UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
For the fiscal year ended March 31, 2005
Commission File Number 333-117287
US GEOTHERMAL INC
.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 84-1472231 |
(State or Other Jurisdiction of | (I.R.S. Employer |
Incorporation or Organization) | Identification No.) |
1509 Tyrell Lane, Suite B | |
Boise, Idaho | 83706 |
(Address of Principal Executive Offices) | (Zip Code) |
208-424-1027
(Registrant’s Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act: NONE
Check whether the issuer (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 at least the past 90 days.
Yes x No ¨
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B is
not contained in this form, and no disclosure will be contained, to the best
of registrant’s
knowledge, in definitive proxy or information statements incorporated by reference
in Part III of
this Form 10-KSB or any amendment to this Form 10-KSB.
x
Issuer’s revenues for its most recent year: $NIL
The aggregate market value of the voting and non-voting common
equity held by non-affiliates
computed by reference to the price at which the common equity was sold, or the
average bid and
asked price of such common equity, as of July 11, 2005: $7,999,837.50
Number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.
Class of Equity | Shares Outstanding as of May 31, 2005 |
Common stock, par value | 17,331,429 |
$0.001 per share |
Transitional Small Business Disclosure Format (check one)
Yes
¨
No
x
US Geothermal
U.S. Geothermal Inc. and Subsidiaries
Form 10-KSB
For the Year ended March 31, 2005
INDEX
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This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended, including, but not limited to, our statements on strategy, operating forecasts, and our working capital requirements and availability. In addition, from time to time, the company or its representatives have made or may make forward-looking statements, orally or in writing. Such forward-looking statements may be included in, but are not limited to, various filings made by the company with the Securities and Exchange Commission (the “SEC”), press releases or oral statements made by or with the approval of an authorized executive officer of the company. Forward-looking statements consist of any statement other than a recitation of historical fact and can be identified by the use of forward-looking terminology such as “may”, “expect”, “anticipate”, “estimate”, or “continue” or the negative thereof or other variations thereon or comparable terminology. Actual results could differ materially from those projected or suggested in any forward-looking statements as a result of a wide variety of factors and conditions, including, but not limited to, the factors and conditions described in the discussions of “Risk Factors” and “Management’s Plan of Operations” in this report and in other documents the company files from time to time with the Securities and Exchange Commission. The reader is cautioned that the company does not have a policy of updating or revising forward-looking statements and thus the reader should not assume that silence by management of the company over time means that actual events are bearing out as estimated in such forward-looking statements.
Part I
ITEM 1. DESCRIPTION OF BUSINESS
The Company’s Business
U.S. Geothermal Inc. (the “company,” “GTH” or “we” or “us” or words of similar import) is in the renewable “green” energy business. Through its subsidiary, U.S. Geothermal Inc., an Idaho corporation (“Geo-Idaho,” although our references to the company include and refer to our operations through Geo-Idaho), we are developing geothermal energy power plants in the Raft River area of Idaho. As more thoroughly discussed in the section below on Management’s Plan of Operations, the company has entered into three power purchase agreements, at 10 megawatts (MW) each, with Idaho Power Company, and is in the process of developing the power plant for the first phase of production.
Business Development
U.S. Geothermal Inc. is a Delaware corporation. GTH was originally incorporated in the province of British Columbia, Canada, under the name “Mango Resources Ltd.” on September 14, 1987. It immediately began trading on the Vancouver Stock Exchange under the symbol “MRH.” On October 7, 1999, the company changed its name from “Mango Resources Ltd.” to “Consolidated Mango Resources Ltd.” and its share capital was consolidated on the basis of ten pre-consolidation common shares for one post-consolidation common share.
On March 13, 2000, the company moved to and began trading on the TSX Venture Exchange (which is the successor to the Vancouver Stock Exchange as well as some other provincial exchanges) under the name “US Cobalt Inc.” and under the symbol “USC” and continued to trade under that symbol until trading was halted on April 3, 2002, in accordance with TSX Venture Exchange policy, in anticipation of and pending completion of the company’s merger
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with Geo-Idaho. Upon completion of the merger, the company again began trading on the TSX Venture Exchange, under its current symbol, “GTH.”
Historically, GTH, first as Mango Resources and Consolidated Mango Resources and then as U.S. Cobalt, operated in the resources sector and held interests in various mining properties. Its mining activities were unproductive and by June, 1999, Mango had no significant assets and became inactive.
U.S. Cobalt Inc., a Colorado corporation (“USC Colorado”) was incorporated on April 27, 1998, to conduct cobalt exploration. In March 2000, the company completed a plan of arrangement with USC Colorado, continuing its incorporation from British Columbia to Delaware, under Delaware corporate law, as U.S. Cobalt Inc. A “plan of arrangement” and “continuation” are Canadian law concepts, whereby a Canadian provincial corporation may, practically speaking, become a Delaware (or other U.S. jurisdiction) corporation, similar to a state-to-state reincorporation under U.S. law. As part of the plan of arrangement, our authorized capital was changed from 100,000,000 common shares without par value to 100,000,000 shares of common stock with a par value of US $0.001 per share. USC Colorado became a subsidiary of the company, and conducted the cobalt exploration activities. By March of 2002, the company concluded that its then current cobalt exploration project was no longer promising, and determined it would refocus its business efforts on renewable, “green” energy projects. USC Colorado was voluntarily dissolved in March, 2005.
Geo-Idaho was formed as an Idaho corporation in February 2002 to conduct geothermal resource development. On March 5, 2002 Geo-Idaho entered into a letter agreement with Vulcan Power Company, pursuant to which Geo-Idaho agreed to acquire from Vulcan all of the real property, personal property and permits that comprised Vulcan’s interest in the Raft River project. We generally refer to Vulcan’s real and personal property interests as the “Vulcan Property”. On December 3, 2002 the letter agreement was replaced by a formal agreement with Vulcan (the “Vulcan Agreement”), which provided for the acquisition, in stages, of 100% of the Vulcan Property in consideration for shares and warrants of Geo-Idaho and cash payments to or on behalf of Vulcan of up to $600,000 (for 100% of the Vulcan Property). Geo-Idaho also agreed that, as a condition to completing the purchase of and as an owner of the Vulcan Property, it would work to advance the Raft River Project by expending at least $200,000 for a work program (which has since been completed). By March 31, 2004, Geo-Idaho had paid Vulcan $492,000 in securities and cash payments, to bring its percentage ownership in the Vulcan Property to 75%. GTH may acquire the remaining 25% interest for a payment of $125,000 at any time on or before receipt of project financing for construction of the initial power plant.
The opportunity to be involved in the geothermal business as presented by Geo-Idaho was attractive to GTH’s board of directors and subsequently approved by its shareholders. The company and Geo-Idaho entered into a merger agreement on February 28, 2002, which was amended and restated on November 30, 2003, and closed on December 19, 2003. In accordance with the merger agreement, GTH acquired Geo-Idaho through the merger of Geo-Idaho with a wholly-owned subsidiary, EverGreen Power Inc., an Idaho corporation formed for that purpose. Geo-Idaho is the surviving corporation and the subsidiary through which GTH conducts operations. As part of this acquisition, we changed our name to U.S. Geothermal Inc. Because the former Geo-Idaho shareholders became the majority holders of GTH, the transaction is treated as a “reverse takeover” for accounting purposes. For a more detailed discussion of the development of the company, please see the section titled “The Company and Its Business” of the company’s SB-2, filed with the SEC on April 7, 2005.
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Competition
Although the market for different forms of energy is large and dominated by very powerful players, we perceive our industrial competition to be independent power producers and in particular those producers who provide “green“ renewable power. Our definition of green power is electricity derived from a source that does not pollute the air, water or earth. Sources of green power, in addition to geothermal, include wind, solar, biomass and run-of-the river hydroelectric. A number of states have instituted renewable portfolio standards (“RPS”) that require utilities to purchase a minimum percentage of their power from renewable sources. For example, RPS statutes in California and Nevada require 20% renewable, and according to the Department of Energy’s Energy Efficiency and Renewable Energy department, utilities in 34 states nationwide are providing their customers with the opportunity to purchase green, renewable power through premium pricing programs. As a result, we believe green power is a niche sub-market, in which many power purchasers are or are becoming committed to increasing their investments. Accordingly, the conventional energy producers do not provide direct competition.
In the Pacific Northwest there are currently no geothermal facilities. There exist a number of wind farms, as well as biomass and run-of-the river hydroelectric facilities. However, GTH believes that the combination of greater reliability and baseload generation from geothermal, access to infrastructure for deliverability, and a low "full life" cost will allow it to successfully compete for long term power purchase agreements.
Governmental Approvals and Regulation
GTH is subject to both federal and state regulation in respect of the production, sale and distribution of electricity. Federal legislation includes The Public Utilities Act of 1935 (which has two titles: The Public Utility Holding Company Act ("PUHCA") and the Federal Power Act), as well as the Public Utility Regulatory Policies Act of 1978 ("PURPA") and the Energy Policy Act of 1992 ("EPACT "). Because GTH is defined as an independent power producer under the rules and regulations of the Federal Energy Regulatory Commission ("FERC"), the relevant aspects of federal legislation are that its electrical generating facilities qualify under the policy set forth under PURPA which encourages alternative energy sources such as geothermal, wind, biomass, solar and cogeneration. Additionally, under EPACT, the company is currently exempt from PUHCA legislation regulating rates for electricity on the wholesale level.
The State of Idaho also regulates electricity. The Public Utility law of the State of Idaho (Title 61 of the Idaho Code) grants authority for rules and regulation to the Idaho Public Utility Commission ("IPUC"). Regulated utilities have the exclusive right to distribute and sell electricity within their service area. They may purchase electricity in the wholesale market from independent producers like GTH. The IPUC, in accordance with Federal PURPA legislation has the authority to set the rules and regulations governing the sale of electricity generated from alternative energy sources. Regulated utilities are required to purchase electricity on an avoided cost basis from qualifying facilities.
Currently, the IPUC defines such a facility as having an average output capacity of 10 Megawatts (MW) per month and a contract term of 20 years. All PURPA contracts in Idaho are subject to the approval of the IPUC. GTH is not required to market any of the electricity that it may generate at Raft River to Idaho utilities; under EPACT, it can transmit and sell its electricity in another state. Nonetheless, GTH has signed three 10 MW power purchase agreements with the Idaho Power Company.
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GTH will require the approval of various federal, state and local authorities for construction of a geothermal facility at Raft River. These authorities include the U.S. Fish and Wildlife Service, Environmental Protection Agency, Idaho Department of Environmental Quality, Idaho Department of Water Resources, Idaho Bureau of Hazardous Materials, Idaho State Historical Society, Cassia County and the Southern Idaho Regional Solid Waste District. We have retained Kleinfelder Inc. of Boise, Idaho, an independent environmental and regulatory consultant, to advise GTH as to the siting and design for purpose of governmental approvals. Additionally, David Evans & Associates of Boise, Idaho is providing consulting and engineering services for transmission and interconnection issues and the preparation of the application for a conditional use permit. Centra Consulting, Inc. of Boise, Idaho has been retained to assist with State of Idaho air quality permitting.
Environmental Compliance
As GTH’s design and permitting activities have progressed, it has further refined and clarified the environmental issues for which it will have to demonstrate compliance in the construction and operation of a geothermal facility at Raft River. Please see discussion below under Permitting in Item 6- Management’s Plan of Operations . The relevant legislation includes: Clean Air Act, Endangered Species Act, Clean Water Act, Rivers and Harbors Act, National Historic Preservation Act, National Pollutant Discharge Elimination System, Resource Conservation and Recovery Act, Idaho Solid Waste Facilities Act and the IDAPA Drilling for Geothermal Resource Rules. The environmental assessment that the company is conducting will identify any additional steps that are needed to comply with these acts.
We believe that a geothermal facility can be designed, constructed and placed into operation at Raft River that will meet environmental compliance requirements. At this time, the company does not believe that the cost of compliance at the federal, state and local levels will be significant.
Employees
GTH currently has seven employees including three full-time employees. Once construction financing is obtained, we intend to engage consultants and service providers, including a construction contractor. Once the power plant is completed, we intend to hire approximately 12 to 14 operating staff, at an estimated annual cost of $635,000. If the Company is successful in making acquisitions, additional management and administrative staff may be added.
Risk Factors
An investment in shares of our common stock involves a high degree of risk. Potential investors should consider the following factors, in addition to the other information provided by the company in its filings with the SEC in evaluating our business and proposed activities before they purchase any shares of our common stock.
Risks Relating To Our Business
Our ability to continue as a going concern is uncertain.
Our financial statements have been prepared on a going concern basis, which
contemplates continuity of operations, realization of assets and liquidation
of liabilities in the ordinary course of business. We have a need for substantial
funds to develop our geothermal properties. We have financed our activities
to date using private debt and equity financings, and we have no line of
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credit or other financing agreement providing borrowing availability with a commercial lender. Our ability to continue as a going concern is dependent upon adequate sources of capital and the ability to sustain positive results of operations and cash flows sufficient to continue to explore for and develop our geothermal assets. All of the foregoing leads to questions concerning our ability to meet our obligations as they come due. There is no assurance that the carrying amounts of our assets will be realized or that liabilities will be liquidated or settled for the amounts recorded. GTH is in a development stage and there is no assurance at this time that we will procure the equity and/or debt financing required to build and commission a geothermal electrical power generation facility. The auditors’ report on the March 31, 2005 financial statements includes an explanatory paragraph that states that as the company has suffered recurring losses from operations, substantial doubt exists about its ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should the company be unable to continue as a going concern.
We have a limited operating history, have incurred losses to date, and
cannot give any assurance that we can ever attain profitability.
Our company has been engaged in limited activities in the geothermal business
since Geo-Idaho’s incorporation in February 2002. As a result of our brief
operating history, our operating results from historical periods are not readily
comparable to and may not be indicative of future results. We have not generated
revenues from operations to date, and cannot give any assurance that we will
be able to generate revenues in the future. For the years ended March 31, 2003,
2004 and 2005, we incurred net losses of ($164,909), ($676,398), and
($1,830,421) respectively. At March 31, 2004, and March 31, 2005, we had
accumulated deficits of ($1,878,729) and ($3,709,150), respectively.
We expect to incur losses for at least the next 18 months. We cannot give you
any assurance that we will soon make a profit or that we will ever make a profit.
To achieve profitability, we must, among other things, obtain financing to build
and commission a geothermal electrical power generation facility for our initial
power purchase agreements.
Our future performance depends on our ability to establish that the geothermal
resource is economically sustainable.
Geothermal resource exploration and development involves a high degree of
risk. The recovery of the amounts shown for geothermal properties and related
deferred costs on our financial statements, as well as the execution of our
business plan generally, is dependent upon the existence of economically recoverable
and sustainable reserves.
We have a need for substantial additional financing and will have to significantly
curtail or cease operations if we are unable to secure such financing.
At March 31, 2005, we had a cash position of approximately $1,957,075.
We require substantial additional financing to fund the cost of continued development
of the Raft River project and other operating activities, to acquire the remaining
ownership of property making up the project, and to finance the growth of our
business, including the construction and commissioning of a power generation
facility. If further funding is not obtained by December 31, 2005, we may be
required to significantly curtail or cease operations. We may not be able to
obtain the needed funds on terms acceptable to us or at all. Further, if additional
funds are raised by issuing equity securities, significant dilution to our current
shareholders may occur and new investors may get rights that are preferential
to current shareholders. Alternatively, we may have to bring in a joint venture
partner to fund further development work, which would result in reducing our
interest in the project.
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It is very costly to place geothermal resources into commercial production.
Before the sale of any power can occur, it will be necessary to construct a
gathering and disposal system, a power plant, and a transmission line, and considerable
administrative costs would be incurred, together with the drilling of additional
wells. We have estimated these costs to be around US $35,000,000. To fund
expenditures of this magnitude, we may have to find a joint venture participant
with substantial financial resources. There can be no assurance that a participant
can be found and, if found, it would result in GTH having to substantially reduce
its interest in the project.
We may not be able to manage our growth.
Significant growth in our operations will place demands on our operational,
administrative and financial resources, and the increased scope of our operations
will present challenges to us due to increased management time and resources
required and our existing limited staff. Our future performance and profitability
will depend in part on our ability to successfully integrate the operational,
financial and administrative functions of Raft River and other acquired properties
into our operations, to hire additional personnel and to implement necessary
enhancements to our management systems to respond to changes in our business.
There can be no assurance that we will be successful in these efforts. Our inability
to integrate acquired properties, to hire additional personnel or to enhance
our management systems could have a material adverse effect on our results of
operations.
If we incur material debt to fund our business, we could face significant
risks associated with such debt levels.
We will need to procure significant additional financing to construct, commission
and operate a power plant at Raft River in order to generate and sell electricity.
If this financing includes the issuance of material amounts of debt, this would
expose GTH to risks including, among others, the following:
• a portion of our cash flow from operations would be used for the payment of principal and interest on such indebtedness and would not be available for financing capital expenditures or other purposes;
• a significant level of indebtedness and the covenants governing such indebtedness could limit our flexibility in planning for, or reacting to, changes in our business because certain activities or financing options may be limited or prohibited under the terms of agreements relating to such indebtedness;
• a significant level of indebtedness may make us more vulnerable to defaults by the purchasers of electricity or in the event of a downturn in our business because of fixed debt service obligations; and
• the terms of agreements may require us to make interest and principal payments and to remain in compliance with stated financial covenants and ratios. If the requirements of such agreements were not satisfied, the lenders would be entitled to accelerate the payment of all outstanding indebtedness and foreclose on the collateral securing payment of that indebtedness, which would likely include our interest in the project.
