|
151,513,638
|
40,563,185
|
192,124,201
|
|||||
Expense
related to vesting stock-based compensation
|
15
|
-
|
-
|
2,744,133
|
-
|
2,744,133
|
||||
Stock
grants issued to employees
|
15
|
1,500,000
|
1,500
|
426,000
|
-
|
427,500
|
||||
Debt
conversion
|
22
|
2,986,595
|
2,987
|
5,970,198
|
-
|
5,973,185
|
||||
Net
income for the year
|
-
|
-
|
-
|
8,993,473
|
8,993,473
|
|||||
At
March 31, 2010
|
51,865,015
|
$
51,865
|
$
160,653,969
|
$
49,556,658
|
$
210,262,492
|
|||||
Notes
|
Year
ended
March 31, 2010 |
Year
ended
March 31, 2009 |
Year
ended
March
31,
2008
|
|||
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||
Net
income
|
$
8,993,473
|
$
17,157,558
|
$
31,310,564
|
|||
Adjustments
to reconcile net income to net cash provided by
operating activities:
|
||||||
Depletion
|
5
|
11,075,590
|
10,403,328
|
9,419,655
|
||
Depreciation
and amortization
|
8
|
613,953
|
324,028
|
239,155
|
||
Interest
expense
|
11
|
4,604,446
|
1,138,874
|
-
|
||
Accretion
expense
|
12
|
448,351
|
449,025
|
254,572
|
||
Stock
based compensation expense
|
3,171,633
|
7,450,211
|
2,303,078
|
|||
Stock
issued for services
|
18
|
-
|
7,662,500
|
-
|
||
(Recovery
of provision)/provision expense for uncollectible advances and
prepayments
|
-
|
(121,302)
|
135,502
|
|||
Loss
on disposal of fixed assets
|
14,230
|
113,666
|
75,883
|
|||
Income
tax benefit
|
13
|
(1,552,062)
|
(1,028,272)
|
(103,582)
|
||
Changes
in operating assets and liabilities
|
||||||
(Increase)/decrease
in trade accounts receivable
|
(3,341,829)
|
2,784,139
|
(1,871,050)
|
|||
(Increase)/decrease
in prepaid expenses and other assets
|
(1,029,839)
|
482,485
|
(1,490,739)
|
|||
(Increase)/decrease
in VAT recoverable
|
(689,999)
|
5,682,457
|
(3,755,338)
|
|||
(Decrease)/increase
in current liabilities
|
(8,212,967)
|
884,441
|
13,463,494
|
|||
Net
cash provided by operating activities
|
14,094,980
|
53,383,138
|
49,981,194
|
|||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||
Purchase
and development of oil and gas properties
|
5
|
(7,296,163)
|
(47,495,078)
|
(68,331,668)
|
||
Purchase
of other fixed assets
|
8
|
(898,870)
|
(5,369,509)
|
(2,110,809)
|
||
Cash
paid for convertible notes coupon, capitalized as oil and gas
properties
|
-
|
(3,000,000)
|
(1,500,000)
|
|||
Increase
in inventories and prepayments for materials used
in oil and gas projects
|
(2,957,762)
|
(8,086,324)
|
(26,394,755)
|
|||
Increase
in gas utilization facility/construction in progress
|
6
|
(75,000)
|
-
|
(2,798,498)
|
||
(Increase)/decrease
in restricted cash
|
(182,336)
|
34,480
|
(319,000)
|
|||
Net
cash used in investing activities
|
(11,410,131)
|
(63,916,431)
|
(101,454,730)
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||
Proceeds
from issuance of convertible debt
|
-
|
-
|
56,210,763
|
|||
Proceeds
from exercise of common stock options and warrants
|
-
|
50,001
|
328,670
|
|||
Cash
paid for convertible notes coupon
|
(3,000,000)
|
-
|
-
|
|||
Net
cash (used in)/provided by financing activities
|
(3,000,000)
|
50,001
|
56,539,433
|
|||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
(315,151)
|
(10,483,292)
|
5,065,897
|
|||
CASH
AND CASH EQUIVALENTS at beginning of year
|
6,755,545
|
17,238,837
|
12,172,940
|
|||
CASH
AND CASH EQUIVALENTS at end of year
|
$
6,440,394
|
$
6,755,545
|
$
17,238,837
|
Year
ended
March 31, 2010 |
Year
ended
March 31, 2009 |
Year
ended
March
31,
2008
|
||||
Non-Cash
Investing and Financing Activities
|
||||||
Asset
retirement obligation incurred in property development, net of estimate
revision
|
$ -
|
$
86,438
|
$
1,308,130
|
|||
Transfers
from oil and gas properties, construction in progress and other fixed
