SECURITIES AND EXCHANGE COMMISSION


Washington D.C.  20549


FORM 20-F





 ̈
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934




OR


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




OR


 ̈
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from __________ to __________







 ̈
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Date of event requiring this shell company report_________




Commission file number 0-52768




EDGE RESOURCES INC.


(Exact Name of Registrant as specified in its charter


and translation of Registrant’s name into English)


British Columbia, Canada


(Jurisdiction of incorporation or organization)





Suite 1400, Elveden House 717-7th Avenue SW Calgary, Alberta T2P 0Z3


(Address of principal executive offices)





Brad Nichol - 1-403-767-9905


(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)





Securities registered or to be registered pursuant to Section 12(b) of the Act:





Title of each class

Name of each exchange on which registeredNone

N/A





Securities registered or to be registered pursuant to Section 12(g) of the Act: Common Shares, No Par Value





Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None





Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:


Common Shares, as of March 31, 2010 ...............43,111,811





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.


Yes  ̈  No x





If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.


Yes  ̈  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  ̈  No x





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  ̈  No  ̈





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer  ̈
Accelerated filer  ̈
Non-accelerated filer   x





Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:




U.S. GAAP  ̈
International Financial Reporting Standards as issued by the International Accounting Standards Board  ̈
Other x





If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:


Item 17 x  Item 18  ̈





If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes   ̈  No  x








TABLE OF CONTENTS





PagePART I


2Item 1.

Identity of Directors, Senior Management and Advisers
2Item 2.

Offer Statistics and Timetable
2Item 3.

Key Information
2Item 4.

Information on the Company
10Item 4A.

Unresolved Staff Comments
18Item 5.

Operating and Financial Review and Prospects
18Item 6.

Directors, Senior Management and Employees
26Item 7.

Major Shareholders and Related Party Transactions
31Item 8.

Financial Information
32Item 9.

The Offer andListing
32Item 10.

Additional Information
34Item 11.

Quantitative and Qualitative Disclosures About Market Risk
42Item 12.

Description of Securities Other Than Equity Securities
42PART II


43Item 13.

Defaults, Dividend Arrearages and Delinquencies
43Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds
43Item 15.

Controls and Procedures
43Item 15T.

Controls and Procedures
44Item 16.

[Reserved]
44Item 16A -

Audit Committee Financial Expert
44Item 16B -

Code of Ethics
44Item 16C -

Principal Accounting Fees and Services
44Item 16D -

Exemptions From the Listing Standards for Audit Committees
45Item 16E -

Purchases of Equity Securities by the Issuer and Affiliated Purchasers
45Item 16F -

Change in Registrant’s Certifying Accountant
44Item 16G -

Corporate Governance
45PART III


46Item 17.

Financial Statements
46Item 18.

Financial Statements
46Item 19.

Exhibits
46










INTRODUCTION




Edge Resources Inc. was incorporated under the British Columbia Company Act in British Columbia, Canada on September 13, 1968, as Tanzilla Explorations Ltd, and continued under the Business Corporations Act of Alberta on July 23, 2009.  We are an exploration stage company engaged principally in the acquisition, exploration and when warranted, development, of oil and gas properties.  Our common shares are listed on the TSX Venture Exchange in Canada under the symbol “EDE.”  As used in this annual report, the terms “we,” “us” and “our” mean Edge Resources Inc.




We have not obtained or applied for trademarks registrations.  Any trademarks and trade names appearing in this registration statement are owned by their respective holders.




Edge Resources Inc. is a “foreign private issuer” as defined in Rule 3b-4 under the Securities Exchange Act of 1934.




Our financial statements appearing in this annual report are prepared in Canadian dollars and in accordance with generally accepted accounting principles in Canada, or Canadian GAAP, which vary in certain respects from generally accepted accounting principles in the United States, or U.S. GAAP, as described in Note 14 to the financial statements as at and for the year ended March 31, 2010.  All references in this annual report to “dollars” or “$” are to Canadian dollars unless otherwise stated.




Statements made in this annual report concerning the contents of any contract, agreement or other document are summaries of such contracts, agreements or documents and are not complete descriptions of all of their terms.  If we filed any of these documents as an exhibit to this annual report or a registration statement that we previously filed, you may read the document itself for a complete description of its terms.




Except for the historical information contained in this annual report, the statements contained in this annual report are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended, with respect to our business, financial condition and results of operations.  Such forward-looking statements reflect our current view with respect to future events and financial results.  We urge you to consider that statements which use the terms “anticipate,” “believe,” “do not believe,” “expect,” “plan,” “intend,” “estimate” and similar expressions are intended to identify forward-looking statements.  We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity, or our achievements, or industry results, to be materially different from any future results, performance, levels of activity, or our achievements expressed or implied by such forward-looking statements.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.  Except as required by applicable law, including the securities laws of the United States, we undertake no obligation to publicly release any update or revision to any forward-looking statements to reflect new information, future events or circumstances, or otherwise after the date hereof.  We have attempted to identify significant uncertainties and other factors affecting forward-looking statements in the Risk Factors section that appears in Item 3.D. “Key Information- Risk Factors.”




1


PART I




Item 1.
Identity of Directors, Senior Management and Advisers




Not applicable.




Item 2.
Offer Statistics and Timetable




Not applicable.




Item 3.
Key Information




A.
Selected Financial Data




The following selected financial data for and as of the five years ended March 31, 2006 through March 31, 2010, are derived from our audited financial statements which have been prepared in accordance with Canadian GAAP.  The selected financial data set forth below should be read in conjunction with and are qualified by reference to Item 5 “Operating and Financial Review and Prospects” and our financial statements and notes thereto.




Selected Financial InformationYear Ended March 31,2010


2009


2008


2007


2006(Canadian dollars in thousands except per share amounts)Canadian GAAP:Revenue from operations


—



—



—



—



—Gross profit (loss)


—



—



—



—



—Expenses (general, administration, interest, amortization and write downs)

$
1,377


$
1,019


$
159


$
268


$
123Net income (loss) for continuing operations


(1,377
)


(999
)


(151
)


(216
)


(112
)Income (loss) from discontinued operations


—



—



—



—



—Net income (loss) for the year after discontinued operations


(1,377
)


(999
)


(151
)


(216
)


(112
)Cash


253



95



664



176



80Other Current assets


447



—



—



—



2Total assets


3,484



132



698



209



142Current liabilities


276



111



77



128



739Long term liabilities


46



—



—



—



—Working capital (deficiency)


424



(16
)


587



48



(657
)Shareholders’ equity (deficiency)


3,162



21



621



80



(597
)Total capital expenditures (including mineral properties)


2,787



—



—



3



8Expenditures on properties


2,767



—



—



12



52Financing raised


4,216



480



624



183



176Market capitalization


14,227



8,625



11,650



*



*Shares outstanding


43,112



24,643



16,643



12,163



3,662Warrants and options (# of shares)


8,588



—



—



4,489



115Net loss per share

$
(0.04
)

$
(0.05
)

$
(0.01
)

$
(0.03
)

$
(0.03
)








*Market capitalization figures are not available for the earlier years indicated.  Our common shares were suspended from trading for the period between October 1, 2003 and November 17, 2006.  During the period that trading was suspended, we consolidated our common shares on a 1:5 basis and the trading which resumed on November 17, 2006 was of consolidated shares.


2


Selected Financial InformationYear Ended March 31,2010


2009


2008


2007


2006(Canadian dollars in thousands except per share amounts)U.S. GAAP:Revenue from operations


—



—



—



—



—Gross profit (loss)


—



—



—



—



—Expenses (general and administration, interest, amortization and write downs)

$
1,529


$
1,019


$
159


$
268


$
123Net income (loss) from continuing operations


(1,529
)


(999
)


(151
)


(216
)


(112
)Net income (loss) from discontinued operations


—



—



—



—



-Net income (loss)


(1,529
)


(999
)


(151
)


(216
)


(112
)Total comprehensive loss


(1,529
)


(999
)


(151
)


(216
)


(112
)Cash


253



95



664



176



80Current assets


447



—



—



—



2Total assets


3,332



132



698



209



142Current liabilities


276



111



77



128



739Long term liabilities


46



—



—



—



—Working capital (deficiency)


424



(16
)


587



48



(657
)Shareholders’ equity (deficiency)


3,010



21



621



80



(597
)Total capital expenditures (including mineral

properties)


2,784



—



—



3



8Expenditures on mineral properties


2,784



—



—



12



52Financing raised


4,216



480



624



183



176Market capitalization


14,227



8,625



11,650



*



*Shares outstanding


43,112



24,643



16,643



12,163



3,662Warrants and options


8,588



—



—



4,489



115Basic and diluted net loss per share

$
(0.04
)

$
(0.05
)

$
(0.01
)

$
(0.03
)

$
(0.03
)





*Market capitalization figures are not available for the earlier years indicated.  Our common shares were suspended from trading for the period between October 1, 2003 and November 17, 2006.  During the period that trading was suspended, we consolidated our common shares on a 1:5 basis and the trading which resumed on November 17, 2006 was of consolidated shares.




Exchange Rate Information





The following tables set forth, for each of the periods and dates indicated, the exchange rate of the United States dollar into Canadian dollars at the end of such year, the average exchange rate during each such year and the range of high and low rates for each such year, as supplied by the Bank of Canada.




Year Ended March 31Exchange Rate


2010



2009



2008



2007



2006Rate at the End of the Period


1.0156



1.1274



1.0024



1.1687



1.1572Average Rate


1.0904



1.2613



1.0324



1.1387



1.1933High Rate


1.2643



1.2645



1.1371



1.1789



1.2590Low Rate


1.0113



0.9994



0.9616



1.1055



1.1461


3





Month2010 Jul


Aug


Sep


Oct


Nov


Dec


2011 Jan


Feb


MarClosing


1.0290



1.0639



1.0298



1.0188



1.0264



0.9946



0.9978



0.9714



0.9696Average


1.0427



1.0408



1.0331



1.0178



1.0128



1.0077



0.9939



0.9875



0.9766High


1.0660



1.0642



1.0520



1.0320



1.0264



1.0178



1.0022



0.9958



0.9918Low


1.0284



1.0158



1.0222



1.0030



1.0013



0.9946



0.9862



0.9714



0.9687





The exchange rate of the Canadian dollar against the U.S. dollar on March 31, 2010 (the balance sheet date) was US$1.00 = CAD $0.9718.




B.
Capitalization and Indebtedness




Not applicable.




C.
Reasons for the Offer and Use of Proceeds




Not applicable.




D.
Risk Factors




Investing in our common shares involves a high degree of risk and uncertainty.  You should carefully consider the risks and uncertainties described below before investing in our common shares.  If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be harmed.  In that case, the value of our common shares could decline, and you could lose all or part of your investment.




The oil and gas industry is a highly diverse and competitive international business.  Competition could adversely affect our ability to acquire suitable producing properties or prospects for exploration in the future.




The oil and gas industry is a highly diverse and competitive international business, and we compete with many companies possessing financial resources and technical facilities many times greater than ours.  Oil and  gas by its nature, is a competitive business including competing for fresh ground with good exploration potential and competing for the requisite capital to move projects forward to production.  The selection of geographic areas of interest is only limited by the degree of risk a company is willing to accept by the acquisition of properties in emerging or developed markets and/or prospecting in explored or virgin territory. Competition could adversely affect our ability to acquire suitable producing properties or prospects for exploration in the future.




Exploration, development and production activities are subject to political, economic, operating hazards and other risks.




Exploration, development and production activities are potentially subject to political, economic, operating hazards and other risks, including:




·
cancellation or renegotiation of contracts;




·
changes in local and foreign laws and regulations;




·
changes in tax laws;




·
delays or refusal in granting prospecting permissions, oil and gas authorizations and work permits for foreign management staff;




·
environmental controls and permitting;




·
expropriation or nationalization of property or assets;




·
foreign exchange controls;




·
government mandated social expenditures;


4


·
import and export regulation, including restrictions on the sale of their production in foreign currencies;




·
industrial relations and the associated stability thereof;




·
inflation of cost that is not compensated for by a currency devaluation;




·
requirement that a foreign subsidiary or operating unit have a domestic joint venture partner, possibly which the foreign company must subsidize;




·
restrictions on the ability of local operating companies to sell their production for foreign currencies, and on the ability of such companies to hold these foreign currencies in offshore and/or local bank accounts;




·
restrictions on the ability of a foreign company to have management control of exploration and/or development of oil and gas operations;




·
restrictions on the remittance of dividend and interest payments offshore;




·
retroactive tax or royalty claims;




·
risks of loss due to civil strife, acts of war, guerrilla activities, insurrection and terrorism;




·
Environmental hazards, industrial accidents, unusual or unexpected geological formations and losses due to theft, fires, power outages, labor disruptions, flooding, explosions, cave-ins, land slides and the inability to obtain suitable or adequate machinery, equipment or labor are other risks involved in the conduct of exploration programs;




·
royalties and tax increases or claims by governmental entities;




·
unreliable local infrastructure and services such as power, communications and transport links; and




·
other risks arising out of foreign sovereignty over the areas in which operations are conducted.




Such risks could potentially arise in any country in which we may operate.  Consequently, our exploration, development and production activities may be substantially affected by factors beyond our control, any of which could materially adversely affect our financial position or results of operations.  Furthermore, in the event of a dispute arising from such activities, we may be subject to exclusive jurisdiction of courts outside North America or may not be successful in subjecting persons to the jurisdiction of the courts in North America, which could adversely affect the outcome of a dispute.




We have a limited operating history and if we are not successful in growing our business, then we may have to scale back or even cease our ongoing business operations.





We have yet to generate positive earnings from our current business strategy and there can be no assurance that we will ever operate profitably.  We have a limited operating history in our business of the acquisition, exploitation, development and production of oil and natural gas.  Our success significantly depends on successful acquisition and subsequent exploration activities. Our operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. We may be unable to locate recoverable reserves or operate on a profitable basis. We are in the development stage and potential investors should be aware of the difficulties normally encountered by enterprises in the development stage. If our business plan is not successful, and we are not able to operate profitably, investors may lose some or all of their investment in our Company.


5


Because our properties are in the exploration stage there is minimal current oil or gas production from these properties and production may never occur on certain current properties.





An investment in oil and gas companies involves a significant degree of risk.  The degree of risk increases substantially where the Company’s properties are in the exploration as opposed to the development stage, as is the case with a number of the Company’s property interests.




Our oil and gas operations involve substantial costs and are subject to various economic risks.




Exploration and development of oil and gas reserves is a speculative venture necessarily involving a high degree of risk.  Exploration and development of oil and gas properties is subject to a number of factors including market fluctuations, the proximity and capacity of oil and gas markets and processing equipment, government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of oil and gas and environmental protection.  The combination of these factors may result in the Company receiving an inadequate return on invested capital.




If we are unable to successfully recruit qualified managerial and field personnel having experience in oil and gas exploration, we may not be able to execute on our business plan.




Locating oil and gas reserves depends on a number of factors, not the least of which is the technical skill of the exploration personnel involved.  Even a combination of experience, knowledge and careful evaluation may not be able to overcome the risks involved in exploration.




Our success depends on the continued contributions of our directors and executive officers and on our ability to attract new personnel whenever we seek to implement our business strategy.  Competition for qualified individuals is intense. We may not be able to locate and hire the skilled personnel that we may require.




Governmentalregulations could adversely affect our business.




The petroleum industry is subject to regulation and intervention by governments in such matters as the awarding of exploration and production interests, the imposition of specific drilling obligations, environmental protection controls, control over the development and abandonment of fields (including restrictions on production) and possibly expropriation or cancellation of contract rights.  As well, governments may regulate or intervene with respect to price, taxes, royalties and the exportation of oil and natural gas.  Such regulations may be changed from time to time in response to economic or political conditions.  The implementation of new regulations or the modification of existing regulations affecting the oil and gas industry could reduce demand for natural gas and crude oil, increase costs and may have a material adverse impact on the Company.  Export sales are subject to the authorization of provincial and federal government agencies and the corresponding governmental policies of foreign countries.




Exploration and production activities are subject to certain environmental regulations which may prevent or delay the commencement or continuation of our operations.




The Company’s operations are subject to stringent environmental laws and regulations.  These laws and regulations generally require the Company to limit, remove or remedy the effect of the Company’s activities on the environment at present and former operating sites, including limiting emissions to the environment, dismantling production facilities and remediating damage caused by the disposal or release of specified substances.




It is expected that changes in environmental legislation may also require, among other things, reductions in emissions to the air from the Company’s operations and could result in increased capital expenditures.  Such changes could result in stricter standards and enforcement, larger fines and liability, and increased capital expenditures and operating costs, which could have a material adverse effect on the Company’s financial condition or results of operations.


6


Even if we were to develop a property, we may not be successful or profitable.




Should a property be developed into a producing property, the operations will be subject to the risks normally encountered in this business.  Recoverable reserves may not be marketed profitably or in such a manner as to provide an adequate return on invested capital.  The commercial viability, marketability and price of hydrocarbons which may be acquired or discovered by the Company will be affected by numerous factors including the particular attributes of the reserve body, proximity to infrastructure, changing production costs, supply and demand, the rate of inflation, international inventory levels, the political environment and changes in international investment patterns.




Volatility of crude oil and natural gas prices may significantly affect our results of operations.




Prices received for crude oil and natural gas are commodities that are sensitive to numerous worldwide factors and are generally sold at contract or posted prices. The marketability and price of oil and natural gas which may be acquired or discovered by the Company are affected by numerous factors.  The Company will be affected by the differential between the price paid by refiners for light quality oil and the medium grades of oil which may be produced by the Company.  The ability of the Company to market its natural gas may depend upon its ability to acquire space on pipelines which deliver natural gas to commercial markets.  The Company is also subject to market fluctuations in the prices of oil and natural gas, deliverability uncertainties related to the proximity of its reserves to pipeline and processing facilities and extensive government regulation relating to price, taxes, royalties, land tenure, allowable production, the export of oil and natural gas and many other aspects of the oil and natural gas business.




Estimates of potential recoverable oil and gas reserves on our properties may not be accurate.




In general, estimates of economically recoverable oil and natural gas reserves and resources and the future net cash flows from such reserves and resources are based upon a number of variable factors and assumptions, such as expected reservoir characteristics based on geological, geophysical and engineering assessments, future production rates based on historical performance and expected future operating and investment activities, future oil and natural gas prices and quality differentials, assumed effects of regulation by governmental agencies and future development and operating costs, all of which may vary considerably from actual results.  All such estimates are to some degree speculative, and classifications of reserves and resources are only attempts to define the degree of speculation involved.  For those reasons, estimates of the economically recoverable oil and natural gas reserves and resources attributable to any particular group of properties, classification of such reserves and resources based on risk of recovery and estimates of the future net revenues expected from such reserves and resources, that are prepared by different engineers or by the same engineers at different times, may vary substantially.




Operating hazards and other uncertainties involved in developing and exploring for oil and natural gas may lead to unexpected losses which may have a material adverse impact on the Company.




The Company’s operations are subject to the risks normally associated with the operation and development of oil and natural gas properties and the drilling of oil and natural gas wells, including encountering unexpected formations or pressures, blowouts and fires, all of which could result in personal injuries, loss of life and damage to the property of the Company and others.  In accordance with customary industry practice, the Company is not fully insured against all of these risks, nor are all such risks insurable.  The Company maintains insurance that it believes is consistent with or exceeds industry practice to protect against losses due to accidental destruction of assets, well blow-outs, pollution and other business interruptions.  The Company currently carries the following policies:




·
Commercial General Liability policy for bodily injury or damages to the property of others not in our care, custody or control, with limits of $1,000,000 for each occurrence of bodily injury or property damage, $2,000,000 general aggregate coverage, $1,000,000 forest fire fighting expense, $1,000,000 non-owned automobile liability, and $1,000,000 for sudden and accidental pollution.  This policy has deductibles ranging from $2,500 for general claims to $500,000 for claims related to oil pipelines exceeding 6 inches in diameter.




·
Operators’ Extra Expense policy covering our wells with per occurrence liability limits of $5,000,000 for cost of control and $1,000,000 for care, custody and control.  The deductible on this policy is $50,000 for wells up to 5,000 feet, and $100,000 for wells deeper than 5,000 feet, and there is a separate deducible of $50,000 for care, custody and control claims.


7


·
Directors and Officers Liability policy with liability limits of $5,000,000 per occurrence and a deductible of $10,000 per claim.




·
Umbrella policy for bodily injury or damage to the property of others in excess of other primary insurance, with a liability limit of $4,000,000.




·
The Company may become subject to liability for accidents or damages arising from pollution or other hazards against which it cannot insure, or against which it may elect not to insure because of high premium costs or other reasons.  Payment of such liabilities could reduce funds available for operations of the Company or could result in the loss of its properties.




Project delays and over-runs may delay expected revenues from operations.




Significant project delays and cost over-runs could make a project uneconomic.  The Company’s ability to execute projects and market oil and natural gas depends upon numerous factors, including the availability of drilling and related equipment; the availability and proximity of pipeline capacity; the availability of processing capacity; the availability and productivity of skilled labor; the effects of inclement weather; unexpected cost increases; currency fluctuations; the supply of and demand for oil and natural gas; the availability of alternative fuel sources; accidental events; and regulation of the oil and natural gas industry by various levels of government and governmental agencies.  Because of these factors, the Company may be unable to execute projects on time, on budget or at all, and may not be able to effectively market the oil and natural gas that it hopes to produce.




Supply and demand of drilling equipment and access restrictions may delay exploration and development activities.




Oil and natural gas exploration and development activities are dependent on the availability of drilling and related equipment in the particular areas where such activities will be conducted.  Demand for such limited equipment or access restrictions may affect the availability of such equipment to the Company and may delay exploration and development activities.




We will need to raise additional capital to finance our exploration and development activities which may not be on favorable terms to us and may be dilutive to existing shareholders.




Additional funds will likely be required to continue and maintain the Company’s operations, including exploration and development activities on an ongoing basis.  The development of the Company’s properties and the acquisition of additional properties will depend upon the Company’s ability to obtain financing through the joint venture of projects, equity financing, debt financing or other means.  The Company’s management estimates that $3,000,000 in financing proceeds will be required by October 31, 2011 in order to maintain our operations, including exploration and development activities.  The Company has obtained an increased line of credit which can accommodate the required financing.