In such event, we cannot assure you that we would have sufficient funds available or could obtain the financing required to meet our obligations, including the repayment of outstanding principal and interest on such indebtedness.
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The success of our business relies on retaining our key personnel.
We are dependent upon the services of our President and Chief Executive
Officer, Daniel J. Kunz, our Chief Operating Officer, Douglas J. Glaspey, and
Kevin Kitz, our Vice President – Project Development. The loss of any
of their services could have a material adverse effect upon us. GTH has executed
employment agreements with these persons but does not have key-man insurance
on any of them.
Our development activities are inherently very risky.
The risks involved in the development of a geothermal resource cannot be
over-stated. The development of a geothermal resource is such that there cannot
be any assurance of success. Exploration costs are not fixed, and the resource
cannot be relied upon until substantial development has taken place, which entails
high exploration and development costs. The costs of development drilling are
subject to numerous variables which could result in substantial cost overruns.
Drilling for geothermal resource may involve unprofitable efforts, not only
from dry wells, but from wells that are productive but do not produce sufficient
net revenues to return a profit after drilling, operating and other costs.
Our drilling operations may be curtailed, delayed or cancelled as a result of numerous factors, many of which are beyond our control, including economic conditions, mechanical problems, title problems, weather conditions, compliance with governmental requirements and shortages or delays of equipment and services. If our drilling activities are not successful, we would experience a material adverse effect on our future results of operations and financial condition.
In addition to the substantial risk that wells drilled will not be productive, or may decline in productivity after commencement of production, hazards such as unusual or unexpected geologic formations, pressures, downhole fires, mechanical failures, blowouts, cratering, explosions, uncontrollable flows of well fluids, pollution and other physical and environmental risks are inherent in geothermal exploration and production. These hazards could result in substantial losses to us due to injury and loss of life, severe damage to and destruction of property and equipment, pollution and other environmental damage and suspension of operations. As protection against operating hazards, we maintain insurance coverage against some, but not all, potential losses. We do not fully insure against all risks associated with our business either because such insurance is not available or because the cost of such coverage is considered prohibitive. The occurrence of an event that is not covered, or not fully covered, by insurance could have a material adverse effect on our financial condition and results of operations.
The impact of governmental regulation could adversely affect our business.
Our business is subject to certain federal, state and local laws and regulations,
including laws and regulations on taxation, the exploration for and development,
production and distribution of electricity, and environmental and safety matters.
Many laws and regulations require drilling permits and govern the spacing of
wells, rates of production, prevention of waste and other matters. Such laws
and regulations may increase the costs of planning, designing, drilling, installing,
operating and abandoning our geothermal wells, the power plant and other facilities.
In addition, our operations are subject to complex environmental laws and regulations
adopted by federal, state and local jurisdictions where we operate. We could
incur liability to governments or third parties for any unlawful discharge of
pollutants into the air, soil or water, including responsibility for remedial
costs. We could potentially discharge such materials into the environment in
any of the following ways:
• from a well or drilling equipment at a drill site;
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• leakage from gathering systems, pipelines, power plant and storage tanks;
• damage to geothermal wells resulting from accidents during normal operations; and
• blowouts, cratering and explosions.
In addition, the submission and approval of environmental impact assessments may be required. Environmental legislation is evolving in a manner which means stricter standards, and enforcement, fines and penalties for non-compliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations has a potential to reduce the profitability of operations.
Because the requirements imposed by such laws and regulations are frequently changed, we cannot assure you that laws and regulations enacted in the future, including changes to existing laws and regulations, will not adversely affect our business. In addition, because we acquire interests in properties that have been operated in the past by others, we may be liable for environmental damage caused by such former operators.
Industry competition may impede our growth.
The electrical power generation industry, of which geothermal power is a
sub-component, is highly competitive and we may not be able to compete successfully
or grow our business.
We compete in areas of pricing, grid access and markets. The industry in the Pacific Northwest, in which the Raft River project is located, is complex as it is composed of public utility districts, cooperatives and investor-owned power companies. Many of the participants produce and distribute electricity. Their willingness to purchase electricity from an independent producer may be based on a number of factors and not solely on pricing and surety of supply.
Claims have been made that some geothermal plants cause seismic activity
and related property damage.
There are approximately two dozen geothermal plants operating within a fifty-square-mile
region in the area of Anderson Springs, in Northern California, and there is
general agreement that the operation of these plants causes a generally low
level of seismic activity. Some residents in the Anderson Springs area have
asserted property damage claims against those plant operators. There are significant
issues whether the plant operators are liable, and to date no court has found
in favor of such claimants. Even if liability is imposed on operators in the
Anderson Springs area, we do not believe the area of the Raft River project
or our intended operation of a power plant present the same geological or seismic
risks.
Actual costs of construction or operation of a power plant may exceed estimates
used in negotiation of power purchase agreements.
The company’s three initial power purchase contracts are under rates
established by the Idaho Public Utility Commission, using an “avoided-cost”
model for cost of construction and operating costs of a power plant. If the
actual costs of construction or operations exceed the model costs, the company
may not be able to build the contemplated power plant, or if constructed, may
not be able to operate profitably.
Payments under our initial power purchase agreement may be reduced if we are unable to forecast our production adequately.
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Under the terms of our three initial power purchase agreements, if we do not deliver electricity output within 90% to 110% of our forecasted amount, payments for the amount delivered will be reduced, possibly significantly. If the company consistently mis-forecasts its output, its revenues will be reduced, and we may not be able to operate profitably.
There are some risks for which we do not or cannot carry insurance.
Because our current operations are limited in scope, GTH carries public
liability insurance and directors’ and officers’ liability coverage,
but does not currently insure against any other risks. As its operations progress,
GTH will acquire additional coverage consistent with its operational needs,
but GTH may become subject to liability for pollution or other hazards against
which it cannot insure or cannot insure at sufficient levels or against which
it may elect not to insure because of high premium costs or other reasons. In
particular, coverage is not available for environmental liability or earthquake
damage.
Our officers and directors may have conflicts of interests arising out
of their relationships with other companies.
Several of our directors and officers serve (or may agree to serve) as directors
or officers of other companies or have significant shareholdings in other companies.
Because some of our executive officers currently serve in only part-time capacities,
the extent that such other companies require their services may conflict with
the available time or scheduling of services performed for GTH. To the extent
that such other companies may participate in ventures in which GTH may participate,
the directors may have a conflict of interest in negotiating and concluding
terms respecting the extent of such participation. If a conflict of interest
arises, a director who has such a conflict will abstain from voting for or against
the approval of such a participation or such terms. From time to time several
companies may participate in the acquisition, exploration and development of
natural resource properties thereby allowing for their participation in larger
programs, permitting involvement in a greater number of programs and reducing
financial exposure in respect of any one program. It may also occur that a particular
company will assign all or a portion of its interest in a particular program
to another of these companies due to the financial position of the company making
the assignment. Under the laws of the State of Delaware, the directors of GTH
would be required to act honestly, in good faith and in the best interests of
GTH.
In determining whether or not GTH would participate in a particular program and what interest GTH would acquire in it, the directors would primarily consider the degree of risk to which GTH would be exposed and its financial position at that time.
Risks Relating To The Market For Our Securities
A significant number of shares of our common stock are eligible for sale
in the United States, which could have an adverse effect on the market price
for our common stock and could adversely affect our ability to raise needed
capital.
Currently, the number of shares in the public float on the TSX Venture Exchange
and over-the-counter market in the U.S. is approximately 17,331,429. The market
price for our common stock could decrease significantly and our ability to raise
capital could be adversely affected by the availability of such a large number
of shares.
Our officers and directors hold sufficient shares that acting collectively
they may be able to influence the outcome of matters submitted to the shareholders.
Our officers and directors own in the aggregate approximately 33% of the
company’s securities, on a fully diluted basis. If the officers and directors
were to act collectively, assuming they
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continue to own all of their shares, there is a substantial likelihood that they would be able to influence the election of the directors of the company and the outcome of all corporate actions requiring the approval of the shareholders, such as mergers and acquisitions, in their own interests and to the detriment of the other shareholders.
The possible issuance of substantial amounts of additional shares without
shareholder approval may dilute the percentage ownership of our shareholders.
There are 17,331,429 shares of our common stock outstanding and 10,393,858 shares
of common stock issuable upon exercise or conversion of outstanding options
and warrants. There are 100,000,000 shares of our common stock authorized for
issuance. All of our authorized shares in excess of those currently outstanding
may be issued without any action or approval by our shareholders and may dilute
the percentage ownership of our current shareholders.
Because the public market for shares of our common stock is limited, investors
may be unable to resell their shares of common stock.
There is currently only a limited public market for our common stock on
the TSX Venture Exchange and on the Over-the-Counter Bulletin Board in the United
States, and investors may be unable to resell their shares of common stock.
The development of an active public trading market depends upon the existence
of willing buyers and sellers that are able to sell their shares and market
makers that are willing to make a market in the shares. Under these circumstances,
the market bid and ask prices for the shares may be significantly influenced
by the decisions of the market makers to buy or sell the shares for their own
account, which may be critical for the establishment and maintenance of a liquid
public market in our common stock. Market makers are not required to maintain
a continuous two-sided market and are free to withdraw firm quotations at any
time. We cannot give you any assurance that an active public trading market
for the shares will develop or be sustained.
The price of our common stock is volatile, which may cause investment losses
for our shareholders.
The market for our common stock is highly volatile, having ranged in the
last twelve months from a low of CDN$0.70 to a high of CDN$1.10 on the
TSX Venture Exchange and from a low of US$0.50 to a high of US$0.66
on the Over-the-Counter Bulletin Board. The trading price of our common stock
on the TSX Venture Exchange and on the OTC is subject to wide fluctuations in
response to, among other things, quarterly variations in operating and financial
results, and general economic and market conditions. In addition, statements
or changes in opinions, ratings, or earnings estimates made by brokerage firms
or industry analysts relating to our market or relating to our company could
result in an immediate and adverse effect on the market price of our common
stock. The highly volatile nature of our stock price may cause investment losses
for our shareholders.
Our common stock is considered to be a “penny stock,” which
may make it more difficult for investors to sell their shares.
Our common stock is considered to be a “penny stock.” The Securities
and Exchange Commission has adopted rules that regulate broker-dealer practices
in connection with transactions in “penny stocks.” Penny stocks
generally are equity securities with a price of less than $5.00 (other than
securities registered on certain national securities exchanges or quoted on
NASDAQ, provided that current price and volume information with respect to transactions
in such securities is provided by the exchange or system). Prior to a transaction
in a penny stock, a broker-dealer is required to:
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• deliver a standardized risk disclosure document prepared by the Securities and Exchange Commission that provides information about penny stocks and the nature and level of risks in the penny stock market;
• provide the customer with current bid and offer quotations for the penny stock;
• explain the compensation of the broker-dealer and its salesperson in the transaction;
• provide monthly account statements showing the market value of each penny stock held in the customer’s account; and,
• make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.
These requirements may have the effect of reducing the level of trading activity in the secondary market for our stock and investors may find it more difficult to sell their shares.
ITEM 2. DESCRIPTION OF PROPERTY
The Raft River project, where the company’s geothermal operations are located, is in south-central Idaho, approximately 55 miles southeast of Burley, the county seat of Cassia County. Burley, population 8,300, is the local agricultural and manufacturing center for the area, providing a full range of light to heavy industrial services.
A commercial airport is located 90 miles to the northeast in Pocatello, Idaho. Pocatello, population 53,000, is a regional center for agriculture, heavy industry (mining, phosphate refining), technology and education with Idaho State University. Malta, a town with a population of 180, is 12 miles north of the project site where basic services, fuel, and groceries are available. Year-round access to the project from Burley is via Interstate Highway 84 south to State Highway 81 south, then east on the Narrows Canyon Road, an improved county road.
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The Raft River project currently consists of seven parcels (generally referred to as the Vulcan Property, the Crank Lease, the Newbold Lease, the Jensen Lease, the Jensen Investments Lease, the Stewart Lease and the Elena Property) comprising 660 acres of fee land and 3,496.79 acres of contiguous leased geothermal rights located on private property in Sections 23, 24, 25, 26, 27, 28, 33, 34 and 35, Township 15 South, Range 26 East Boise Meridian, and Sections 17, 18, 19, 29, and 30, Township 15 South, Range 27 East Boise Meridian, Cassia County, Idaho. All parcels are defined by legal subdivision or by metes and bounds survey description. The seven parcels are as follows:
The Vulcan Property. The Vulcan Property includes both surface and geothermal rights and consists of two units. The first unit has a total area of 240 acres and is comprised of the East half of the South-East quarter of Section 22, plus the South-West quarter of Section 23, Township 15 South, Range 26 East Boise Meridian. Three geothermal wells (RRGE-1, RRGP-4 and RRGP-5) are located on this parcel. The second unit has a total area of 320 acres, and is comprised of the South half of the North-West quarter, the South half of the North-East quarter, and the entire South-East quarter of Section 25, Township 15, South, Range 26 East Boise Meridian. Three additional geothermal wells (RRGE-3, RRGI-6 and RRGI-7) are located on this parcel. A fourth well, RRGE-2, although located on the property covered by the Crank lease, was acquired by the company as part of its purchase of the Vulcan Property.
The Crank Lease. The Crank lease covers 160 acres of mineral and geothermal rights, with right of ingress and egress. The lease is comprised of the NE quarter of Section 23, Township 15 South, Range 26 East Boise Meridian.
The Newbold Lease. The Newbold lease covers 20 acres of both surface and geothermal rights. The lease is comprised of the NE quarter of Section 23, Township 15 South, Range 26 East Boise Meridian.
The Jensen Lease. The Jensen lease covers 2,954.75 acres of geothermal rights only. It is contiguous with the Vulcan property and the Crank lease with land parcels located in Sections
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24, 25, 26, 27, 33, and 34, Township 15 South, Range 26 East Boise Meridian, and in Sections 18, 19, 20, 29, and 30, Township 15 South, Range 27 East Boise Meridian.
The Jensen Investments Lease. The Jensen Investments lease covers 44.5 acres of surface and geothermal rights in Section 35, Township 15 South, Range 26 East Boise Meridian, and is contiguous with the Jensen lease.
The Stewart Lease. The Stewart Lease covers 317.54 acres in two adjoining parcels; Parcel 1 includes the N half of the SE quarter of the SE quarter, the SE quarter of the SE quarter of the SE quarter, and the SW quarter of the SE quarter of the SE quarter of Section 23, and the W half of the SW quarter, the SE quarter of the SW quarter and part of the SE quarter of the SW quarter of Section 24, Township 15 South, Range 26 East Boise Meridian, contains 159.04 acres and includes surface and geothermal rights, Parcel 2 contains 158.50 acres in the NE quarter of Section 26, Township 15 South, Range 26 East Boise Meridian and only covers surface rights. The underlying geothermal rights for Parcel 2 are subject to the Jensen Lease.
The Elena Property. The Elena Property is approximately 100 acres of surface and geothermal rights, excluding the oil and gas rights to the property. The property is in the W half of the SE quarter, and the W half of the NE quarter of the SE quarter of Section 23, Township 15 South, Range 26 East Boise Meridian, and is contiguous to other properties owned and leased by the company.
Lease/Royalty Terms
The Crank lease, the Newbold lease, the Jensen lease and the Jensen Investments lease have royalties payable under the following terms:
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(a) | Energy produced, saved and used for the generation of electric power, which is then sold by lessee, has a royalty of ten percent (10%) of the net proceeds. |
(b) | Energy produced, saved and sold by lessee, then used by the purchaser for generation of electric power, has a royalty of ten percent (10%) of the market value. |
(c) | Energy produced, which is used for any purpose other than the generation of electricity has a royalty of five percent (5%) of the gross proceeds. |
The Stewart lease has production royalties payable under the following terms:
(a) | Energy produced, saved and sold by the Lessee, then used by the purchaser for generation of electric power, has a royalty of ten percent (10%) of the market value of the electric power. |
(b) | Energy produced, saved and used for the generation of electric power, which is then sold by Lessee, has a royalty of three percent (3%) of the market value of the electric power. |
(c) | Energy produced, which is used for any purpose other than the generation of electricity has a royalty of five percent (5%) of the gross proceeds. |
No production royalties have been paid to date under any of the leases. All of the leases may be extended indefinitely if production is achieved during the primary term, so long as production is maintained. For each lease other than the Crank Lease (see below), once production is achieved the amounts due annually will be the greater of the production royalty and the minimum payment for the last year of the primary term. All payments under the leases are made annually in advance on the anniversary date of the particular lease. In addition, the following lease and other royalty terms apply to the individual leases:
The Crank Lease. The lease agreement with Janice Crank was originally entered into June 28, 2002, and had a primary term of 5 years. After GTH provided evidence to the lessor that the well (RRGE2) located on lessor’s property is not owned by the lessor (but instead is included in the Vulcan Property), a new lease was entered into on June 28, 2003, with a four-year initial term. Advance production royalties (on a June to June basis) are payable under the Crank lease as follows:
• Year 1 (Paid June 2002 under original lease): US $5,000
• Year 2 (Paid June 2003 under original lease): US $10,000
• Year 3 (Paid June 2004 under renegotiated lease): US $10,000
• Year 4: Due June 2005: US $10,000
• Year 5: Due June 2006: US $10,000
Payments for years 2002 through 2006 are advances against future production royalties. For later years, during commercial production, there is a minimum annual production royalty of US $18,000. The minimum amount that will be payable over the course of the leases is $45,000. Maximum amounts payable will depend on production from the property.