assets to gas utilization facility
|
6
|
24,107
|
13,470,631
|
-
|
||
Coupon
payments on convertible notes, capitalized as part of oil and gas
properties
|
11
|
-
|
2,250,000
|
2,141,667
|
||
Accretion
of discount on convertible notes, capitalized as part of oil and gas
properties
|
-
|
596,654
|
535,455
|
|||
Amortization
of convertible notes issue costs, capitalized as part of oil and gas
properties
|
-
|
568,386
|
541,019
|
|||
Depreciation
on other fixed assets capitalized as oil and gas
properties
|
5
|
454,174
|
353,545
|
180,804
|
||
Addition
of other fixed assets under capital lease
contract
|
8
|
369,801
|
-
|
-
|
||
Issuance
of common stock for the settlement of liabilities
|
22
|
5,973,185
|
-
|
-
|
||
Transfer
of inventory and prepayments for materials used in oil and gas projects to
oil and gas properties
|
5
|
3,147,789
|
16,284,487
|
15,236,315
|
||
Supplemental
Cash Flow Information
|
||||||
Cash
paid for interest
|
$
3,000,000
|
$
3,000,000
|
$
1,500,000
|
|
NOTE
1 - DESCRIPTION OF BUSINESS
|
|
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES
|
Buildings
and improvements
|
7-10
years
|
Machinery
and equipment
|
6-10
years
|
Vehicles
|
3-5
years
|
Office
equipment
|
3-5
years
|
Software
|
3-4
years
|
Furniture
and fixtures
|
2-7
years
|
·
|
Introduce
a new definition of oil and gas producing activities. This new definition
allows companies to include in their reserve base volumes from
unconventional resources. Such unconventional resources include bitumen
extracted from oil sands and oil and gas extracted from coal beds and
shale formations.
|
·
|
Report
oil and gas reserves using an unweighted average price using the prior
12-month period, based on the closing prices on the first day of each
month, rather than year-end prices. The SEC indicated that they will
continue to communicate with the FASB staff to align their accounting
standards with these rules. The FASB currently requires a single-day,
year-end price for accounting
purposes.
|
·
|
Permit
companies to disclose their probable and possible reserves on a voluntary
basis. In the past, proved reserves were the only reserves allowed in the
disclosures.
|
·
|
Requires
companies to provide additional disclosure regarding the aging of proved
undeveloped reserves.
|
·
|
Permit
the use of reliable technologies to determine proved reserves if those
technologies have been demonstrated empirically to lead to reliable
conclusions about reserves volumes.
|
·
|
Replace
the existing “certainty” test for areas beyond one offsetting drilling
unit from a productive well with a “reasonable certainty”
test.
|
·
|
Require
additional disclosures regarding the qualifications of the chief technical
person who oversees the company’s overall reserve estimation process.
Additionally, disclosures regarding internal controls over reserve
estimation, as well as a report addressing the independence and
qualifications of its reserves preparer or auditor will be
mandatory.
|
·
|
Separately
disclose the amounts of significant transfers in and out of Level 1 and
Level 2 fair value measurements and describe reasons for the
transfers.
|
·
|
Present
separately information about purchases, sales, issuances and settlements,
on a gross basis, rather than on one net number, in the reconciliation for
fair value measurements using significant unobservable inputs (Level
3).
|
·
|
Provide
fair value measurement disclosures for each class of assets and
liabilities.
|
·
|
Provide
disclosures about the valuation techniques and inputs used to measure fair
value for both recurring and nonrecurring fair value measurements for fair
value measurements that fall in either Level 2 or Level
3.
