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| KALG.OB > SEC Filings for KALG.OB > Form 10KSB on 15-Sep-2008 | All Recent SEC Filings |
15-Sep-2008
Annual Report
Plan of Operation
Our plan of operation for the twelve months following the date of this Annual Report on Form 10-KSB is to:
· Complete the Phase I exploration of the Bunyut concession. This evaluation will lead to a Phase II programme which is designed to be the initial step towards completing a mine plan with feasibility studies and environmental review. We anticipate this current phase will require $300,000 to $400,000.
· Complete the Phase II exploration of the Graha concession. This phase will yield the economic viability of the concession. This will provide a mine plan and the capital requirements for the establishment of mining operations. We anticipate this phase will require $2,000,000 to $3,000,000, depending on the coverage of the phase.
As of May 31, 2008, we had $1,944,567 in cash in our account. We can operate into the fourth quarter of the 2008 calendar year with the cash on hand, but will be looking to raise funds to move to Phase II drilling shortly after the completion and review of the Phase I Programme. We plan to raise $5,000,000 to accommodate the exploration programmes and subsequent activities.
We will require equipment for drilling and earth moving activities. We currently contract for equipment on a short term basis as needed, but we will reevaluate the amount of equipment to purchase as the Phase II Programme concludes and the ensuing mine planning activity shows the volume and scope of equipment necessary. At this point, we will continue to use short term rentals to satisfy our needs.
We plan to grow our employee base as we move past the Phase II programme. We currently use third party suppliers for most of our exploration personnel.
Results Of Operations
References in the discussion below to 2008 are to our current fiscal year ended May 31, 2008, while references to 2007 are to our fiscal year ended May 31, 2007.
Year ended May 31, 2008 compared to the year ended May 31, 2007
Revenue
We have not earned any revenue from operations from our incorporation on February 21, 2001 to May 31, 2008. Our activities have been financed from the proceeds of private placement offerings of our common stock. We do not anticipate earning any revenue until such time as we complete the property exploration and complete activities relating to the preparation of coal extraction, of which there is no assurance.
Expenses
Exploration Expenses
During our fiscal year ended May 31, 2008, we incurred $3,140,838 of exploration expenses, as compared to $1,228,807 of exploration expenses for the year ended May 31, 2007. This increase in exploration expense is due primarily to the work performed on the Graha concession to bring it to a JORC Compliant inferred resource of 204 million tons in June 2007, the exploration of a coal concession in Mongolia and the follow up work in the southwest and eastern blocks of the Graha Concession to further define the resource, including its coal quality and resource mineability.
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We incurred significant manpower expense of approximately $1,552,421 for the year ended May 31, 2008 versus $500,325 for the year ended May 31, 2007. This increase in manpower expense is due primarily to the difference in months under exploration of twelve in 2008 as compared to four in 2007. Site expenses incurred were approximately $816,333 for the year ended May 31, 2008 as compared to $407,740 for the year ended May 31, 2007. These include on site facilities, catering, paving and telecommunications. Equipment expense of approximately $481,205 was incurred for the year ended May 31, 2008 as compared to $178,899 for the year ended May 31, 2007. We incurred travel expense of approximately $290,879 for the year ended May 31, 2008 as compared to $141,843 for the year ended May 31, 2007. This includes the travel to and within Kalimantan, Indonesia, as well as travel to Mongolia and other prospective properties under evaluation.
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We spent $2,768,948 in coal concessions in Indonesia and $371,890 in due diligence exploration in Mongolia. These expenses were related to the coal concessions in Indonesia under exploration that started after the reorganization transaction. These expenses were part of our Phase I drilling programme to establish a JORC-compliant inferred resource. This included equipment rentals, fuel costs, third party manpower and site maintenance costs.
Stock Based Compensation Expense
We incurred stock based compensation expense of $4,883,059 for the year ended May 31, 2008 as compared to $1,301,372 for the year ended May 31, 2007. This increase resulted from operating under the 2007 Stock Incentive Plan for a full year versus one month in 2007. We reduced the number of our employees and consultants as part of our ongoing efforts to reduce operating costs during the last two quarters of 2008. Those efforts resulted in a reduction of stock based compensation. A one time reduction of $1,115,798 was recorded in the fourth quarter to reflect the impact of the grant cancellations. The net fourth quarter expense of $330,788 is not indicative of the ongoing expense. The recurring expense in the fourth quarter was $1,243,713.
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General and Administrative Expenses
We incurred general and administrative expense of $1,980,357 for the year ended May 31, 2008 as compared to $552,025 for the year ended May 31, 2007, with the increase resulting from a full year of operations in 2008 as compared to four months of operations in 2007. The primary expense was related to salaries and fees for our officers and directors. We also leased offices in London, Singapore and Jakarta during the year ended May 31, 2008. The expense also covers the amortization of intangible assets of $88,571 per quarter. Travel also contributed to the high run rate, although we curtailed travel in the later quarters of 2008 as part of our cost controls.
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Professional Expenses
Professional and consulting fees for the year ended May 31, 2008 increased to $732,921, as compared to $642,835 for the year ended May 31, 2007. This increase in professional fees reflects our operations over the course of an entire year as compared to four months in 2007. We use the services of legal counsel and accountants in all the countries in which we operate to ensure compliance with applicable laws and regulatory filings. We also used the services of Mining House Ltd during the year ended May 31, 2008.
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Loss
Net loss for the year ended May 31, 2008 increased to $10,647,276, as compared to $3,693,152 for the year ended May 31, 2007. The increased loss was due to an increase in expenses, as discussed above. We have not attained profitable operations and are dependent upon obtaining additional financing to move from our exploration activities to our initial production.
Capital Resources
At May 31, 2008, we had assets recorded at $8,757,144 consisting of cash of $1,944,567, accounts receivable of 75,945, prepaid expense and other current assets of $123,307 and an intangible asset of $6,613,326. We are dependent upon obtaining additional financing to fund our activities to move from our exploration activities to our initial production.
Cash Used In Operating Activities
Our net cash used in operating activities decreased by $4,911,598 in our fiscal year ended May 31, 2008, as compared to $2,031,453 used in operating activities during our fiscal year ended May 31, 2007. This increase use of $2,880,145 resulted primarily from the increase in exploration, general and administrative expenses discussed above.
Cash Provided By Investing Activities
Our net cash provided by investing activities did not change in our fiscal year ended May 31, 2008, as compared to $191,054 provided by investing activities during our fiscal year ended May 31, 2007. This decrease of $191,054 resulted primarily from the lack of our investing activity during the year ended May 31, 2008.
Cash Provided By Financing Activities
Our net cash provided by financing activities increased by $6,126,539 in our fiscal year ended May 31, 2008, as compared to $2,568,185 provided by financing activities during our fiscal year ended May 31, 2007. This increase of $3,558,354 resulted primarily from the capital raise of the June 2008 Financing.
Liabilities
Our liabilities at May 31, 2008 totaled $1,297,459 and consisted of various payables to our service providers as well as $700,000 of shares to be issued to certain of our investors.
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