The Newbold Lease . The company leases this property pursuant to a lease agreement with Jay Newbold dated March 1, 2004. The Newbold lease has a primary term of 10 years (through February 28, 2014) and is extended indefinitely so long as production from the geothermal field is maintained. Lease payments are as follows:
• Years 1-5: $10.00 per acre or $200 per year (Year 1 paid on signing)
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• Years 6-10: $15.00 per acre or $300 per year
The minimum amount that will be payable over the course of the lease is $2,500. Maximum amounts payable will depend on production from the property.
The Jensen Lease. The Jensen lease, with Sergene Jensen, lessor, is dated July 11, 2002, has a primary term of 10 years. Lease payments (on a July to July basis) are as follows:
• Years 1-5: US $2.50 per acre or $7,386.88 per year (Years 1-3 paid for a total of $22,160.64)
• Years 6-10: US $3.00 per acre or $8,864.25 per year
The minimum amount that will be payable over the course of the lease is $81,255.65. Maximum amounts payable will depend on production from the property.
The Jensen Investments Lease. The Jensen Investments lease, with Jensen Investments, Inc., is dated July 12, 2002, and has a primary term of 10 years. Lease payments (on a July to July basis) are as follows:
• Years 1-5: US $2.50 per acre or $111.25 per year (Years 1-3 paid for a total of $333.75)
• Years 6-10: US $3.00 per acre or $133.50 per year
The minimum amount that will be payable over the course of the lease is $1,223.75. Maximum amounts payable will depend on production from the property.
The Stewart Lease. The Stewart lease, with Reid and Ruth Stewart, is dated December 1, 2004, and has a term of 30 years. Lease payments are as follows:
• Year 1: US $8,000 (paid on signing).
• Year 2: US $5,000.
• Year 3-30: $5,000 plus an annual increase of 5% per year.
The minimum amount that will be payable over the course of the lease is $319,614.00. Maximum amounts payable will depend upon production from the property.
The total minimum amount payable under all of the leases during their primary terms is $449,593.43. All of the above listed lease payments are payable annually in advance, and are current through lease years beginning in 2004.
We sub-lease general office space “at cost” for our executive office in Boise from an affiliate of Daniel Kunz, the company's Chief Executive Officer, at an annual cost of $13,399. The underlying lease is a year-to-year lease that expires on January 31, 2006.
Until the construction of the power plant included in phase one of the Raft River project is initiated, management believes that only general liability and umbrella liability insurance is necessary. Additional insurance will be obtained prior to construction of the power plant.
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ITEM 3. LEGAL PROCEEDINGS
As of March 31, 2005, management is not aware of any legal proceedings in which the Company is a party, as plaintiff or defendant, or which involve any of its properties.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Part II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Effective June 3, 2005, the common stock of US Geothermal Inc. has been listed for trading on the Over-The-Counter Bulletin Board (the “Bulletin Board”) under the trading symbol “UGTH”. J Giordano Securities Group (“Giordano”), of New York City, is the market maker for the company’s securities. The first trades of our shares on the Bulletin Board started June 8, 2005, but there can be no assurance that a viable and active trading market will develop. In limited trading on the Bulletin Board, the common stock of the company has traded from a low of US$0.50 to a high of US$0.66. There can be no assurance that even if a market is developed for our shares, there will be a sufficient market so that holders of common shares will be able to sell their shares, or with respect to any price at which holders may be able to sell their shares. Future trading prices of our common shares will depend on many factors, including, among others, our operating results and the market for similar securities.
Our common shares are traded on the TSX Venture Exchange under the symbol GTH. The following sets forth information relating to the trading of GTH shares on the TSX Venture Exchange. The trading prices reflect the reverse stock-split on a 5 to 1 basis, which was effected December 19, 2003. In accordance with TSX Venture Exchange policy, the trading of GTH shares was halted on April 3, 2002, prior to the announcement of the acquisition of Geo-Idaho, pending the completion of that acquisition. The last trade of shares of GTH prior to the halt was at CDN $0.80 per share ($0.16 pre-consolidation). Trading resumed on December 22, 2003 with the initial trade not occurring until January 5, 2004.
BID PRICES | ||
2002 | HIGH | LOW |
(CDN) | (CDN) | |
First Quarter | $1.00 | $0.15 |
Second Quarter | $1.00 | $0.75 |
Third Quarter | n/a | n/a |
Fourth Quarter | n/a | n/a |
2003 | ||
(CDN) | (CDN) | |
First Quarter | n/a | n/a |
Second Quarter | n/a | n/a |
Third Quarter | n/a | n/a |
Fourth Quarter | none | none |
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2004 | ||
(CDN) | (CDN) | |
First Quarter | $0.90 | $0.54 |
Second Quarter | $1.05 | $0.70 |
Third Quarter | $1.10 | $0.76 |
Fourth Quarter | $1.05 | $0.80 |
2005 | ||
(CDN) | (CDN) | |
First Quarter | $1.10 | $0.80 |
Second Quarter | $0.90 | $0.61 |
As of June 30, 2005, we had approximately 300 stockholders of record.
The Company has never paid and does not intend to pay dividends on our common stock in the foreseeable future. We currently intend to retain any future earnings for reinvestment in our business. Any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements and other relevant factors. All of the common shares are entitled to an equal share in any dividend declared and paid.
The following table details the number of securities authorized for issuance under the Company’s equity compensation plans:
Plan Category |
Number of securities to be
issued upon exercise of outstanding options, warrants and rights |
Weighted average exercise
price of outstanding options, warrants and rights |
Number of securities
remaining available for future issuance |
Equity compensation plans
approved by security holders |
1,756,265 | $ 0.530 | 828,235 |
Equity compensation plans
not approved by security holders |
Nil | Nil | Nil |
Total | 1,756,265 | $0.518 | 828,235 |
Recent Sales of Unregistered Securities
During the past three years, GTH has issued the following unregistered securities:
1. On February 2, 2002, the following persons, as founders, purchased an aggregate of 2,600,000 shares of Geo-Idaho common stock for a total purchase price of $40,000:
Daniel J. Kunz | 650,000 |
Douglas J. Glaspey | 650,000 |
Paul A. Larkin | 650,000 |
Ronald P. Bourgeois | 650,000 |
The shares were issued in a transaction exempt from the registration requirements of the Securities Act by virtue of the exemption afforded by Section 4(2). Each of such persons purchased the shares for his own account, for investment and not with a view to the distribution of the shares. The certificates for the shares bear a restrictive legend and stop transfer
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instructions have been placed against the transfer of the shares. No commissions were paid with respect to the issuance.
2. On March 5, 2002, 1,895,000 shares of Geo-Idaho common stock and 1,612,000 warrants to purchase shares of Geo-Idaho common stock were issued by Geo-Idaho to Vulcan Power Company in exchange for interests in the Raft River project. The value of the issued shares and warrants for financial statement purposes was approximately $17,000. The securities were issued in a transaction exempt from the registration requirements of the Securities Act in reliance on Section 4(2). Vulcan Power Company represented to Geo-Idaho that it purchased the securities for its own account, for investment and not with a view to the distribution of the securities. The certificates for the securities bear a restrictive legend and stop transfer instructions have been placed against the transfer of securities. No commissions were paid with respect to the issuance.
3. On May 28, 2002, an aggregate of 400,000 shares of Geo-Idaho common stock were purchased by 13 persons for a subscription price of $0.25 per share, and gross proceeds of $98,750 in cash and $1,250 in consulting services. The purchasers either represented that they were "accredited investors" as defined in Regulation D, or the sales were to non-US persons and took place outside of the United States, as defined in Regulation S. None of the purchasers were officers or directors. The shares were issued in transactions exempt from the registration requirements of the Securities Act in reliance on and compliance with Regulations D and S. Each of such persons represented to Geo-Idaho that he purchased the shares for his own account, for investment and not with a view to the distribution of the shares. No commissions were paid with respect to the issuance.
4. On November 1, 2002, an aggregate of 1,033,667 shares of Geo-Idaho common stock were purchased by 18 persons, including Daniel Kunz and John Walker, who are officers and/or directors of Geo-Idaho and GTH, for a subscription price of $0.30 per share, and gross proceeds of $307,100 in cash, and consulting services valued at $3,000. The purchasers were either "accredited investors" as defined in Regulation D, or the sales were to non-US persons and took place outside of the United States, as defined in Regulation S. The shares were issued in transactions exempt from the registration requirements of the Securities Act in reliance on and compliance with Regulations D and S. Each of such persons represented to Geo-Idaho that he purchased the shares for his own account, for investment and not with a view to the distribution of the shares. No commissions were paid with respect to the issuance.
5. On February 14, 2003, GTH (then U.S. Cobalt Inc.) issued 151,170 shares to the following persons for past services rendered, at a deemed aggregate consideration of $45,350 or $0.30 per share:
Name | No. of Shares |
Daniel J. Kunz | 30,479 |
Douglas J. Glaspey | 78,929 |
Paul A. Larkin | 41,762 |
Total | 151,170 |
6. Pursuant to agreements executed April 25, 2003, GTH issued convertible promissory notes in the aggregate principal amount of $269,000 for bridge financing pending completion of the merger acquisition of Geo-Idaho, to a group of six investors, including Daniel Kunz and Kevin Kitz, officers of the company. The investors were either "accredited investors" as defined
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in Regulation D, or the transactions were with non-US persons and took place outside of the United States, as defined in Regulation S. The notes were issued in transactions exempt from the registration requirements of the Securities Act in reliance on and compliance with Regulations D and S. Each of such persons represented to the company that he purchased the notes for his own account, for investment and not with a view to the distribution of the notes. The notes were issued with a restrictive legend and stop transfer instructions were placed against the transfer of the notes. No commissions were paid with respect to the issuance.
7. On December 19, 2003, GTH issued 6,939,992 shares of its common stock and 2,420,217 warrants to purchase its common stock in exchange for 100% of Geo-Idaho's outstanding shares and warrants. The shares were issued to the following persons, each of whom was a security holder of Geo-Idaho, in reliance on Section 4(2):
NAME |
NO. OF
SHARES |
Vulcan Power Company | 1,755,156 |
Daniel J. Kunz | 1,254,769 |
Douglas J. Glaspey | 1,014,649 |
Paul A. Larkin | 863,187 |
Ronald Bourgeois | 821,425 |
Tom Menning | 183,332 |
Grim Estate Ltd. | 180,000 |
Donald Nelson | 108,000 |
Ronald C. Yanke | 108,000 |
Ross Beaty | 85,000 |
Gerald Sneddon | 80,000 |
John H. Walker | 73,807 |
Sneddon Family Trust | 50,000 |
Steve R. Smith | 45,000 |
Burton Egger | 40,000 |
Steven Chi | 36,667 |
Dr. John Swartley | 36,667 |
John W. Leonard | 35,000 |
William Brock | 33,333 |
Robert Falls | 24,000 |
Steven Jensen | 21,000 |
John Beaulieu | 20,000 |
William Batiuk | 17,000 |
Barry Marcus | 15,000 |
Roscoe Ward | 5,000 |
H. Cobbs | 4,000 |
Veritable Quandry LLC | 10,000 |
Ed Cryer | 10,000 |
Mary Mink | 10,000 |
The warrants were issued solely to Vulcan Power Company, the sole warrant holder of Geo-Idaho, in reliance on Section 4(2), and are exercisable at a price of $0.75 per share, until December 15, 2005. Pursuant to the negotiated agreement of the parties, and as approved by the TSX Venture Exchange, the shares were exchanged on a one-for-one basis with all shareholders other than Vulcan Power Company, which received shares and warrants so that Vulcan Power would own 14% on a non-diluted and 25% on a fully-diluted basis after closing (and taking into account the private placement discussed in paragraph 8, below). The warrants were valued using
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the Black Scholes model at $0.26 each, or $629,256 in the aggregate, and recorded on our financial statements as an addition to deficit. Each of such persons represented to Geo-Idaho that he purchased the securities for his, her or its own account, for investment and not with a view to the distribution of the securities. The certificates for the securities bear a restrictive legend and stop transfer instructions have been placed against the transfer of the securities.
8. Also on December 19, 2003, GTH sold 3,322,221 shares of common stock and 1,661,110 warrants to purchase shares of its common stock in a private offering under Regulations D and S, at a price of $0.45 per unit (a unit being one share and one-half share purchase warrant), for gross proceeds of $1,494,999. The warrants are exercisable at an exercise price of $0.75 until December 15, 2005, subject to acceleration upon 30 days notice once the company obtains a license from permitting authorities for a 10 megawatt power plant and corresponding power purchase and power transmission agreements. The warrants were valued using the Black Scholes model at $0.26 each, or $431,889 in the aggregate. Of the 13 purchasers, two were residents of the United States who represented that they were "accredited investors" under Regulation D, and the remaining 11 sales were to non-US persons and took place outside of the United States, as defined in Regulation S. Daniel J. Kunz, an officer and director of GTH, subscribed for 1,111,111 units. Toll Cross Securities of Toronto, Canada, was paid a cash fee of $52,500 and issued warrants exercisable until December 15, 2005, to purchase 83,333 shares of GTH at an exercise price of $0.45, as compensation for its services in connection with the private offering. An additional $22,622 was incurred in legal expenses relating to the offering and together with the $52,500 cash and $25,437 fair value of the Agent’s warrants ($0.26 per warrant, calculated using the Black Scholes model) made up the $100,559 which was charged to share issue costs. The securities were issued in transactions exempt from the registration requirements of the Securities Act in reliance on and compliance with Regulations D and S. Each of such persons represented to the company that he purchased the securities for his own account, for investment and not with a view to the distribution of the securities. The certificates for the securities bear a restrictive legend and stop transfer instructions have been placed against the transfer of the securities.
9. On February 20, 2004, GTH issued 385,864 shares and 192,932 share purchase warrants in connection with the conversion of $147,000 of principal and $26,639 in interest of the promissory notes referred to in paragraph 5, above. Mr. Kunz did not participate in the conversion, and was repaid his principal and interest. The warrants are exercisable until February 17, 2006, at an exercise price of $0.75 per share, and are subject to acceleration upon 30 days notice once the company obtains a license from permitting authorities for a 10 megawatt power plant and corresponding power purchase and transmission agreements. The securities were issued in transactions exempt from the registration requirements of the Securities Act in reliance on and compliance with Regulations D and S. Each of such persons represented to the company that he purchased the securities for his own account, for investment and not with a view to the distribution of the securities. The certificates for the securities bear a restrictive legend and stop transfer instructions have been placed against the transfer of the securities. No commissions were paid with respect to the issuance.
10. On September 17, 2004, GTH sold 4,000,001 shares of common stock and 4,000,001 warrants to purchase shares of its common stock in a private offering under Regulation S, at a price of CDN $0.85 per unit (a unit being one share and one warrant), for gross proceeds of CDN $3,400,000. The units consist of one share and a warrant which entitles the holder to purchase one share at an exercise price of CDN $1.25 until September 17, 2006. GTH may accelerate the exercise period of the warrants on twenty days notice if the closing price of the company’s common shares on a public market exceeds CDN $1.65 for twenty consecutive business days.
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The value of each warrant (using the Black-Scholes model) was $0.30, and the aggregate value of the 4,000,001 warrants was $1,190,697. The securities were issued in transactions exempt from the registration requirements of the Securities Act in reliance on and compliance with Regulation S. Each of such persons represented to the company that he purchased the securities for his own account, for investment and not with a view to the distribution of the securities. The certificates for the securities bear a restrictive legend and stop transfer instructions have been placed against the transfer of the securities. Dundee Securities Corporation of Toronto, Canada, was paid a cash fee of CDN $238,000, and issued a “compensation option” to acquire 280,000 units at an exercise price per unit of CDN $0.85, until September 17, 2006, and valued at $133,341 ($0.30 per warrant, using the Black-Scholes model). The warrants included in Dundee’s units are also subject to acceleration, whether or not the compensation option has been exercised. An additional CDN $31,977.45 was incurred in legal expenses relating to the offering, as well as CDN $18,190 in fees to the TSX Venture Exchange which together with the CDN $238,000 cash paid to Dundee made up the $225,131 cash component of issuance costs. With the $131,341 which was the fair value of the Dundee compensation option, the total charged to share issue costs was $358,472.
11. On October 19, 2004, GTH issued a total of 278,735 shares on the exercise of stock options issued under the company’s stock option plan to officers and directors of the company as follows:
Optionee | Number of Shares Purchased |
Daniel Kunz | 86,506 |
Douglas Glaspey | 77,866 |
Ron Bourgeois | 27,733 |
Paul Larkin | 86,630 |
Total | 278,735 |
12. During February 2005, GTH issued 100,000 shares to Elena Corporation as partial consideration for purchase of 100 acres known as the Elena Property. No commissions were paid with respect to the issuance.