|
|
NOTE
3 - CASH AND CASH EQUIVALENTS
|
March
31, 2010
|
March
31, 2009
|
||
US
Dollars
|
$
3,476,741
|
$
6,030,173
|
|
Foreign
currency
|
2,963,653
|
725,372
|
|
$
6,440,394
|
$
6,755,545
|
|
NOTE
4 - PREPAID EXPENSES AND OTHER
ASSETS
|
March
31, 2010
|
March
31, 2009
|
||
Advances
for services
|
$
2,593,527
|
$
2,740,915
|
|
Taxes
prepaid
|
920,066
|
75,216
|
|
Other
|
570,324
|
237,947
|
|
$
4,083,917
|
$
3,054,078
|
|
NOTE
5 - OIL AND GAS PROPERTIES
|
March
31, 2010
|
March
31, 2009
|
||
Cost
of drilling wells
|
$
96,562,442
|
$
96,203,705
|
|
Professional
services received in exploration and
development
activities |
62,967,506
|
55,424,910
|
|
Material
and fuel used in exploration and development activities
|
52,221,735
|
51,273,747
|
|
Subsoil
use rights
|
20,788,119
|
20,788,119
|
|
Deferred
tax
|
7,219,219
|
7,219,219
|
|
Geological
and geophysical
|
7,883,856
|
7,870,516
|
|
Capitalized
interest, accreted discount and amortised bond
issue
costs on convertible notes issued |
6,633,181
|
6,633,181
|
|
Infrastructure
development costs
|
1,429,526
|
1,245,298
|
|
Other
capitalized costs
|
17,198,306
|
15,296,176
|
|
Accumulated
depletion
|
(34,302,048)
|
(23,226,458)
|
|
$
238,601,842
|
$
238,728,413
|
|
NOTE
6 – GAS UTILIZATION FACILITY
|
|
|
NOTE
7 – INVENTORIES FOR OIL AND GAS
PROJECTS
|
March
31, 2010
|
March
31, 2009
|
||
Construction
material
|
$
12,756,417
|
$
12,962,397
|
|
Spare
parts
|
87,722
|
84,524
|
|
Crude
oil produced
|
2,895
|
5,029
|
|
Other
|
870,813
|
950,196
|
|
$
13,717,847
|
$
14,002,146
|
|
NOTE 8 - OTHER FIXED ASSETS
|
Buildings
and improvements
|
Machinery
and equipment
|
Vehicles
|
Office
equipment |
Furniture
and fixtures
|
Software
|
Total
|
|||||||
Cost
|
|||||||||||||
at
March 31, 2009
|
$
2,056,325
|
$
728,941
|
$
1,418,147
|
$
368,690
|
$
374,888
|
$
150,838
|
$ 5,097,829
|
||||||
Additions
|
228,555
|
102,608
|
879,492
|
40,994
|
16,755
|
267
|
1,268,671
|
||||||
Disposals
|
-
|
-
|
64,919
|
16,098
|
10,609
|
1,632
|
93,258
|
||||||
at
March 31, 2010
|
2,284,880
|
831,549
|
2,232,720
|
393,586
|
381,034
|
149,473
|
6,273,242
|
||||||
Accumulated
depreciation
|
|||||||||||||
at
March 31, 2009
|
270,651
|
198,146
|
518,693
|
225,521
|
147,296
|
108,414
|
1,468,721
|
||||||
Charge
for the period
|
438,459
|
204,863
|
280,420
|
84,095
|
30,627
|
29,663
|
1,068,127
|
||||||
Disposals
|
-
|
16,984
|
31,468
|
15,884
|
11,584
|
3,108
|
79,028
|
||||||
at
March 31, 2010
|
709,110
|
386,025
|
767,645
|
293,732
|
166,339
|
134,969
|
2,457,820
|
||||||
Net
book value at March 31, 2009
|
$
1,785,674
|
$
530,795
|
$
899,454
|
$
143,169
|
$
227,592
|
$
42,424
|
$
3,629,108
|
||||||
Net
book value at March
31, 2010
|
$
1,575,770
|
$
445,524
|
$
1,465,075
|
$
99,854
|
$
214,695
|
$
14,504
|
$
3,815,422
|
|
NOTE
9 - LONG TERM VAT RECOVERABLE
|
|
As
of March 31, 2010 and 2009 the Company had long term VAT recoverable in
the amount of $3,113,939 and $2,423,940, respectively. The VAT recoverable
is a Tenge denominated asset due from the Republic of Kazakhstan. The VAT
recoverable consists of VAT paid on local expenditures and imported goods.