Any additional equity financing may be dilutive to existing shareholders and debt financing, if available, may involve restrictions on financing operating activities.  Failure to obtain additional financing on a timely basis could cause the Company to forfeit its interest in certain properties, miss certain acquisition opportunities, and reduce or terminate its operations.




We may enter debt financings which may impair our ability to obtain additional financings in the future.




From time to time, the Company may enter into transactions to acquire assets or the shares of other companies.  These transactions may be financed partially or wholly with debt, which may increase the Company’s debt levels above industry standards.  Neither the Company’s articles nor its by-laws limit the amount of indebtedness that the Company may incur.  The level of the Company’s indebtedness from time to time could impair the Company’s ability to obtain additional financing in the future on a timely basis to take advantage of business opportunities that may arise.


8




We do not maintain key-man insurance with respect to any of our directors, officers or key employees and loss of such persons may adversely effect our operations.




The success of the Company will depend on management and its key personnel.  Loss of such management or personnel could adversely affect the Company’s business operations and prospects.  The Company does not maintain “key-man” insurance with respect to any of its directors, officers or key employees as at the date hereof.




Our officers and directors are also officers and directors of other companies involved in oil and gas exploration which may result in a conflict on interest.




Certain of the directors and officers of the Company are also directors and officers of other companies involved in oil and natural gas exploitation, development, production and acquisition, and conflicts of interest may arise between their duties as officers and directors of the Company and as officers and directors of such other companies and situations may arise where directors or officers of the Company will be in direct competition with the Company.  Conflicts, if any, in respect of the Company and its directors and officers must be disclosed in accordance with and will be subject to the procedures and remedies under the Business Corporations Act of Alberta, as applicable.




We are subject to foreign currency risks that could harm our financial results.




Little to none of the Company’s activities are transacted in or referenced to United States dollars.  The Company’s operating costs, and certain of the Company’s payments in order to maintain property interests are to be in the local currency of the jurisdiction where the applicable property is located.  As a result, fluctuations in the US dollar against the Canadian dollar could result in unanticipated fluctuations in the Company’s financial results which are denominated in Canadian dollars.  The Company does not manage its exposure to fluctuations in the United States dollar to Canadian dollar exchange rates.




We may be exposed to interest rate cash flow risk in the event we assume any long term debt.




If the Company assumes any long term debt, management of the Company anticipates the use of floating rate debt to finance its operations.  Floating rate debt obligations would expose the Company to changes in interest payments due to fluctuations in interest rates.  The Company does not currently manage its exposure to interest rate cash flow risk.




Title to the properties in which we have an interest may be impaired by title defects.




Title to oil and natural gas interests are difficult to determine without incurring substantial expenses.  In accordance with industry practice, the Company conducts such title reviews in connection with its principal properties as it believes are commensurate with the value of such properties.  The actual interest of the Company in certain properties may vary from the Company’s records.




The Company’s properties are expected to be generally held in the form of licenses, concessions, permits and regulatory consents (in this section, “Authorizations”).  The Company’s activities are dependent upon the grant and maintenance of appropriate Authorizations, which may not be granted; may be made subject to limitations which, if not met, will result in the termination or withdrawal of the Authorization; or may be otherwise withdrawn.  The obligations required to maintain each Authorization may not be met.  In addition, such Authorizations are subject to periodic renewal and they may not be renewed or granted on the same terms of the initial grant, if at all.  The termination or expiration of the Company’s Authorizations may have a material adverse effect on the Company’s results of operations and business.




In addition, the areas covered by the Authorizations are or may be subject to agreements with the proprietors of the land.  If such agreements are terminated, found void or otherwise challenged, the Company may suffer significant damage through the loss of opportunity to identify and extract oil or gas.


9




We are subject to political, economic and other uncertainties at our properties located in Alberta, Canada.


For the foreseeable future, all of the Company’s exploration activities will be located in Alberta.  As a result, the Company is subject to political, economic and other uncertainties, including but not limited to, changes in energy policies or the personnel administering them, nationalization, cancellation or modification of contract rights, restrictions, royalty and tax increases, and other risks over the areas in which the Company’s operations are conducted.  Changes in legislation may affect the Company’s oil and natural gas exploration and production activities.




We have never paid cash dividends and have no intention to pay dividends in the foreseeable future.




The Company has never declared or paid cash dividends on its common stock.  The Company does not anticipate that it will pay any cash dividends on its common stock in the foreseeable future.  The Company intends to retain all available funds and any future earnings to fund the development and growth of its business.  Accordingly, the stockholders of the Company will not receive a return on their investment unless the value of the Company’s shares increases, which may or may not occur.




The volume of trading of our shares has been limited and volatile in the past and is likely to continue to be so in the future.




The volume of trading of our common shares on the TSX Venture Exchange in Canada has been limited and volatile in the past and is likely to continue to be so in the future, reducing the liquidity of an investment in our shares and making it difficult for investors to readily sell their shares in the open market.  Without a liquid market for our shares, investors may be unable to sell their shares at favorable times and prices and may be required to hold their shares in declining markets or to sell them at unfavorable prices.




Our share price has been highly volatile and may continue to be volatile and decline.




The trading price of our shares has fluctuated in the past and may continue to do so in the future as a result of a number of factors.  In addition, market prices for oil and gas company securities, by their nature, are volatile and have experienced wide fluctuations.  Factors such as rapidly changing commodity prices, political unrest globally and in countries where we operate, speculative interest in oil and gas stocks are but a few factors affecting the volatility of the share price.  Substantially all of our past financings have been conducted through the sale of our common shares and we intend to seek financing in the future through a private placement of our common shares.  Market price fluctuations would have a significant impact on our ability to complete equity financings in the future.




It may be difficult to enforce a U.S. judgment against us or our officers and directors, to assert U.S. securities laws claims in Canada or serve process on substantially all of our officers and directors.




We were incorporated under the laws of the Province of British Columbia, Canada, and continued under the Business Corporations Act of Alberta on July, 23, 2009.  Consequently, it will be difficult for U.S. investors to effect service of process in the United States upon our directors or officers, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under the U.S. Securities Exchange Act of 1934, as amended.  All of our directors and officers are residents of Canada and our assets may be located outside of the United States.  A judgment of a U.S. court predicated solely upon such civil liabilities would probably be enforceable in Canada by a Canadian court if the U.S. court in which the judgment was obtained had jurisdiction, as determined by the Canadian court, in the matter.  There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or our Company predicated solely upon such civil liabilities.




Item 4.
Information on the Company




A.
History and Development of the Company




We were incorporated under the British Columbia Company Act in British Columbia, Canada on September 13, 1968, as Tanzilla Explorations Ltd, and continued under the Business Corporations Act of Alberta on July 23, 2009.  We changed our name to Regis Development Corporation on June 28, 1974, to Manus Industries Inc. on January 10, 1992, to Consolidated Manus Industries Inc. on November 10, 1992, to Westmount Resources Ltd. On February 8, 1996, to Mt. Tom Minerals Corp. on May 20, 1998, and to Global Net Entertainment Corp. on October 21, 1999. At a meeting of the shareholders held on September 1, 2005, the Company’s shareholders approved a change of the Company’s name from “Global Net Entertainment Corp.” to “Guildhall Minerals Ltd.” (effective February 21, 2006) to reflect the change in the Company’s primary business focus.  The shareholders also approved a consolidation of its share capital on a one-for-five basis.  The share consolidation received regulatory approval and took effect on November 17, 2006. The common shares of the Company were also reinstated for trading on the NEX.  At a meeting of the shareholders held on July 20, 2009, the Company’s shareholders approved a change of the Company’s name from “Guildhall Minerals Ltd.” to “Edge Resources Inc.” to reflect the change in the Company’s primary business focus.


10


On April 15, 2009, the Company entered into the Asset Purchase Agreement to purchase certain petroleum and natural gas assets, tangibles and miscellaneous interest situated in the Willesden Green area of west-central Alberta from Poplar Point Energy Inc.  In doing so, the Company became an oil and gas exploration company, the primary asset of which being its rights and interests in the petroleum and natural gas assets of the Willesden Green Property. By executing this transaction, the Company was able to become a Tier 2 issuer listed on the TSX Venture Exchange.




Our efforts and capital expenditures are entirely focused in Alberta, Canada and have been externally financed through the issuance of shares and short term debt contracts.




We are a company registered under the Business Corporations Act (Alberta) and operate under that Act and associated legislation.  Our principal executive offices are at Suite 1400, Elveden House 717-7th Avenue SW Calgary, Alberta T2P 0Z3 (403)767-9905.Our common shares are listed for trading on TSX Venture Exchange in Canada under the symbol “EDE.”




B.
Business Overview




We are engaged principally in the acquisition, exploration and when warranted, development, of oil and gas properties.  From our incorporation in 1968 until the end of 2004, we engaged in various business activities and mineral exploration activities, all of which were abandoned and terminated as being not successful or offering a potential for profit.  Since the beginning of 2005, we negotiated and signed option agreements for two British Columbia, Canada mineral properties, both of which we have since terminated. We are presently engaged in the acquisition and development of oil and gas properties.  Our principal business is to identify and evaluate opportunities for the acquisition of interests in oil and gas properties and to undertake exploration and/or development programs on such properties if acquired or to joint venture or option such properties to third parties, with a view to discovering oil and natural gas.




Options to Acquire Interests




British American Natural Gas Corporation




On May 1, 2008, we entered into a letter of intent with British American Natural Gas Corporation (“BANG”), an oil and gas exploration company, incorporated in Nevada and headquartered in Houston, Texas.  BANG’s assets include oil and gas concessions aggregating approximately 11,400,000 acres onshore and offshore Mozambique.  Three concessions are now subject to farm-out agreements, pursuant to which another U.S. oil company will drill exploration wells on such concessions and will pay 100% of the exploration costs (estimated at $90 million) for a 60% interest in the concessions.  BANG informed us that the drilling of a well on the Inhaminga Concession commenced on July 4, 2008.  Under the letter of intent, we agreed to acquire BANG in a share purchase transaction.




On July 16, 2008 the Company loaned $504,520 (US$400,000) by way of a promissory note to BANG.  The loan together with interest at a rate of 5% per annum, was due on July 16, 2010.  The funds were provided to BANG to enable it to meet its interim funding requirements with respect to its share of the work program on the Mozambique concessions as provided for in the Letter of Intent dated May 1, 2008.




Due to the weak world market and credit conditions, on December 23, 2008 all parties mutually agreed not to proceed with the proposed transactions.  The proposed $30,000,000 financing through Haywood Securities Ltd., as agent, was also cancelled.


11


With the termination of these transactions, the Company charged all the due diligence and pre-acquisition costs aggregating $268,279 to operations.




We believe that the recovery of the promissory note to BANG and accrued interest is unlikely.  The asset has been impaired and written down to a nominal value.  This has resulted in a charge to operations of $522,350 which was recorded in the 2009 fiscal year.




First West Petroleum Inc.




On May 20, 2008, we entered into a non-binding letter of intent with First West Petroleum Inc. (“First West”), under which we agreed to acquire First West in a share purchase transaction.  First West is a private Alberta company which owns crude oil, natural gas and natural gas liquids and associated equipment.  First West’s production is all located in the Province of Alberta, Canada.




Under the letter of intent, we agreed to offer the shareholders of First West to purchase 100% of the issued and outstanding shares of First West, subject to certain terms and conditions.




Due to the weak world market and credit conditions, on December 23, 2008 all parties mutually agreed not to proceed with the proposed transactions.  The proposed $30,000,000 financing through Haywood Securities Ltd., as agent, was also cancelled.




Willesden Green Property





The Company entered into a series of agreements (the “Agreements”) which resulted in the purchase of certain petroleum and natural gas interest from Poplar Point Energy Ltd. Under the terms of the Agreements, the Company paid total cash consideration of $1,500,000 for the certain petroleum and natural gas assets, tangible items and miscellaneous interests situated in the Willesden Green area of west-central Alberta. This was an arm’s length transaction to the Company and closed effective April 15, 2009 and was subject to TSX approval, which was obtained.  The petroleum and natural gas assets consisted of 50% working interest in two sections and 100% working interest in five sections, all of which contained drilled, cased and in some cases, completed gas wells.  None of the wells were producing at the time of the acquisition.




Additionally, the Company was required to drill and complete two gross shallow gas wells prior to July 31, 2009, to earn post pooled minority interests of 4.84375% and 7.23125% respectively, in two gross sections of land in the same area.  The Company completed this acquisition, and drilled and completed the two wells within the specified time period.   In addition to the $1,500,000 CDN paid, the Company agreed to pay a finder’s fee of $107,500 to Corporate House Equity Ltd., an arm’s length party, and $25,000 to Quarry Bay Capital LLC for certain negotiation rights.




The purchase was completed based on a reserve report dated December 31, 2008, and as such at the time of the purchase of the Willesden Green properties, there was no production, nor were there any proved reserves.  Subsequent to acquiring the properties, the Company completed work on those properties as described above and updated the reserve report.  The new reserve report, dated August 17, 2009 and effective June 1, 2009 showed proven reserves.  However production had not commenced prior to the period covered by this annual report as there was still significant infrastructure expenditures, including tying the wells into pipeline and compression, required to bring the wells onto production.  The estimated total cost of the first phase of the Willesden Green program totals $7.4 million, of which approximately $2.2 million had been spent acquiring the sections and drilling the required wells as noted above.  At the time of the issuance of the reserve report, approximately $5.2 million was still expected to be expended, including building a pipeline as well as compressor infrastructure to bring the wells onto production.  As a result of the remaining significant capital expenditures required, all proved reserves were classified as proved undeveloped by the independent engineering evaluators, AJM Petroleum Consultants.




No production was recorded during the period covered by this report.  Production commenced May 15, 2010 from one well.  As at January 31, 2011, this remained the only well brought onto production by the Company, however numerous wells have been brought onto production between February 1, 2011 and the date of filing of this annual report.


12


Geology of Willesden Green





Edge Resources does not currently produce, nor does the Company intend to produce, Coal Bed Methane.  No reserves have been assigned to any hydrocarbons, potential or otherwise, contained in coals.  The Company intends to produce from conventional sandstone reservoirs contained within the Edmonton Sands Group of formations, which is defined as a grouping of the Scollard formations (Upper Edmonton Group) and the Horseshoe Canyon formations (Lower Edmonton Group).  The Upper and Lower Edmonton Group are typically segregated by the Knee Hills Tuft, a volcanic event and stratigraphic marker.  The geology of the Scollard and Horseshoe Canyon components of the Edmonton Sands Group is described as follows:





Scollard (Edmonton Group)





The Late Cretaceous Scollard Formation disconformably overlies the Battle Formation of the Edmonton Group. The Scollard is representative of a fluvial/coastal plain environment with widespread coal swamps. The top of the Scollard is noted by an abrupt and disconformable contact at the top of the Ardley Coal Zone that is overlain by the fluvial sands of the Paskapoo Formation.  Lithologically, the Scollard is comprised of medium to coarse grained fluvial sands that are interbedded with siltstones, mudstones, and coals. Localized tuffaceous beds may also be present.  The Scollard Formation is informally divided into two members; the Lower, which is identified by the lack of coal beds, and the Upper, which has significant coal content (“Ardley Coal Zone”). The majority of producing sands within the Scollard Formation are found in the Lower Unit which may have between one and four producing sands per wellbore. Individual sand packages in the Scollard range from two to seven meters in thickness. Hydrocarbons are trapped stratigraphically as the sands pinch-out or grade laterally into the surrounding shales.





Horseshoe Canyon (Edmonton Group)





The Horseshoe Canyon is identified by the presence of the Carbon-Thompson Coal Zone at its top which is disconformably overlain by the fluvial sands of the Whitemud Formation. Generally, the Horseshoe Canyon is comprised of a series of interbedded fine-grained sands, sandy shales, and carbonaceous shales and coals. A variety of depositional environments are represented within the Horseshoe Canyon; the base of the formation is marginal marine and the top is a fluvialla-custrine environment highlighted by abundant coals (Carbon-Thompson Coal Zone). Hydrocarbons are trapped stratigraphically as the sands pinch-out or grade laterally into the surrounding shales.





Southern Alberta Oil Properties





The Company has entered into an arms-length agreement with a private Alberta-based oil and gas company (the  “P&S Agreement” to acquire certain producing, conventional oil and gas assets in Southern Alberta for $5.1 million.   Pursuant to the P&S Agreement, the Company has acquired a well-understood and partially developed, conventional, shallow oil play. The Company is able to build off its well-established core competencies, which include mapping conventional, shallow oil and gas trends and successfully implementing shallow drilling and completion techniques.  The acquisition was funded by a new credit facility with the Company’s bank.





Private Placements




On December 31, 2008, the Company announced a private placement of up to 8,000,000 common shares in the capital stock of the Company at a price of $0.05 per share, for proceeds of $400,000.  This private placement was accepted by the TSX Venture Exchange for filing on January 16, 2009.  Proceeds from this private placement and the aforementioned loan were used to retire debt incurred during the acquisition process of BANG and First West and for general working capital purposes.




On May 28, 2009, concurrent with the closing of the acquisition of the Willesden Green area petroleum interests from Poplar Point Energy Inc., the Company completed a private placement of 12,183,000 common shares at $0.25 per share for gross proceeds of $3,045,750.  The proceeds were used to pay cash commissions aggregating $165,602 to certain finders for the introduction of the subscribers, the acquisition costs of the petroleum interests of $1,500,000 and for general working capital purposes.


13


On October 14, 2009, the Company completed a non-brokered private placement of shares for net proceeds of $520,800 to be used for drilling programs and general working capital purposes.




On February 2, 2010, the Company announced a private placement of up to 2,000,000 common shares in at a price of $0.15 per common share, for gross proceeds of up to $300,000.  On March 4 , 2010, the Company announced that the amount of the offering had increased to 4,066,997 units at a price of $0.15 per unit, for gross proceeds of $609,050.  Each unit consisted of one common and one common share purchase warrant with an exercise price of $0.20 per share and an exercise period of one year from the closing of the offering.  Securities issued pursuant to the offering are subject to a four-month hold period from the date of closing. Proceeds from the offering will be used for general working capital purposes.




On December 30, 2010, the Company completed a private placement of 197,000 flow-through shares at $0.30 per flow-through share and 3,500,005 common shares at $0.22 per share for gross proceeds of approximately $829,100.  Securities issued pursuant to the offering are subject to a four-month hold period from the date of closing. Proceeds from the offering will be used for general working capital purposes.




On January 17, 2011, the Company completed a private placement of 2,984,945 common shares at $0.22 per share for gross proceeds of approximately $656,000.  Securities issued pursuant to the offering are subject to a four-month hold period from the date of closing. The Company paid $45,962 in cash (representing 7% of the gross proceeds from subscribers initiated by finders) and 208,918 common shares were issued to finders (representing 7% of the securities issued to subscribers initiated by finders).  Proceeds from the offering will be used for general working capital purposes.




On January 30, 2011, the Company completed a private placement of 1,078,163 Units at $0.38 per Unit for gross proceeds of approximately $409,702.  Each Unit comprises of  one common share of the Company (each a “Common Share”) to be issued on a “flow through” basis and one purchase warrant (each a “Warrant”) exercisable into one Common Share upon payment of $0.40 per share for a period of one year from the date of issuance.  The Company has agreed to pay a finders’ fee to eligible persons in the amount of $24,150 and 63,553 finders warrants, with each finders warrant exercisable into one Common Share upon payment of $0.40 per share for a period of one year from the date of issuance.  Securities issued pursuant to the offering are subject to a four-month hold period from the date of closing.





The Company intends to pursue additional financing for the purpose of financing general working capital and exploration programs.




During the 2009 fiscal year the Company received $80,000 by way of a loan payable on demand, unsecured and non-interest bearing from a third party. The amount was repaid during the 2010 fiscal year. The Company has made no other debt financing arrangements during the 2010 fiscal year.




In September 2010, the Company entered into a short term debt arrangement for $1.5 million which was originally due in January 2011.  The Company has been granted a postponement of repayment on this debt.




The Company maintains a $4.5 million credit facility agreement with its bank.  The funds were originally used to acquire oil producing assets as described above under Business Overview.




C.
Organizational Structure




We are not a member of any group of companies.  We do not presently have any subsidiaries, however, if we identify in the future any company to acquire, we may form or acquire one or more subsidiaries for such acquisition.




D.
Property, Plants and Equipment




Our activities are focused on the exploration of oil and gas properties. The Company recently completed assembly of certain infrastructure which resulted in a pipeline system and compressor station owned by the Company.  This infrastructure was tied into existing wells and will be tied into certain wells as they are drilled and completed.  The estimated cost of the initial infrastructure investment is approximately $3.5 million.   The compressor has an estimated capacity of 5,000 mcf per day.


14


Willesden Green Property





The Company entered into a series of agreements (the “Agreements”) which resulted in the purchase of certain petroleum and natural gas interest from Poplar Point Energy Ltd. Under the terms of the Agreements, the Company paid total cash consideration of $1,500,000 for the certain petroleum and natural gas assets, tangible items and miscellaneous interests situated in the Willesden Green area of west-central Alberta. This was an arm’s length transaction to the Company and closed effective April 15, 2009 and was subject to TSX Venture Exchange approval, which was obtained.  The petroleum and natural gas assets consisted of 50% working interest in two sections and 100% working interest in five sections, all of which contained drilled, cased and in some cases, completed gas wells.  None of the wells were producing at the time of the acquisition.




Additionally, the Company was required to drill and complete two gross shallow gas wells prior to July 31, 2009, to earn post pooled minority interests of 4.84375% and 7.23125% respectively, in two gross sections of land in the same area.  The Company completed this acquisition, and drilled and completed the two wells within the specified time period.   In addition to the $1,500,000 paid, the Company agreed to pay a finder’s fee of $107,500 to Corporate House Equity Ltd., an arm’s length party And $25,000 to Quarry Bay Capital LLC for certain negotiation rights.




No production was recorded in the period covered by this document.  Production commenced May 15, 2010 from one well with additional wells being brought on to production in 2011.