13. On February 18, 2005, GTH issued 30,000 shares on the exercise of stock options issued under the company’s stock option plan to Ron Bourgeois. No commissions were paid with respect to the issuance.
ITEM 6. MANAGEMENT’S PLAN OF OPERATIONS
U.S. Geothermal Inc. is a Delaware corporation. The Company’s shares of common stock trade on the TSX Venture Exchange under the symbol “GTH” and on the Bulletin Board under the symbol “UGTH”. On December 19, 2003, the Company acquired all of the outstanding securities of U.S. Geothermal, Inc., an Idaho corporation (“Geo-Idaho”) incorporated in February 2002, through a transaction merging Geo-Idaho into Evergreen Power Inc., a wholly-owned Idaho subsidiary formed for purposes of the merger transaction. Following the merger, the Company changed its name from U.S. Cobalt Inc. to U.S. Geothermal Inc. Pursuant to the merger, Geo-Idaho became the surviving subsidiary of the Company, and Evergreen Power, Inc. ceased to exist. GTH is still a development stage company and has produced no revenues to date.
During the three months ended March 31, 2005, GTH was focused on (1) utilizing the results of the extended well testing program at the Raft River, Idaho geothermal project (“Raft River”), (2) the procurement of power purchase agreements, and (3) the evaluation of acquisitions of new geothermal projects. The data collected in the well testing program was utilized by GeothermEx
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Inc. (“GeothermEx”) to complete an independent productivity assessment that concluded that four production wells have an initial electrical power capacity of 13.8 megawatts utilizing binary cycle power process technology. On January 24, 2005, the Idaho Public Utilities Commission approved a long-term power purchase agreement with Idaho Power Company for the sale of power output from the proposed GTH Phase One power plant. On May 5, 2005, the company signed two additional power purchase agreements with Idaho Power Company for the sale of the power output from the proposed GTH Phase Two and Three power plants.
On February 11, 2005 the Company’s initial SB-2 registration statement was declared effective by the SEC. A subsequent SB-2 registration statement was declared effective April 25, 2005. Both statements registered shares held by selling shareholders, and shares issuable under warrants and options held by those shareholders.
On June 24, 2005, GTH signed a transmission agreement with the U.S. Department of Energy’s Bonneville Power Administration- Transmission Business Line for the transmission of electrical power from the project site to Idaho Power’s receiving point at Minidoka, Idaho.
PLAN OF OPERATIONS
The Company’s plan of operations for the next 12 months includes the following elements:
(1) | Obtain final bids for construction of the initial 10 MW power plant contemplated by the first power purchase agreement with Idaho Power Company executed December 29, 2004, and enter into final negotiations for the supply of the plant and equipment with the vendor. | |
(2) | Finalize negotiations with Marathon Capital LLC for financing to construct the power plant and close the transaction to allow financing drawdown. | |
(3) | Negotiate and execute a final engineering, procurement and construction agreement with CH2M Hill’s subsidiary Lockwood Greene E&C, Inc., who is experienced in the design, construction and commissioning of thermal based power generation facilities. | |
(4) | Initiate project construction for first power plant. | |
(5) | Continue to seek and acquire additional geothermal resource properties and/or operations. |
Power Purchase Agreement. The company signed a power purchase agreement (“PPA”) as a Qualifying Facility on December 29, 2004 with the Idaho Power Company. The PPA forms the basis for the economic development of the first phase of the Raft River project and allows for the arrangement of a financing package to construct the facilities, including the power plant. The PPA has a 20-year term and includes annually adjusted electric power prices based on the avoided cost method, which the company believes will be adequate for the successful development of a 10 MW power plant.
The company has signed two additional power purchase agreements with Idaho Power for future phases, which will involve drilling new wells and determining the production capacity of those wells for additional plant construction. These new PPAs are on essentially identical terms as the initial PPA other than location, wells, scheduling and similar particularities of the individual projects. Each PPA has a 20-year term from the scheduled operations commencement date of December 15, 2008, and the new plants for these projects will be constructed concurrently.
24
Resource Utilization. For the first phase of development at Raft River, the company will commercialize the existing production wells and energy field by construction of a 10 MW geothermal power plant that will provide the energy to be delivered under the PPA with Idaho Power Company. The company has received four EPC and other construction-related bids (see Engineering/EPC Contract and Project Design , below) from which it will be able to select a technology application for the power block and develop a final construction plan for financing of a power plant. These bids are currently under review. GTH has begun exclusive negotiations with Marathon Capital LLC for financing of the Phase One geothermal power plant. Marathon has developed a term sheet to evaluate potential financing sources and initiate discussions regarding financing structure, and the company anticipates that financing will be completed and initial construction activities can begin by the third quarter, 2005. Construction is anticipated to take approximately 14 to 16 months (assuming no significant or unusual delays from weather, supply issues or similar events), and the initial power plant is anticipated to begin production by the winter of 2006.
Engineering / EPC Contract and Project Design. The first phase plant design will be finalized to meet the requirements of the PPA and the basis for a request for proposal from engineering and/or engineering-procurement-construction (“EPC”) contractors. GTH is finalizing project design plans for a conventional 10 MW facility. In addition, GTH is exploring the feasibility of using an advanced power generation process, the ammonia absorption power cycle (AAPC), which is a new application of refrigeration technology.
This AAPC technology may be more efficient in producing energy from the existing wells, which would provide the ability to obtain energy from the existing wells for a longer period of time, and possibly reduce the number of additional wells that would be necessary for the first phase project and future phases. The U.S. Department of Energy awarded the Company a $2.2 million grant in February 2005 which can be used to construct a power plant that uses the AAPC process. While very promising and proven in other applications, the technology is unproven in this application. In order to obtain financing, adequate performance guarantees would be needed from qualified engineering and/or construction companies. The grant would be used to help mitigate the cost of these guarantees. Because the plant and equipment incorporating the advanced power generation process and the conventional technology are approximately 90% the same, the company is able to pursue both paths concurrently. The company has received final bids based on its request for proposal, will decide whether to pursue the AAPC technology or the conventional technology, and finalize its plans accordingly, by the end of June 2005.
Transmission / Interconnect Agreement. An Interconnect Feasibility Evaluation has been completed by Bonneville Power Administration- Transmission Business Line (TBL) and no problems have been identified for up to 30 MW of transmission capacity to the delivery point. TBL has estimated the cost of the interconnect, and has issued a National Environmental Policy Act (“NEPA”) categorical exclusion for the substation requirements. A detailed Interconnection Facility Study is underway by TBL.
On June 24, 2005, GTH signed a service agreement for firm, point-to-point power transmission with the TBL for up to 12 megawatts (MW) of electrical transmission capacity for an initial term of 30 years, beginning June 1, 2006. The service agreement is intended to provide transmission capability in support of the company’s Power Purchase Agreement with Idaho Power Company for the first phase of development at the company’s Raft River project. Charges under the transmission agreement are based on federal tariff; the non-refundable annual reservation fee for the first year is $12,336, which represents an estimation of likely annual charges under the agreement, without taking into account potential “short distance” discounts.
25
In addition to the transmission agreement for the first phase of the Raft River project, the company has reserved capacity through December 1, 2010, for two plants of up to 12 MW each, for an additional 24 MW of transmission capacity with TBL to support the company’s other two Power Purchase Agreements with Idaho Power Company, and has paid fees of $24,672 for the first year. The term of service will be increased once the projects are further along in the development process. In addition, if the TBL receives a firm request from a third party for transmission capacity for the period after December 1, 2010 (assuming the company has not already extended the term), the company will have the first right to match the term proposed by the third party.
Permitting. The company has begun permitting activities, which will be ongoing throughout the execution of the project. Most of the project is on private ground and GTH believes the project does not require a federal NEPA action unless the DOE grant is accepted. If the DOE grant is used for the project, an Environmental Assessment will be required. The Environmental Assessment would require additional permitting activities by the Company and would add to the overall time required for initiation of construction. During the Department of Energy’s development of the Raft River project in the early 1980’s, a multi-year survey of land, plant, animal, archeological, weather, and human health survey was undertaken. The DOE published an extensive report in 1982. GTH contacted the Department of the Interior Fish and Wildlife Service regarding any plants or animals in the region that are listed as threatened or endangered species, and received a reply stating that there are no issues identified for the project that require consultation under Section 7 of the Endangered Species Act of 1973, as amended.
An application for a Conditional Use Permit was submitted to the Cassia County Planning and Zoning Commission on February 17, 2005. A hearing before the Commission on the permit was held on April 7, 2005, during which the Commission unanimously approved the permit. Various state permits may or may not be required for the project, depending upon the technology used for the power plant.
Project Financing. Our cash position as at March 31, 2005, is adequate to fund our activities to December 31, 2005. On or before December 31, 2005, we will have to raise additional capital to construct the initial Raft River power plant, and for future working capital.
Total capital expenditures for the phase one project are currently estimated to be between $30 and $35 million. We expect we will finance the project through either a lease or a combination of debt and equity, with the equity portion being up to 50% of the total. We anticipate that some or all of the equity portion may be raised through the issuance of shares, exercise of existing outstanding warrants, or through the sale of tax credits and benefits. Discussions for both construction and long-term financing for the initial facility are currently taking place with Marathon Capital LLC, who specializes in power plant project debt financing and raising the tax oriented equity portion of the capital cost for the project, and with potential participants who may be interested in utilizing tax credits and benefits that may be available to the project.
Potential Acquisitions. GTH intends to continue its growth through the acquisition of ownership or leasehold interests in properties that it believes will add to the value of the company’s geothermal resources, and through possible mergers with or acquisitions of operating power plants and advanced geothermal or other renewable energy properties.
ITEM 7. FINANCIAL STATEMENTS
26
US Geothermal
U.S. GEOTHERMAL INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
MARCH 31, 2005 and 2004
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders of
U.S. Geothermal Inc.
(A development stage company)
We have audited the accompanying consolidated balance sheets of U.S. Geothermal Inc. (a development stage company) and its subsidiaries as of March 31, 2005 and 2004, and the related consolidated statements of operations and comprehensive loss, cash flows, and stockholders’ equity for each of the two years then ended and for the cumulative period from February 26, 2002 (date of inception) to March 31, 2005. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance 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. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as at March 31, 2005 and 2004, and the consolidated results of its operations and its cash flows for the periods indicated in conformity with accounting principles generally accepted in the United States.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectives of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered losses since inception, has not attained profitable operations and is dependent upon obtaining adequate financing to fulfill its development activities. These factors raise substantial doubt that the Company will be able to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Vancouver, Canada | “Morgan & Company” |
June 16, 2005 | Chartered Accountants |
Tel: (604) 687-5841 | P.O. Box 10007 Pacific Centre | |
Fax: (604) 687-0075 | Sute 1488 - 700 West Georgia Street | |
www.morgan-cas.com | Vancouver, B.C. V7Y 1A1 |
F-2
U.S. GEOTHERMAL INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Stated in U.S. Dollars)
March 31 | ||||||
2005 | 2004 | |||||
(Restated, | ||||||
Note 2(f)) | ||||||
ASSETS | ||||||
Current | ||||||
Cash and cash equivalents | $ | 1,957,075 | $ | 870,513 | ||
Refundable tax credit | 3,095 | 7,900 | ||||
Prepaid expenses | 29,099 | - | ||||
1,989,269 | 878,413 | |||||
Property, Plant and Equipment (Note 4) | 595,701 | 495,418 | ||||
$ | 2,584,970 | $ | 1,373,831 | |||
LIABILITIES | ||||||
Current | ||||||
Accounts payable and accrued liabilities | $ | 165,102 | $ | 185,465 | ||
STOCKHOLDERS’ EQUITY | ||||||
Capital Stock (Note 5) | ||||||
Authorized: | ||||||
100,000,000 common shares with a $0.001 par | ||||||
value | ||||||
Issued: | ||||||
17,331,429 shares at March 31, 2005 and | 17,332 | 12,923 | ||||
12,922,693 shares at March 31, 2004 | ||||||
Additional Paid-In Capital | 3,485,642 | 1,881,636 | ||||
Stock Purchase Warrants | 2,460,782 | 1,136,744 | ||||
Accumulated Other Comprehensive Income | 165,262 | 35,792 | ||||
Accumulated Deficit During Development Stage | (3,709,150 | ) | (1,878,729 | ) | ||
2,419,868 | 1,188,366 | |||||
$ | 2,584,970 | $ | 1,373,831 |
Approved on behalf of the Board:
“Doug Glaspey” | “Paul Larkin” | |
Director | Director |
The accompanying notes are an integral part of these consolidated financial statements.
F-3
U.S. GEOTHERMAL INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS
(Stated in U.S. Dollars)
CUMULATIVE | |||||||||
PERIOD FROM | |||||||||
YEARS ENDED | INCORPORATION | ||||||||
MARCH 31 | FEBRUARY 26, 2002 | ||||||||
2005 | 2004 | TO MARCH 31, 2005 | |||||||
(Restated, | |||||||||
Note 2(f)) | |||||||||
Revenue | $ | - | $ | - | $ | - | |||
Expenses | |||||||||
Consulting fees | 489,747 | 364,205 | 853,952 | ||||||
Corporate administration and development | 118,098 | 46,879 | 173,447 | ||||||
Exploration expenditures | 438,885 | 18,141 | 474,325 | ||||||
Interest and foreign exchange loss | 95,885 | 9,254 | 105,139 | ||||||
Professional fees | 321,081 | 117,169 | 511,440 | ||||||
Management fees | 86,463 | 111,855 | 252,318 | ||||||
Salaries and wages | 207,759 | - | 207,759 | ||||||
Travel and promotion | 89,497 | 12,318 | 113,765 | ||||||
Loss Before The Following | (1,847,415 | ) | (679,821 | ) | (2,692,145 | ) | |||
Interest Income | 16,994 | 3,423 | 20,417 | ||||||
Net Loss For The Period | $ | (1,830,421 | ) | $ | (676,398 | ) | $ | (2,671,728 | ) |
Basic And Diluted Loss Per Share | $ | (0.12 | ) | $ | (0.11 | ) | |||
Weighted Average Number Of Shares Outstanding | 14,209,468 | 6,337,901 | |||||||
Other Comprehensive Income | |||||||||
Net loss for the period | $ | (1,830,421 | ) | $ | (676,398 | ) | |||
Foreign currency translation adjustment | 165,262 | 35,792 | |||||||
Total Comprehensive Loss | $ | (1,665,159 | ) | $ | (640,606 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
F-4
U.S. GEOTHERMAL INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in U.S. Dollars)
CUMULATIVE | |||||||||
PERIOD FROM | |||||||||
YEARS ENDED | INCORPORATION | ||||||||
MARCH 31 | FEBRUARY 26, 2002 | ||||||||
2005 | 2004 | TO MARCH 31, 2005 | |||||||
(Restated
Note 2(f)) |
|||||||||
Operating Activities | |||||||||
Net loss for the period | $ | (1,830,421 | ) | $ | (676,398 | ) | $ | (2,671,728 | ) |
Add: Non-cash items: | |||||||||
Depreciation | 1,399 | 323 | 1,975 | ||||||
Shares issued for other than cash | - | - | 49,600 | ||||||
Stock based compensation | 295,540 | 296,081 | 591,621 | ||||||
Change in non-cash working capital items: | |||||||||
Accounts payable and accrued liabilities | (20,363 | ) | (97,802 | ) | (81,042 | ) | |||
Prepaid expenses | (29,099 | ) | - | (29,099 | ) | ||||
Refundable tax credit | 4,805 | (2,082 | ) | 2,723 | |||||
(1,578,139 | ) | (479,878 | ) | (2,135,950 | ) | ||||
Investing Activities | |||||||||
Purchases of property, plant and equipment | (41,331 | ) | (227,306 | ) | (520,325 | ) | |||
Cash acquired on business combination | - | 5,798 | 5,798 | ||||||
(41,331 | ) | (221,508 | ) | (514,527 | ) | ||||
Financing Activities | |||||||||
Issuance of share capital, net of share issue cost | 2,576,562 | 1,419,878 | 4,442,290 | ||||||
Advances to affiliated companies | - | 86,500 | - | ||||||
2,576,562 | 1,506,378 | 4,442,290 | |||||||
Foreign Exchange Effect On Cash And Cash | |||||||||
Equivalents | 129,470 | 35,792 | 165,262 | ||||||
Increase In Cash And Cash Equivalents | 1,086,562 | 840,784 | 1,957,075 | ||||||
Cash And Cash Equivalents, Beginning Of Period | 870,513 | 29,729 | - | ||||||
Cash And Cash Equivalents, End Of Period | $ | 1,957,075 | $ | 870,513 | $ | 1,957,075 | |||
Supplemental Disclosure | |||||||||
Taxes paid | - | - | - | ||||||
Interest paid | - | - | - | ||||||
Non-cash investing and financing activities | |||||||||
Shares issued for settlement of debt | - | 173,639 | 173,639 | ||||||
Shares issued for professional services | - | - | 49,600 | ||||||
Shares issued for geothermal property | 60,351 | - | 77,350 | ||||||
Warrants issued for share issue cost | 133,341 | 25,437 | 158,778 |
The accompanying notes are an integral part of these consolidated financial statements.