VAT charged to the Company is recoverable in future periods as either cash
refunds or offsets against the Company’s fiscal obligations, including
future income tax liabilities. Management cannot estimate which part of
this asset will be realized in the current year because in order to return
funds or offset this tax with other taxes a tax examination must be
performed by local Kazakhstan tax authorities. During the year ended March
31, 2010 the Company received refunds of VAT in the amount of
$910,057.
|
|
NOTE
10 - RESTRICTED CASH
|
|
Under
the laws of the Republic of Kazakhstan, the Company is obligated to set
aside funds for required environmental remediation. As of March 31, 2010
and 2009 the Company had restricted $770,553 and $588,217, respectively,
for this purpose.
|
|
NOTE
11 - CONVERTIBLE NOTES PAYABLE
|
Conversion Date
|
Percentage
|
On
or before July 13, 2008
|
81.6
|
Thereafter,
but on or before July 13, 2009
|
86.2
|
Thereafter,
but on or before July 13, 2010
|
90.9
|
Thereafter,
but on or before July 13, 2011
|
95.5
|
Thereafter,
and until Maturity Date
|
100.0
|
Conversion Date
|
Amount
|
On
or before July 13, 2008
|
$
0.12239
|
Thereafter,
but on or before July 13, 2009
|
$
0.07246
|
Thereafter,
but on or before July 13, 2010
|
$
0.02250
|
Thereafter,
but on or before July 13, 2011
|
$
-
|
Thereafter,
and until Maturity Date
|
$
-
|
·
|
have
been effectively registered under the Securities Act and disposed of in
accordance with the registration statement relating
thereto;
|
·
|
may
be resold without restriction pursuant to Rule 144 under the Securities
Act or any successor provision
thereto;
|
·
|
(A)
are not subject to the restrictions imposed by Rule 903(b)(3)(iii) under
the Securities Act or any successor provision thereto and (B) may be
resold pursuant to Rule 144 under the Securities Act or any successor
provision thereto without being subject to the restrictions imposed by
paragraphs (e), (f) and (h) of Rule 144 under the Securities Act or any
successor provisions thereto; provided that
the requirements set forth in paragraph (c) of Rule 144 under the
Securities Act or any successor provision thereto are met as of such date;
or
|
·
|
have
been publicly sold pursuant to Rule 144 under the Securities Act or any
successor provision thereto.
|
March
31, 2010
|
March
31, 2009
|
||
Convertible
notes redemption value
|
$
64,323,785
|
$
64,323,785
|
|
Unamortized
discount
|
(2,145,666)
|
(2,992,264)
|
|
$
62,178,119
|
$
61,331,521
|
|
NOTE
12 - LIQUIDATION FUND
|
Total
|
|
At
March 31, 2008
|
$
3,728,531
|
Revision
of estimate
|
(757,047)
|
Accrual
of liability
|
843,485
|
Accretion
expenses
|
449,025
|
At
March 31, 2009
|
$
4,263,994
|
Accrual
of liability
|
-
|
Accretion
expenses
|
448,351
|
At
March 31, 2010
|
$
4,712,345
|
|
At
March 31, 2010, undiscounted expected future cash flows that will be
required to satisfy the Company’s obligation by 2013 for the Dolinnoe,
Aksaz, Emir and Kariman fields, respectively, are $6,204,545. After
application of a 10% discount rate, the present value of the Company’s
liability at March 31, 2010 and 2009, was $4,712,345 and $4,263,994
respectively.