The table below outlines certain Petroleum and Natural Gas Rights and certain Tangibles and other Miscellaneous Interests in the properties acquired pursuant to the Asset Purchase Agreement:




Lands

Petroleum And Natural

Gas Rights

Vendor’s

Interest


WellsTWP 41 RGE 3 W5M: 31

NG to base Edmonton Sands


100
%

100/04-31-041-03-W5/00TWP 41 RGE 4 W5M: 33

NG to base Edmonton Sands


100
%

100/16-33-041-04-W5/00TWP 41 RGE 4 W5M:SE 35

NG to base Edmonton Sands


100
%

100/12-35-041-04-W5/00TWP 41 RGE 4 W5M: SW 35

NG to base Edmonton Sands


100
%

100/12-35-041-04-W5/00TWP 41 RGE 4 W5M: NE 35

NG to base Edmonton Sands


100
%

100/12-35-041-04-W5/00TWP 41 RGE 4 W5M: Ptn. NW 35

NG to base Edmonton Sands


100
%

100/12-35-041-04-W5/00TWP 41 RGE 4 W5M: Ptn. NW 35

NG to top Belly River


100
%

100/12-35-041-04-W5/00TWP 42 RGE 4 W5M: NE 5

NG to top Belly River


100
%

102/11-05-042-04-W5/00TWP 42 RGE 4 W5M: NW 5

TWP 42 RGE 4 W5M: SW 5

NG to top Belly River


100
%

102/11-05-042-04-W5/00


15




Lands

Petroleum And Natural

Gas Rights

Vendor’s

Interest


WellsTWP 42 RGE 4 W5M: NW 5

TWP 42 RGE 4 W5M: SW 5

NG to top Belly River


100
%

102/11-05-042-04-W5/00TWP 42 RGE 4 W5M: NW 5

TWP 42 RGE 4 W5M: SW 5

NG to top Belly River


100
%

102/11-05-042-04-W5/00TWP 42 RGE 4 W5M: NW 5

TWP 42 RGE 4 W5M: SW 5

NG to top Belly River


100
%

102/11-05-042-04-W5/00TWP 42 RGE 4 W5M: SE 5

NG to top Belly River


100
%

102/11-05-042-04-W5/00TWP 42 RGE 4 W5M: 6

NG to base Edmonton Sands


100
%

102/16-06-042-04-W5/00TWP 42 RGE 4 W5M: SE 7

NG to base Edmonton Sands


50
%

102/14-07-042-04-W5/00TWP 42 RGE 4 W5M: NW 7

NG to base Edmonton Sands


50
%

102/14-07-042-04-W5/00TWP 42 RGE 4 W5M: SW 7

NG to base Edmonton Sands


50
%

102/14-07-042-04-W5/00TWP 42 RGE 4 W5M: NE 7

NG to base Edmonton Sands


50
%

102/14-07-042-04-W5/00TWP 42 RGE 4 W5M: W 9

NG to base Edmonton Sands


50
%

102/4-09-042-04-W5/00TWP 42 RGE 4 W5M: SE 9

NG to base Edmonton Sands


50
%

102/4-09-042-04-W5/00TWP 42 RGE 4 W5M: NE 9

NG to base Edmonton Sands


50
%

102/4-09-042-04-W5/00




Additionally, the Company drilled and completed two gross wells on behalf of the Vendor to earn certain Petroleum and Natural Gas Rights and other Miscellaneous Interests related thereto in respect of the following properties:




Lands

Petroleum And Natural

Gas Rights

Vendor’s

Interest


WellsTWP 40 RGE 5 W5M: NE24

TWP 40 RGE 5 W5M: SE25

NG to base Edmonton Sands


19.375
%

None


16




Lands

Petroleum And Natural

Gas Rights

Vendor’s

Interest


WellsTWP 40 RGE 5 W5M: SW25

NG to base Edmonton Sands


9.55
%

None




NI 51-101 Report




A report entitled “Guildhall Minerals Ltd. – Reserve Estimation and Economic Evaluation” by AJM Petroleum Consultants (“AJM”) and prepared by Douglas S. Ashton, P. Eng, and D.L. Horbachewski, P. Geol, each an independent qualified person, (collectively, the “Author”) dated June 9, 2010 (effective date March 31, 2010) (the “NI 51-101 Report”), was prepared for the Company in compliance with NI 51-101. This report shows no producing reserves on Company’s properties as production did not commence until after the effective date of the report.  A copy of the NI 51-101 Report is included as an appendix to this report and may also be inspected at the offices of the Company at Suite 1400, Elveden House, 717 – 7th Avenue SW Calgary, Alberta T2P 0Z3 during normal business hours.  The NI 51-101 Report was filed with certain Canadian securities regulatory authorities pursuant to NI-51-101 and will be available for review on the SEDAR website at www.sedar.com.




In the course of the evaluation, the Vendor provided the Author’s personnel with basic information which included land, well and accounting (product prices and operating costs) information; reservoir and geological studies, estimates of on-stream dates for certain properties, contract information, budget forecasts and financial data. Other engineering, geological or economic data required to conduct the evaluation and upon which this report is based, were obtained from public records, other operators and from the Author’s non-confidential files. The extent and character of ownership and accuracy of all factual data supplied for the independent evaluation, from all sources, has been accepted.




AJM received a “Representation Letter” from the Vendor dated June 7, 2010 prior to the finalization of the NI 51-101 Report. This letter specifically addressed the accuracy, completeness and materiality of all the data and information that was supplied to AJM during the course of its evaluation of the Vendor’s reserves and net present values.




A field inspection and environmental/safety assessment of the properties was beyond the scope of the engagement of the AJM and none was carried out. The Representation Letter received from the Vendor provided assurance that no additional information necessary for the completion of our assignment would have been obtained by a field inspection.




The accuracy of any reserve and production estimates is a function of the quality and quantity of available data and of engineering interpretation and judgment. While reserve and production estimates presented herein are considered reasonable, and adhere to the COGEH and NI 51-101 (as applicable), the estimates should be accepted with the understanding that reservoir performance subsequent to the date of the estimate may justify revision, either upward or downward.




Revenue projections presented in the NI 51-101 Report are based in part on forecasts of market prices, current exchange rates, inflation, market demand and government policy which are subject to uncertainties and may in future differ materially from the forecasts in the NI 51-101 Report. Present values of future net revenues documented in the NI 51-101 Report do not necessarily represent the fair market value of the reserves evaluated herein.


17


The prices used in the calculations within the reserve report are as follows:




Natural Gas


CondensateYear

$/Mcf ($CDN)


$/bbl ($CDN)2010


4.74



68.902011


5.66



74.452012


6.53



79.952013


6.78



84.852014


7.04



89.802015


7.29



97.952016


7.60



106.552017


7.85



109.002018


8.21



111.452019


8.62



114.05Thereafter


9.18



116.60




Summary of Oil and Gas Reserves as of Fiscal-Year End Based on Average Fiscal-Year Prices




ReservesReserves category

Oil

(mbbls)


Natural gas

(mmcf)


Synthetic oil

(mbbls)


Synthetic gas

(mmcf)


Product A

(measure)PROVEDDeveloped:Alberta, Canada


-



-



-



-



-Undeveloped:Alberta, Canada


523.3



3,102.5



-



-



-TOTAL PROVED


523.3



3,102.5



-



-



-PROBABLEDeveloped


-



-



-



-



-Undeveloped


805.6



4,776.4



-



-



-POSSIBLEDeveloped


-



-



-



-



-Undeveloped


-



-



-



-



-




The Company has no producing wells as at March 31, 2010.  Production began in May, 2010 from one well with additional wells being brought on in February 2011. The Company has not entered into any delivery commitments.




Item 4A.
Unresolved Staff Comments




Not applicable.




Item 5.
Operating and Financial Review and Prospects




The following discussion of our results of operations should be read together with our financial statements and the related notes, which appear elsewhere in this registration statement.  The following discussion may contain forward-looking statements that reflect our current plans, estimates and beliefs and involve risks and uncertainties.  Our actual results may differ materially from those discussed in the forward-looking statements.  Factors that could cause or contribute to such differences include those discussed below and elsewhere in this registration statement.


18


A.
Operating Results




Overview




We are engaged principally in the acquisition, exploration and when warranted, development, of oil and gas properties.  From our incorporation in 1968 until the end of 2004, we engaged in various business activities and mineral exploration activities, all of which were abandoned and terminated as being not successful or offering a potential for profit.  Since the beginning of 2005, we have negotiated and signed option agreements for two British Columbia, Canada mineral properties, both of which we have since terminated. We are presently engaged in the acquisition and development of oil and gas properties.  Our principal business will be to identify and evaluate opportunities for the acquisition of interests in oil and gas properties and to undertake exploration and/or development programs on such properties if acquired or to joint venture or option such properties to third parties, with a view to discovering oil and natural gas. The Company completed the acquisition of certain oil and gas assets effective April 15, 2009.   See Item 4B “Information on the Company – Business Overview.”




Our financial statements appearing in this registration statement are prepared in Canadian dollars and in accordance with Canadian GAAP which vary in certain respects from U.S. GAAP, as described in Note 14 to the financial statements as at and for the year ended March 31, 2010.   The accounting policies chosen under Canadian GAAP are outlined in those same statements under Note 2.  Readers are strongly encouraged to review those policies as they may differ from US GAAP.  Management believes that the following are the most significant policies.




Critical Accounting Policies




The preparation of financial statements in accordance with Canadian generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. The Company’s most significant areas of estimation are asset retirement obligations, stock based compensation expenses, valuation of accounts receivable, completeness and accuracy of accounts payable and accrued liabilities, and the valuation of crude oil and natural gas properties.





Oil and Gas Properties




The Company follows the full cost method of accounting. All costs of acquiring crude oil and natural gas properties and related exploration and development costs, including overhead charges directly related to these activities, are capitalized and accumulated in one cost center. The costs associated with the acquisition and evaluation of unproved properties are excluded from the depletion base, until such time when proved reserves can be assigned to these assets or impairment occurs. Maintenance and repairs are charged against income (loss), and renewals and enhancements that extend the economic life of the property and equipment are capitalized.





Gains and losses are not recognized on disposition of crude oil and natural gas properties unless that disposition would alter the rate of depletion by 20% or more.





The Company applies a two-stage ceiling test at least annually to capitalized costs to ensure that such costs do not exceed the undiscounted future cash flows from production of proved reserves. Undiscounted future cash flows are calculated based on management’s best estimate of forward indexed prices applied to estimated future production of proved reserves, less estimated future operating costs, royalties, future capital development costs and abandonment costs. When the carrying amount of a cost centre is not recoverable the second stage of the process will determine the fair value of the cost centre and its carrying amount would be written down to this amount. The second stage requires the calculation of discounted future cash flows from proved plus probable reserves. The fair value is estimated using accepted present value techniques, which incorporate risks and other uncertainties when determining expected cash flows.


19





The cost of unproved properties is excluded from the preceding impairment test, and is subject to its own impairment test on at least an annual basis.





Loss per Share





Basic loss per common share is computed by dividing earnings (loss) from operations by the weighted average number of common shares outstanding for the period.





The Company uses the treasury stock method to determine the dilutive effect of stock options and other dilutive instruments. This method assumes that proceeds received from the exercise of in-the-money stock options and other instruments, are used to repurchase common shares at the average market price of the period.  Diluted earnings (loss) per share are computed by giving effect to the potential dilution that would occur if stock options and other dilutive instruments were exercised.





Stock-Based Compensation and other stock-based payments





The Company uses the fair value method of accounting for the share option plan. Under this method, compensation cost is measured at fair value using a Black Scholes option pricing model at the date of grant and expensed over the vesting period of the option.  The Company does not incorporate an estimated forfeiture rate for stock options that will not vest but instead accounts for forfeitures as a change in estimate in the period in which they occur.





Transactions to acquire goods or services by granting equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instruments, whichever is more reliably measured. The asset or cost is recognized in the same period as if the Company had paid cash for the goods and services.





Asset Retirement Obligations





The Company recognizes the estimated fair value of an asset retirement obligation (“ARO”) in the period in which it is incurred.  The fair value of the estimated ARO is recorded as a liability with a corresponding increase in the carrying amount of the related asset. ARO obligations are initially measured at fair value and subsequently adjusted for the accretion and any changes to the underlying cash flows. The capitalized amount is depleted on a unit-of-production basis over the life of the proven reserves. The liability amount is increased each reporting period due to the passage of time and the amount of accretion is charged to earnings (loss) in the period. Revisions to the estimated timing of cash flows or to the original estimated undiscounted cost would also result in an increase or decrease to the ARO and the capitalized amount. Actual costs incurred are charged against the ARO to the extent of the recorded liability. Any difference between the actual costs incurred and the recorded liability is recognized as a gain or loss in the period in which the costs are incurred.





Comprehensive Income (Loss)





Comprehensive loss is the change in equity of the Company during the period as a result of transactions and other events and circumstances from non-owner sources.  There were no comprehensive loss items during the years ended March 31, 2010, 2009, and 2008; accordingly, comprehensive loss is equal to net loss.





Financial Instruments





The Company classifies all financial instruments as held-to-maturity, available-for-sale, held-for-trading, loans and receivables, or other liabilities. Financial assets held to maturity, loans and receivables, and other liabilities, other than those classified as held-for-trading or available-for-sale, are measured at fair value on inception and then subsequently carried at amortized cost except to recognize other than temporary impairment. Available-for-sale instruments are measured at fair value with unrealized gains and losses recognized in other comprehensive income. Instruments classified as held-for-trading are measured at fair value with unrealized gains and losses recognized in the Statements of Loss.


20


The Company has classified its financial instruments as follows:





Cash and cash equivalents
Held-for-tradingAccounts receivable
Loans and receivablesAccounts payable and accrued liabilities
Other liabilitiesLoan payable
Other liabilities





Transaction costs are expensed as incurred for financial instruments classified as held for trading.  For other financial instruments, transaction costs are capitalized on initial recognition.





Results of Operations - Year Ended March 31, 2010




Income.We did not have any operating revenues in the three fiscal years ended March 31, 2010, 2009 and 2008.  In the fiscal year ended March 31, 2009, we had interest income of $3,716 earned on short term guaranteed certificates and $16,710 of accrued interest on the “BANG” promissory note receivable (2008 - $7,714).




Expenses.Our operating expenses are primarily general and administrative in nature and include management, consulting, accounting and legal fees.  Our operating expenses increased to $884,404 (excluding stock compensation) in the fiscal year ended March 31, 2010, from $321,738 in the fiscal year ended March 31, 2009 (2008 - $169,910).  Expenses increased primarily as a result of the company being active for fiscal 2010 as opposed to fiscal 2009 which was primarily spent investigating investment opportunities with a significantly smaller staff/consultant complement.   Total expenses have also increased in 2010 to $1,377,493 compared to $1,019,568 in 2009 (2008 - $158,797).  The most significant expenditure in 2010 was the stock-compensation expense of $493,089 resulting from options granted to the new management team.  The 2009 expenses included write-offs of acquisition and financing costs of $268,279 and the write-down of a note receivable totaling $522,350 including accrued interest.




Write-down of mineral properties. In the fiscal year ended March 31, 2008, following our termination of the option agreement for the Stellar property in July 2007, we wrote-off the property to nil carrying value and recorded a write-down of $1. At March 31, 2009 the Company decided not to pursue further interest in the claims and have allowed the option to lapse.  The Company has written off the property to $nil resulting in a loss of $33,500. No writeoffs occurred for 2010 for Canadian GAAP purposes.




Exploration Tax Credit.No tax credits were recorded in the year ended March 31, 2010.  We recorded a British Columbia Mineral Tax credit of $2,461 in the year ended March 31, 2009 for exploration previously carried out on the Bridge property which has been recorded in income as the carrying value has been fully written off.  We recorded a British Columbia Mineral Tax credit of $11,114 in the year ended March 31, 2008 for exploration previously carried out on the Stellar property which has been recorded in income as the carrying value has been fully written off.




Net Loss.  As a result of the above, we incurred a net loss of $1,377,493, $999,142 and $151,083, in the years ended March 31, 2010, 2009 and 2008 respectively.




Recently Issued Accounting Standards





Canadian Pronouncements




Recently Adopted Accounting Policies





New Accounting Standards Not Yet Adopted





International Financial Reporting Standards





In 2006, Canada’s Accounting Standards Board (“AcSB”) ratified a strategic plan that will result in the convergence of Canadian GAAP, as used by public companies, with International Financial Reporting Standards (“IFRS”) over a transitional period. The AcSB has developed and published a detailed implementation plan, with a changeover date for fiscal years beginning on or after January 1, 2011. The impact of the transition to IFRS on the Company’s financial statements has yet to be determined.


21





The Company has assessed its requirements and first time adoption methodologies, including its internal training and resource needs.  Management has completed the opening balance sheet and is currently finalizing adjustments to the 2011 fiscal year as well as preparing additional disclosures for the first quarter of fiscal 2012.





Business Combination, Non-Controlling Interest, and Consolidation





In January 2009, the CICA issued Handbook Sections 1582, Business Combination (“Section 1582”), 1601, Consolidated Financial Statements. (“Section 1601”) and 1602, Non-controlling Interests, (“Section 1602”) which replaces CICA Handbook Sections 1581, Business Combinations, and 1600, Consolidated Financial Statements.  Section 1582 establishes standards for the accounting for business combinations that is equivalent to the business combination accounting standard under IFRS.  Section 1582 is applicable for the Company’s business combinations and acquisition dates on or after January 1, 2011.  Early adoption of this section is permitted.  Section 1601 is applicable for the Company’s interim and annual financial statements for its fiscal year beginning January 1, 2011.  Early adoption of this section is permitted.  If the Company chooses to adopt any one of these sections, the other sections must also be adopted at the same time.  The adoption of this standard is not expected to have a material impact on the Company’s financial statements.





United States Pronouncements





In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles,” or SFAS 162.  SFAS 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. GAAP for nongovernmental entities.  SFAS 162 is effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board’s amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.”  We do not expect there to be any significant impact of adopting SFAS 162 on our financial position, cash flows and results of operations.





In April 2009, the FASB issued FSP SFAS 157-4 which provides additional guidance for estimating fair value in accordance with SFAS 157, “Fair Value Measurements”, when the volume and level of activity for the asset or liability have significantly decreased. FSP SFAS 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP SFAS 157-4 requires the disclosure of the inputs and valuation technique(s) used to measure fair value and a discussion of changes in valuation techniques and related inputs, if any, during the period. The adoption of this statement did not have a material impact on the Company’s results of operations and financial position.





In June 2009, the FASB issued FAS No. 165 “Subsequent Events”(“FAS 165”). FAS 165 requires companies to recognize in the financial statements the effects of subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. An entity shall disclose the date through which subsequent events have been evaluated, as well as whether that date is the date the financial statements were issued.  Companies are not permitted to recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before financial statements are issued. Some non recognized subsequent events must be disclosed to keep the financial statements from being misleading.  For such events a company must disclose the nature of the event, an estimate of its financial effect, or a statement that such an estimate cannot be made. This Statement applies prospectively for interim or annual financial periods ending after June 15, 2009. The adoption of FAS 165 is not expected to have a material impact on the Company’s results of operations and financial position.


22


In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162(“SFAS 168”). Upon its adoption, the FASB Accounting Standards Codification (the “Codification”) will become the source of authoritative GAAP recognized by the FASB to be applied to nongovernmental entities. On the effective date of SFAS 168, the Codification will supersede all then-existing non-SEC accounting and reporting standards. Following SFAS 168, the FASB will not issue new accounting standards in the form of FASB Statements, FASB Staff Positions, or Emerging Issues Task Force abstracts. SFAS 168 will also modify the existing hierarchy of GAAP to include only two levels — authoritative and non-authoritative. SFAS 168 will be effective for financial statements issued for interim and annual periods ending after September 15, 2009, and early adoption is not permitted. The Company does not believe that the adoption of this standard will have a material impact on its financial position, results of operations or cash flows.





In April 2010, the FASB issued ASU, “Compensation–Stock Compensation (Topic 718).” The amendments clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. We do not expect the adoption of this standard to have a material impact on our results of operations or financial position.





In July 2010, the FASB issued ASU, "Receivables (Topic 310)." The update is intended to provide financial statement users with greater transparency about an entity’s allowance for credit losses and the credit quality of its financing receivables. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. We do not expect the adoption of this standard to have a material impact on our results of operations, financial position or Company’s disclosures.




B.
Liquidity and Capital Resources




As of March 31, 2010




We are engaged principally in the acquisition, exploration and, when warranted, the development of oil and gas properties.  As of March 31, 2010, we had an accumulated deficit of $12,423,270.  We have historically financed our operations from the sale of our securities and the exercise of outstanding warrants and options.




We had $253,158 of cash and cash equivalents and working capital of $424,095 at March 31, 2010 compared to $94,822 of cash and cash equivalents and a working capital deficit of $15,724 of working capital as of March 31, 2009.   Cash, cash equivalents and working capital increased significantly in fiscal year 2010 as a result of the completion of three separate financings.




Net cash used in operating activities was $1,127,031, $609,747 and $135,908 during the years ended March 31, 2010, 2009 and 2008, respectively.  These amounts were used for administrative expenses, including management fees, consulting fees, accounting fees and legal fees.  The increase is primarily a result of the recommencement of operations which occurred in April 2009 in conjunction with the acquisition of the Willesden Green properties as described elsewhere in this report.




Net cash used in investing activities was $2,673,222, $439,764 and $nil, during the years ended March 31, 2010, 2009 and 2008, respectively.  Cash used in investing activities increased in fiscal 2010 as we began drilling operations on the Willesden Green property.




Net cash provided by financing activities was$3,958,589, $480,000 and $624,030 during the years ended March 31, 2010, 2009 and 2008, respectively.  Cash provided by financing activities during the fiscal year ended March 31, 2010 includes the proceeds from the three financings less share issue costs and the repayment of a loan which the Company took out in the year ended March 31, 2009.  Cash provided by financing activities during the year ended March 31, 2008 reflects the exercise of warrants.




Subsequent to reporting period




In May 2010, 566,160 finders’ warrants were exercised at $0.30 per warrant for gross proceeds of $169,848.  96,250 finders’ warrants expired unexercised.