F-5
U.S. GEOTHERMAL INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE
PERIOD
FROM
INCEPTION,
FEBRUARY
26, 2002 TO
MARCH
31, 2005
(Stated in U.S. Dollars)
ACCUMULATED | ||||||||||||||||||||
ACCUMULATED | DEFICIT | |||||||||||||||||||
NUMBER | ADDITIONAL | STOCK | OTHER | DURING | ||||||||||||||||
OF | PAID-IN | PURCHASE | COMPREHENSIVE | DEVELOPMENT | ||||||||||||||||
SHARES | AMOUNT | CAPITAL | WARRANTS | INCOME | STAGE | TOTAL | ||||||||||||||
Shares issued for cash at $0.015 per share – | - | |||||||||||||||||||
February 2, 2002 | 2,600,000 | $ | 2,600 | $ | 37,400 | $ | $ | - | $ | - | $ | 40,000 | ||||||||
Shares and warrants issued for Geothermal property | ||||||||||||||||||||
at $0.009 – March 5, 2002 | 1,895,000 | 1,895 | 15,105 | - | - | - | 17,000 | |||||||||||||
Balance, March 31, 2002 – U.S. Geothermal Inc. – | ||||||||||||||||||||
Idaho | 4,495,000 | 4,495 | 52,505 | - | - | - | 57,000 | |||||||||||||
Shares issued for cash at $0.25 per share – May 28, | ||||||||||||||||||||
2002 (Note 5(a)(i))) | 395,000 | 395 | 98,355 | - | - | - | 98,750 | |||||||||||||
Shares issued for services at $0.25 per share – May | ||||||||||||||||||||
28, 2002 (Note 5(a)(i))) | 5,000 | 5 | 1,245 | - | - | - | 1,250 | |||||||||||||
Shares issued for cash at $0.30 per share – | ||||||||||||||||||||
November 1, 2002 (Note 5(a)(ii))) | 1,023,667 | 1,024 | 306,076 | - | - | - | 307,100 | |||||||||||||
Shares issued for services at $0.30 per share – | ||||||||||||||||||||
November 1, 2002 (Note 5(a)(ii))) | 10,000 | 10 | 2,990 | - | - | - | 3,000 | |||||||||||||
Shares issued for services at $0.30 per share – | ||||||||||||||||||||
February 14, 2003 (Note 5(a)(iii))) | 151,170 | 151 | 45,199 | - | - | - | 45,350 | |||||||||||||
Net loss for the period | - | - | - | - | - | (164,909 | ) | (164,909 | ) | |||||||||||
Balance carried forward, March 31, 2003 – U.S. | ||||||||||||||||||||
Geothermal Inc. - Idaho | 6,079,837 | 6,080 | 506,370 | - | - | (164,909 | ) | 347,541 |
F-6
U.S. GEOTHERMAL INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Continued)
FOR THE
PERIOD
FROM
INCEPTION,
FEBRUARY
26, 2002 TO
MARCH
31, 2005
(Stated in U.S. Dollars)
ACCUMULATED | ||||||||||||||||||||
ACCUMULATED | DEFICIT | |||||||||||||||||||
NUMBER | ADDITIONAL | STOCK | OTHER | DURING | ||||||||||||||||
OF | PAID-IN | PURCHASE | COMPREHENSIVE | DEVELOPMENT | ||||||||||||||||
SHARES | AMOUNT | CAPITAL | WARRANTS | INCOME | STAGE | TOTAL | ||||||||||||||
Balance brought forward, March 31, 2003 – U.S. | ||||||||||||||||||||
Geothermal Inc. - Idaho | 6,079,837 | $ | 6,080 | $ | 506,370 | $ | - | $ | - | $ | (164,909 | ) | $ | 347,541 | ||||||
Consolidation adjustment to the number of shares | ||||||||||||||||||||
issued and outstanding as a result of the reverse | ||||||||||||||||||||
take-over transaction – U.S. Geothermal Inc. – | ||||||||||||||||||||
Idaho – December 19, 2003 (Note 3) | (6,079,837 | ) | (6,080 | ) | 6,080 | - | - | - | - | |||||||||||
Legal parent company shares issued and | ||||||||||||||||||||
outstanding at time of reverse take-over – U.S. | ||||||||||||||||||||
Cobalt Inc. – December 19, 2003 (Note 3) | 2,274,616 | 2,275 | (2,275 | ) | - | - | - | - | ||||||||||||
2,274,616 | 2,275 | 510,175 | - | - | (164,909 | ) | 347,541 | |||||||||||||
Shares issued for acquisition of U.S. Geothermal | ||||||||||||||||||||
Inc. – Idaho (Note 3) | 6,939,992 | 6,940 | (6,940 | ) | - | - | (408,166 | ) | (408,166 | ) | ||||||||||
Warrants issued for acquisition of U.S. Geothermal | ||||||||||||||||||||
Inc. – Idaho (Note 3) | - | - | - | 629,256 | - | (629,256 | ) | - | ||||||||||||
Shares and warrants issued for cash at a price of | ||||||||||||||||||||
$0.45 per share in a private placement, net of | ||||||||||||||||||||
share issue costs of $100,559, which consists of | ||||||||||||||||||||
$75,122 paid in cash and $25,437 paid by the | ||||||||||||||||||||
issuance of 83,333 agent’s warrants – December | ||||||||||||||||||||
19, 2003 (Note 5(a)(v) | 3,322,221 | 3,322 | 959,230 | 457,326 | - | - | 1,419,878 | |||||||||||||
Shares and warrants issued for conversion of notes | ||||||||||||||||||||
at $0.45 – February 20, 2004 (Note 5(a)(vi)) | 385,864 | 386 | 123,090 | 50,162 | - | - | 173,638 | |||||||||||||
Stock options granted (Note 6) | - | - | 296,081 | - | - | - | 296,081 | |||||||||||||
Foreign currency translation | - | - | - | - | 35,792 | 35,792 | ||||||||||||||
Net loss for the period | - | - | - | - | - | (676,398 | ) | (676,398 | ) | |||||||||||
Balance, March 31, 2004 | 12,922,693 | 12,923 | 1,881,636 | 1,136,744 | 35,792 | (1,878,729 | ) | 1,188,366 |
F-7
U.S. GEOTHERMAL INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Continued)
FOR THE
PERIOD
FROM
INCEPTION,
FEBRUARY
26, 2002 TO
MARCH
31, 2005
(Stated in U.S. Dollars)
ACCUMULATED | ||||||||||||||||||||
ACCUMULATED | DEFICIT | |||||||||||||||||||
NUMBER | ADDITIONAL | STOCK | OTHER | DURING | ||||||||||||||||
OF | PAID-IN | PURCHASE | COMPREHENSIVE | DEVELOPMENT | ||||||||||||||||
SHARES | AMOUNT | CAPITAL | WARRANTS | INCOME | STAGE | TOTAL | ||||||||||||||
Balance, March 31, 2004 | 12,922,693 | $ | 12,923 | $ | 1,881,636 | $ | 1,136,744 | $ | 35,792 | $ | (1,878,729 | ) | $ | 1,188,366 | ||||||
Shares and warrants issued for cash at a price of $0.66 | ||||||||||||||||||||
in a private placement, net of share issue costs of | ||||||||||||||||||||
$358,472, which consists of $225,131 paid in cash and | ||||||||||||||||||||
$133,341 paid by the issuance of 280,000 agent’s | ||||||||||||||||||||
warrants – September 17, 2004 (Note 5(a)(vii)) | 4,000,001 | 4,000 | 1,103,082 | 1,324,038 | - | - | 2,431,120 | |||||||||||||
Shares issued for property at a price of $0.60 – February | ||||||||||||||||||||
22, 2005 (Note 5(a)(x)) | 100,000 | 100 | 60,251 | - | - | - | 60,351 | |||||||||||||
Shares issued for stock options exercised (Note | ||||||||||||||||||||
5(viii)(ix)) | 308,735 | 309 | 145,133 | - | - | - | 145,442 | |||||||||||||
Stock options granted (Note 6) | - | - | 295,540 | - | - | - | 295,540 | |||||||||||||
Foreign currency translation | - | - | - | - | 129,470 | - | 129,470 | |||||||||||||
Net loss for the year | - | - | - | - | - | (1,830,421 | ) | (1,830,421 | ) | |||||||||||
Balance, March 31, 2005 | 17,331,429 | $ | 17,332 | $ | 3,485,642 | $ | 2,460,782 | $ | 165,262 | $ | (3,709,150 | ) | $ | 2,419,868 |
The accompanying notes are an integral part of these consolidated financial statements.
F-8
U.S. GEOTHERMAL INC.
(A Development Stage Company)
NOTES CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
(Stated in U.S. Dollars)
1. |
NATURE OF OPERATIONS AND GOING CONCERN
|
|
a)
|
Organization
|
|
U.S. Cobalt Inc. (“GTH”) completed a
reverse take-over on December 19, 2003 (Note 3). The effect of this reverse
take-over was that the former stockholders of U.S. Geothermal Inc. (“GEO
– Idaho”) a company incorporated on February 26, 2002 in the
state of Idaho, acquired control of GTH. In connection with the transaction
U.S. Cobalt Inc. changed its name to U.S. Geothermal Inc. and consolidated
its common stock on a one new to five old basis. All references to common
shares in these financial statements have been restated to reflect the
roll-back of common stock.
|
||
b)
|
Development Stage Activities
|
|
The Company has been in the development stage since
its formation and has not yet realized any revenues from its planned operations.
GEO - Idaho operates for the purpose of acquiring geothermal properties
and has entered into an agreement with Vulcan Power Company (“Vulcan”)
of Bend, Oregon, U.S.A., pursuant to which the Company has agreed to acquire
up to a 100% interest in the Raft River Geothermal Property located in
Cassia County, Idaho, U.S.A. (Note 4).
|
||
c)
|
Going Concern
|
|
These financial statements have been prepared on
the basis of accounting principles applicable to a going concern, which
assumes the realization of assets and discharge of liabilities in the
normal course of business. As shown in the accompanying consolidated financial
statements, the Company has incurred an accumulated deficit of $3,709,150
for the period from February 26, 2002 (inception) to March 31, 2005, and
has no revenue from operations.
|
F-9
U.S. GEOTHERMAL INC.
(A Development Stage Company)
NOTES CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
(Stated in U.S. Dollars)
1. | NATURE OF OPERATIONS AND GOING CONCERN (Continued) | ||
c) | Going Concern (Continued) | ||
The Company is in the process of developing
its geothermal properties and has not yet determined whether these properties
contain economically recoverable geothermal reserves. The recoverability
of the amounts shown for geothermal properties is dependent upon the existence
of economically recoverable reserves, the ability of the Company to obtain
necessary financing to complete the development of the properties, and
upon future profitable production. The Company expects to continue to
incur substantial losses to complete the development of its business.
Since its inception, the Company has funded operations through common
stock issuances in order to meet its strategic objectives. Management
believes that sufficient funding will be available to meet its business
objectives, including anticipated cash needs for working capital, and
is currently evaluating several financing options. Management may seek
additional capital through public and/or private offerings of its common
stock. In the event the Company is unable to obtain additional financing,
there is no assurance that the Company will be able to continue as a going
concern. These financial statements do not give effect to any adjustments,
which may be necessary should the Company be unable to continue as a going
concern.
|
|||
2. | ACCOUNTING POLICIES | ||
a) | Basis of Presentation | ||
These consolidated financial statements
are prepared in accordance with accounting principles generally accepted
in the United States. These consolidated financial statements include
the accounts of the following companies:
|
|||
i) | U.S. Geothermal Inc. (incorporated in the state of Delaware); | ||
ii) | U.S. Geothermal Inc. (incorporated in the state of Idaho); | ||
iii) | U.S. Cobalt Inc. (incorporated in the state of Colorado). | ||
All inter-group transactions are eliminated
on consolidation with GEO-Idaho being the acquirer for accounting purposes.
|
|||
b) | Use of Estimates | ||
The presentation of financial statements
in accordance with generally accepted accounting principles required management
to make estimates and assumptions that affect certain reported amounts
and disclosures. Accordingly, actual results could differ from those estimates
which have been made using careful judgement.
|
F-10
U.S. GEOTHERMAL INC.
(A Development Stage Company)
NOTES CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
(Stated in U.S. Dollars)
2. | ACCOUNTING POLICIES (Continued) | |
c) |
Property, Plant and Equipment
|
|
Costs of acquisition of geothermal properties are
capitalized on an area-of-interest basis. Amortization of these costs
will be on a unit-of-production basis, based on estimated proven geothermal
reserves should such reserves be found. If an area of interest is abandoned,
the costs thereof are charged to income in the year of abandonment.
|
||
The Company expenses all costs related to the development
of geothermal reserves prior to the establishment of proven and profitable
reserves.
|
||
Other equipment is recorded at cost. Depreciation
of other equipment is calculated on a straight-line basis at an annual
rate of 30%.
|
||
d) |
Impairment of Long-Lived Assets
|
|
SFAS No. 144 - “Accounting for the Impairment
or Disposal of Long-Lived Assets” establishes a single accounting
model for long-lived assets to be disposed of by sale including discontinued
operations. SFAS 144 requires that these long-lived assets be measured
at the lower of the carrying amount or fair value less cost to sell, whether
reported in continuing operations or discontinued operations.
|
||
e) |
Income Taxes
|
|
The Company accounts for income taxes pursuant to
SFAS No. 109 – “Accounting for Income Taxes”. Under
SFAS No. 109, the Company is required to compute tax asset benefits for
net operating losses carried forward. The potential benefit of net operating
losses has not been recognized in these financial statements because the
Company cannot be assured it is more likely than not it will utilize the
net operating losses carried forward in future years.
|
F-11
U.S. GEOTHERMAL INC.
(A Development Stage Company)
NOTES CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
(Stated in U.S. Dollars)
2. | ACCOUNTING POLICIES (Continued) | |
f) |
Stock Based Compensation
|
|
At March 31, 2005, the Company has a stock option
plan, which is described more fully in Note 6. Prior to March 31, 2005,
the Company accounted for stock options under the recognition and measurement
provisions of APB Opinion No. 25,
Accounting for Stock Issued to Employees
,
and related Interpretations. No stock-based employee compensation cost
was reflected in previously reported results, as all options granted under
the plan had an exercise price equal to the market value of the underlying
common stock on the date of grant. Effective April 1, 2004, the company
adopted the fair value recognition provisions of FASB Statement No. 123,
Accounting for Stock-Based Compensation
, for stock-based employee
compensation. All prior periods presented have been restated to reflect
the compensation cost that would have been recognized had the recognition
provisions of Statement 123 been applied to all awards granted to employees
after January 1, 1995.
|
||
As a result of implementation, the provision had
the following effect on the Company’s March 31, 2004 Consolidated
Financial Statements:
|
Changes to consolidated balance sheet | |||||
Increase to additional paid-in capital | $ | 73,095 | |||
Increase to accumulated deficit during development stage | $ | (73,095 | ) | ||
Changes to consolidated statement of operations | |||||
Net loss for the year before change in accounting policy | $ | (603,303 | ) | ||
Increase in net loss: | |||||
Stock based compensation | (73,095 | ) | |||
Net loss for the year after change in accounting policy | $ | (676,398 | ) |
g) |
Financial Instruments
|
|
The Company’s financial instruments consist
of cash and equivalents, refundable tax credits, and accounts payable
and accrued liabilities. Unless otherwise noted, it is management’s
opinion that the Company is not exposed to significant interest, currency
or credit risks arising from these financial instruments. The fair values
of these financial instruments approximate their carrying values, unless
otherwise noted.
|
||
Refundable tax credit is comprised of Goods and
Services Tax (“GST”) which is refundable from the Government
of Canada.
|
F-12
U.S. GEOTHERMAL INC.
(A Development Stage Company)
NOTES CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
(Stated in U.S. Dollars)
2. | ACCOUNTING POLICIES (Continued) | |
h) |
Basic and Diluted Loss Per Share
|
|
In accordance with SFAS No. 128 – “Earnings
Per Share”, the basic loss per common share is computed by dividing
net loss available to common stockholders by the weighted average number
of common shares outstanding. Diluted loss per common share is computed
similar to basic loss per common share except that the denominator is
increased to include the number of additional common shares that would
have been outstanding if the potential common shares had been issued and
if the additional common shares were dilutive. As the Company generated
net losses in each of the periods presented, the basic and diluted loss
per share is the same, as any exercise of options or warrants would be
anti-dilutive.
|
||
i) |
Foreign Currency Translation
|
|
U.S. Geothermal has adopted the U.S. dollar as its
reporting currency since most of its operations are located in the United
States and to facilitate a more direct comparison to other North American
exploration stage companies. All references to US$ or to $ are
to United States dollars and references to CDN$ are to Canadian dollars.
|
||
The financial statements of the Company are translated
from its CDN$ functional currency to the US$ reporting currency
using the current rate method, whereby assets and liabilities are translated
at period-end exchange rates, while revenues and expenses are translated
using average rates over the period. Adjustments resulting from this translation
process are reflected as a separate component of shareholder’s equity.
|
||
The financial results of the Company’s foreign
subsidiaries are translated into its CDN$ functional currency as follows:
monetary assets and liabilities at the rates of exchange prevailing at
the balance sheet date; other assets and liabilities at the applicable
historical exchange rates; and revenues and expenses at the average rates
over the period, except for non-monetary expenses which are at the rates
used for the translation of the related assets. Gains and losses rising
from this translation process are included in operations.
|
||
j) |
Restoration Costs
|
|
SFAS No. 143 - “Accounting for Asset Retirement
Obligations,” requires legal obligations associated with the retirement
of long-lived assets to be recognized at their fair value at the time
that the obligations are incurred. Upon initial recognition of a liability,
that cost should be capitalized as part of the related long-lived asset
and allocated to expense over the useful life of the asset. As at March
31, 2005, the Company does not have any asset retirement obligations.
|
||
k) |
Cash and Cash Equivalents
|
|
Cash and cash equivalents consist of cash and short
term deposits with maturities of no more than ninety days when acquired.
|
F-13
U.S. GEOTHERMAL INC.