|
|
NOTE
13 - INCOME TAXES
|
Year
ended
March 31, 2010 |
Year
ended
March
31, 2009
|
Year
ended
March
31, 2008
|
|||
United
States
|
$
(7,275,579)
|
$
(12,937,563)
|
$
(1,827,168)
|
||
Kazakhstan
|
14,716,990
|
29,066,849
|
33,034,150
|
||
$
7,441,411
|
$
16,129,286
|
$ 31,206,982
|
Year
ended
March
31, 2010
|
Year
ended
March
31, 2009
|
Year
ended
March
31, 2008
(Restated)
|
|||
Current
tax expense
|
$ -
|
$ -
|
$ -
|
||
Deferred
tax benefit
|
(1,552,062)
|
(1,028,272)
|
(103,582)
|
||
$
(1,552,062)
|
$
(1,028,272)
|
$
(103,582)
|
Year
ended
March
31, 2010
|
Year
ended
March 31, 2009 |
Year
ended
March
31, 2008
(Restated)
|
|||
Tax
at federal statutory rate (34%)
|
$
2,530,505
|
$
5,483,957
|
$
10,610,374
|
||
Effect
of lower foreign tax rates
|
(1,852,605)
|
(1,601,126)
|
(876,907)
|
||
Tax
benefit from exploration stage
|
(3,577,975)
|
(7,243,413)
|
(10,301,168)
|
||
Effect
of change from cash to accrual
basis of accounting |
1,348,013
|
-
|
-
|
||
Non-deductible
expenses
|
-
|
2,332,310
|
464,119
|
||
$
(1,552,062)
|
$
(1,028,272)
|
$
(103,582)
|
March
31, 2010
|
March
31, 2009
|
||
Deferred
tax assets:
|
|||
Stock
based compensation
|
$ -
|
$
185,418
|
|
Liquidation
fund
|
353,088
|
236,505
|
|
Tax
losses carried forward
|
4,606,215
|
6,867,054
|
|
Accrued
interest expense
|
5,905,599
|
5,093,405
|
|
10,864,902
|
12,382,382
|
||
Deferred
tax liabilities:
|
|||
Oil
and gas properties
|
5,879,053
|
6,972,564
|
|
Accrued
interest income
|
9,950,231
|
11,926,262
|
|
15,829,284
|
18,898,826
|
||
Net
deferred tax liability
|
$ 4,964,382
|
$ 6,516,444
|
March
31, 2010
|
March
31, 2009
|
||||||
US
tax
jurisdiction |
Kazakhstan
tax
jurisdiction |
US
tax
jurisdiction |
Kazakhstan
tax
jurisdiction |
||||
Deferred
tax assets:
|
|||||||
Stock
based compensation
|
$ -
|
$ -
|
$
185,418
|
$ -
|
|||
Liquidation
fund
|
353,088
|
-
|
236,505
|
||||
Tax
losses carried forward
|
4,606,215
|
-
|
6,867,054
|
-
|
|||
Accrued
interest expense
|
-
|
5,905,599
|
-
|
5,093,405
|
|||
4,606,215
|
6,258,687
|
7,052,472
|
5,329,910
|
||||
Deferred
tax liabilities:
|
|||||||
Oil
and gas properties
|
6,291,814
|
(412,761)
|
6,579,121
|
393,443
|
|||
Accrued
interest income
|
9,950,231
|
-
|
11,926,262
|
-
|
|||
16,242,045
|
(412,761)
|
18,505,383
|
393,443
|
||||
Net
deferred tax liability/(asset)
|
$
11,635,830
|
$
(6,671,448)
|
$
11,452,911
|
$
(4,936,467)
|
Year
ended March 31,
|
Total
Minimum Payments
|
||
2011
|
$
185,019
|
||
2012
|
240,149
|
||
2013
|
129,652
|
||
Net
minimum lease payments
|
554,820
|
||
Less:
Amount representing interest
|
(137,010)
|
||
Present
value of net minimum lease payments
|
$
417,810
|
Number
of Shares
|
Weighted
Average
Exercise Price |
||
As
of March 31, 2007
|
1,173,583
|
$
5.33
|
|
Granted
|
-
|
-
|
|
Exercised
|
(3,000)
|
$
4.00
|
|
Expired
|
-
|
-
|
|
As
of March 31, 2008
|
1,170,583
|
$
5.33
|
|
Granted
|
-
|
-
|
|
Exercised
|
-
|
-
|
|
Expired
|
-
|
-
|
|
As
of March 31, 2009
|
1,170,583
|
$
5.33
|
|
Granted
|
-
|
-
|
|
Exercised
|
-
|
-
|
|
Expired
|
(249,800)
|
$
6.40
|
|
As
of March 31, 2010
|
920,783
|
$
5.04
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||
Range
of
Exercise
Price
|
Options
|
Weighted
Average Exercise Price
|
Weighted
Average Contractual Life (years)
|
Options
|
Weighted
Average
Exercise Price |
|||||
$
4.75 – $ 7.40
|
920,783
|
$
5.04
|
5.00
|
920,783
|
$
5.04
|
|
NOTE
16 - REVENUES
|
Year
ended March 31, 2010
|
Year ended
March 31, 2009
|
Year
ended March 31, 2008
|
|||
Export
sales
|
$
56,135,006
|
$
65,721,241
|
$
57,626,429
|
||
Domestic
sales
|
1,139,520
|
3,895,634
|
2,570,197
|
||
$
57,274,526
|
$
69,616,875
|
$
60,196,626
|
|
NOTE
17 – RENT EXPORT TAX AND EXPORT
DUTY
|
|
NOTE
18 - CONSULTING EXPENSES
|
|
NOTE
19 – FOREIGN CURRENCY GAIN
|
|
On
February 3, 2009, the National Bank of Kazakhstan enacted a devaluation of
Kazakh Tenge to US Dollar of approximately 25%. As a result of this
devaluation, the Company realized a foreign currency gain of $2,592,341
for the year ended March 31, 2009, resulting from the revaluation of
assets and liabilities denominated in Kazakh
Tenge.