23





In September 2010, the Company entered into a short term debt arrangement for $1.5 million which was originally due in January 2011.  The Company has been granted a postponement of repayment on $1 million of this debt to December 1, 2011.  The remaining $500,000 has been repaid.  In addition, the Company has entered into a $4.5 million credit facility with a Canadian chartered bank.  Currently, approximately $4 million has been drawn on this credit facility.





On December 30, 2010 the Company closed a private placement consisting of 3,500,005 common shares of the Company at a price of $0.22 per share and 197,000 flow through shares at a price of $0.30 per share for gross aggregate proceeds of $829,101.  The Company paid $52,044 in issue costs as well as 258,790 finders warrants as share issue costs.  The warrants are exercisable into one common share each at a price of $0.30 for a period of one year.




On January 17, 2011 the Company closed a private placement consisting of 2,984,545 common shares of the Company at a price of $0.22 per share for gross aggregate proceeds of $656,600.  The Company paid $45,962 in issue costs as well as 208,918 broker warrants as share issue costs.  The warrants are exercisable into one common share each at a price of $0.30 for a period of one year from the date of issuance.




On January 31, 2011 the Company closed a private placement consisting of 1,075,400 Units of the Company at a price of $0.38 per Unit for gross proceeds of $408,652.  Each Unit consists of one flow-through share of the Company and one purchase warrant.  Each warrant is exercisable into one Common Share for $0.40 for a period of one year from the date of issuance.  The Company agreed to pay a finders’ fee to eligible persons in the amount of $24,150 and 63,553 finders’ warrants, with each finders’ warrant exercisable into one Common Share for $0.40 for a period of one year from the date of issuance.




On February 17, 2011 the Company closed a private placement consisting of 333,200 units of the Company at a purchase price of $0.38 per unit for gross proceeds of $126,616, each unit consisting of one common share of the Company to be issued on a “flow through” basis and one purchase warrant exercisable into one Common Share upon payment of $0.40 per share for a period of one year from the date of issuance. Additionally, the Company issued 4,300,000 units of the Company at a purchase price of $0.32 per unit for gross proceeds of $1,376,000, each unit consisting of one common share of the Company (each a “Common Share”) and one-half of one purchase warrant, with each whole warrant exercisable into one Common Share upon payment of $0.385 per share for a period of one year from the date of issuance. The Company agreed to pay a finders’ fee to eligible persons in the aggregate amount of $64,152 and 202,051 finders warrants, with 183,627 of the finders warrants exercisable into one Common Share upon payment of $0.385 per share for a period of one year from the date of issuance and 18,424 of the finders warrants exercisable into one Common Share upon payment of $0.40 per share for a period of one year from the date of issuance.




From January through March 2011, 4,285,887 warrants were exercised at $0.20 per warrant for gross proceeds of $857,177.




Subsequent to March 31, 2011 the Company has raised $4.4 million (before issuance costs) in equity according to the following issuances (these items are in addition to subsequent events that have already been disclosed):




·
11,414,637 common shares with 1,108,222 of these shares issued on a flow-through basis


·
5,153,207 warrants with an exercise price of $0.50 per share, with 2,140,750 expiring in April 2012 and 3,008,457 expiring in May 2012, and


·
759,532 warrants with an exercise price of $0.40 per share, with 370,085 expiring in April 2012 and 389,447 expiring in May 2012


·
1,600,000 options with an exercise price of $0.275 per share were issued.  One quarter of the options vest immediately with the remaining three quarters vesting in equal amounts on an annual basis.


24


Outlook




We will require substantial additional funds in order to achieve our long-term goals and make any significant acquisitions.  In addition, we will require additional funds to undertake any significant exploration work or other business activities.  As previously stated, The Company’s management estimates that $3,000,000 in financing proceeds will be required by October 31, 2011 in order to maintain our operations, including exploration and development activities.  We have historically financed our operations from the sale of our securities and the exercise of outstanding warrants and options.  In the opinion of the Company’s management, the current working capital of the Company is not sufficient for the Company’s present requirements, including the Company’s planned operations and exploration and development activities.   Any shortfall in funding could have a material adverse effect on our business and future success.    The Company has obtained an increased line of credit which can accommodate the required financing.  In addition, new production is expected to be brought online which will increase incoming cash flows.




C.
Research and Development, Patents and Licenses




We have not performed any research and development over the past three fiscal years.  We do not have any specific research and development policies.




D.
Trend Information




We are exploration stage company engaged principally in the acquisition, exploration and when warranted, development, of oil and gas properties.  As a result, our business is dependent on the worldwide prices of oil and gas on which we are focused at a given time.




The Company did not generate any revenues from operations in the years ended March 31, 2010, 2009 and 2008 respectively.  Revenue generating production commenced in May, 2010 and is expected to increase further with new production which began in the early part of calendar year 2011.




E.
Off-balance Sheet Arrangements




We are not a party to any material off-balance sheet arrangements.  In addition, we have no unconsolidated special purpose financing or partnership entities that are likely to create material contingent obligations.




F.
Tabular Disclosure of Contractual Obligations




Contractual Obligations

Payments due by periodTotal


Less than 1

year


1-3 years


3-5

years


More than

5 yearsFinance lease obligations

$
50,713


$
24,492


$
26,221


$
-


$
-Total

$
50,713


$
24,492


$
26,221


$
-


$
-











The Company has entered into two separate agreements  whereby the Company is committed to drill a certain number of wells within a specified timeframe to earn working interests in the various properties.  The financial outlays involved are not guaranteed and the potential penalties include $25,000 per well for seven wells, and $37,500 per well for four wells.  As of the date of this report, all agreements have either been complied with or extended with permission from the counterparties involved.




As noted elsewhere in this annual report, subsequent to the period covered by this report the Company has entered into various debt contracts totaling $5.5 million.  Of this amount $1.5 million is due June 1, 2011 with the remaining $4 million included in a credit facility agreement with the Company’s bank.


25


Item 6.
Directors, Senior Management and Employees




A.
Directors and Senior Management





Set forth below are the name, age, principal position and a biographical description of each of our directors and executive officers:




Name

Age

PositionBrad Nichol

39

President & Chief Executive OfficerScott Reeves

40

DirectorIan Thomson(1)

29

Chief Financial Officer (former)Christopher R. Cooper

40

DirectorNathan Steinke(2)

38

Chief Financial  OfficerTed Konyi

55

Director


(1) Mr. Thomson resigned as the Company’s Chief Financial Officer effective August 1, 2011.


(2) Mr. Steinke was appointed as the Company’s Chief Financial Officer effective August 1, 2011.





There are no known family relationships between any of our officers and directors. To the best knowledge of our knowledge, there are no arrangements or understandings with any major shareholders, customers, suppliers or others, pursuant to which any of our officers and directors was selected as a director or member of senior management.





Scott Reeves, Director





Mr. Reeves is a law firm partner with a practice focused on securities, corporate finance and commercial transactions for emerging and growth companies and partnerships. He has advised numerous private and public corporations on a wide range of business matters including access to capital markets, corporate governance and operational issues.




Mr. Reeves acts for a large number of TSX and TSX Venture Exchange-listed companies in a wide range of industries, including oil and gas, mining, technology, biotechnology and industrial issuers. Mr. Reeves has extensive experience in private and public debt and equity offerings, corporate acquisitions of assets and shares, corporate restructurings and debt financing. He also acts a director and/or corporate secretary for many public and private companies, providing detailed corporate governance and continuous disclosure advice to his clients.




Mr. Reeves has both law and bachelor of commerce degrees (with distinction) from the University of Alberta where he served as co-editor in chief for the Alberta Law Review. He has received numerous academic and community service awards and has published and lectured extensively in the areas of growth financing, stock exchange listing and corporate governance.




He has acted as a lead instructor for the Masters degree program in eBusiness from Osgoode Hall Law School and has taught eCommerce Financing at Calgary’s Mount Royal College. He currently teaches an advanced corporate finance course on Growth Businesses and the Law for the University of Alberta’s Faculty of Law. Mr. Reeves is also a member of the Alberta Advisory Board for the TSX Venture Exchange.





Christopher R. Cooper, Director





Mr. Cooper has over ten years experience in oil and gas management and finance. Since April 2003, Mr. Cooper has served as the President and Chief Executive Officer of Northern Sun Exploration Company Inc. and was a director of Benchmark Energy. Mr. Cooper co-founded several junior and intermediate oil and gas companies including Choice Resources, Watch Resources Ltd. And Banks Energy Inc., and was instrumental in the acquisition and/or merger of these companies. Mr. Cooper holds a Bachelor of Business Administration degree from Hofstra University and an MBA degree in Business from Dowling College.


26





Ian Thomson, Chief Financial Officer (resigned August 1, 2011)





Mr. Thomson completed his Bachelor of Commerce degree at the University of Calgary in 2003. He articled at Heywood Holmes & Partners LLP in Red Deer, Alberta for a year before returning to Calgary and joining DNTW Chartered Accountants, LLP. He wrote the UFE in 2005 and obtained his Chartered Accountant designation in September 2006. In January 2006, Mr. Thomson moved on to work with Ascend LLP which merged with Meyers Norris Penny LLP in January 2008. Mr. Thomson started his own firm, Ian Thomson Professional Corporation, in December 2008 through which he provides accounting support to public and private companies, as well as compilations and tax services for owner-managed businesses.





Nathan Steinke, Chief Financial Officer (appointed August 1, 2011)





Nathan Steinke was formerly the CFO of Milestone Exploration Inc., a private junior oil and gas exploration, development and production company focused on growth opportunities and recently achieved production of approximately 2,800 boe/day.  Mr. Steinke is a Chartered Accountant and articled in Calgary with a well known accounting firm.  Mr. Steinke also worked as a field operator with Husky Energy, prior to pursuing his accounting designation.





Ted Konyi, Director





Mr. Konyi has over 25 years experience as a financial entrepreneur. As founder of the Maxwell group of companies, he has been involved in the startup and growth phases of 15 corporations primarily in the energy and technology industries. The primary operating company in the group, Maxwell Mercantile Inc., has completed in excess of $200 million in private and public financings. From 1988 through 1998, Mr. Konyi was responsible for forming and financing 17 Limited Partnerships that invested successfully in the energy sector. This involved the acquisition of ~$120 million of producing oil and gas assets in Alberta and managing the cash flow for over 1500 limited partners. From 1994 to the present, Mr. Konyi has been involved as a director or senior officer in 12 publicly listed companies. Currently Mr. Konyi is a director of Magnum Energy Inc., a public Alberta based oil and gas company and a founding director of First Coal Corporation, a private B.C. based metallurgical coal company.





Brad Nichol, President, Chief Executive Officer





Mr. Nichol has held roles in the executive suite of junior oil and gas exploration and production companies. His experiences are in private and public startups, takeovers and turnarounds. In his position as Management Consultant at a top-tier international firm, Mr. Nichol advised the CEOs and CFOs of Fortune 500 corporations on business and corporate strategies, mergers & acquisitions and corporate reorganizations throughout Europe and the United States.





Mr. Nichol joined Schlumberger in 1992, and enjoyed an international career focused on technical excellence, project management and field operations. His early career focused on reservoir evaluation and enhancement strategies. In 1996 he assumed responsibility for reservoir stimulation and wellbore construction services for BP in Colombia. In 1999 Mr. Nichol joined a U.K business unit in the Measurement and Systems division of Schlumberger, and was on the team responsible for the corporate turnaround and eventual sale of that business.  Mr. Nichol is a Professional Engineer (Mechanical) and earned his MBA, with honors, from the London Business School.





B.
Compensation





On June 1, 2009, the Company entered into an Executive Consulting Agreement with FiveN Consulting Inc. (FiveN) a company owned and operated by Brad Nichol, our President and CEO.  Pursuant to this agreement, FiveN provides the functions of the Company’s President & CEO through the services of Mr. Nichol.  FiveN Consulting is paid $15,416 (2009 - $15,416 and 2008 - $nil) per month for these services.  All services provided by Mr. Nichol to the Company are provided through FiveN.  The duties and services Mr. Nichol provides to the Company are not in conflict nor are there any fiduciary conflicts with FiveN Consulting.  In providing services to the Company, Mr. Nichol does not owe any fiduciary duty to FiveN that is different from, or in conflict with, the duties owed by Mr. Nichol to the Company.  On June 2, 2009 the Company granted 750,000 options to Mr. Nichol at an exercise price of $0.30 per share for a 5 year period.  One-quarter of these options vested immediately; and one-quarter of the options shall vest on each of the sixth month anniversary; the one year anniversary and the eighteenth month anniversary from the grant date.


27





During the year ended March 31, 2010 the Company incurred: $nil for management fees to the past President and CEO (2009 - $22,500 2008 - $30,000).  At March 31, 2010 $nil (2009 - $nil 2008 - $7,516) is owing to the past President and CEO for fees and expenses incurred on behalf of the Company.  The outstanding amounts are unsecured, non-interest bearing and without specific repayment terms. During November 2007, 130,000 shares at a price of $0.21 per share were issued in settlement of $27,300 of debt due the former President and CEO.





Terence Kwan is the Company’s former Chief Financial Officer.  Pursuant to an unwritten agreement between the Company, Mr. Kwan and TK Investments Ltd., a company controlled by Mr. Kwan, a monthly fee of $3,000 was paid to TK Investments, Ltd. in consideration of Mr. Kwan’s accounting services from the period of April 2008 to September 2008.  The monthly fee was increased to $3,500 per month from October 2008 to March 2009.  Total fees paid for the fiscal year ended March 31, 2010 were $43,500 (2009 -$39,000, 2008- $36,000).  At March 31, 2010 $nil (2009 - $nil, 2008 - $3,150) was owing to TK Investments Ltd.   In November 2007, 70,000 shares at a price of $0.21 per share were issued in settlement of $14,700 of debt due to TK Investments, Ltd.  In providing services to the Company, Mr. Kwan does not owe any fiduciary duty to TK Investments, Ltd, that is different from, or in conflict with, the duties owed by Mr. Kwan to the Company.   Mr. Kwan ceased being an officer of the Company in May, 2010.





In May, 2010, Ian Thomson CA replaced Mr. Kwan as the Company’s Chief Financial Officer.  Pursuant to an unwritten agreement between the Company, Mr. Thomson and Ian Thomson Professional Corporation, a company controlled by Mr. Thomson, a fee is paid to Ian Thomson Professional Corporation in consideration of Mr. Thomson’s services to the Company.  The fee is calculated based on the time spent and difficulty of the duties Mr. Thomson is required to complete to satisfy his duty as the CFO.  In providing services to the Company, Mr. Thomson does not owe any fiduciary duty to Ian Thomson Professional Corporation that is different from, or in conflict with, the duties owed by Mr. Thomson to the Company.





From April 2009 to September 2009, Mr. Darcy Spady, a former Director of the Company,  received $1,500 per month for his services as a director.  In addition, Mr. Spady received a $10,000 initial retainer fee, bringing his total compensation to $19,000 for the period April 2009 through September 2009.





Except for these stock option grants and the payments to Mr. Spady, executive officers of the company who also act as directors of the Company are not expected to receive any additional compensation for services rendered in their capacity as directors, but will be eligible to receive stock options and to be reimbursed for their related reasonable expenses incurred in relation to attendance at meetings. The options issued to the current and former directors are as follows:





Directors

Number of

Share Options


Exercise

Price

Grant

Date
ExpirationScott Reeves


100,000


$
0.30

3/26/2010
3/26/2015Christopher R. Cooper


100,000


$
0.30

3/26/2010
3/26/2015Scott Reeves


100,000


$
0.30

6/2/2009
6/2/2014Christopher R. Cooper


100,000


$
0.30

6/2/2009
6/2/2014Darcy Spady (former Director)


100,000


$
0.30

6/2/2009
2/28/2011Brad Nichol


750,000


$
0.30

6/2/2009
6/2/2014Ted Konyi


100,000


$
0.30

5/31/2010
5/31/2015







C.
Board Practices




Our directors are elected by the shareholders at our annual general meeting of shareholders.  The term of office of each director expires immediately before the annual general meeting of shareholders, and the directors are eligible for re-election at the meeting.  The directors may appoint one or more additional directors, but the number of additional directors so appointed may not exceed one-third of the number of serving directors appointed by the shareholders.


28


There are no arrangements or understandings between us, on the one hand, and any of our directors, on the other hand, providing for benefits upon termination of their employment or service as directors of our company.




Our Audit Committee is comprised of Christopher Cooper, Ted Konyi and Scott Reeves.  Our Audit Committee has adopted an Audit Committee Charter which generally provides as follows:




The Audit Committee must be comprised of a majority of unrelated directors who are financially literate, and at least one member must have accounting or related financial expertise.  All members of the audit committee have the required accounting or related financial expertise.  The Audit Committee is responsible for: (1)  reviewing the Company’s annual financial statements and making recommendations as to approval of such statements by the board of directors; (2) approving the quarterly financial statements of the Company before publication; (3) establishing the independence of the external auditor; and  (4) overseeing management reporting on internal control.




D.
Employees




The Company has no employees.  We retain consultants as senior management.





E.
Share Ownership




Share Ownership





The following sets forth, as at December 31, 2010, the total amount of common shares directly or indirectly owned by our directors and senior management and that may be acquired within 60 days, based on 47,374,976 common shares issued and outstanding on December 31, 2010.





Percentage ofCommon Shares


Common SharesBeneficially Owned


OutstandingHolder


(1)Officers, Directors and ManagementBrad Nichol, President and CEO


2,350,000



4.96
%Scott Reeves, Director


150,000



0.33
%Christopher R. Cooper, Director


210,000



0.44
%Ian Thomson, CFO(2)


50,000



0.11
%Ted Konyi, Director


50,000



0.11
%Total Officers, Directors and Management (5 persons)


2,810,000



5.95
%








(1)
Includes common shares issuable upon the exercise of stock options that are vested within 60 days of, December 31, 2010, as follows:





Brad Nichol, President and CEO


750,000Scott Reeves, Director


150,000Christopher R. Cooper, Director


150,000Ian Thomson, CFO


50,000Ted Konyi, Director


50,000





(2)     Mr. Thomson resigned as the Company’s Chief Financial Officer effective August 1, 2011.


29





Share Options





At December 31, 2010, our directors and senior management held the following share options:




Number of


AverageShare


Strike

ExpirationOfficers, Directors and Management

Options


Price

DatesBrad Nichol, Director President and CEO


750,000


$
0.30

6/2/2014Scott Reeves, Director


100,000


$
0.30

6/2/2014Scott Reeves, Director


100,000


$
0.30

3/22/2015Christopher R. Cooper, Director


100,000


$
0.30

6/2/2014Christopher R. Cooper, Director


100,000


$
0.30

3/22/2015Ian Thomson, CFO (former)


100,000


$
0.30

3/31/2015Total Officers, Directors and Management (8 persons)


2,300,000


$
0.30




Stock Option Plan




On July 7, 2005, the Company adopted a formal stock option plan (the “Plan”) for senior officers, directors, employees and key consultants of the Company and any subsidiary, which permits the granting of options to purchase up to a maximum of 10% of the outstanding common shares.  The Plan is structured to comply with the rules of the TEX and was reapproved by the Shareholders at the Annual General and Special Meeting held on August 31, 2010.  Under the Plan, no one optionee can receive grants of options for greater than 5% of the outstanding common shares during any 12 month period.  Option grants to persons conducting investor relations activities must not exceed greater than 2% of the number of outstanding common shares.  The number of options and the exercise price of all options is set by the board of directors of the Company, or a committee thereof, at the time of grant, provided that the exercise price will not be less than the minimum then specified by the rules of the TEX.  Options may not be granted for a term exceeding five years – which will be, if the optionee dies, reduced to a term of one year following the date of death – and if the optionee ceases to be qualified to receive options from the Company, options held by such optionee will expire 30 days after the date of such cessation.  Options granted under the Plan may not be assigned by the optionee.




Grants to December 31, 2010




On June 2, 2009 the Company granted options to certain officers, directors, employees or consultants to purchase an aggregate of 2,700,000 common shares in the capital of the Company at an exercise price of $0.30 per share for a 5 year period.  Included in the June 2, 2009 option grant are 750,000 options issued to our President, Mr. Brad Nichol increasing his fully diluted ownership to 6.4% of the common shares as of June 2, 2009.  One-quarter of these options vested immediately; and one-quarter of the options shall vest on each of the sixth month anniversary; the one year anniversary and the eighteenth month anniversary from the grant date.  The options are also subject to a four month and one day hold period from the date of grant.




On July 8, 2009, the Company granted options to certain officers, directors, or consultants to purchase an aggregate of 300,000 common shares at an exercise price of $0.31 per share for a 5 year period.  One-quarter of the options vested immediately; and one-quarter of the options shall be vested on each of the sixth month anniversary; the one year anniversary and the eighteen month anniversary from the grant date. The options are also subject to a four month and one day hold period from the date of grant.




On September 24, 2009, the Company granted options to a consultant to purchase an aggregate of 500,000 common shares at an exercise price of $0.31 per share for a 5 year period.  One-quarter of these options vested immediately; and one-quarter of the options shall be vested on each of the sixth month anniversary; the one year anniversary and the eighteen month anniversary from the grant date.  The options are also subject to a four month and one day hold period from the date of grant.


30


On March 22, 2010, the Company granted options to certain officers, directors or employees of the Company to purchase an aggregate of for a total of 400,000 common shares of the Company at an exercise price of $0.30 per share for a 5 year period.  One-quarter of these options vested immediately; and one-quarter of the options shall be vested on each of the sixth month anniversary; the one year anniversary and the eighteen month anniversary from the grant date. The options are also subject to a four month and one day hold period from the date of grant.




Item 7.
Major Shareholders and Related Party Transactions




A.
Major Shareholders




To the best of our knowledge, as of December 31, 2010 one shareholder beneficially owns 5% or more of our issued and outstanding common shares: Quarry Bay Equity Inc., which owns 2,720,000, or 5.74%. Although we have an unlimited number of preferred shares available for issue, we have not issued any preferred shares to date.  All of our shareholders have the same voting rights.  Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Pursuant to the rules of the SEC, common shares which an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be beneficially owned and outstanding for the purpose of computing the percentage ownership of any other person.