(A Development Stage Company)
NOTES CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
(Stated in U.S. Dollars)
2. |
ACCOUNTING POLICIES
(Continued)
|
|
l)
|
Recent Accounting Pronouncements
|
|
In May 2003, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 150 – “Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity”. SFAS No. 150 establishes
standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. It requires
that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). The requirements of
SFAS No. 150 apply to issuers’ classification and measurement of
freestanding financial instruments, including those that comprise more
than one option or forward contract. SFAS No. 150 does not apply to features
that are embedded in a financial instrument that is not a derivative in
its entirety. SFAS No. 150 is effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003, except
for mandatory redeemable financial instruments of non-public entities.
It is to be implemented by reporting the cumulative effect of a change
in an accounting principle for financial instruments created before the
issuance date of SFAS No. 150 and still existing at the beginning of the
interim period of adoption. Restatement is not permitted. The adoption
of this standard did not have a material effect on the Company’s
results of operations or financial position.
|
||
FASB has also issued SFAS No. 145, 146, 147, 149,
151, 152, 153, and 154 but they will not have any relationship to the
operations of the Company, therefore, a description of each and their
respective impact on the Company’s operations have not been disclosed.
|
||
3. |
REVERSE TAKE-OVER
|
|
Effective December 19, 2003, GTH acquired
100% of the issued and outstanding voting shares of GEO - Idaho by issuing
6,939,992 common shares and 2,420,217 share purchase warrants, of which
4,147,534 common shares and 1,452,130 share purchase warrants were held
in escrow as at March 31, 2005 (March 31, 2004, 6,204,694 common shares
and 2,178,195 share purchase warrants). Each share purchase warrant entitles
the holder to purchase one additional common share at a price of $0.75
per share until December 15, 2005. Since the transaction resulted in the
former shareholders of GEO - Idaho owning the majority of the issued shares
of GTH, the transaction, which is referred to as a “reverse take-
over”, has been treated for accounting purposes as an acquisition
by GEO - Idaho of the net assets and liabilities of GTH. Under this purchase
method of accounting, the results of operations of GTH are included in
these financial statements from December 19, 2003. GEO - Idaho is deemed
to be the purchaser for accounting purposes. Accordingly, its net assets
are included in the balance sheet at their previously recorded values.
|
F-14
U.S. GEOTHERMAL INC.
(A Development Stage Company)
NOTES CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
(Stated in U.S. Dollars)
3. |
REVERSE TAKE-OVER
(Continued)
|
The Company has determined that the share purchase
warrants issued as part of the transaction have a fair value of $629,256
as determined by using the Black-Scholes pricing model with the assumptions
as stated in Note 5(c). The amount is considered to be additional consideration
given to the former GEO-Idaho shareholders and, as such, has been allocated,
along with the net liabilities assumed of GTH, to deficit.
|
|
The acquisition is summarized as follows:
|
Current assets (including cash of $5,798) | $ | 11,616 | ||
Current liabilities | (419,782 | ) | ||
Net liabilities assumed | $ | (408,166 | ) |
The net liabilities amount assumed has been charged
to accumulated deficit.
|
|
4. |
PROPERTY, PLANT AND EQUIPMENT
|
GEO-Idaho entered into an agreement, as amended
December 3, 2002, with Vulcan Power Company (“Vulcan”), a
company incorporated in Oregon, U.S.A., to purchase up to a 100% interest
in the Raft River Geothermal Property (“the Property”) located
in Cassia County, Idaho, U.S.A., in exchange for 1,895,000 shares (the
“old shares”) and 1,612,000 warrants (the “old warrants”)
of GEO-Idaho and up to $600,000 in cash. A condition to acquiring
100% of the Property is the completion by GEO-Idaho of at least a $200,000
work program on the Property. The old shares and old warrants were exchanged
subsequent to December 31, 2002 (as part of the reverse take-over described
in Notes 3 and 5(a)(v)) for shares and warrants of the Company.
|
|
As at March 31, 2005, the Company has acquired a
75% interest in the Property by making cash payments totalling $250,000
in fiscal 2003 and $225,000 in fiscal 2004. The Company has also completed
the work program.
|
|
To purchase the remaining 25% interest in the Property,
the Company must pay Vulcan $125,000 on or before receipt of project
financing for construction of the power plant.
|
|
During the year ended March 31, 2005, the Company
acquired 100 acres of surface and energy rights in exchange for a cash
payment of $40,000 and issuance of 100,000 common shares.
|
F-15
U.S. GEOTHERMAL INC.
(A Development Stage Company)
NOTES CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
(Stated in U.S. Dollars)
4. |
PROPERTY, PLANT AND EQUIPMENT (Continued) Property, plant and equipment consisted of the following: |
2005 | 2004 | ||||||
Geothermal property (land and equipment) | |||||||
Shares issued | $ | 60,351 | $ | - | |||
Cash payments | 40,000 | 225,000 | |||||
100,351 | 225,000 | ||||||
Balance, beginning of year | 492,000 | 267,000 | |||||
Balance, end of year | 592,351 | 492,000 | |||||
Other equipment | |||||||
Acquisitions | 1,331 | 2,306 | |||||
Balance, beginning of year | 3,994 | 1,688 | |||||
Balance, end of year | 5,325 | 3,994 | |||||
597,676 | 495,994 | ||||||
Less: Accumulated depreciation | (1,975 | ) | (576 | ) | |||
$ | 595,701 | $ | 495,418 |
5. | STOCK CAPITAL | ||
a) | Shares Issued | ||
i)
|
On May 28, 2002, the Company issued 395,000 common
shares for at a price of $0.25 per share for cash proceeds of $98,750
and 5,000 common shares for consulting services. The shares issued for
services had a fair value on that date of $1,250. Accordingly, the
shares issued for services were recorded as a charge to consulting fees
in the consolidated statement of operations.
|
||
ii)
|
On November 1, 2002, the Company issued 1,023,667
common shares at a price of $0.30 per share for cash proceeds of $307,100
and 10,000 common shares for services related to the geothermal property.
The shares issued for services had a fair value on that date of $3,000.
Accordingly, these shares were recorded as a charge to exploration expenditures
in the consolidated statement of operations.
|
||
iii)
|
On February 14, 2003, the Company issued 151,170
common shares to directors of the Company for management services. These
shares had a fair value on that date of $45,350. Accordingly, these
shares were recorded as a charge to management fees in the consolidated
statement of operations.
|
F-16
U.S. GEOTHERMAL INC.
(A Development Stage Company)
NOTES CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
(Stated in U.S. Dollars)
5. | STOCK CAPITAL (Continued) | |||
a) | Shares Issued (Continued) | |||
iv) |
On April 25, 2003, the Company committed
to issue convertible promissory notes in an aggregate principal amount
of $269,000. The notes were convertible, at the option of the holder,
into units as described in subparagraph (vi), except with respect to the
expiration date of the units. The notes carried an interest rate of 20%.
See subparagraph (vi).
|
|||
v) |
On December 19, 2003, the Company issued
6,939,992 shares and 2,420,217 warrants (the “new warrants”)
to the shareholders of GEO-Idaho to effect the reverse take-over (“RTO”).
Pursuant to the negotiated agreement of the parties, as approved by the
TSX Venture Exchange, the GEO-Idaho shares were exchanged on a one-for-one
basis with all shareholders other than Vulcan Power Company, which received
shares and warrants so that Vulcan Power would own 14% on a non- diluted
and 25% on a fully-diluted basis after closing (taking into account the
private placement closed in conjunction with the RTO discussed below).
To meet these percentages, Vulcan was issued 1,755,159 shares and 2,420,217
warrants. Vulcan held 1,895,000 GEO-Idaho shares and 1,612,000 GEO-Idaho
warrants prior to the RTO. The new warrants, issued only to Vulcan as
the sole old warrant holder of GEO-Idaho, have an exercise price of $0.75
per share and expire December 15, 2005. Concurrently, the Company issued
3,322,221 units for a private placement at a price of $0.45 per
unit. Each unit consists of one common share and one half of one share
purchase warrant. Each full share purchase warrant entitles the holder
to purchase one additional common share at a price of $0.75 per share
until December 15, 2005. The share issuance costs of this issuance were
$100,559. Of this amount, $75,122 was paid in cash and $25,437
was paid by the issuance of 83,333 agent’s warrants to purchase
up to 83,333 common shares, exercisable at a price of $0.45 until
December 15, 2005. The value assigned to the new warrants was $629,256
($0.26 per warrant), and the value assigned to the warrants included
in the units was $431,889 ($0.26 per warrant) as calculated by
the Black-Scholes model. The exercise date of the warrants issued in connection
with the private placement and agent services can be accelerated to 30
days after written notice from the Company provided that the Company has
obtained both: (i) all material permits and licenses necessary to authorize
initiation of construction of a 10 megawatt power plant; and (ii) power
purchase and transmission agreements. The fair value of the agent’s
warrants of $25,437 ($0.30 per warrant) was calculated by the
Black- Scholes model. The share issue costs have been netted against the
proceeds allocated to additional paid in capital.
|
F-17
U.S. GEOTHERMAL INC.
(A Development Stage Company)
NOTES CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
(Stated in U.S. Dollars)
5. |
STOCK CAPITAL
(Continued)
|
||
a)
|
Shares Issued (Continued)
|
||
vi)
|
During the year ended March 31, 2004, the Company
made cash payments totalling $137,398 pursuant to the convertible
notes described in subparagraph (iv). On February 20, 2004, the Company
issued 385,864 units, at a value of $0.45 per unit, on conversion
of amounts due under convertible promissory notes totalling $173,639,
including unpaid principal of $147,000 and interest accrued at a rate
of 20% per annum totalling $26,638. Each unit is identical to the
units issued in the December 2003 private placement, other than the term
of the warrants expires on February 17, 2006.
|
||
vii)
|
On September 17, 2004, the Company issued 4,000,001
units for a private placement at a price of $0.85 CDN ($0.66 U.S.
as at September 17, 2004) per unit. Each unit consists of one common share
and one share purchase warrant. Each full share purchase warrant entitles
the holder to purchase one additional common share at a price of $1.25
CDN ($1.03 U.S. as at March 31, 2005) per share until September 17,
2006. Should the closing price of the Company’s common shares exceed
$1.65 CDN ($1.36 U.S. as at March 31, 2005) per share for twenty
consecutive trading days, the exercise date of the warrants can be accelerated
to a date not earlier than twenty days following the date of the press
release indicating the acceleration.
|
||
In payment for services provided in connection with
the private placement, the Company paid $225,131 in cash and granted
280,000 agent’s warrants exercisable at a price of $0.85 CDN
($0.70 U.S. as at March 31, 2005) until September 17, 2006. The warrants
are exercisable into units identical (including with respect to acceleration)
to the units offered in the private placement. The fair value of $133,341
as calculated by the Black-Scholes model was recorded as a share issue
cost.
|
|||
viii)
|
On October 20, 2004, the Company issued 278,735
common shares upon the exercise of 278,735 stock options at an exercise
price of $0.60 CDN ($0.47 U.S. as at October 20, 2004).
|
||
ix)
|
On February 18, 2005, the Company issued 30,000
common shares upon the exercise of 30,000 stock options at an exercise
price of $0.60 CDN ($0.49 U.S. as at February 18, 2005).
|
||
x)
|
On February 23, 2005, the Company issued 100,000
common shares at a price of $0.60 for a parcel of land and energy
rights at its Raft River Property valued at $60,351.
|
F-18
U.S. GEOTHERMAL INC.
(A Development Stage Company)
NOTES CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
(Stated in U.S. Dollars)
5. | STOCK CAPITAL (Continued) | |
b) | Escrow Shares | |
The following common shares and share purchase warrants are in escrow: |
2005 | 2004 | |||
Common shares | 4,241,540 | 6,439,567 | ||
Share purchase warrants | 1,946,937 | 2,678,195 |
The escrow shares and warrants are held in escrow
pursuant to standard requirements of the TSX Venture Exchange, which required
the escrow conditions be placed upon the shares and share purchase warrants
issued in conjunction with the acquisition of GEO- Idaho (Note 3) and
the concurrently completed private placement (Note 5(a)(v)).
|
||
c) |
Stock Purchase Warrants
|
|
As at March 31, 2005, the following share purchase
warrants are outstanding:
|
EXERCISABLE | ||||||||
WARRANTS | INTO NUMBER | |||||||
ISSUED | OF COMMON | EXERCISE | EXPIRY | FAIR | ||||
PURSUANT TO | SHARES | PRICE | DATE | VALUE (1) | ||||
Acquisition of U.S. | ||||||||
Geothermal – Idaho Inc. | 2,420,217 | $0.75 | December 15, 2005 | $629,256 | ||||
Private placement | 1,661,110 | $0.75 | December 15, 2005 | $431,889 | ||||
Agent’s warrants | 83,333 | $0.45 | December 15, 2005 | $25,437 | ||||
Conversion of notes | 192,932 | $0.75 | February 17, 2006 | $50,162 | ||||
Private placement | 4,000,001 | $1.25CDN | September 17, 2006 | $1,190,697 | ||||
Agent’s warrants | 280,000 | $0.85CDN | September 17, 2006 | $133,341 | ||||
8,637,593 | $2,460,782 |
F-19
U.S. GEOTHERMAL INC.
(A Development Stage Company)
NOTES CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
(Stated in U.S. Dollars)
5. | SHARE CAPITAL (Continued) |
(1) |
The Black-Scholes option pricing model was used
to determine the fair value of the warrants, with the following assumptions:
|
2005 | 2004 | ||
Dividend yield | 0% | 0% | |
Expected volatility | 150% | 136% | |
Risk free interest rate | 2.65% | 4.18% | |
Expected life | 24 months | 24 months |
6. |
STOCK BASED COMPENSATION
|
The Company's 2004 stock option plan provides for
the grant of incentive stock options for up to 2,584,000 common shares
to employees, consultants, officers and directors of the company. Options
are granted for a term of up to five years from the date of grant. Stock
options granted generally vest over a period of eighteen months.
|
|
During the year ended March 31, 2005, the Company
granted 560,000 stock options to consultants, directors and officers exercisable
at prices ranging from $0.72 to $0.90 CDN ($0.47 to $0.59
USD as at March 31, 2005).
|
|
During the year ended March 31, 2004, the Company
granted 1,745,000 stock options to consultants, directors and officers
exercisable at a price of $0.60 CDN ($0.50 USD as at March 31,
2005) until January 3, 2009.
|
|
Compensation expense related to stock options granted
is recorded at their fair value as calculated by the Black-Scholes option
pricing model. Compensation expense of $264,090 was included in consulting
fees and $31,451 was included in salaries and wages for the year ended
March 31, 2005 (March 31, 2004 - $296,081).
|
F-20
U.S. GEOTHERMAL INC.
(A Development Stage Company)
NOTES CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
(Stated in U.S. Dollars)
6. |
STOCK BASED COMPENSATION (Continued) The changes in stock options are as follows: |
WEIGHTED | |||||
AVERAGE | |||||
EXERCISE | |||||
NUMBER | PRICE | ||||
Balance outstanding, March 31, 2003 | - | $ | - | ||
Granted | 1,745,000 | 0.60 CDN | |||
Balance outstanding, March 31, 2004 | 1,745,000 | $ | 0.60 CDN | ||
Granted | 560,000 | $ | 0.75 CDN | ||
Cancelled | (240,000 | ) | 0.60 CDN | ||
Exercised | (308,735 | ) | 0.60 CDN | ||
Balance outstanding March 31, 2005 | 1,756,265 | $ | $0.65 CDN |
The following table summarizes information about
the stock options outstanding at March 31, 2005:
|
OPTIONS OUTSTANDING | OPTIONS EXERCISABLE | |||||
REMAINING | ||||||
EXERCISE | NUMBER OF | CONTRACTUAL | NUMBER OF | |||
PRICE | SHARES | LIFE (YEARS) | SHARES | |||
$ 0.60CDN | 1,196,265 | 3.76 | 897,199 | |||
$ 0.72CDN | 470,000 | 4.67 | 117,500 | |||
$ 0.90CDN | 90,000 | 4.62 | 22,500 | |||
$ 0.65CDN | 1,756,265 | 4.05 | 1,037,199 |
F-21
U.S. GEOTHERMAL INC.
(A Development Stage Company)
NOTES CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
(Stated in U.S. Dollars)
6. | STOCK BASED COMPENSATION (Continued) |
The fair value of the stock options granted was
estimated using the Black-Scholes option- pricing model and is amortized
over the vesting period of the underlying options. The weighted average
fair value of options granted was $0.50 per share. The assumptions
used to calculate the fair value are as follows:
|
2005 | 2004 | ||||
Dividend yield | 0 | 0 | |||
Expected volatility | 116% | 136% | |||
Risk free interest rate | 3.88% | 4.18% | |||
Expected life | 5 Years | 5 Years |
2005 | 2004 | ||||||
Statutory rates | 35% | 35% | |||||
Recovery of income taxes computed at statutory | |||||||
rates | $ | (641,000 | ) | $ | (237,000 | ) | |
Non-deductible items | 104,000 | 104,000 | |||||
Temporary differences | 38,000 | 1,000 | |||||
Tax benefit not recognized on current losses | 499,000 | 132,000 | |||||
$ | - | $ | - |
F-22
U.S. GEOTHERMAL INC.