|
|
NOTE
20 – DISGORGEMENT FUNDS RECEIVED
|
|
NOTE
21 - EARNINGS PER SHARE INFORMATION
|
Year
ended
March 31, 2010 |
Year
ended
March
31, 2009
|
Year
ended
March 31, 2008 |
|||
Net
income
|
$
8,993,473
|
$
17,157,558
|
$
31,310,564
|
||
Basic
weighted-average common
shares
outstanding |
50,018,895
|
46,797,351
|
44,697,364
|
||
Effect
of dilutive securities
|
|||||
Warrants
|
-
|
1,860
|
55,008
|
||
Stock
options
|
-
|
-
|
200,559
|
||
Non-vesting
share grants
|
-
|
-
|
-
|
||
Dilutive
weighted average common
shares
outstanding |
50,018,895
|
46,799,211
|
44,952,931
|
||
Basic
income per common share
|
$
0.18
|
$
0.37
|
$
0.70
|
||
Diluted
income per common share
|
$
0.18
|
$
0.37
|
$
0.70
|
|
NOTE
22 - RELATED PARTY TRANSACTIONS
|
|
NOTE
23 - COMMITMENTS AND CONTINGENCIES
|
·
|
make
additional payments to the liquidation fund, stipulated by the
Contract;
|
·
|
make
a one-time payment in the amount of $200,000 to the Astana Fund by the end
of 2010; and
|
·
|
make
annual payments to social projects of the Mangistau Oblast in the amounts
of $100,000 from 2010 to 2012.
|
|
Economic Environment
|
|
Operating Lease
|
|
NOTE 24 - FINANCIAL INSTRUMENTS
|
|
NOTE
25 - QUARTERLY FINANCIAL DATA
(unaudited)
|
|
|
Quarterly
financial information is presented in the following
summary:
|
Fiscal
year ended March 31, 2010
|
|||||||
June
30,
2009
|
September
30,
2009 |
December
31,
2009 |
March
31,
2010
|
||||
Revenues
|
$
11,766,806
|
$
16,074,217
|
$
13,894,712
|
$
15,538,791
|
|||
Income
from operations
|
192,432
|
4,026,811
|
887,650
|
2,781,406
|
|||
Net
income
|
30,782
|
4,040,009
|
607,081
|
4,315,601
|
|||
Basic
net income per share
|
-
|
0.08
|
0.01
|
0.09
|
|||
Diluted
net income per share
|
$
-
|
$
0.08
|
$
0.01
|
$
0.09
|
Year
ended March 31, 2009
|
|||||||
June
30,
2008
|
September
30,
2008 |
December
31,
2008 |
March
31,
2009
|
||||
Revenues
|
$
34,827,224
|
$
22,758,160
|
$
4,883,790
|
$
7,147,701
|
|||
Income/(loss)
from operations
|
11,575,417
|
9,636,121
|
(8,382,895)
|
(1,233,061)
|
|||
Net
income/(loss)
|
13,321,323
|
9,830,026
|
(8,292,982)
|
2,299,191
|
|||
Basic
net income/(loss) per share
|
0.30
|
0.21
|
(0.18)
|
0.04
|
|||
Diluted
net income/(loss) per share
|
$
0.30
|
$
0.21
|
$
(0.18)
|
$
0.04
|
Fiscal
year ended March 31, 2008
|
|||||||
June
30,
2007
|
September
30,
2007 |
December
31,
2007 |
March
31,
2008
|
||||
Revenues
|
$
11,580,958
|
$
12,764,397
|
$
16,832,612
|
$
19,018,659
|
|||
Income
from operations
|
5,899,591
|
6,606,045
|
9,456,235
|
8,058,216
|
|||
Net
income
|
5,409,688
|
7,480,413
|
9,856,062
|
8,564,401
|
|||
Basic
net income per share
|
0.12
|
0.17
|
0.22
|
0.19
|
|||
Diluted
net income per share
|
$
0.12
|
$
0.17
|
$
0.22
|
$
0.19
|
March
31, 2010
|
March
