The Good news? We still have assets of $46.7 million versus debt of just $6.7 million, and current liabilities of $12.5 million.
In accounting for equity in Joint Development Zone Blocks 2, 3 and 4, the company said that "Upon sale of the participation interests, the Company removed the entire cost of the related Blocks due to the uncertainty surrounding their unproved interests."
The company has still not achieved adequate financial controls, meaning that money can stolen without such thefts being readily visible to shareholders and accountants. However, it is working to fix that problem, the company said:
Based on our assessment and those criteria as of September 30, 2005, management concluded that the Company did not maintain effective internal control over financial reporting as of as a result of material weaknesses in (a) internal controls surrounding corporate governance, and (b) internal controls surrounding the accounting for common stock issuances.
A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
The operations and activities of this company have essentially been focused and limited to (1) continuing efforts to secure its working rights in the JDZ and EEZ; (2) funding the associated contractual obligations related to securing its rights )primarily legal and technical support); (3) funding a limited office staff consisting of the CEO, the CFO and an administrative manager and associated rental obligations. With the exception of (1) above, these were no operational activities that required the institution of complex internal controls; however, but an appropriate level of internal controls were necessary to conform to rules and regulations to which the Company is subject.
The Company has now perfected its interests in the JDZ and is poised for full operations. Accordingly, the Company has made changes to its staff to add the skills necessary to achieve full operations.