(A Development Stage Company)
NOTES CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
(Stated in U.S. Dollars)
7. | INCOME TAX LOSSES (Continued) |
The components of the deferred tax asset and valuation
allowance are long-term items. Whereas no reduction in valuation is anticipated
within a year, the tax effects of timing differences that give rise to
significant components of the future tax assets and future tax liabilities
are as follows:
|
2005 | 2004 | ||||||
Net operating loss carry forward | $ | 687,000 | $ | 188,000 | |||
Property, plant and equipment | 40,000 | 3,000 | |||||
Less: Valuation allowance | (727,000 | ) | (191,000 | ) | |||
Deferred tax asset | $ | - | $ | - |
At March 31, 2005, the Company has net operating
losses of approximately $1,962,000, which may be carried forward to
apply against future years’ income for tax purposes expiring as
follows:
|
2023 | $ | 160,000 |
2024 | $ | 377,000 |
2025 | $ | 1,425,000 |
8. | COMMITMENTS | |
a) |
The Company has entered in several lease
agreements with terms expiring up to December 1, 2034, for geothermal
properties adjoining the Raft River Geothermal Property.
|
|
The leases provide for the following annual payments within the next five years: |
2006 | $ | 22,700 |
2007 | $ | 22,900 |
2008 | $ | 14,700 |
2009 | $ | 14,900 |
2010 | $ | 15,200 |
b)
|
The Company is committed to issue 120,000 common
shares as a bonus pursuant to an employment agreement.
|
|
9. |
RELATED PARTY TRANSACTIONS
|
|
As at March 31, 2005, an amount of $4,842
(March 31, 2004 - $147,616) is payable to directors and officers of
the Company.
|
F-23
U.S. GEOTHERMAL INC.
(A Development Stage Company)
NOTES CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
(Stated in U.S. Dollars)
9. | RELATED PARTY TRANSACTIONS (Continued) | |
b) |
The Company incurred the following transactions
with directors, officers and a company with a common director:
|
2005 | 2004 | ||||||
Administrative services | $ | 18,142 | $ | 10,029 | |||
Management fees | 64,196 | 111,855 | |||||
Salaries and wages | 98,197 | - | |||||
Consulting fees | 49,194 | 24,123 | |||||
Legal fees | 14,913 | - | |||||
Rent | 11,273 | 10,067 | |||||
$ | 255,915 | $ | 156,074 |
10. | SUBSEQUENT EVENTS | |
a) |
On April 11, 2005, the Company issued 17,778 common
shares for stock options exercised at a price of CDN$0.90.
|
|
b) |
On April 19, 2005, the Company granted stock options
to a consultant, to purchase 50,000 common shares at a price of CDN$0.72
until April 19, 2010.
|
|
c) |
On May 5, 2005, the Company entered into two 10
megawatt (“MW”) Power Purchase Agreements (“PPA’s”)
for the electrical output from the Raft River Geothermal Power Property.
Under terms of the PPA’s, the Company will receive payments for
power generated under a price schedule that starts at $53.90 per MW
and increases 2.3% annually to a maximum of $85.04 per MW over the
20 year term of the contract.
|
F-24
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 8A. CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including the CEO and CFO, concluded that the disclosure controls and procedures were effective as of March 31, 2005, in ensuring that all material information required to be filed in this annual report has been made known to them in a timely manner.
There has been no change to our internal control over financial reporting during the quarter or fiscal year ended March 31, 2005 that has materially affected, or is likely to materially affect, our internal control over financial reporting.
The company is not required to have, nor was Morgan & Company engaged to perform, an audit of internal control over financial reporting. The audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectives of the company’s internal control over financial reporting. Accordingly, Morgan & Company expressed no such opinion.
ITEM 8B. OTHER INFORMATION
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The following sets forth certain information concerning the current directors, executive officers and significant employees of our company. Each director has been elected to serve until our next annual meeting of stockholders and until his successor has been elected and qualified. Each executive officer serves at the discretion of the board of directors of our company.
NAME | AGE | POSITION |
Daniel J. Kunz | 53 | Chief Executive Officer, President and Director |
Douglas J. Glaspey (1) | 52 | Chief Operating Officer and Director |
John H. Walker | 56 | Chairman of the Board and Director |
Paul A. Larkin (1) (2) | 55 | Director |
Jon Wellinghoff (1) | 56 | Director |
Kerry D. Hawkley | 51 | Chief Financial Officer and Secretary |
Kevin Kitz | 44 | Vice President, Development, Geo-Idaho |
Robert Cline | 48 | Vice President, Engineering, Geo-Idaho |
(1) | Member of the Audit Committee. | |
(2) | Audit Committee Financial Expert. Not independent. |
27
Daniel J. Kunz is the President and Chief Executive Officer and a director of GTH and the President of Geo-Idaho. He has served as a director of the company since March 2000, and was Chairman of the Board of Directors from March 2000 until December 2003. Prior to the acquisition of Geo-Idaho, he served as a director and the President for that company from February 2002 until the acquisition. Mr. Kunz was an executive of Ivanhoe Mines Ltd. from 1997, and served as its President and Chief Executive Officer from November 1, 2000 until March 1, 2003. From March 2, 2003 until March 8, 2004, Mr. Kunz served as Interim President of Jinshan Gold Mines Inc. Mr. Kunz has more than 28 years of experience in international mining, engineering and construction, including, marketing, business development, management, accounting, finance and operations, having held key positions in MK Gold Company (President & CEO) and Morrison Knudsen Corporation (Vice President & Controller, and as CFO to the Mining Group). Mr. Kunz holds a Masters of Business Administration and a Bachelor of Science in Engineering Science. He is currently a director of several companies publicly traded on the TSX Venture Exchange, including Jinshan Gold Mines Inc., Triumph Gold Corp., Tyner Resources Ltd., and Chesapeake Gold Corp. Mr. Kunz serves as Chairman of the Board of Directors of China Mineral Acquisition Corporation, which is a publicly traded company on the OTC Bulletin Board.
Douglas J. Glaspey is the Chief Operating Officer and a director of GTH. He has served as a director of the company since March 2000, and served as its President from March 2000 until the acquisition of Geo-Idaho. He also served as a director and the Chief Executive Officer of Geo-Idaho from February 2002 until the acquisition, and continues to serve as President. From December 1986 to the present, Mr. Glaspey has been a Metallurgical Engineer and Project Manager with Twin Gold Corporation. Mr. Glaspey has 27 years of operating and management experience. He holds a Bachelor of Science in Mineral Processing Engineering and an Associate of Science in Engineering Science. His experience includes production management, planning and directing resource exploration programs, preparing feasibility studies and environmental permitting. He has formed and served as an executive officer of several private resource development companies in the United States, including Drumlummon Gold Mines Corporation and Black Diamond Corporation.
John H. Walker is a director and the Chairman of the Board of directors of GTH. He has held that position since December 2003. He has served (and continues to serve) as Chief Executive Officer of Mihaly International Canada Limited since 1987. Prior to that Mr. Walker was a Senior Advisor to Falconbridge Limited from September 2000 to April 2002; and Managing Director of Loewen, Ondaatje, McCutcheon, from November 1996 to August 2000. Mr. Walker holds a Master of Environmental Studies degree from York University in Toronto. For many years he was an executive with Ontario Hydro where he directed programs in renewable energy and international business development, specifically in respect of thermal power generation. Currently as CEO of Mihaly International Canada Limited, based in Oakville, Ontario, he provides services to development and mining companies, corporations, banks, and insurance companies on a range of issues related to project management, construction, fuel supply, build own operate and transfer, project finance and risk management.
Paul Larkin serves as a director of GTH, a position he has held since March 2000. He served as Secretary of GTH until December, 2003, and served as a director and the Secretary-Treasurer of Geo-Idaho from February 2002 until the acquisition. Since 1983, Mr. Larkin has also been the President of the New Dawn Group, an investment and financial consulting firm located in Vancouver, British Columbia, and the President of Tyner Resources Ltd., a TSX Venture Exchange listed company. New Dawn is primarily involved in corporate finance, merchant
28
banking and administrative management of public companies. Mr. Larkin held various accounting and banking positions for over a decade before founding New Dawn in 1983, and currently serves on the boards of the following companies which are listed on the TSX Venture Exchange: Eventure Capital Corp., Tyner Resources Ltd., and Webtech Wireless Inc.
Jon Wellinghoff is a director of GTH, a position he has held since December 2003. Since November 2000, Mr. Wellinghoff has been an attorney in private practice with the firm of Beckley Singleton of Las Vegas, Nevada. From May 1999 to November 2000, he served as Regional Manager of Noresco, and served as General Counsel with Nevada P.U.C. from May 1998 to May 1999. He was an attorney in private practice from July 1989 until joining Nevada P.U.C. Mr. Wellinghoff has an extensive background in the renewable energy field including, Federal Trade Commission with a focus on renewable energy development. He was the first Nevada Consumer Advocate and wrote the first integrated resource planning acts for Nevada. He has been involved with and advised clients in connection with the negotiation of power purchase agreements with utilities and PURPA issues. Mr. Wellinghoff drafted and advocated the Nevada Renewable Portfolio Standard, and is counsel for other geothermal and renewable power producers.
Kerry D. Hawkley serves as the company’s Chief Financial Officer and as its Secretary. He has served as the company’s controller since July 2003, and became CFO and Secretary as of January 1, 2005. Since July 2003, he has also provided, and continues to provide, consulting services to Triumph Gold Corp. From 1998 to June 2003, Mr. Hawkley served as controller, director and treasurer of LB Industries. Mr. Hawkley has over 28 years experience in all areas of accounting, finance and administration. He holds Bachelor of Business Administration degrees in Accounting and Finance. He started his career as an internal auditor with Union Pacific Corporation and has held various accounting management positions in the oil and gas, truck leasing, mining and energy industries.
Kevin Kitz is the Vice President-Development of Geo-Idaho. He joined the company in April 2003. He is a mechanical engineer with 18 years of geothermal power plant design, construction and operating experience with UNOCAL, with whom he worked until November 2002. He holds a Bachelor of Science in Mechanical Engineering and Material Science, and is a Professional Engineer in California. During his career with Unocal, he was a Production and Operations Engineer at the 75MW Salton Sea geothermal power plant in southern California, a Senior Production Engineer at the Geysers geothermal field in northern California, and a Power Plant Engineering Advisor in the Philippines for geothermal power plants ranging from 12 to 55 MW.
Robert Cline is the Vice President-Engineering of Geo-Idaho. He joined the company in February 2005. He is a civil engineer with 23 years experience developing energy and water resources projects in the western U.S. He holds Bachelor of Science degrees in Civil Engineering and Physics, and is a Professional Engineer in Arizona and Oregon. Prior to joining US Geothermal, he was the Manager Engineering at Ida-West Energy Company, playing a key role in developing several hydroelectric and gas-fired generating facilities, and was instrumental in several highly successful hydroelectric acquisitions. Prior to 1991, he worked nine years for the US Bureau of Reclamation where he was involved in engineering, contracting and construction of various water resources related projects in Arizona.
Code of Ethics. Management has submitted a proposed “Code of Ethics” to the Board of Directors for review and comment. GTH anticipates approval of the code of ethics at the board
29
meeting to be held in conjunction with the annual general meeting in September 2005. When approved, the code of ethics will apply to all directors, officers and employees of the company.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual compensation earned or paid to Daniel Kunz, the chief executive officer (the "named executive officer") for the year ended March 31, 2005. No executive officer of GTH or Geo-Idaho had compensation that exceeded $100,000 during the fiscal years ending March 31, 2004 and March 31, 2005. Long term compensation in the form of options that had been issued prior to December 19, 2003, were cancelled in accordance with the vote of the shareholders of GTH approving the acquisition of Geo-Idaho. Annual bonuses or other compensation have not been paid to the named executive officer for any period prior to March 31, 2005, except for the stock options listed below.
Mr. Kunz has an employment agreement with the company which provides that he will devote at least one-half of working time to the company. Mr. Kunz may engage in other business activities provided he does not engage in any activities which another executive officer determines is competitive, or will otherwise interfere with the performance of Mr. Kunz’s duties to the company. In addition to monetary compensation, Mr. Kunz is entitled to receive incentive stock options as determined by the company’s board of directors, benefits (including for immediate family) as are or may become available to other employees, and vacation. The employment agreement may be terminated by the company without notice, payment in lieu of notice, severance or other sums for causes which include failure to perform in a competent and professional manner, appropriation of corporate opportunities or failure to disclose a conflict of interest, conviction which has become final for an indictable offense, fraud, dishonesty, refusal to follow reasonable and lawful direction of the company, breach of fiduciary duty, and a declaration of bankruptcy by or against Mr. Kunz. Otherwise the company upon one month written notice may terminate the agreement. The agreement includes covenants by Mr. Kunz of confidentiality and noncompetition, and provides for equitable relief in the event of breach. A copy of Mr. Kunz’s employment agreement is included as Exhibit 10.12 in Part II of the SB-2 registration statement dated April 7, 2005.
Name and Principal
position(s) |
Year Ended
March 31, 2005 |
Annual Compensation |
Long-term Compensation
Awards |
Salary ($) | Securities underlying options/SARs (# ) | ||
Daniel J. Kunz | 2005 | $60,500 | NIL |
Chief Executive Officer | |||
and President |
On November 10, 2004, GTH granted 460,000 stock options to officers, employees and consultants. The number of stock options granted to executive officers is identified below. The options vest in quarterly increments, starting with the date of grant and every six months thereafter. The exercise price on the date of grant was the fair market value of the company’s stock on the date of grant.
Number of Shares | Percentage of Total | |||
Underlying Options | Options Granted to | |||
Optionee | Granted | Employees | Exercise Price | Expiration Date |
Kerry D. Hawkley | 60,000 | 13.04 | CDN$0.72 | November 10, 2009 |
30
On October 19, 2004, Daniel J. Kunz and Douglas J. Glaspey exercised options granted in a previous year.
Shares | CDN | Number of Shares | Value of in-the-money | |
Acquired on | $Value | Underlying | Unexercised | |
Name | Exercise | Realized | Unexercised Options | Stock Options |
Daniel J. Kunz | 86,506 | $25,952 | 63,494/50,000 | CDN$12,670/$10,000 |
Douglas J. Glaspey | 77,866 | $23,360 | 72,134/50,000 | CDN$14,427/$10,000 |
GTH did not award any shares, units or rights to any executive officer under a Long-Term Incentive Plan during the fiscal year ended March 31, 2005.
Directors who are not otherwise remunerated per an employment agreement are paid $2,000 per quarter and $500 per board meeting attended in person. Directors who are also officers do not receive any cash compensation for serving in that capacity. However, all directors are reimbursed for their out-of-pocket expenses in attending meetings.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS
The following table sets forth the common stock owned by (1) our directors and "named executive officers," (2) persons known by us to beneficially own, individually, or as a group, more than 5% of our outstanding common stock as of May 31, 2005 and (3) all of our current directors and executive officers as a group.
Total Number | |||||
Name and | Shares | Beneficially Owned | Percentage of | ||
Address (2) | Outstanding (3) | Options (1) | Warrants (1) | (1) | Shares |
Daniel J. Kunz | 2,629,175 | 113,494 | 652,439 | 3,395,108 | 18.76% |
Douglas J. Glaspey | 1,190,145 | 122,134 | 16,148 | 1,328,427 | 7.60% |
Paul A. Larkin | 987,693 | 113,370 | 16,147 | 1,117,210 | 6.40% |
Kerry D. Hawkley | 0 | 70,000 | 0 | 70,000 | 0.40% |
John H. Walker | 102,807 | 80,000 | 0 | 182,807 | 1.05% |
Jon Wellinghoff | 0 | 60,000 | 0 | 60,000 | 0.34% |
Vulcan Power Company(4) | 1,755,159 | 0 | 2,420,217 | 4,175,376 | 21.14% |
All Directors and | |||||
Officers as a group (5) | 4,909,820 | 558,998 | 684,734 | 6,153,552 | 33.13% |
(1) | This tabular information is intended to conform with Rule 13d-3 promulgated under the Securities Exchange Act of 1934 relating to the determination of beneficial ownership of securities. The tabular information gives effect to the exercise of warrants and options exercisable on or before August 4, 2005, owned in each case by the person or group whose |
31
percentage ownership is set forth opposite the respective percentage and is based on the assumption that no other person or group exercise their warrants or options. | |
(2) | Unless otherwise indicated, the address for each of the above is c/o U.S. Geothermal Inc., 1509 Tyrell Lane, Suite B, Boise, Idaho, 83706. |
(3) | A majority of the shares of Messrs. Kunz, Glaspey, Larkin and Walker and of Vulcan Power Company included in this column are subject to the Escrow Agreements described below in paragraph 5 of the section titled “Certain Relationships and Related Transactions. |
(4) | Vulcan Power Company's address is 1183 NW Wall Street, Suite G, Bend, Oregon, 97701. Steve Munson is the CEO and Chairman of the Board of Vulcan Power Company. |
(5) | Vulcan Power Company is not included in the totals for all directors and officers as a group. |
Please also see Item 5 above with respect to securities authorized for issuance under equity compensation plans.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1. On April 25, 2003, GTH (then U.S. Cobalt Inc.) entered into loan agreements for an aggregate $269,000 in bridge loans to commence well inspection work on the Raft River Project. Pursuant to the loan agreements, convertible notes were issued to the lenders identified in the table below. The loan was convertible into units, with each unit comprising one share and one half of one share purchase warrant on the same terms as the private offering closed in December 2003 in connection with the acquisition of Geo-Idaho. The interest rate was 20% per annum. On January 23, 2004, Daniel Kunz was repaid his principal plus accrued interest, and on February 12, 2004, Kevin Kitz was repaid $22,000 of his principal. The remaining principal amounts, plus accrued interest, were converted as of February 20, 2004 into 385,864 shares and 192,932 share purchase warrants.