31, 2009
|
||
Developed
oil and natural gas properties
|
$
246,979,803
|
$
221,374,856
|
|
Unevaluated
oil and natural gas properties
|
25,924,087
|
40,580,015
|
|
Accumulated
depletion, depreciation and amortization
|
(34,302,048)
|
(23,226,458)
|
|
Net
capitalized cost
|
$
238,601,842
|
$
238,728,413
|
For
the year ended
March 31, 2010 |
For
the year ended
March 31, 2009 |
For
the year ended
March
31, 2008
|
||||
Acquisition
costs:
|
||||||
Unproved
properties
|
$ -
|
$ -
|
$ -
|
|||
Proved
properties
|
-
|
-
|
-
|
|||
Exploration
costs
|
-
|
2,275,021
|
3,024,386
|
|||
Development
costs
|
10,949,019
|
63,727,311
|
83,950,096
|
|||
Subtotal
|
10,949,019
|
66,002,332
|
86,974,482
|
|||
Asset
retirement costs
|
-
|
86,438
|
1,300,576
|
|||
Total
costs incurred
|
$
10,949,019
|
$
66,088,770
|
$
88,275,058
|
For
the year ended
March
31, 2010
|
For
the year ended
March
31, 2009
|
For
the year ended
March
31, 2008
|
||||
Oil
and natural gas revenues
|
$
57,274,526
|
|
$
69,616,875
|
|
$
60,196,626
|
|
|
||||||
Operating
expenses:
|
||||||
Rent
export tax
|
10,032,857
|
467,359
|
-
|
|||
Export
duty
|
-
|
6,783,278
|
-
|
|||
Oil
and natural gas operating expenses and ad valorem taxes
|
8,568,453
|
7,530,653
|
5,515,403
|
|||
Accretion
expense
|
448,351
|
449,025
|
254,572
|
|||
Depletion
expense
|
11,075,590
|
10,403,328
|
9,419,655
|
|||
Results
of operations from oil and gas producing activities
|
$
27,149,275
|
$
43,983,232
|
$
45,006,996
|
Oil,
Condensate and Natural Gas Liquids
(Bbls)
|
||||||
For
the year ended
March
31, 2010
|
For
the year ended
March
31, 2009
|
For
the year ended
March
31, 2008
|
||||
Proved
developed and undeveloped reserves
|
|
|||||
Beginning
of the year
|
$
23,641,000
|
$
20,911,000
|
$
15,280,000
|
|||
Revisions
of previous estimates
|
101,221
|
(3,505,105)
|
(2,964,177)
|
|||
Purchase
of oil and gas properties
|
-
|
-
|
-
|
|||
Extensions
and discoveries
|
-
|
7,316,000(1)
|
9,503,000(2)
|
|||
Sales
of properties
|
-
|
-
|
-
|
|||
Production
|
(1,016,221)
|
(1,080,895)
|
(907,823)
|
|||
End
of year
|
22,726,000
|
23,641,000
|
20,911,000
|
|||
Proved
developed reserves at year end
|
$
20,155,000
|
$
21,070,000
|
$
10,784,000
|
(1)
|
During
the year ended March 31, 2009 four wells were drilled (gross and net) on
the Kariman structure, one well (gross and net) on the Dolinnoe structure,
one well (gross and net) on the Aksaz structure and one well (gross and
net) on the Emir structure. These additions to the Kariman, Dolinnoe,
Aksaz and Emir structures during the year ended March 31, 2009 resulted in
an increase in estimated proved developed reserves of approximately 7.3
million BOE. These were the only extensions and discoveries made during
the year ended March 31, 2009.