We are not aware of any arrangement, the operation of which may at some subsequent date result in a change of control of our company.




B.
Related Party Transactions




The Company incurred and/or paid fees and expenses directly and indirectly to certain current or former officers and directors of the Company.  During the years ended March 31, 2010, March 31, 2009 and March 31, 2008 transactions with related parties conducted in the normal course of operations are recorded at the exchange value as summarized below:




On June 1, 2009, the Company entered into an Executive Consulting Agreement with FiveN Consulting Inc. (FiveN) a company owned and operated by Brad Nichol, our President and CEO.  Pursuant to this agreement, FiveN provides the functions of the Company’s President & CEO through the services of Mr. Nichol.  FiveN Consulting is paid $15,416 (2009 - $15,416 and 2008 - $nil) per month for these services.




Terence Kwan, the Company’s former Chief Financial Officer, also acted as its accountant and was paid a monthly fee of $3,000 to TK Investments Ltd., a company controlled by him, for the time spent by him doing the Company’s accounting from the period of April 2008 to September 2008.  The monthly fee was increased to $3,500 per month for the months from October 2008 to March 2009.  Total fees paid for the fiscal year ended March 31, 2010 was $43,500 (2009 - $39,000; 2008 - $36,000).  At March 31, 2010 $nil (2009 - $nil; 2008 - $3,150) was owing to the firm controlled by him.  During November 2007, 70,000 shares at a price of $0.21 per share were issued in settlement of $14,700 of debt due to this Company. Mr. Kwan resigned in May 2010.




Ian Thomson, the Company’s former Chief Financial Officer, began in May 2010.  Fees incurred to his Professional Corporation since his inception to December 31, 2010 total $27,700.




For the year ended March 31, 2010, the Company incurred $25,000 (2009 and 2008 - $nil) in consulting fees from a private company in which Christopher Cooper, a director of the Company is the principal shareholder. These fees were in regards to investor relations activities and have been included in general and administrative expenses on the statement of operations.  The fees were not incurred for Mr. Cooper’s services as a director.





For the year ended March 31, 2010, the Company incurred $62,186 (2009 and 2008 - $nil) in legal fees from a law firm in which Scott Reeves, a director and Corporate Secretary of the Company is a principal. These fees have been included in professional fees on the statement of operations. Accounts payable and accrued liabilities as at March 31, 2010 includes $12,176 with respect to these fees.   The fees were not incurred for Mr. Reeves’s services as a director.


31





For the year ended March 31, 2010, the Company incurred $91,775 in office and rental fees from Poplar Point Energy Ltd., a company related by virtue of certain common officers and directors. Accounts payable  and accrued liabilities as at March 31, 2010 includes $35,040 with respect to these fees.





For the year ended March 31, 2010, the Company incurred $154,160 (2009 - $nil) in management and engineering consulting fees from a private company in which a director and officer of the Company is the principal shareholder.  Of these fees $131,295 (2009 - $nil) has been capitalized to property and equipment with the remaining


$22,865 included in consulting fees on the statement of operations.





From April 2009 to September 2009, Mr. Spady received $1,500 per month for his services as a director.  In addition, Mr. Spady received a $10,000 initial retainer fee, bringing his total compensation to $19,000 for the period April 2009 through December 2009.  Mr. Spady resigned in August, 2010.





C.
Interests of Experts and Counsel




Not applicable.




Item 8.
Financial Information




A.
Consolidated Statements and Other Financial Information




See the financial statements included under Item 17 “Financial Statements.”




We are not a party to any legal proceedings and we are not aware of any threatened proceedings, which in the aggregate would be material to the business of our company.  In addition, we are not aware of any material proceedings in which any director, any member of senior management, or any of our affiliates is either a party adverse to us or has a material interest adverse to us.




We have never paid cash dividends to our shareholders and have no plans to pay or declare dividends on our common shares in the foreseeable future.




B.
Significant Changes




The Company completed a purchase of producing conventional oil and gas assets in Alberta, Canada for $5.1 million in February, 2011.




Item 9.
The Offer and Listing




A.
Offer and Listing Details




Our common shares were listed for trading on the TSX Venture Exchange in Canada under our prior corporate name, Global Net Entertainment Corp, for a certain period prior to October 1, 2003.  On October 1, 2003, trading in our shares of common stock was suspended as a result of our failure to file annual and quarterly financial statements.  On November 6, 2006, trading in our common shares was transferred to the NEX board of the TSX Venture Exchange in Canada and trading commenced on the NEX board on November 17, 2006 under the symbol “GDMH.”  During the period that trading was suspended, we consolidated our common shares on a 1:5 basis and the trading which commenced on November 17, 2006 was of consolidated shares.  The trading prices provided below for the period subsequent to November 17, 2006 relate to the consolidated common shares.  On May 1, 2008, we initiated a suspension in the trading of our common shares pending the public announcement of the letters of intent relating to the BANG and First West acquisitions, which we entered into on such date.  On July, 2008, our management determined that the trading in our shares of common stock would remain suspended until the closing of the BANG and First West acquisitions. The BANG and First West acquisitions were cancelled at the end of the calendar year of 2008. Trading resumed at the beginning of 2009 and since the end of May 2009 the Company has been trading under the symbol “EDE.” “EDE” better suits the Company’s new direction as an oil and gas company and at a meeting of the shareholders held on July 20, 2009, the Company’s shareholders approved a change of the Company’s name from “Guildhall Minerals Ltd.” to “Edge Resources Inc.” to reflect the change in the Company’s primary business focus.


32


All of the following trading prices are expressed in Canadian dollars.




Annual Stock Information




The following table sets forth, for each of the years indicated, the range of high and low prices of our common shares on the TSX Venture Exchange.




Fiscal year ended March 31,

High


Low2010

$
0.40


$
0.162009

$
0.35


$
0.0752008

$
0.70


$
0.252007

$
0.35


$
0.222006


—



—








Quarterly Stock Information




The following table sets forth, for the periods indicated, the high and low prices of our common shares on the NEX board of the TSX Venture Exchange:




High


Low2006First Quarter


—



—Second Quarter


—



—Third Quarter


—



—Fourth Quarter

$
0.32


$
0.102007First Quarter

$
0.32


$
0.22Second Quarter

$
0.35


$
0.28Third Quarter

$
0.33


$
0.27Fourth Quarter

$
0.34


$
0.262008First Quarter

$
0.495


$
0.25Second Quarter

$
0.70


$
0.42Third Quarter


—



—Fourth Quarter

$
0.50


$
0.062009First Quarter

$
0.35


$
0.075Second Quarter

$
0.34


$
0.28Third Quarter

$
0.34


$
0.23Fourth Quarter

$
0.32


$
0.172010First Quarter

$
0.34


$
0.17Second Quarter

$
0.40


$
0.27Third Quarter

$
0.285


$
0.20Fourth Quarter

$
0.345


$
0.16





Monthly Stock Information




The following table sets forth, for each of the most recent six months, the range of high and low prices of our common shares on the TSX Venture Exchange.




Month

High


LowOctober 2010

$
0.23


$
0.16November  2010

$
0.23


$
0.185December 2010

$
0.30


$
0.195January 2011

$
0.40


$
0.28February 2011

$
0.47


$
0.34March 2011

$
0.42


$
0.31


33


B.
Plan of Distribution




Not applicable.




C.
Markets




Our common shares are listed for trading on the TSX Venture Exchange in Canada under the symbol “EDE.”




D.
Selling Shareholders




Not applicable.





E.
Dilution




Not applicable.




F.
Expense of the Issue




Not applicable.




Item 10.
Additional Information




A.
Share Capital




Our authorized capital consists of an unlimited number of common shares without par value.  As at the close of business on December 31, 2010 there were 47,374,976 common shares issued and outstanding, and as of December 31, 2009, there were 38,825,924 common shares issued and outstanding, all of which are validly issued and fully paid shares.  Each share has attached to it one non-cumulative vote.




A summary of the transactions for the 2010, 2009, and 2008 fiscal years is as follows:




Common

Shares


Value


Contributed

SurplusBalance, March 31, 2007


12,162.812


$
9,915.988


$
60,000Shares issued under debt settlement arrangements @ $0.21 per share


320,000



67,200



-Warrants exercised shares issued for cash @ $0.15 per share


4,160,200



624,030



-Balance, March 31, 2008


16,643,012



10,607,218



60,000Shares issued for cash


8,000,000



400,000



-Balance, March 31, 2009


24,643,012


$
11,007,218


$
60,000Shares and warrants issued for cash


18,468,799


$
3,675,090


$
493,089Balance, March 31, 2010


43,111,811


$
14,682,308


$
553,089


34


B.
Memorandum and Articles of Association




The information for this section remains unchanged from that of our Registration Statement filed on Form 20-F with the SEC on December 27, 2010.




C.
Material Contracts




See Item 4B “Information on the Company - Business Overview.”


35


D.
Exchange Controls




There are no governmental laws, decrees or regulations existing in Canada, our domicile of incorporation, which restrict the export or import of capital, or the remittance of dividends, interest or other payments to non-resident holders of our common shares.  Nor does Canada have foreign exchange currency controls.




E.
Taxation




Canadian Federal Income Tax Consequences




The following summary of the material Canadian federal income tax considerations generally applicable to shares will vary according to the status of that holder as an individual, trust, corporation, or member of a partnership, the jurisdiction in which that holder is subject to taxation, the place where that holder is resident and, generally, according to that holder’s particular circumstances.  This summary is applicable only to holders who are residents of the United States, have never been a resident of Canada, deal at arm’s length with us, hold their common shares as capital property, and who will not use or hold the common shares in carrying on business in Canada.  Special rules, which are not discussed in this summary, may apply to a United States holder that is an issuer that carries on business in Canada and elsewhere.




This summary is based upon the provisions of the Income Tax Act of Canada and the regulations thereunder, referred to collectively as the Tax Act or ITA, and the Canada-United States Tax Convention as amended by the Protocols thereto, referred to as the Tax Convention, as of the date of this registration statement and the current administrative practices of Canada Revenue Agency.  This summary does not take into account Canadian provincial income tax consequences.




This summary is not exhaustive of all possible income tax consequences.  It is not intended as legal or tax advice to any particular holder of common stock and should not be so construed.  Each holder should consult his own tax advisor with respect to the income tax consequences applicable to him in his own particular circumstances.




North American Free Trade Agreement (Canada).




The Investment Act was amended with the North American Free Trade Agreement (NAFTA) to provide for special review thresholds for U.S. persons (including “American-controlled “entities” as defined in the Investment Act).  Under the Investment Act, as amended, an investment in our common shares by a U.S. person would be reviewable only if it was an investment to acquire control of us and the value of our assets was equal to or greater than a specified amount, which increases in stages.  Such amount is currently $150 million.




Disposition of Common Shares




If a non-resident of Canada were to dispose of our common shares to a Canadian corporation which deals or is deemed to deal on a non-arm’s length basis with the non-resident and that, and immediately after the disposition is connected with us (i.e. holds shares representing more than 10% of the voting power and more than 10% of the market value of all of our shares issued and outstanding), the amount by which the fair market value of any consideration (other than any shares of the purchaser corporation) exceeds the paid-up capital of the common shares sold will be deemed to be taxable as a dividend paid by the purchasing corporation, either immediately or eventually by means of a deduction in computing the paid-up capital of the purchasing corporation, and subject to withholding taxes as described below.




Under the Tax Act, a gain from the sale of common shares by a non-resident will not be subject to Canadian tax, provided the shareholder (and/or persons who do not deal at arm’s length with the shareholder) has not held a “substantial interest” in us (25% or more of the shares of any class of our stock) at any time in the five years preceding the disposition.  Generally, the Tax Convention will exempt from Canadian taxation any capital gain realized by a resident of the United States, provided that the value of the common shares is not derived principally from real property situated in Canada.


36


Dividend




In the case of any dividends paid to non-residents, we withhold the Canadian tax and remit only the net amount to the shareholder.  By virtue of Article X of the Tax Convention, the rate of tax on dividends paid to residents of the United States is generally limited to 15% of the gross dividend (or 5% in the case of certain corporate shareholders owning at least 10% of our voting shares.  In the absence of the Tax Convention provisions, the rate of Canadian withholding tax imposed on non-residents is 25% of the gross dividend.  Stock dividends received by nonresidents from us are taxable by Canada as ordinary dividends and therefore the withholding tax rates will be applicable.




Where a holder disposes of common shares to us (unless we acquired the common shares in the open market in the manner in which shares would normally be purchased by any member of the public), this will result in a deemed dividend to the U.S. holder equal to the amount by which the consideration we paid by exceeds the paid-up capital of such stock.  The amount of such dividend will be subject to withholding tax as described above.




Capital Gains




A non-resident of Canada is not subject to tax under the ITA in respect of a capital gain realized upon the disposition of a share of a class that is listed on a prescribed stock exchange unless the share represents “taxable Canadian property” to the holder thereof.  Our common shares will be taxable Canadian property to a non-resident holder if, at any time during the period of five years immediately preceding the disposition, the non-resident holder, persons with whom the non-resident holder did not deal at arm’s length, or the non-resident holder and persons with whom he/she did not deal at arm’s length owned 25% or more of our issued shares of any class or series.  In the case of a nonresident holder to whom our shares represent taxable Canadian property and who is resident of the United States, no Canadian tax will be payable on a capital gain realized on such shares by reason of the Tax Convention unless the value of such shares is derived principally from real property situated in Canada or the non-resident holder previously held the shares while resident in Canada.




United States Federal Income Taxation




The following discussion summarizes the material U.S. federal income tax considerations applicable to the purchase, ownership and disposition of our common shares.  Unless otherwise stated, this summary deals only with shareholders that are U.S. Holders (as defined below) who hold their common shares as capital assets.




As used in this section, the term “U.S. Holder” means a beneficial owner of a common share who is:




1.
an individual citizen or resident of the United States or an individual treated as a U.S. citizen or resident for U.S. federal income tax purposes;




2.
a corporation or other entity taxable as a corporation for U.S. federal income tax purposes created or organized in or under the laws of the United States, any State or the District of Columbia;




3.
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or




4.
any trust if (A)(i) a court within the United States is able to exercise primary supervision over the administration of the trust and (ii) one or more United States persons have the authority to control all substantial decisions of the trust, or (B) such trust validly elects to be treated as a United States person.




The term “Non-U.S. Holder” means a beneficial owner of a common share that is an individual, corporation, estate or trust and is not a U.S. Holder.  The tax consequences to a Non-U.S. Holder may differ substantially from the tax consequences to a U.S. Holder.  Certain aspects of U.S. federal income tax relevant to a Non-U.S. Holder are discussed below.




This description is based on provisions of the U.S. Internal Revenue Code of 1986, as amended, or the Code, existing and proposed U.S. Treasury regulations promulgated thereunder, administrative and judicial interpretations thereof, and the U.S.-Canada Tax Treaty, each as in effect as of the date of this document.  These sources may change, possibly with retroactive effect, and are open to differing interpretations.  This description does not discuss all aspects of U.S. federal income taxation that may be applicable to investors in light of their particular circumstances or to investors who are subject to special treatment under U.S. federal income tax law, including:


37


·
insurance companies;




·
dealers in stocks, securities or currencies;




·
financial institutions and financial services entities;




·
real estate investment trusts;




·
regulated investment companies;




·
persons that receive common shares in connection with the performance of services;




·
tax-exempt organizations;




·
persons that hold common shares as part of a straddle or appreciated financial position or as part of a hedging, conversion or other integrated instrument;




·
persons who acquire their common shares through the exercise or cancellation of employee stock options or otherwise as consideration for their services;




·
individual retirement and other tax-deferred accounts;




·
expatriates of the United States and certain former long-term residents of the United States;




·
persons liable for the alternative minimum tax;




·
persons having a “functional currency” other than the U.S. dollar; and




·
direct, indirect or constructive owners of 10% or more, by voting power or value, of our company.




If a partnership or an entity treated as a partnership for U.S. federal income tax purposes owns common shares, the U.S. federal income tax treatment of a partner in such a partnership will generally depend upon the status of the partner and the activities of the partnership.  A partnership that owns common shares and the partners in such partnership should consult their tax own advisors about the U.S. federal income tax consequences of holding and disposing of common shares.




This discussion does not consider the possible application of U.S. federal gift or estate tax or alternative minimum tax.




All investors are urged to consult their own tax advisors as to the particular tax consequences to them of an investment in our common shares, including the effect and applicability of United States federal, state, local and foreign income and other tax laws (including estate and gift tax laws) and tax treaties.




Distributions Paid on the Common Shares




Subject to the discussion below under “Passive Foreign Investment Company Considerations,” a U.S. Holder generally will be required to include in his or her gross income as ordinary dividend income the amount of any distributions paid on the common shares, including the amount of any Canadian taxes withheld, to the extent that those distributions are paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes.  Subject to the discussion below under “Passive Foreign Investment Company Considerations,” distributions in excess of our earnings and profits will be applied against and will reduce the U.S. Holder’s tax basis in its common shares and, to the extent they exceed that tax basis, will be treated as gain from a sale or exchange of those common shares.  Our dividends will not qualify for the dividends-received deduction applicable in some cases to U.S. corporations.


38




Dividends that we pay in Canadian dollars, including the amount of any Canadian taxes withheld therefrom, will be included in your income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day such dividends are received, regardless of whether the payment is in fact converted into U.S. dollars.  A U.S. Holder who receives payment in Canadian dollars and converts them into U.S. dollars at an exchange rate other than the rate in effect on such day will have a foreign currency exchange gain or loss that would be treated as ordinary income or loss.  U.S. Holders should consult their own tax advisors concerning the U.S. tax consequences of acquiring, holding and disposing of Canadian dollars.




Subject to certain limitations, “qualified dividend income” received by a noncorporate U.S. Holder in tax years beginning on or before December 31, 2010 will be subject to tax at a reduced maximum tax rate of 15%.  Distributions taxable as dividends paid on the common shares should qualify for the 15% rate provided that we are not a passive foreign investment company (as described below) for U.S. tax purposes and that either: (i) we are entitled to benefits under the income tax treaty between the United States and Canada, referred to as the U.S.-Canada Tax Treaty, or (ii) the common shares are readily tradable on an established securities market in the United States and certain other requirements are met.  We believe that we are entitled to benefits under the U.S.-Canada Tax Treaty and that the common shares currently are readily tradable on an established securities market.  However, no assurance can be given that the common shares will remain readily tradable.  The rate reduction does not apply unless certain holding period requirements are satisfied.  With respect to the common shares, the U.S. Holder must have held such shares for at least 61 days during the 121-day period beginning 60 days before the ex-dividend date.  The rate reduction also does not apply to dividends received from passive foreign investment companies, see discussion below, or in respect of certain hedged positions or in certain other situations.  The legislation enacting the reduced tax rate contains special rules for computing the foreign tax credit limitation of a taxpayer who receives dividends subject to the reduced tax rate.  U.S. Holders of common shares should consult their own tax advisors regarding the effect of these rules in their particular circumstances.




Subject to the discussion below under “Information Reporting and Back-up Withholding,” a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax on dividends received on common shares unless that income is effectively connected with the conduct by that Non-U.S. Holder of a trade or business in the United States, in which case a corporate Non-U.S. Holder may also be subject to the U.S. branch profits tax.




Foreign Tax Credit




Any dividend income resulting from distributions we pay to a U.S. Holder with respect to the common shares generally will be treated as foreign source income for U.S. foreign tax credit limitation purposes.  Subject to certain conditions and limitations, Canadian tax withheld on dividends may be deducted from taxable income or credited against a U.S. Holder’s U.S. federal income tax liability.  The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income.  For this purpose, any dividend that we distribute generally will constitute “passive category income,” or, in the case of certain U.S. Holders, “general category income.”  The rules relating to the determination of foreign source income and the foreign tax credit are complex, and the availability of a foreign tax credit depends on numerous factors.  Each investor who is a U.S. Holder should consult with its own tax advisor to determine whether its income with respect to the common shares would be foreign source income and whether and to what extent that investor would be entitled to a foreign tax credit.




Disposition of Common Shares




Upon the sale or other disposition of common shares, subject to the discussion below under “Passive Foreign Investment Company Considerations,” a U.S. Holder generally will recognize capital gain or loss equal to the difference between the amount realized on the disposition and the holder’s adjusted tax basis in the common shares.  U.S. Holders should consult their own advisors with respect to the tax consequences of the receipt of a currency other than U.S. dollars upon such sale or other disposition.


39


Gain or loss upon the disposition of the common shares will be treated as long-term if, at the time of the sale or disposition, the common shares were held for more than one year.  The deductibility of capital losses by a U.S. Holder is subject to limitations.  In general, any gain or loss recognized by a U.S. Holder on the sale or other disposition of common shares will be U.S. source income or loss for U.S. foreign tax credit purposes.  U.S. Holders should consult their own tax advisors concerning the source of income for U.S. foreign tax credit purposes and the effect of the U.S.-Canada Tax Treaty on the source of income.




Subject to the discussion below under “Information Reporting and Back-up Withholding,” a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax on any gain realized on the sale or exchange of common shares unless:




1.
that gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States, and, if a tax treaty applies, is attributable to a permanent establishment or fixed base of the Non-U.S. Holder in the United States; or




2.
in the case of any gain realized by an individual Non-U.S. Holder, that holder is present in the United States for 183 days or more in the taxable year of the sale or exchange, and other conditions are met.




Passive Foreign Investment Company Considerations




Investors should note that our company may be a passive foreign investment company, or PFIC, as defined in Section 1297 of the Code.  For U.S. federal income tax purposes, a foreign company is considered a PFIC for any taxable year in which either (i) 75% or more of its gross income is passive income, or (ii) at least 50% of the average value of all of its assets for the taxable year produce or are held for the production of passive income.  For this purpose, passive income generally includes dividends, interest, royalties, rents, annuities and the excess of gains over losses from the disposition of assets which produce passive income.  Any portfolio companies held (directly or indirectly) by our company may also be classified as PFICs.  However, because the determination of whether we are a PFIC is based upon the composition of our income and assets from time to time, we cannot be certain whether or not we will be considered a PFIC for the current taxable year or any future taxable year.