|
(2)
|
During
the year ended March 31, 2008 four wells were drilled (gross and net) on
the Kariman structure, one well (gross and net) on the Dolinnoe structure
and one well (gross and net) on the Aksaz structure. These additions to
the Kariman, Dolinnoe and Aksaz structures during the year ended March 31,
2008 resulted in an increase in our estimated proved developed reserves of
approximately 4.5 million BOE and an increase in proved undeveloped
reserves of approximately 4.9 million BOE. These were the only extensions
and discoveries made during the year ended March 31,
2008.
|
(3)
|
During
the year ended March 31, 2007 we drilled one well was drilled (gross and
net) on the Kariman structure. The addition of the Kariman structure
during the year ended March 31, 2007 resulted in an increase in estimated
proved developed reserves of approximately 2.7 million BOE (barrels of oil
equivalent) and no increase in proved undeveloped reserves. These were the
only extensions or discoveries made during the year ended March 31,
2007.
|
For
the year ended
March
31, 2010
|
For
the year ended
March
31, 2009
|
For
the year ended
March
31, 2008
|
|||
Future
cash inflows
|
$
931,885,000
|
$
652,739,000
|
$ 1,107,109,000
|
||
Future
oil and natural gas operating expenses
|
157,667,000
|
144,661,000
|
83,380,000
|
||
Future
development costs
|
30,890,000
|
33,403,000
|
89,350,000
|
||
Future
income tax expense
|
279,763,000
|
41,520,000
|
249,884,000
|
||
Future
net cash flows
|
463,565,000
|
433,155,000
|
684,495,000
|
||
10%
discount factor
|
195,243,000
|
179,803,000
|
331,516,000
|
||
Standardized
measure of discounted future net cash flows
|
$
268,322,000
|
$
253,352,000
|
$
352,979,000
|
For
the year ended
March
31, 2010
|
For
the year ended
March
31, 2009
|
For
the year ended
March
31, 2008
|
|||
Changes
due to current year operations:
|
|||||
Sales
of oil and natural gas, net of oil and
natural gas
operating expenses |
$
(38,673,216)
|
$
(54,835,585)
|
$
(54,681,223)
|
||
Sales
of oil and natural gas properties
|
-
|
-
|
-
|
||
Purchase
of oil and gas properties
|
-
|
-
|
-
|
||
Extensions
and discoveries
|
-
|
85,153,000
|
189,557,166
|
||
Net
change in sales and transfer prices, net of production
costs
|
163,113,547
|
(305,001,925)
|
154,594,264
|
||
Changes
due to revisions of standardized variables
|
-
|
-
|
-
|
||
Prices
and operating expenses
|
-
|
-
|
-
|
||
Revisions
to previous quantity estimates
|
1,776,460
|
(21,739,505)
|
(77,465,492)
|
||
Estimated
future development costs
|
1,426,515
|
30,020,093
|
(34,976,338)
|
||
Income
taxes
|
(123,077,000)
|
104,421,000
|
(26,797,000)
|
||
Accretion
of discount
|
25,335,200
|
35,297,900
|
17,126,500
|
||
Production
rates (timing)
|
10,405,096
|
64,073,697
|
(26,973,812)
|
||
Other
|
(25,336,602)
|
(37,015,675)
|
41,329,935
|
||
Net
Change
|
14,970,000
|
(99,627,000)
|
181,714,000
|
||
Beginning
of year
|
253,352,000
|
352,979,000
|
171,265,000
|
||
End
of year
|
$
268,322,000
|
$
253,352,000
|
$
352,979,000
|
Exhibit
No.
|
Exhibit
Description
|
||
12.1
|
Computation
of Earnings to Fixed Charges
|
||
21.1
|
Subsidiaries
|
||
23.1
|
Consent
of Chapman Petroleum Engineering Ltd., Independent Petroleum
Engineers
|
||
23.2
|
Consent
of Hansen, Barnett & Maxwell, P.C., Independent Registered Public
Accounting Firm
|
||
31.1
|
Certification
of Principal Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
||
31.2
|
Certification
of Principal Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
||
32.1
|
Certification
of Principal Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
||
32.2
|
Certification
of Principal Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
||
99.1
|
Chapman
Petroleum Engineering Ltd. Letter on its estimation of proved oil and gas
reserves at March 31, 2010
|