If our company is classified as a PFIC, a U.S. Holder (other than a U.S. Holder who makes a timely QEF election, as discussed below) would be required to allocate to each day in its holding period with respect to the common shares a pro rata portion of any distributions received (or deemed to be received) on the common shares which are treated as “excess distributions,” as defined under the Code.  Generally, an excess distribution is the ratable share of distributions received (or deemed to be received) by a U.S. Holder during the taxable year that is greater than 125% of the average annual distributions received by such U.S. Holder in the three preceding years (or such shorter period as the U.S. Holder may have held such shares).  Any amount of the excess distribution treated as allocable to a prior taxable year would be subject to tax at the highest individual or corporate tax rate, as the case may be, applicable for such prior year and an interest charge will be imposed with respect to the resulting tax liability allocated to each such year.  Any dividends received would not qualify for the reduced maximum tax rate.  Similar rules would apply to distributions with respect to the shares in each portfolio company which is classified as a PFIC, which shares would be considered owned by our company’s shareholders pro rata.  In addition, any gain recognized on a disposition or deemed disposition of shares of our company or shares of a portfolio company which is classified as a PFIC, including on liquidation, would be treated in the same manner as an excess distribution.  Any such gain would be treated as ordinary income rather than as capital gain.




Under certain circumstances, shares held by a Non-U.S. Holder may be attributed to a United States person owning an interest, directly or indirectly, in the Non-U.S. Holder.  In this event, dividends and other transactions in respect of the shares (or the shares of direct or indirect subsidiaries of our company that are classified as PFICs) would be attributed to such United States person for purposes of applying the PFIC rules.




If a U.S. Holder makes a timely qualified electing fund, or QEF, election in respect of its common shares, such U.S. Holder will not be subject to the rules described above.  Instead, the U.S. Holder would be required to include in its income for each taxable year its pro rata share of our ordinary earnings as ordinary income and its pro rata share of our net capital gain as long term capital gain, whether or not such amounts are actually distributed.  A U.S. Holder generally may elect to defer the payment of this tax until distributions are received or the shares are sold, subject to the imposition of an interest charge on such deferral.  We offer no assurance that we will comply with all accounting, recordkeeping and reporting requirements necessary for U.S. Holders to make QEF elections.


40




If the common shares are considered “marketable stock” and if a U.S. Holder elects to “mark-to-market” his common shares, such holder will generally include in income, in each year in which we are considered a PFIC, any excess of the fair market value of the common shares at the close of each tax year over such holder’s adjusted basis in the common shares.  If the fair market value of the common shares had depreciated below the U.S. Holder’s adjusted basis at the close of the tax year, such holder may generally deduct the excess of the adjusted basis of the shares over its fair market value at that time.  However, such deductions will generally be limited to the net mark-to-market gains, if any, that were included in income with respect to such common shares in prior years.  Income recognized and deductions allowed under the mark-to-market provisions, as well as any gain or loss on the disposition of common shares with respect to which the mark-to-market election is made, is treated as ordinary income or loss (except that loss is treated as capital loss to the extent the loss exceeds the net mark-to-market gains, if any, that were included in income with respect to such shares in prior years).  Gain or loss from the disposition of common shares (as to which a “mark-to-market” election was made) in a year in which we are no longer a PFIC will be capital gain or loss.  The common shares will be considered “marketable stock” if they are traded on a qualified exchange, other than in de minimis quantities, on at least 15 days during each calendar quarter.  We believe that the TSX is a qualified exchange.  U.S. Holders should consult their own tax advisers to determine whether a mark-to-market election is available and the consequences of making such an election.




A U.S. Holder will be required to either: (i) file an Internal Revenue Service Form 8621 for our company and each of its (direct and indirect) portfolio companies that are PFICs for each taxable year in which it owns (directly or indirectly) shares in such PFICs, or (ii) file an Internal Revenue Service Form 8621 for our company for each taxable year in which it owns common shares and, in an attachment, provide the information required on Form 8621 for each of the PFICs owned directly or indirectly by our company.




Passive Foreign Investment Company Rules Applicable to Tax Exempt Organizations




If the shareholder is an organization exempt from tax under the Code, or a TEO Shareholder, the PFIC rules would apply to the TEO Shareholder only if a dividend from the PFIC would be taxable to the organization under the Code.  Generally, under Section 512(b) of the Code a dividend from a PFIC and any gain from disposition of shares in a PFIC will not be taxable to a TEO Shareholder.  A dividend from a PFIC or any gain from the disposition of shares in a PFIC held by such organization would be taxable to the TEO Shareholder if shares owned by the TEO Shareholder constituted debt-financed property, within the meaning of Section 514(b) of the Code.  Under Section 514(b), “debt-financed property” is defined generally as any property that is held to produce income and with respect to which there is an acquisition indebtedness.  Section 514(c) generally defines “acquisition indebtedness” as indebtedness incurred by an organization in acquiring property or indebtedness which would not be incurred but for the acquisition of the property and which exists at any time during the taxable year or, if any shares are disposed of during the taxable year, at any time during the 12-month period ending on the date of disposition of the shares.  In determining whether a TEO Shareholder has incurred acquisition indebtedness, the indebtedness of our company will not be attributed to the TEO Shareholder.




If a TEO Shareholder owns shares which constitute debt-financed property, it would be subject to United States federal income taxation under the general PFIC rules summarized above.




Other PFIC Rules




Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder which has not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of shares that would otherwise be tax-deferred (e.g. gifts and exchanges pursuant to corporate reorganizations).  However, the specific U.S. federal income tax consequences to a US Holder may vary based on the manner in which shares are transferred.




Certain complex rules will apply with respect to a U.S. Holder if our company is a PFIC, regardless of whether such U.S. Holder makes a QEF Election.  For example, under Section 1298(b)(6) of the Code, a U.S. Holder that uses shares as security for a loan will, except as may be provided in Treasury Regulations, be treated as having made a taxable disposition of such shares.




41





Information Reporting and Backup Withholding




Payments in respect of common shares may be subject to information reporting to the U.S. Internal Revenue Service and to U.S. backup withholding tax at a rate equal to the fourth lowest income tax rate applicable to individuals (which, under current law, is 28%).  Backup withholding will not apply, however, if you (i) are a corporation or come within certain exempt categories, and demonstrate the fact when so required, or (ii) furnish a correct taxpayer identification number and make any other required certification.  U.S. Holders who are required to establish their exempt status generally must provide such certification on IRS Form W-9.




Backup withholding is not an additional tax.  Amounts withheld under the backup withholding rules may be credited against a U.S. Holder’s U.S. tax liability, and a U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS.




Any U.S. holder who holds 10% or more in vote or value of our common shares will be subject to certain additional United States information reporting requirements.




U.S. Gift and Estate Tax




An individual U.S. Holder of common shares will generally be subject to U.S. gift and estate taxes with respect to common shares in the same manner and to the same extent as with respect to other types of personal property.




F.           Dividends and Paying Agents




Not applicable.




G.           Statement by Experts




Not applicable.




H.           Documents on display




This annual report and the exhibits thereto and any other document we file pursuant to the Exchange Act may be inspected without charge and copied at prescribed rates at the following Securities and Exchange Commission public reference rooms: 100 F Street, N.E., Room 1580, Washington, D.C. 20549; and on the Securities and Exchange Commission Internet site (http://www.sec.gov).  You may obtain information on the operation of the Securities and Exchange Commission’s public reference room in Washington, D.C. by calling the Securities and Exchange Commission at 1-800-SEC-0330 or by visiting the Securities and Exchange Commission’s website at http://www.sec.gov, and may obtain copies of our filings from the public reference room by calling 1-800-SEC-0330.  The Exchange Act file number for our Securities and Exchange Commission filings is 000-52768.  Certain of our material documents or filings can also be viewed on SEDAR (the System for Electronic Document Analysis and Retrieval of the Canadian securities regulatory authorities) at www.sedar.com.  Copies of our material contracts are kept in our  administrative headquarters.




I.           Subsidiary information




Not applicable.




Item 11.
Quantitative and Qualitative Disclosures About Market Risk




See Note 11 to the Financial Statements for the year ended March 31, 2010.




Item 12.
Description of Securities Other Than Equity Securities




None.




42


PART II




Item 13.
Defaults, Dividend Arrearages and Delinquencies




None.




Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds




None.




Item 15.
Controls and Procedures




Evaluation of Disclosure Controls and Procedures




We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer along with our Chief Financial Officer, of the effectiveness of the design of our disclosure controls and procedures (as defined by Exchange Act Rules 13a-15(e) or 15d-15(e)) as of March 31, 2010 pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our Chief Executive Officer along with our Chief Financial Officer concluded that our disclosure controls and procedures are not effective as of March 31, 2010 in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.  Management recognizes that the filing of this report has been delayed by a number of factors and as such, the filing was not made with the specified time period.  The information herein is correct as of the dates noted.




Management’s Annual Report on Internal Control Over Financial Reporting




As noted above, management is responsible for establishing and maintaining adequate internal control over financial reporting.  The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements in accordance with Canadian GAAP. The Company’s internal control over financial reporting includes those policies and procedures that:





·
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets;


·
Provide reasonable assurance that transactions are recorded as necessary to permit preparation and fair presentation of financial statements, and that receipts and expenditures of the company are being made only in accordance with authorizations of Company management; 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.





Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


43





Company management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2010 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework, Guidance for Smaller Public Companies.  Based on this assessment, management believes that, as of March 31, 2010, the Company’s internal control over financial reporting was effective.




Changes in Internal Controls over Financial Reporting




There was no change in our internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.




Item 15T.  Controls and Procedures




Not applicable.




Item 16.
[Reserved]




Item 16A.  Audit Committee Financial Expert




Our Board of Directors has determined that Scott Reeves meets the definition of an audit committee financial expert, as defined by rules of the Securities and Exchange Commission. For a brief listing of the relevant experience of Mr. Reeves, see Item 6.A. “Directors, Senior Management and Employees – Directors and Senior Management.”




Item 16B.  Code of Ethics




We have adopted a code of ethics (as that term is defined in Form 20-F) which is applicable to our Directors, Officers and Employees.  This code of ethics includes provisions for compliance with laws, rules and regulations, fair dealing, confidentiality, integrity and conflicts of interest.  A copy of the Company’s code of ethics is attached to this Annual Report on Form 20-F.




Item 16C.  Principal Accounting Fees and Services




The following table shows the fees paid or accrued by us for the audit and other services provided by Deloitte & Touche LLP for the fiscal periods shown.




March31, 2010


March 31, 2009Audit Fees

$
35,000


$
-Audit — Related Fees


-



-Tax Fees


-



-All Other Fees


23,000



-Total

$
58,000


$
-





The following table shows the fees paid or accrued by us for the audit and other services provided by Dale Matheson Carr-Hilton LaBonte LLP for the fiscal periods shown.





March 31, 2010


March 31, 2009Audit Fees

$
-


$
20,000Audit — Related Fees


-



-Tax Fees


-



-All Other Fees


-



10,000Total

$
-


$
30,000


44





Audit fees consist of fees billed for professional services rendered for the audit of our financial statements and review of the interim financial statements included in quarterly reports and services that are normally provided by the above auditors in connection with statutory and regulatory fillings or engagements.  In the absence of a formal audit committee, the full Board of Directors pre-approves all audit and non-audit services to be performed by the independent registered public accounting firm in accordance with the rules and regulations promulgated under the Securities Exchange Act of 1934, as amended. The Board of Directors pre-approved 100% of the audit, audit-related and tax services performed by the independent registered public accounting firm in fiscal 2010. The percentage of hours expended on the principal accountant’s engagement to audit the Company’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was 0%.




Item 16D.  Exemptions From the Listing Standards for Audit Committees




Not applicable.




Item 16E.  Purchases of Equity Securities by the Issuer and Affiliated Purchasers




None.




Item 16F.  Change in Registrant’s Certifying Accountant




Dale Matheson Carr-Hilton LaBonte LLP (“DM”) was previously the principal accountants for the Company. On June 18, 2009  we dismissed DM and engaged Deloitte & Touche LLP (“Deloitte”) as our principal accountants for the year ended March 31, 2010. During the two fiscal years ended March 31, 2009 and 2008, and the subsequent interim period through June 18, 2009, there were: (1) no disagreements between DM and us on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreement if not resolved to their satisfaction would have caused them to make reference in connection with their opinion to the subject matter of the disagreement; (2) nor reportable events. The Company’s Board of Directors approved the decision to change independent certifying accountants.




The audit reports of DM on the consolidated financial statements of the Company as of and for the fiscal years ended March 31, 2009 and 2008 did not contain any adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. A letter from DM is attached as Exhibit 15.1 to this Annual Report on Form 20-F.




Prior to June 18, 2009, the date that Deloitte was retained as our principal independent accountants:




(i) We did not consult with Deloitte regarding either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements;




(ii) Neither a written report nor oral advice was provided to us by Deloitte that they concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue; and




(iii) We did not consult Deloitte regarding any matter that was either the subject of a “disagreement” (as defined in Item 16F(a)(1)(iv) of Form 20-F and the related instructions) or any of the reportable events set forth in Item 16F (a)(1)(v) of Form 20-F.




Item 16G.  Corporate Governance




Not applicable.


45




PART III




Item 17.
Financial Statements




The financial statements beginning on page 50 are filed as part of this Annual Report.




Item 18.
Financial Statements




Not applicable.




Item 19.
Exhibits




Exhibit

Description1.1

Articles of Association (1)1.2

Articles of Continuance (7)4.1

Option Agreement dated February 20, 2007, by and between the Registrant and Nicoya Explorations Ltd. (2)4.2

Letter Agreement dated March 20, 2008, amending the Option Agreement dated February 20, 2007, by and between the Registrant and Nicoya Explorations Ltd. (3)4.3

Letter of Intent dated May 1, 2008, by and between the Registrant and British American Natural Gas Corporation (4)4.4

Letter of Intent dated May 8, 2008, by and between the Registrant and First West Petroleum Inc. (5)4.5

Agreement of Purchase and Sale – Gilby Area, Alberta (Willsden Green Property) (6)4.6*

Audit Committee Charter4.7*

Form of Flow-Through Shares Subscription Agreement - Dec. 20104.8*

Form of Flow-Through Shares Subscription Agreement - March 20114.9

Executive Consulting Agreement dated June 1, 2009, between the Registrant and FiveN Consulting Inc. (7)4.10

Executive Consulting Agreement, dated June 1, 2009, between the Registrant and 1271632 Alberta Ltd. (7)4.11

Executive Consulting Agreement, dated June 1, 2009, between the Registrant and Freeport Energy Services Ltd.  (7)4.12*

2005 Stock Option Plan4.13*

Amended & Restated Promissory Note - Coronado Contracting Corp., dated Sept. 24, 20104.14*

Letter of Intent with Mosaic Energy Ltd., dated January 4, 20114.15*

Promissory Note - Mpidherney’s Trucking Ltd., dated Feb. 4, 20114.16*

Promissory Note - Coronado Contracting Corp., dated Sept. 24, 20104.17*

Form of Unit Subscription Agreement - March 20114.18*

Form of Unit Subscription Agreement - Jan. 20114.19*

Form of Flow-Through Unit Subscription Agreement - Jan. 20114.20*

Form of Common Shares Subscription Agreement - Dec. 201011.1*

Code of Business Conduct and Ethics12.1*

Section 302 Certification of Chief Executive Officer12.2*

Section 302 Certification of Chief Financial Officer13.1*

Section 906 Certification of Chief Executive and Chief Financial Officer15.1*

NI 51-101 Report of AJM Petroleum Consultants15.2*

Letter from Dale Matheson Carr-Hilton LaBonte LLP, dated June 18, 2009








(1)
Filed as Exhibit 1 to the Registrant’s Registration Statement on Form 20-F, filed with the Securities and Exchange Commission on August 15, 2007, and incorporated herein by reference.


46





(2)
Filed as Exhibit 4 to the Registrant’s Registration Statement on Form 20-F, filed with the Securities and Exchange Commission on August 15, 2007, and incorporated herein by reference.


(3)
Filed as Exhibit 4.2 to the Registrant’s Registration Statement on Form 20-F, filed with the Securities and Exchange Commission on October 20, 2009, and incorporated herein by reference.


(4)
Filed as Exhibit 4.3 to the Registrant’s Registration Statement on Form 20-F, filed with the Securities and Exchange Commission on October 20, 2009, and incorporated herein by reference.


(5)
Filed as Exhibit 4.4 to the Registrant’s Registration Statement on Form 20-F, filed with the Securities and Exchange Commission on October 20, 2009, and incorporated herein by reference.


(6)
Filed as Exhibit 4.5 to the Registrant’s Registration Statement on Form 20-F, filed with the Securities and Exchange Commission on October 20, 2009, and incorporated herein by reference.


(7)
Filed as Exhibit 10.1 to the Registrant’s Registration Statement on Form 20F/A, filed with the Securities and Exchange Commission on April 7, 2010, and incorporated herein by reference.





* Filed herewith


47


SIGNATURE





The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.




EDGE RESOURCES INC.By:
/s/ Nathan SteinkeName:
Nathan SteinkeTitle:
Chief Financial Officer(Principal Financial Officer& Principal Accounting Officer)Dated: September 1, 2011


48


Edge Resources Inc.


(an exploration stage company)


(formerly Guildhall Minerals Ltd.)





Financial Statements


For the years ended


March 31, 2010, 2009 and 2008





Contents




Auditors’ Report - Deloitte & Touche LLP

50Auditors’ Report - Dale Matheson Carr-Hilton Labonte, LLP

52Financial StatementsBalance Sheets

53Statements of Loss, Comprehensive Loss and Deficit

54Statements of Cash Flows

55Notes to Financial Statements

56 – 74


49




REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS





To the Board of Directors and Shareholders of


Edge Resources Inc.





We have audited the balance sheet of Edge Resources Inc. as at March 31, 2010 and the statements of loss, comprehensive loss and deficit and cash flows for the year then ended.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audit.





We conducted our audit in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.





In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at March 31, 2010 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles.





On June 11, 2010, we reported separately to the shareholders of Edge Resources Inc. on our audit, conducted in accordance with Canadian generally accepted auditing standards, of the financial statements for the same period prepared in accordance with Canadian generally accepted accounting principles, but which excluded Note 14, Differences Between Canadian and United States of America Generally Accepted Accounting Principles (GAAP).





/s/ Deloitte & Touche LLP





Independent Registered Chartered Accountants


Calgary, Canada


June 11, 2010 (except Note 14, which is as of August 31, 2011)


50





COMMENTS BY INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS ON CANADA-UNITED STATES OF AMERICA REPORTING DIFFERENCE





The standards of the Public Company Accounting Oversight Board (United States) require the addition of an explanatory paragraph when the financial statements are affected by conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as those described in Note 1 to the financial statements and when there are changes in accounting principles that have a material effect on the comparability of the Company’s financial statements, such as the changes described in Note 2(m) to the financial statements. Although our audit was conducted in accordance with both Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), our report to the board of directors and shareholders on the financial statements of the Company dated June 11, 2010 (except Note 14, which is as of August 31, 2011), is expressed in accordance with Canadian reporting standards which do not permit a reference to such going concern conditions and do not require a reference to such changes in accounting principles in the auditors’ report when the changes are properly accounted for and adequately disclosed in the financial statements.





/s/ Deloitte & Touche LLP





Independent Registered Chartered Accountants


Calgary, Canada


June 11, 2010 (except Note 14, which is as of August 31, 2011)


51











INDEPENDENT AUDITORS’ REPORT


To the Shareholders of Edge Resources Inc. (formerly Guildhall Minerals Ltd.)





We have audited the balance sheets of Edge Resources Inc. (formerly Guildhall Minerals Ltd.) as at March 31, 2009 and 2008 and the statements of loss, comprehensive loss and deficit, cash flows and shareholders’ equity for the years ended March 31, 2009, 2008 and 2007.  These financial statements are the responsibility of the company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.





We conducted our audits in accordance with Canadian generally accepted auditing standards and with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.





In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at March 31, 2009 and 2008 and the results of its operations and its cash flows for the years ended March 31, 2009, 2008 and 2007 in accordance with Canadian generally accepted accounting principles.




“DMCL”




DALE MATHESON CARR-HILTON LABONTE LLP


CHARTERED ACCOUNTANTS


Vancouver, Canada


September 30, 2009, except for Note 14, which is as of May 25, 2010





COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA
 -UNITED STATES REPORTING DIFFERENCES





In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as those described in Note 1 to the financial statements.  Our report to the shareholders dated September 30, 2009 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors’ report when these are adequately disclosed in the financial statements.





“DMCL”




DALE MATHESON CARR-HILTON LABONTE LLP


CHARTERED ACCOUNTANTS


Vancouver, Canada


September 30, 2009, except for Note 14, which is as of May 25, 2010








52




EDGE RESOURCES INC.
 BALANCE SHEETS
 
 As at March 31,

2010


2009ASSETSCurrent AssetsCash and cash equivalents

$
253,158


$
94,822Accounts receivable


391,966



-Prepaid expenses and deposits


55,222



-700,346



94,822Promissory note receivable (Note 3)


-



1Deferred acquisition and financing costs


-



37,164Property and equipment (Note 4)


2,783,808



-$
3,484,154


$
131,987LIABILITIES & SHAREHOLDERS ' EQUITYCurrent LiabilitiesAccounts payable & accrued liabilities

$
276,251


$
30,546Loan payable


-



80,000276,251



110,546Asset retirement obligation (Note 5)


45,869



-322,120



110,546Shareholders ' EquityShare capital (Note 7 (b))


14,682,308



11,007,218Warrants (Note 7 (d))


349,907



-Contributed surplus (Note 7 (e))


553,089



60,000Deficit


(12,423,270
)


(11,045,777
)3,162,034



21,441$
3,484,154


$
131,987Nature of Operations and Going Concern Assumption (Note 1)Commitments (Note 9)
 
 APPROVED BY THE DIRECTORS:Signed: Chris Cooper
DirectorSigned: Ted Konyi
Director
 
 The accompanying notes are an integral part of the financial statements.




53




EDGE RESOURCES INC.
 STATEMENTS OF LOSS,
 COMPREHENSIVE LOSS AND DEFICIT
 
 For the years ended March 31,

2010


2009


2008RevenuesInterest income

$
-


$
20,426


$
7,714ExpensesConsulting fees


250,518



47,250



-Director fees


19,000



21,500



-Exploration tax credits received


-



(2,461
)


(11,114
)Foreign exchange loss (gain)


987



(96,408
)


-General and administration


359,429



143,926



112,994Stock-based compensation


493,089



-



-Amortization and accretion


6,677



-



-Management fees


-



22,500



30,000Professional fees


247,792



86,562



26,916Write-down of mineral properties


-



33,500



1Write-off of acquisition and financing costs


-



268,279



-Write-down of note receivable (Note 3)


1



522,350



-Write-down of accounts payable


-



(27,430
)


-1,377,493



1,019,568



158,797Loss and comprehensive loss for the year


(1,377,493
)


(999,142
)


(151,083
)Deficit, beginning of year


(11,045,777
)


(10,046,635
)


(9,895,552
)Deficit, end of year

$
(12,423,270
)

$
(11,045,777
)

$
(10,046,635
)Basic and diluted loss per share (Note 7 (f))

$
(0.04
)

$
(0.05
)

$
(0.01
)Weighted average number of shares outstanding


36,127,595



18,218,342



13,427,325
 
 The accompanying notes are an integral part of the financial statements.


54
  EDGE RESOURCES INC.
 STATEMENT OF CASH FLOWS
 
 For the years ended March 31,

2010


2009


2008Cash provided by (used in) operating activitiesLoss for the year

$
(1,377,493
)

$
(999,142
)

$
(151,083
)Items not involving cash:Amortization and accretion


6,677



-



-Stock-based compensation


493,089



-



-Write-down of mineral properties


-



33,500



1Accrued interest on note receivable


-



(16,720
)


-Write-down of note receivable


1



522,350



-Write-down of accounts payable


-



(27,430
)


-Non cash management fees and expenses


-



-



19,041Foreign exchange gain on note receivable


-



(103,031
)


-(877,726
)


(590,473
)


(132,041
)Change in non-cash working capital items related to operating activites


(249,305
)


(19,274
)


(3,867
)(1,127,031
)


(609,747
)


(135,908
)Cash provided by (used in) investing activitiesPromissory note receivable


-



(402,600
)


-Expenditures on property and equipment


(2,707,452
)


-



-Pre acquisition and financing costs


-



(37,164
)


-Change in non-cash working capital itemsrelated to investing activites


34,230



-



-(2,673,222
)


(439,764
)


-Cash provided by (used in) financing activitiesShares issued for cash


4,215,800



400,000



624,030Share issue costs


(190,803
)


-



-Loan payable


(80,000
)


80,000



-Change in non-cash working capital items related to financing activites


13,592



-



-3,958,589



480,000



624,030Increase (decrease) in cash and cash equivalentsduring the year


158,336



(569,511
)


488,122Cash and cash equivalents, beginning of year


94,822



664,333



176,211Cash and cash equivalents, end of year

$
253,158


$
94,822


$
664,333
 Supplemental Cash Flow Information (Note 13)
 The accompanying notes are an integral part of the financial statements.
  55




1.  Nature of Operations and Going Concern Assumption





Edge Resources Inc. (the “Company” or “Edge”) (formerly Guildhall Minerals Ltd.) was incorporated under the laws of the Province of British Columbia on September 13, 1968.  The shares of the Company were reinstated for trading on the NEX board of the TSX Venture Exchange and graduated to the TSX Venture Tier 2 on May 27, 2009.  The Company is engaged in the exploration for and the production of crude oil and natural gas in Western Canada.





These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. During the year ended March 31, 2010, the Company incurred a net loss of $1.38 million.  The Company’s ability to continue as a going concern is dependent upon the Company achieving profitable results on an ongoing basis, and the raising of funds from new debt or equity issues to provide it with sufficient resources to fund its operations, commitments (see note 9) and exploration and development activities.  Although management’s efforts to raise capital have been successful in the past, there is no certainty that they will be able to do so in the future. If the Company is unsuccessful in raising additional capital, the Company may have to sell or farm out certain properties. If the Company cannot sell or farm out certain properties, it will be unable to participate with joint venture partners and may forfeit rights to some of its properties.





Production has commenced subsequent to the end of the year, however profitable operations have not yet been achieved.  Management is currently pursuing financing alternatives and believes that financing will be obtained which will allow the Company to fulfill its commitments.  If the going concern basis is not appropriate, adjustments may be necessary to the carrying amounts and classification of the Company’s assets and liabilities.





Property and equipment is recognized in these financial statements in accordance with the accounting policies described in Note 2. Accordingly, the carrying values represent costs incurred to date, net of write-downs, and do not necessarily reflect present or future values. The continued operations of the Company and the recoverability of amounts shown for the properties is dependent upon the existence of economically recoverable reserves and the availability of resources to continue its exploration for and development of crude oil and natural gas.





These financial statements do not reflect the adjustments to the amounts and classifications of the assets and liabilities that would be necessary if the Company were unable to continue operations for the foreseeable future and such adjustments may be significant.





The Company has reviewed the differences between Canadian GAAP and US GAAP for the purposes of filing financial statement information in the United States.  See note 14 for further information.





2.  Significant Accounting Policies





The financial statements of the Company have been prepared by management in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”).  The financial statements have, in management’s opinion, been properly prepared using careful judgment with reasonable limits of materiality and within the framework of the significant accounting policies summarized below:





(a)  Cash and cash equivalents





Short-term investments with initial maturities less than three months are considered to be cash equivalents and are recorded at fair value.


56


2.  Significant Accounting Policies  (continued)





(b)  Financial instruments





The Company classifies all financial instruments as held-to-maturity, available-for-sale, held-for-trading, loans and receivables, or other liabilities. Financial assets held to maturity, loans and receivables, and other liabilities, other than those classified as held-for-trading or available-for-sale, are measured at fair value on inception and then subsequently carried at amortized cost except to recognize other than temporary impairment. Available-for-sale instruments are measured at fair value with unrealized gains and losses recognized in other comprehensive income. Instruments classified as held-for-trading are measured at fair value with unrealized gains and losses recognized in the Statements of Loss.





The Company has classified its financial instruments as follows:




Cash and cash equivalents
Held-for-tradingAccounts receivable
Loans and receivablesAccounts payable and accrued liabilities
Other liabilitiesLoan payable
Other liabilities


Transaction costs are expensed as incurred for financial instruments classified as held for trading.  For other financial instruments, transaction costs are capitalized on initial recognition.





Comprehensive loss is the change in equity of the Company during the period as a result of transactions and other events and circumstances from non-owner sources.  There were no comprehensive loss items during the years ended March 31, 2010, 2009, and 2008; accordingly, comprehensive loss is equal to net loss.





(c)  Joint interests





The Company conducts substantially all of its crude oil and natural gas exploration and production activities through joint interests, and the accounts reflect only its proportionate interest in such activities.





(d)  Property and equipment





(i)         Crude oil and natural gas properties





The Company follows the full cost method of accounting. All costs of acquiring crude oil and natural gas properties and related exploration and development costs, including overhead charges directly related to these activities, are capitalized and accumulated in one cost center. The costs associated with the acquisition and evaluation of unproved properties are excluded from the depletion base, until such time when proved reserves can be assigned to these assets or impairment occurs. Maintenance and repairs are charged against income (loss), and renewals and enhancements that extend the economic life of the property and equipment are capitalized.





Gains and losses are not recognized on disposition of crude oil and natural gas properties unless that disposition would alter the rate of depletion by 20% or more.


57





2.  Significant Accounting Policies (continued)





(d)  Property and equipment (continued)





The Company applies a two-stage ceiling test at least annually to capitalized costs to ensure that such costs do not exceed the undiscounted future cash flows from production of proved reserves. Undiscounted future cash flows are calculated based on management’s best estimate of forward indexed prices applied to estimated future production of proved reserves, less estimated future operating costs, royalties, future capital development costs and abandonment costs. When the carrying amount of a cost centre is not recoverable the second stage of the process will determine the fair value of the cost centre and its carrying amount would be written down to this amount. The second stage requires the calculation of discounted future cash flows from proved plus probable reserves. The fair value is estimated using accepted present value techniques, which incorporate risks and other uncertainties when determining expected cash flows.





The cost of unproved properties is excluded from the preceding impairment test, and is subject to its own impairment test on at least an annual basis.





(ii)
Furniture and equipment





Furniture and equipment are recorded at cost less accumulated amortization. Amortization is provided at rates designed to amortize the cost of the assets over their estimated useful lives as follows:




Computer equipment
-
30%, declining balanceComputer software
-
50%, declining balance


(e)     Depletion and amortization





Capitalized costs of proved crude oil and natural gas properties are depleted using the unit of production method based on estimated proved crude oil and natural gas reserves before any royalty deductions as determined by independent engineers. The basis for this calculation includes the estimated future development costs of proved undeveloped reserves. Natural gas is converted using the equivalent of six thousand cubic feet of natural gas to one barrel of crude oil.





(f)    Asset retirement obligation





The Company recognizes the estimated fair value of an asset retirement obligation (“ARO”) in the period in which it is incurred.  The fair value of the estimated ARO is recorded as a liability with a corresponding increase in the carrying amount of the related asset. ARO obligations are initially measured at fair value and subsequently adjusted for the accretion and any changes to the underlying cash flows. The capitalized amount is depleted on a unit-of-production basis over the life of the proven reserves. The liability amount is increased each reporting period due to the passage of time and the amount of accretion is charged to earnings (loss) in the period. Revisions to the estimated timing of cash flows or to the original estimated undiscounted cost would also result in an increase or decrease to the ARO and the capitalized amount. Actual costs incurred are charged against the ARO to the extent of the recorded liability. Any difference between the actual costs incurred and the recorded liability is recognized as a gain or loss in the period in which the costs are incurred.


58





2.  Significant Accounting Policies (continued)





(g)  Income taxes





The Company follows the liability method of accounting for income taxes. Under this method, future income taxes are based on the differences between assets and liabilities reported for accounting purposes and those reported for income tax purposes. The rates used in the future income tax calculation are substantively enacted at the time of the calculation. The effect of a change in rates on future tax assets and liabilities is recognized in income (loss) in the period in which the change occurs. Future income tax assets are calculated and if realization is not considered more likely than not, a valuation allowance is provided.





(h)   Warrants





The Company issues share purchase warrants from time to time.  These warrants are measured and recorded as equity instruments at fair value using a Black-Scholes pricing model.





(i)    Revenue recognition





Revenues associated with the sale of crude oil and natural gas are recognized when title and risks and rewards of ownership passes from the Company to its customers. The costs associated with the delivery, including operating, transportation and production-based royalty expenses, are recognized in the same period in which the related revenue is earned and recorded.





(j)    Stock-based compensation and other stock-based payments





The Company uses the fair value method of accounting for the share option plan (Note 7(c)).Under this method, compensation cost is measured at fair value using a Black Scholes option pricing model at the date of grant and expensed over the vesting period of the option.  The Company does not incorporate an estimated forfeiture rate for stock options that will not vest but instead accounts for forfeitures as a change in estimate in the period in which they occur.





Transactions to acquire goods or services by granting equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instruments, whichever is more reliably measured. The asset or cost is recognized in the same period as if the Company had paid cash for the goods and services.





(k)   Per share amounts





Basic loss per common share is computed by dividing earnings (loss) from operations by the weighted average number of common shares outstanding for the period.





The Company uses the treasury stock method to determine the dilutive effect of stock options and other dilutive instruments. This method assumes that proceeds received from the exercise of in-the-money stock options and other instruments, are used to repurchase common shares at the average market price of the period.  Diluted earnings (loss) per share are computed by giving effect to the potential dilution that would occur if stock options and other dilutive instruments were exercised.


59





2.  Significant Accounting Policies (continued)





(l)  Measurement uncertainty





The preparation of financial statements in accordance with Canadian generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. The Company’s most significant areas of estimation are asset retirement obligations, stock based compensation expenses, valuation of accounts receivable, completeness and accuracy of accounts payable and accrued liabilities, and the valuation of crude oil and natural gas properties.





The value of the asset retirement obligation depends on estimates of credit adjusted risk free interest rates, future restoration and reclamation expenditures and the timing of expenditures.





The Black Scholes option valuation model was developed for use in estimating the fair value of traded options and warrants which have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions including the expected stock price volatility.





Amounts recorded for depletion, amortization and accretion and amounts used for the ceiling test calculation and impairment of unproven properties are based on estimates of crude oil and natural gas reserves and future costs required to develop and reclaim and abandon those reserves and explore unproven properties.





The financial statements include accruals based on the terms of existing joint venture agreements. Due to varying interpretations of the definition of terms in these agreements the accruals made by management in this regard may be significantly different from those determined by the Company’s joint venture partners. The effect on the financial statements resulting from such adjustments, if any, will be reflected prospectively.





By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future periods could be significant.





(m)  Changes in accounting policies





(i) Adopted in 2010





Goodwill and Intangible Assets





As of April 1, 2009, the Company has adopted Handbook Section 3064 “Goodwill and Intangible Assets” which replaced Handbook Section 3062 “Goodwill and Other Intangible Assets” and Handbook Section 3450 “Research and Development Costs”.  This Section clarifies the criteria for recognizing assets, intangible assets and internally developed assets.  Items no longer meeting the definition of an asset are not recognized with assets.  The provisions relating to the definition and initial recognition of intangible assets are equivalent to the corresponding provisions of International Accounting Standard 38 “Intangible Assets”.  At the time of adoption there was no effect on the financial statements.


60





2.  Significant Accounting Policies (continued)





(m)  Changes in accounting policies (continued)





(i) Adopted in 2010 (continued)





Financial Instruments – Amended Disclosures





Effective April 1, 2009 the Company adopted CICA issued amendments to Handbook Section 3862, “Financial Instruments – Disclosures”. The amendments include enhanced disclosures relating to the fair value of financial instruments and the liquidity risk associated with financial instruments. Section 3862 now requires that all financial instruments measured at fair value be categorized into one of three hierarchy levels. Refer to Note 11 Financial Instruments for enhanced fair value disclosures.





Credit Risk and the Fair Value of Financial Assets and Financial Liabilities





On April 1, 2009, the Company adopted the CICA’s EIC-173, “Credit Risk and the Fair Value of Financial Assets and Financial Liabilities”. The EIC provides guidance on how to take into account credit risk of an entity and counterparty when determining the fair value of financial assets and financial liabilities, including derivative instruments. The adoption of this EIC had no impact on the Company’s financial statements.





(ii) Recently issued





International Financial Reporting Standards





On February 13, 2008, the Accounting Standards Board confirmed the date of changeover from GAAP to International Financial Reporting Standards (“IFRS”). Canadian publicly accountable enterprises must adopt IFRS for their interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The Company is currently undergoing its IFRS conversion process.





Business combinations





In December 2008, the CICA issued section 1582 “Business Combinations”, which will replace CICA section 1581 of the same name.  Under this guidance, the purchase price used in a business combination is based on the fair value of shares exchanged at their market price at the date of the exchange. Currently the purchase price used is based on the market price of the shares for a reasonable period before and after the date the acquisition is agreed upon and announced. This new guidance generally requires all acquisition costs to be expensed, which currently are capitalized as part of the purchase price. Contingent liabilities are to be recognized at fair value at the acquisition date and re-measured at fair value through earnings (loss) each period until settled. Currently only contingent liabilities that are resolved and payable are included in the cost to acquire the business. In addition, negative goodwill is required to be recognized immediately in earnings (loss), unlike the current requirement to eliminate it to the extent possible, by deducting it from non-current assets in the purchase price allocation. Section 1582 will be effective for the Company on April 1, 2011.  The adoption of this standard is not expected to impact the financial statements.


61





2.  Significant Accounting Policies (continued)





(m)  Changes in accounting policies (continued)





(ii) Recently issued (continued)





Change in Accounting Policy: 3855





In July 2009, the CICA amended section 3855, “Financial Instruments – Recognition and Measurement”, in relation to the impairment of financial assets. Amendments to this section have revised the definition of “loans and receivables” and provided that certain conditions have been met, permits reclassification of financial assets from the held-for trading and available-for-sale categories into the loans and receivables category. The amendments also provide one method of assessing impairment for all financial assets regardless of classification. The Company adopted this standard prospectively effective March 31, 2010. The adoption of this section had no effect on the results of operations or financial position of the Company.





3.  Promissory Note Receivable





Pursuant to a loan agreement dated July 16, 2008, the Company loaned $504,520 (US $400,000) by way of promissory note to British American Natural Gas Corporation.  This loan was in conjunction with a proposed transaction.  The loan, together with interest at a rate of 5% per annum is due on July 6, 2010.





Management determined that collection of the amount was uncertain and it was therefore written down to $1 in the prior period.  The remaining amount has been written off in the current period.





4.  Property and Equipment





Accumulateddepletion,amortization and


2010 Net book


2009 Net book


2008 Net bookMarch 31, 2010

Cost


impairment


value


value


ValueCrude oil and natural gas properties

$
2,767,413


$
-


$
2,767,413



-



-Computer equipment


14,172



2,362



11,810



-



-Computer software


5,502



917



4,585



-



-$
2,787,087


$
3,279


$
2,783,808



-



-




General and administrative costs related to exploration and development activities of $469,479 have been capitalized during the year ended March 31, 2010 (March 31, 2009 - $nil) (March 31, 2008 – $nil).





On May 26, 2009, the Company acquired, in an arm’s length transaction, petroleum and natural gas rights, certain tangibles and other miscellaneous interests for consideration equal to $1.5 million.  The Company’s working interest in the oil and gas assets consists of 50% in two sections and 100% in five sections, all of which contain drilled, cased and completed wells.





At March 31, 2010, the Company had not yet achieved production.  As such, no amount for depletion has been recorded.





The Company applied the ceiling test to its crude oil and natural gas properties at March 31, 2010 and no impairment was required.


62


4.  Property and Equipment (continued)





The following table outlines benchmark prices used in the ceiling test at March 31, 2010 (all of the Company’s reserves are natural gas reserves, so only natural gas pricing was used for the ceiling test):





Year

2010


2011


2012


2013


2014

ThereafterNatural Gas-ACEO CDN $/Mcf

$
4.74


$
5.66


$
6.53


$
6.78


$
7.04

+2.0%/year





All barrels of oil equivalent conversions are derived by converting natural gas to crude oil in the ratio of six thousand cubic feet of natural gas to one barrel of crude oil.





5.  Asset Retirement Obligation





The following table presents the continuity of the beginning and ending aggregate carrying amount of the obligation associated with the retirement of crude oil and gas properties.





Year Ended


Year Ended


Year EndedMarch 31 2010


March 31 2009


March 31 2008Asset retirement obligation, beginning of year

$
-


$
-


$
-Liabilities incurred


42,471



-



-Accretion expense


3,398



-



-Asset retirement obligation, end of year

$
45,869


$
-


$
-




The undiscounted amount of cash flows, required over the estimated reserve life of the underlying assets, to settle the obligation, adjusted for inflation, is estimated at $105,990 (2009 - $nil) (2008 - $nil). The obligation was calculated using a credit-adjusted risk free discount rate of 8% and an inflation rate of 2%. It is expected that this obligation will be funded from general Company resources at the time the costs are incurred with the majority of costs expected to occur around the year 2026.





6.  Income taxes





(a)
Income tax expense differs from that which would be expected from applying the effective Canadian federal and provincial 2010 income tax rates of 29.00% (2009 – 31.00%) (2008 – 34.1%) to loss before income taxes as follows:




Year ended March 31,2010


2009


2008Net loss before taxes

$
(1,377,493
)

$
(999,142
)

$
(151,083
)Combined federal and provincial tax rate


29.00
%


31.00
%


34.10
%Expected income tax (recovery)

$
(399,473
)

$
(309,734
)

$
(50,764
)Increase (decrease) resulting from:Change in valuation allowance


206,844



(84,380
)


54,265Other adjustments


43,194



393,804



(3,501
)Non-deductible items


149,435



310



-Provision for income taxes (recovery)

$
-


$
-


$
-


63





6.Income taxes (continued)





(b)
Significant components of the future income tax asset include the following:





2010


2009


2008Property and equipment and asset retirement obligations

$
726,986


$
703,789


$
675,236Share issuance costs


38,161



-



-Other reserves


-



109,020



-Non-capital losses


809,671



555,165



912,462Valuation allowance


(1,574,818
)


(1,367,974
)


(1,587,968
)$
-


$
-


$
-





(c)
At the end of the year, subject to confirmation by income tax authorities, the Company has approximately the following undeducted tax pools:





2010


2009


2008Cumulative Canadian exploration expenditures

$
1,757,281


$
711,483


$
724,365Cumulative Canadian crude oil and natural gas property expenditures


1,267,181



-



-Cumulative Canadian development expenditures


310,311



231,685



231,685Undepreciated capital cost


363,552



-



-Cumulative eligible capital


187,124



201,209



201,209Non-capital losses carried forward


3,238,682



2,135,250



2,259,282Undeducted share issue costs carried forward


152,642



-



-$
7,276,773


$
3,279,627


$
3,416,541





The non deductible losses expire as follows:





Year

Amount ($)2014


141,2142015


88,8802026


125,0552027


723,7052028


160,9252029


671,8262030


1,327,077Total


3,238,682





These pools are deductible from future income at rates prescribed by the Canadian Income Tax Act.





7.Equity Instruments





(a)
Authorized:
Unlimited number of voting common shares without par value

Unlimited number of preferred shares issuable in series


64





7.  Equity Instruments (continued)





(b)       Issued and outstanding:




Year Ended March 31, 2010


Year Ended March 31, 2009


Year Ended March 31, 2008Share Capital - Common Shares

Number


Amount


Number


Amount


Number


AmountBalance, beginning of year


24,643,012


$
11,007,218



16,643,012


$
10,607,218



12,162,812


$
9,915,988Shares issued for cash


18,249,909



4,215,800



8,000,000



400,000



4,480,200



691,230Unit value attributed to warrants


-



(277,857
)


-



-



-



-Share issue costs paid in cash


-



(190,803
)


-



-



-



-Share issue costs paid in stock


218,890



-



-



-



-



-Share issue costs paid in warrants


-



(72,050
)


-



-



-



-Balance, end of year


43,111,811


$
14,682,308



24,643,012


$
11,007,218



16,643,012


$
10,607,218




(i)
During November 2007 the Company issued 320,000 common shares at a price of $0.21 per share pursuant to debt settlement agreements with its three officers to settle amounts owing to them or their firms in the aggregate of $67,200 for services rendered (See Note 8).





(ii)
In January, 2009, the Company completed a non-brokered private placement of 8,000,000 common shares at a price of $0.05 per share, for gross proceeds of $400,000.





(iii)
In May, 2009, the Company completed a private placement of 12,182,912 common shares at a price of $0.25 per share, for gross proceeds of $3,045,750.  The Company paid a cash commission to certain finders equal to 7% of the gross proceeds of the private placement which totaled $151,603 as well as issuing 662,410 finders warrants.  Each warrant, entitles the holder to purchase one common share of the Company at a price of $0.30 per common share for a period of 12 months following the closing on the transaction.  The fair value of the warrants totaling $47,655 was recorded as share issue costs.





(iv)
In October, 2009, the Company completed a financing consisting of the issuance of 2,000,000 common shares at a price of $0.28 per share, for gross proceeds of $560,000.  The Company paid a cash commission of $39,200 and issued 140,000 broker warrants, with each broker warrant being exercisable into one common share at $0.28 for a period of one year following the closing on the transaction.  The securities issued were subject to a hold period ending February 15, 2010.  The fair value of the warrants totaling $9,440 has been recorded as share issue costs.





(v)
In March, 2010, the Company completed a private placement consisting of the issuance of 4,066,997 Units at a price of $0.15 per Unit, for gross proceeds of $610,050.  Each Unit comprises of one common share and on purchase warrant.  Each purchase warrant is exercisable into one common share of the Company at $0.20 for a period of one year following the closing on the transaction.  The Company paid a commission of 7% of the proceeds secured by the broker via the issuance of 218,890 broker warrants.  Each broker warrant is exercisable into one common share at $0.20 for a period of one year following the closing on the transaction.





The pro-rate fair value method has been used to value the transaction.  As a result the value of the Units has been divided with $277,857 being attributed to the warrants and the remaining $332,193 being recorded in share capital.  The fair value of the broker warrants totaling $14,955 has been recorded as share issue costs.


65





7.Equity Instruments (continued)





(c)  Stock options





On September 1, 2005 the Company adopted a stock option plan which provides for the granting of incentive stock options up to a maximum of 10% of the Company’s issued and outstanding common shares.  The vesting requirements and terms of the options are set by the Board on the grant date.  For the 2010 year, all options issued had one quarter vest immediately, with one quarter vesting on each of the six, twelve, and eighteen months from the date of issue.  The following options are outstanding as at March 31, 2010,  2009, and 2008 respectively:




2010


2009


2008Weighed





Weighed





Weighedaverage





average





averageexercise





exercise





exerciseNumber


price


Number


price


Number


priceOptionsBalance, beginning of year


-


$
-



-


$
-



-


$
-Issuance of options


3,900,000



0.30



-



-



-



-Forfeited options


(300,000
)


0.30



-



-



-



-Expired options


(100,000
)


0.30



-



-



-



-Balance, end of year


3,500,000


$
0.30



-


$
-



-


$
-Exercisable, end of year


1,650,000


$
0.30



-


$
-



-


$
-




Subsequent to March 31, 2010, 200,000 options were issued with an exercise price of $0.30 for a term of five years, and 100,000 options were issued with an exercise price of $0.35 for a term of two years.





No options were issued during the 2009 or 2008 fiscal years.  The fair value of stock options is estimated using a Black Scholes option pricing model with the following weighted average assumptions for the 2010 year are:





Options2010Risk free interest rate


26
%Expected dividend rate


0
%Expected stock price volatility


70
%Expected life (years)

5 yearsWeighted-average grant-date fair vale per share of options granted

$
0.18


66





7.  Equity Instruments (continued)





(d) Warrants




2010


2009


2008Number


Amount


Number


Amount


Number


AmountWarrantsBalance, beginning of year


-


$
-



-


$
-



-


$
-Issuance of broker warrants


1,021,300



72,050



-



-



-



-Issuance of warrants


4,066,997



277,857



-



-



4,160,200



-Exercised


-



-



-



-



(4,160,200
)


-Balance, end of year


5,088,297


$
349,907



-


$
-



-


$
-




As at March 31, 2010, the following warrants were outstanding and exercisable:





Number of Warrants


Exercise price

Expiry date662,410
*

$
0.30

May 28, 2010140,000
*

$
0.28

October 14, 2010218,890
*

$
0.20

March 10, 20114,066,997


$
0.20

March 10, 20115,088,297


$
0.22


* - indicates broker warrants issued in respect of financings.





Subsequent to March 31, 2010, 566,160 warrants were exercised and 96,250 warrants expired unexercised.





No warrants were issued during the 2009 fiscal year.  The fair value of warrants is estimated using the Black Scholes option pricing model with the following weighted average assumptions for the 2010 year are:





2010


2010Warrants


Broker warrantsRisk free interest rate


1.36
%


1.14
%Expected dividend rate

nil


nilExpected stock price volatility


60
%


60
%Expected warrant life (years)

1 year


1 yearWeighted-average grant-date fairvalue per warrant granted

$
0.07


$
0.07





(e)  Contributed Surplus




2010


2009


2008Balance, beginning of year

$
60,000


$
60,000


$
60,000Stock compensation expense


493,089



-



-Balance, end of year

$
553,089


$
60,000


$
60,000


67





7.Equity Instruments (continued)





(f)  Loss per share





Basic per share calculations are based on the weighted average number of common shares outstanding during the year ended March 31, 2010 of 36,127,595 (2009 – 18,218,342) (2008 – 13,427,325).  3,500,000 options and 5,088,297 warrants have been excluded from the diluted loss per share computation as they are anti-dilutive due to the Company being in a loss position.





8.  Related Party Transactions





Except as disclosed elsewhere, the Company had the following transactions with related parties:





(a)
For the year ended March 31, 2010, the Company incurred $154,160 (2009 - $nil) (2008 - $nil) in management and engineering consulting fees from a private company in which a director and officer of the Company is the principal shareholder.  Of these fees $131,295 (2009 - $nil) (2008 - $nil) has been capitalized to property and equipment with the remaining $22,865 included in consulting fees on the statement of operations.





(b)
For the year ended March 31, 2010, the Company incurred $43,500 (2009 - $39,000) (2008 - $36,000) in management and accounting consulting fees from a private company in which a director and officer of the Company is the principal shareholder.  These fees have been included in consulting fees on the statement of operations.





(c)
For the year ended March 31, 2010, the Company incurred $25,000 (2009 - $nil) (2008 - $nil) in consulting fees from a private company in which a director of the Company is the principal shareholder.  These fees were in regards investor relations expenses and have been included in general and administrative expenses on the statement of operations.





(d)
For the year ended March 31, 2010, the Company incurred $62,186 (2009 - $nil) (2008 - $nil) in legal fees from a law firm in which a director of the Company is a principal.  These fees have been included in professional fees on the statement of operations.  Accounts payable and accrued liabilities as at March 31, 2010 includes $12,176 with respect to these fees.





(e)
For the year ended March 31, 2010, the Company incurred $19,000 (2009 - $nil) (2008 - $nil) in fees from a director of the Company.  These fees were for time spent on various projects and serving on certain committees.  These fees have been included in general and administrative expenses on the statement of operations.





(f)
For the year ended March 31, 2010 the Company incurred $nil (2009 - $22,500) (2008 - $30,000) in management fees from a past President and CEO. In November 2007, 130,000 shares at a price of $0.21 per share were issued in settlement of $27,300 of debt with respect to these fees.





(g)
For the year ended March 31, 2010 the Company incurred $nil (2009 - $20,854) (2008 - $28,816) in legal fees and disbursements from a law firm in which a former director of the Company is a principal. In November 2007 120,000 shares at a price of $0.21 per share were issued in settlement of debt with respect to these fees





(h)
For the year ended March 31, 2010 the Company incurred $nil (2009 - $21,500) (2008 - $nil) in aggregate fees to three former directors.


68





8.  Related Party Transactions (continued)





(i)
For the year ended March 31, 2010 the Company incurred $nil (2009 - $45,000) (2008 - $nil) in consulting fees from a company in which a director was a principal shareholder.





(j)
For the year ended March 31, 2010 the Company incurred $91,775 (2009 - $nil) (2008 - $nil) in office and rental fees from Poplar Point Energy Ltd., a company related by virtue of certain common officers and directors.  These fees have been included in general and administrative expenditures.  Accounts payable and accrued liabilities as at March 31, 2010 includes $35,040 with respect to these fees.





All related party transactions are in the normal course of operations and have been measured at the agreed to exchange amounts, which is the amount of consideration established and agreed to by the related parties.





9.  Commitments





Except as disclosed elsewhere, the Company has the following commitments:





(a)
The Company signed a lease for premises commencing August 1, 2010 and expiring June 29, 2012.  The lease calls for basic rent in the amount of $1,751 per month over the term of the lease with the first three months of occupancy free.  The lease also requires the Company to pay their share of monthly operating costs.  The future minimum lease payments, exclusive of occupancy costs are as follows:


2010

$
8,7552011

$
21,0122012

$
10,506





(b)
The Company signed a lease for equipment commencing May 1, 2010 and expiring April 30, 2013.  The lease calls for payments in the amount of $290 per month over the term of the lease.





(c)
The Company has entered into a drilling commitment whereby the Company must drill seven wells prior to October 31, 2010.  For each well not spudded by this date, a $25,000 per well penalty will apply.  In addition, a $1,500 per month per well penalty will be assessed the Company for each well not brought onto test production.  Subsequent to the balance sheet date, the Company began surveying locations these wells and is currently nearing the drilling phase.





(d)
The Company has entered into a drilling commitment whereby the Company must drill four wells with the first well spud date being no later than September 30, 2010 and each of the three wells spudded one per quarter for the next three consecutive subsequent quarters.  Should these wells not be completed in the allotted timeframe, the Company will forfeit its working interest in these wells and may have to pay $150,000 in liquidated damages.  The Company was granted an extension and currently has two remaining wells to be drilled to fulfill the commitment.





(e)
In the ordinary course of business, the Company enters into contracts which contain indemnification provisions, such as loan agreements, purchase contracts, service agreements, licensing agreements, asset purchase and sale agreements, operating agreements, leasing agreements, asset use agreements, industry farm-out agreements, etc. In such contracts, the Company may indemnify counter-parties to the contracts if certain events occur. These indemnification provisions vary on an agreement by agreement basis. In some cases, there are no pre-determined amounts or limits included in the indemnification provisions and the occurrence of contingent events that will trigger payment under them is difficult to predict. Therefore, the maximum potential future amount that the Company could be required to pay cannot be estimated.


69





9.Commitments (continued)





(f)
Under the terms of certain agreements and the Company’s by-laws the Company indemnifies individuals who have acted at the Company’s request to be a director and/or officer of the Company, to the extent permitted by law, against any and all damages, liabilities, costs, charges or expenses suffered by or incurred by the individuals as a result of their service.  The claims covered by such indemnifications are subject to statutory and other legal limitation periods.  The nature of the indemnification agreements prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to beneficiaries of such indemnification agreements.





10.  Contingencies





The Company is subject to various regulatory and statutory requirements relating to the protection of the environment. These requirements, in addition to contractual agreements and management decisions, result in the accrual of estimated future removal and site restoration costs. Any changes in these estimates will affect future earnings.





Costs attributable to these commitments and contingencies are expected to be incurred over an extended period of time and are to be funded mainly from the Company’s cash provided by operating activities. Although the ultimate impact of these matters on operations cannot be determined at this time, it could be material for any one quarter or year.





11.  Financial Instruments





As disclosed in Note 2, the Company holds various forms of financial instruments. The nature of these instruments and the Company’s operation expose the Company to commodity price risk, credit risk, liquidity risk, and market risk. The Company manages its exposure to these risks by operating in a manner that minimizes its exposure to the extent practical.





(a)
Commodity Price Risk





The Company is subject to commodity price risk for the delivery of crude oil and natural gas. The Company may manage and minimize the risk by entering into various joint ventures with sub-participants. As at March 31, 2010, 2009, and 2008 the Company has not entered into any future commodity price contracts.





(b)
Credit Risk





Credit risk is the risk that a customer or counterparty will fail to perform an obligation or fail to pay amounts due causing a financial loss.  The Company manages their accounts receivable risk by attempting to deal with reputable partners and by collecting their accounts receivable on a timely basis.  A significant portion of the Company’s cash is held with the same financial institution, and as such, the Company is exposed to concentration of credit risk.  The Company maintains a deposit held by a single counterparty which is a crown corporation.





The Company has funded 100% of the costs to drill and complete certain wells.  However, the Company has encountered an unusual delay in informing joint venture partners of costs which must be repaid to the Company.  Currently, $279,365 is included in accounts receivable representing a weighted average working interest of 72% which is not controlled by the Company.  Once the joint venture partners are informed of their portion, they may elect to go penalty on their working interest.  As such, there is no guarantee that this amount will be collected.  Any parties electing to go penalty on their working interest would result in their working interest being transferred to the Company until certain conditions are met.


70





11.  Financial Instruments (continued)





(c)
Liquidity Risk





The Company ensures that there is sufficient capital in order to meet short-term business requirements, after taking into account the Company’s holdings of cash and cash equivalents. The Company’s cash and cash equivalents are invested in interest bearing business accounts that are available on demand.  At March 31, 2010 the Company’s financial liabilities were comprised of accounts payable and accrued liabilities which have a maturity of less than one year.





(d)
Market Risk





The Company is subject to normal market risks including fluctuations in interest rates on its cash and cash equivalents. While the Company manages its operations in order to minimize exposure to these risks, the Company has not entered into any derivatives or contract to hedge or otherwise mitigate this exposure.




(e)
Fair Value of Financial Instruments





The methods and assumptions used to develop fair value measurements for those financial instruments carried at fair value in the balance sheet have been prioritized into three levels of a fair value hierarchy included in Section 3862 of the CICA Handbook.  Level one includes quoted prices (unadjusted) in active markets for identical assets or liabilities, level two includes inputs that are observable other than quoted prices included in level one and level three includes inputs that are not based on observable market data.  The Company’s cash and cash equivalents is a level one fair value measurement.  The fair values of financial instruments consisting of cash and cash equivalents, accounts receivable, deposits, accounts payable and accrued liabilities approximate their carrying values due to their short-term nature.





12.  Capital Disclosures





The Company’s objective with the management of its capital is to allow it to maintain investor, creditor and market confidence and to sustain future development of the business.  The Company seeks to maintain a balance between the level of debt and shareholders’ equity to ensure access to capital to fund growth and working capital given the cyclical nature of the oil and gas sector. The capital structure consists of shareholders’ equity comprised of share capital, share purchase warrants, contributed surplus and deficit which totaled $3,162,035 at March 31, 2010 (March 31, 2009 - $21,441) (March 31, 2008 - $620,583).  Management monitors its available cash and compares the amount to the short term and long term capital requirements.  Management then determines the best course of action for the Company and makes adjustments to the capital structure.  As at March 31, 2010, the Company has no credit facilities in place, no bank indebtedness or long-term debt and as such has no external capital requirements.


71


13.  Supplemental Cash Flow Information





Changes in non-cash working capital were comprised of the following:




2010


2009


2008Accounts receivable

$
(391,966
)

$
-



-Prepaid expenses


(55,222
)


-



-Accounts payable and accrued liabilities


245,705



39,188



(3,867
)Net change

$
(201,483
)

$
39,188



(3,867
)Net change by activityOperating

$
(249,305
)

$
39,188



(3,867
)Financing


13,592



-



-Investing


34,230



-



-Net change

$
(201,483
)

$
39,188



(3,867
)




The Company did not receive any interest any interest income, nor did it pay any taxes.





The Company’s cash and cash equivalents as at March 31, 2010, 2009 and 2008 consisted entirely of deposits at a financial institution.





14.  Differences between Canadian and United States Generally Accepted Accounting Principles (GAAP)





As set out in Note 2, these financial statements are prepared in accordance with Canadian GAAP.  Canadian GAAP varies in certain respects from accounting principles generally accepted in the United States of America (“US GAAP”).  As required by the United States Securities and Exchange Commission (“SEC”), the effect of these differences on the Company’s financial statements is described and quantified below.





The application of US GAAP would have the following effects on the loss and comprehensive loss for the years ended March 31, 2010, 2009 and 2008:





2010


2009


2008Loss and comprehensive loss for the year as reported in the Statement of Loss, Comprehensive Loss and Deficit – Canadian GAAP

$
(1,377,493
)


(999,142
)


(151,083
)Adjustments:Impairment of property, plant and equipment (Note (a))


(152,000
)


-



-Loss and comprehensive loss for the year – US GAAP


(1,529,493
)


(999,142
)


(151,083
)Basic and diluted loss per share

$
(0.04
)


(0.05
)


(0.01
)





The application of US GAAP would have the following effects on total shareholders’ equity as at March 31, 2010, 2009 and 2008:





2010


2009


2008Shareholders’ Equity as at March 31, 2010 as reported in the Balance Sheet – Canadian GAAP

$
3,162,034



21,441



620,583Adjustments:Impairment of property, plant and equipment (Note (c))


(152,000
)


-



-Shareholders’ Equity as at March 31, 2010 – US GAAP


3,010,034



21,441



620,583


72





14.  Differences between Canadian and United States Generally Accepted Accounting Principles (GAAP) (continued)





a)     Crude Oil and Natural Gas Properties





On December 31, 2009, the changes announced by the SEC in December 2008 to modernize the oil and gas reporting requirements became effective, which led to a change in the impairment test. This new guidance is considered a change in estimate and is to be applied prospectively as at March 31, 2010 for the Company.  Under US GAAP, the carrying value of crude oil and natural gas properties, net of deferred income taxes, is limited to the amount of after-tax future net revenue from proved reserves, discounted at 10%, using an average price based on the first day of each month for the prior twelve month period and costs at the balance sheet date, plus the lower of cost and fair value of unproved properties.





Under Canadian GAAP, impairment exists when the carrying amount of the Company’s PP&E exceeds the estimated undiscounted future net cash flows associated with the Company’s proved reserves calculated using forecast prices and costs, and the cost of unproved properties. If impairment is determined to exist, the costs carried on the balance sheet in excess of the discounted future net cash flows associated with the Company’s proved and probable reserves are charged to income.





The application of the impairment tests under US GAAP as at March 31, 2010 resulted in an impairment and write down of $152,000 of capitalized costs, thus increasing the loss and decreasing property and equipment by $152,000.  There was no impairment of capitalized costs under Canadian GAAP as at March 31, 2010. For the year ended March 31, 2009 the Company recorded and impairment in the amount of $33,500 under Canadian GAAP.  The amount was equivalent to the impairment required under US GAAP. As such no adjustment to the Canadian net income was required.





b)     Cash Flow Statement





The statement of cash flows prepared in accordance with Canadian GAAP present operating cash flows before changes in non-cash working capital items. This sub-total cannot be presented under US GAAP.





c)     Income taxes





Given the Company is in a loss position, any impact on the net deferred tax asset would be fully allowed for under US GAAP.  Therefore, there are no income tax impacts shown with respect to the differences identified.  Additionally, under Canadian GAAP, the Company uses enacted and substantively enacted rates to determine future income taxes; whereas under US GAAP only enacted rates may be used.  There are no differences in enacted versus substantively enacted rates in the periods presented.





d)    Recent accounting pronouncements





In April 2009, The FASB issued FSP SFAS 157-4 which provides additional guidance for estimating fair value in accordance with SFAS 157, “Fair Value Measurements”, when the volume and level of activity for the asset or liability have significantly decreased.  FSP SFAS 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly.  The adoption of this statement did not have a material impact on the Company’s results of operations and financial position.


73


14.  Differences between Canadian and United States Generally Accepted Accounting Principles (GAAP) (continued)





d)     Recent accounting pronouncements (continued)





In June 2009, the FASB issued FAS No. 165 Subsequent Events (“FAS 165”).  FAS 165 requires companies to recognize in the financial statements the effects of subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements.  Companies are not permitted to recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before financial statements are issued.  Some non-recognized subsequent events must be disclosed to keep the financial statements from being misleading.  For such events a company must disclose the nature of the event, an estimate of its financial effect, or a statement that such an estimate cannot be made.  This Statement applies prospectively for interim or annual financial periods ending after June 15, 2009.  The adoption of FAS 165 did not have a material impact on the Company’s results of operations and financial position.





In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162 (“SFAS 168”).  Upon its adoption, the FASB Accounting Standards Codification (the “Codification”) will become the source of authoritative GAAP recognized by the FASB to be applied to nongovernment entities.  On the effective date of SFAS 168, the Codification will supersede all then-existing non-SEC accounting and reporting standards.  Following SFAS 168, the FASB will not issue new accounting standards in the form of FASB Statements, FASB Staff Positions, or Emerging Issues Task Force abstracts.  SFAS 168 will also modify the existing hierarchy of GAAP to include only two levels – authoritative and non-authoritative.  SFAS 168 will be effective for financial statements issued for interim and annual periods ending after September 15, 2009, and early adoption is not permitted.  The adoption of the Codification did not have a material impact on the Company’s financial position, results of operations or cash flows.





On April 1, 2009, we prospectively adopted Business Combinations, which establishes principles and requirements of the acquisition method for business combinations and related disclosures. The adoption of this standard did not impact our results of operations or financial position.





In June 2009, FASB issued Amendments to Consolidation of Variable Interest Entities. It retains the scope of the previous guidance with the addition of entities previously considered qualifying special-purpose entities and replaces the previous quantitative approach with a qualitative analysis in determining whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity. The Statement is further amended to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity and requires enhanced disclosures about an enterprise’s involvement in a variable interest entity. The standard is effective at the beginning of the first annual reporting period after November 15, 2009. We do not expect the adoption of this standard to have a material impact on our results of operations or financial position.





In April 2010, the FASB issued ASU, "Compensation–Stock Compensation (Topic 718)." The amendments clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. We do not expect the adoption of this standard to have a material impact on our results of operations or financial position.






74