Name of Lender |
Principal Amount of
Loan |
Accrued Interest at
February 20, 2004 |
Amount Repaid |
Principal
Converted |
Accrued Interest
Converted |
Converted at
$0.45 per unit |
Daniel Kunz | $ 100,000 | $ 15,398.00 | $ 115,398 | $ - | $ - | - |
Kevin Kitz | $ 24,000* | $ 3,782.95 | $ 22,000 | $ 2,000 | $ 3,782.95 | 12,851 |
Toll Cross Securities | $ 75,000 | $ 11,822.10 | $ - | $ 75,000 | $ 11,822.10 | 192,938 |
Wendell King | $ 30,000 | $ 4,728.75 | $ - | $ 30,000 | $ 4,728.75 | 77,175 |
Donald Falconer | $ 10,000 | $ 1,576.25 | $ - | $ 10,000 | $ 1,576.25 | 25,725 |
Wayne Beach | $ 30,000 | $ 4,728.75 | $ - | $ 30,000 | $ 4,728.75 | 77,175 |
$ 269,000 | $ 42,036 | $ 137,398 | $ 147,000 | $ 26,639 | 385,864 |
*Converted a portion of amounts due to him for services to loan.
2. In July 2003, Vulcan Power Company approached Geo-Idaho for a loan of $30,000, to be secured by an executed direction to the company to issue 60,000 each of the shares and the warrants that were issuable to Vulcan upon closing of the merger with Geo-Idaho, if the loan had not been repaid by the earlier of July 30, 2004 and such closing. Geo-Idaho did not have the resources to make the loan, so Mr. Kunz agreed to loan the money personally. Mr. Kunz was concerned, however, that he might have difficulties in perfecting and/or realizing on a security interest in property not actually held by the proposed debtor. As an accommodation, Geo-Idaho effectively acted as an administrator of the loan, for the benefit of the true creditor, Mr. Kunz. In September 2003, Vulcan again approached Geo-Idaho for a loan, this time for $25,000, to be secured by an executed direction to the company to issue 50,000 each of the shares and the warrants that were issuable to Vulcan upon closing of the merger with Geo-Idaho, if the loan had
32
not been repaid by the earlier of September 30, 2004 and such closing. Geo-Idaho did not have the resources to make this loan, so Messrs. Kunz, Bourgeois, Glaspey, Kitz and Larkin (each of whom were then officers and/or directors of the company) agreed to loan the money personally. To address the same concerns with respect to difficulties of perfection and/or realization, Geo-Idaho again accommodated the parties by acting as an administrator of the loan. The deadline for payment of both the July and September loans was extended by agreement dated December 11, 2003 in consideration of, among other things, a direction for an additional 51,474 each of the shares and warrants upon release from escrow (as described in paragraph 5, below), and were issued on May 24, 2005.
3. On December 19, 2003, as consideration for the acquisition of Geo-Idaho, the company issued 6,939,992 common shares and 2,420,217 share purchase warrants exercisable at $0.75 per share until December 15, 2005. As shareholders of Geo-Idaho, the following persons received:
Name | No. of Shares | No. of Warrants |
Daniel J. Kunz | 1,254,769 | -- |
Douglas J. Glaspey | 1,014,649 | -- |
Paul A. Larkin | 863,187 | -- |
Ronald Bourgeois(a) | 821,425 | -- |
John Walker | 73,807 | -- |
Vulcan Power Company | 1,755,156 | 2,420,217 |
Subtotal | 5,782,993 | 2,420,217 |
All other Geo-Idaho | ||
shareholders | 1,156,999 | -- |
Total | 6,939,992 | 2,420,217 |
(a) Mr. Bourgeois was then the Chief Financial Officer and Secretary of the company and a director of Geo-Idaho.
4. Mr. Kunz also participated as a subscriber in the private offering completed December 19, 2003, in connection with the merger acquisition of Geo-Idaho. He subscribed for 1,111,111 units at a purchase price of $0.45 per unit.
5. In connection with the acquisition of Geo-Idaho and the closing of the private placement conducted in connection with the acquisition, two escrow agreements were entered into. In accordance with standard TSX Venture Exchange rules and regulations, one escrow was established for the 5,782,993 shares and 2,420,217 warrants of the above related individuals and Vulcan Power Company, as officers, directors and/or principal stockholders. Pursuant to the terms of that agreement and TSX rules, an additional 1,111,111 shares (for an aggregate of 6,894,104 shares in escrow) and 555,556 warrants (for an aggregate of 2,975,773 warrants in escrow) which Mr. Kunz acquired as an investor in the private placement were also added to the escrow. Ten percent of the 6,894,104 shares and the 2,975,773 warrants were released from escrow upon closing of the transaction, leaving, 90%, or 6,204,694 shares and 2,678,195 warrants held in escrow. These shares and warrants are released at the rate of 15% every 6 months over a 36-month period. Releases from escrow occur on June 19 and December 19, annually. As of June 19, 2005, 3,102,346 of these shares and 1,339,098 of these warrants remain in this escrow.
The first escrow arrangement also includes a condition imposed as part of the business transaction, and effectively creates additional restrictions to the release of the last 1,000,000 in the aggregate of the shares issued to Messrs. Kunz, Glaspey, Bourgeois, Walker and Larkin and 585,052 of the shares issued to Vulcan. 750,000 of the individuals’ shares and all of the Vulcan shares will be released if the Raft River Project is licensed and holds the necessary key
33
documents (prior to construction) to be able to generate and distribute ten megawatts of electricity at standard commercial prices. The balance of the individuals’ 250,000 shares will be released if an additional five megawatts of electricity is licensed.
A second escrow arrangement, also required by standard TSX Venture Exchange rules and regulations, was established with respect to shares of the company held by Messrs. Kunz, Glaspey and Larkin prior to the merger. A total of 211,300 shares are held pursuant to the second agreement for a period of 18 months, with one third released on June 19, 2004 one third released on December 19, 2004 and the remaining one third to be released on June 19, 2005.
A third escrow arrangement (dating back to Mango management, and which has expired) is currently included in the company’s escrow figures. The number of shares in this arrangement is 23,573 and the company is in the process of making an application with the TSX Venture Exchange to have these shares cancelled.
6. In September, 2004, the company agreed to pay past due compensation for services rendered in calendar year 2004 to Messrs. Kunz, Glaspey, Bourgeois (who was then the Chief Financial Officer and Secretary of the company) and Larkin, which, on October 19, 2004, each used to exercise options as follows:
OPTIONEE |
Amount
exercised (USD) |
Amount
exercised (CDN) |
Exercise
price (CDN) |
Number of
common shares |
Daniel Kunz | $ 40,550.00 | $ 51,903.60 | $ 0.60 | 86,506 |
Doug Glaspey | $ 36,500.00 | $ 46,719.60 | $ 0.60 | 77,866 |
Ron Bourgeois | $ 13,000.00 | $ 16,639.80 | $ 0.60 | 27,733 |
Paul Larkin | $ 40,607.42 | $ 51,978.00 | $ 0.60 | 86,630 |
Totals | $ 130,657.42 | 278,735 |
ITEM 13. EXHIBITS
See the exhibits index to this Form 10-KSB.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The aggregate fees billed by the Company’s principal accountant for the fiscal years ended March 31, 2004 and 2005 are as follows:
Year ended | Audit Fees | Audit-Related | Tax Fees | All Other |
March 31 | (1) | Fees (2) | (3) | Fees (4) |
2005 | $38,300 | $0 | $0 | $0 |
2004 | $13,870 | $0 | $0 | $0 |
(1) |
Includes services for the annual audit of the Company’s
financial statements and services associated with SB-2 registration statements
filed with the SEC.
|
(2) |
Fees charged for assurance and related services
reasonably related to the performance of an audit, and not included under
“Audit Fees”.
|
34
(3) | Fees charged for tax compliance, tax advice and tax planning services. |
(4) | Fees for services other than disclosed in any other column. |
The Audit Committee reviews the Company’s financial statements, MD&A and any annual and interim earnings press releases before the Company publicly discloses this information and any reports or other financial information (including quarterly financial statements) which are submitted to any governmental body, or to the public, including any certification, report, opinion, or review rendered by the principal accountant performing the external audit of the Company’s records. The Audit Committee also confirms that adequate procedures are in place for the review of the Company’s public disclosure of financial information extracted or derived from the Company’s financial statements.
The Audit Committee engaged Morgan & Co to perform the annual audit of the financial statements of the company, and to attest to the adequacy of the company’s internal controls over financial reporting. Audit fees and scope of work are monitored and approved by the Audit Committee.
SUPPLEMENTAL INFORMATION PURSUANT TO SECTION 15(d) BY NON-REPORTING ISSUERS
The company is not sending an annual report or any proxy material to its security holders.
35
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
U.S. GEOTHERMAL INC. | ||
(Registrant) | ||
Date: July 12, 2005 | By | /s/ Daniel J. Kunz |
Daniel J. Kunz | ||
President, Chief Executive Officer and | ||
Director | ||
Date: July 12, 2005 | By | /s/ Kerry D. Hawkley |
Kerry D. Hawkley | ||
Chief Financial Officer |
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Daniel J. Kunz | . | Director | July 12, 2005 |
Daniel J. Kunz | |||
/s/Douglas J. Glaspey | . | Director | July 12, 2005 |
Douglas J. Glaspey | |||
/s/ John Walker | . | Director and Chairman | July 12, 2005 |
John Walker | |||
/s/ Paul Larkin | . | Director | July 12, 2005 |
Paul Larkin | |||
/s/ Jon Wellinghoff | . | Director | July 12, 2005 |
Jon Wellinghoff |
36
EXHIBIT LIST
EXHIBIT | |
NUMBER | DESCRIPTION |
3.1 | Certificate of Incorporation of U.S. Cobalt Inc. (now known as U.S. Geothermal Inc.) (1) |
3.2 | Certificate of Domestication of Non-U.S. Corporation (1) |
3.3 | Certificate of Amendment of Certificate of Incorporation (changing name of U.S. Cobalt Inc. to U.S. Geothermal Inc.) (1) |
3.4 | Bylaws of U.S. Cobalt Inc. (now known as U.S. Geothermal Inc.) (1) |
3.5 | Plan of Merger of U.S. Geothermal Inc., an Idaho corporation and EverGreen Power Inc., an Idaho corporation (1) |
3.6 | Amendment to Plan of Merger (1) |
4.1 | Form of Stock Certificate (1) |
4.2 | Form of Warrant Certificate (1) |
4.3 | Provisions Regarding Rights of Stockholders (1) |
10.1 | Agreement by and between U.S. Geothermal Inc. And Vulcan Power Company dated December 3, 2002 (1) |
10.2 | Amendment No. 1 to "Agreement by and between U.S. Geothermal Inc. And Vulcan Power Company" dated November 15, 2003 (1) |
10.3 | Amendment No. 2 to "Agreement by and between U.S. Geothermal Inc. And Vulcan Power Company" dated December 30, 2003 (1) |
10.4 | Letter Agreement dated January 8, 2004 between U.S. Geothermal Inc. and Vulcan Power Company (1) |
10.5 | Geothermal Lease and Agreement dated July 11, 2002, by and between Sergene Jensen, Personal Representative of the Estate of Harlan B. Jensen, and U.S. Geothermal Inc., an Idaho corporation (1) |
10.6 | Geothermal Lease and Agreement dated June 14, 2002, by and between Jensen Investments Inc. and U.S. Geothermal Inc., an Idaho corporation (1) |
10.7 | Geothermal Lease and Agreement dated March 1, 2004, by and between: Jay Newbold and U.S. Geothermal Inc., an Idaho corporation (1) |
10.8 | Geothermal Lease and Agreement dated June 28, 2003, by and between Janice Crank and the children of Paul Crank and U.S. Geothermal Inc., an Idaho corporation (1) |
10.10 | Administrative Services Contract between U.S. Geothermal Inc. and New Dawn Holdings Ltd . (1) |
10.12 | Employment Agreement for Daniel Kunz (1) |
10.15 | Escrow Agreement made December 19, 2003, among U.S. Geothermal Inc., Pacific Corporate Trust Company as escrow agent, and certain security holders (1) |
10.16 | Escrow Agreement made December 19, 2003, among U. S. Geothermal Inc., Pacific Corporate Trust Company as escrow agent, and certain security holders .(1) |
10.17 | First Amended and Restated Merger Agreement among U.S. Cobalt Inc., a Delaware corporation, EverGreen Power Inc., an Idaho corporation, U.S. Geothermal Inc., an Idaho corporation ("Geo"), and the stockholders of Geo (1) |
10.18 | Agreement with Dundee Securities Corporation dated June 28, 2004 (1) |
10.19 | Stock Option Plan of U.S. Cobalt Inc. (now known as U.S. Geothermal Inc.) dated April 3, 2003 (1) |
10.20 | Geothermal Lease and Agreement dated December 1, 2004, by and between Reid S. Stewart and Ruth O. Stewart and U.S. Geothermal Inc., an Idaho corporation (2) |
37
10.21 | Employment Agreement for Kevin Kitz (2) |
10.22 | Employment Agreement for Kerry D. Hawkley (2) |
10.23 | Employment Agreement for Douglas Glaspey (2) |
10.24 | Power Purchase Agreement dated December 29, 2004 with Idaho Power Company (2) |
10.25 | Power Purchase Agreement dated May 5, 2005 with Idaho Power Company (3) |
10.26 | Power Purchase Agreement dated May 5, 2005 with Idaho Power Company (3) |
10.27 | Service Agreement for Point-to-Point Transmission Service dated June 24, 2005 with Bonneville Power Administration (4) |
21 | List of Subsidiaries (1) |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (4) |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (4) |
32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (4) |
32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (4) |
(1) Filed as part of Form SB-2 filed with the SEC on July 8, 2004, and incorporated
herein by this reference.
(2) Filed as part of Amendment No. 2 to Form SB-2 filed with the SEC on January
10, 2005, and incorporated herein by this reference.
(3) Filed as part of Form 8-K filed with the SEC on May 10, 2005, and incorporated
herein by this reference.
(4) Filed herewith.
38
Service Agreement No. 05TX-11399
SERVICE AGREEMENT
for
POINT-TO-POINT
TRANSMISSION SERVICE
executed by the
UNITED STATES OF AMERICA
DEPARTMENT OF ENERGY
acting by and through the
BONNEVILLE POWER ADMINISTRATION
and
U.S. GEOTHERMAL, INC.
1. | This Service Agreement, dated as of _______________ , is entered into, by and between the Bonneville Power Administration Transmission Business Line (Transmission Provider) and U.S. Geothermal, Inc. (Transmission Customer). |
2. | The Transmission Customer has been determined by the Transmission Provider to have a Completed Application for Point-to-Point (PTP) Transmission Service under the Transmission Provider’s Open Access Transmission Tariff (Tariff). |
3. | The Transmission Customer has provided to the Transmission Provider a deposit, unless such deposit has been waived by the Transmission Provider, for Firm Point- to-Point Transmission Service in accordance with the provisions of section 17.3 of the Tariff. |
4. | Service under this agreement shall commence on 0000 hours on June 1, 2006. Service under this agreement shall terminate on such date as mutually agreed upon by the parties. |
5. | The Transmission Provider agrees to provide and the Transmission Customer agrees to take and pay for Point-to-Point Transmission Service in accordance with the provisions of Part II of the Tariff and this Service Agreement. |
6. | Any notice or request made to or by either Party regarding this Service Agreement shall be made to the representative of the other Party as indicated in Exhibit B. |
7. | The Tariff, Exhibit A (Specifications for Long-Term Firm Point-To-Point Transmission Service), and Exhibit B (Notices), are incorporated herein and made a part hereof. Capitalized terms not defined in this agreement are defined in the Tariff. |
8. | This Service Agreement shall be interpreted, construed and enforced in accordance with Federal law. |
9. | This Service Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and assigns. |
10. | The Transmission Customer and the Transmission Provider agree that provisions of section 3201(i) of Public Law 104-134 (Bonneville Power Administration Refinancing Act) are incorporated in their entirety and hereby made a part of this Service Agreement. |
IN WITNESS WHEREOF, the Parties have caused this Service Agreement to be executed by their respective authorized officials.
Service Agreement No. 05TX-11399, U.S. Geothermal, Inc. | 2 |
EXHIBIT A
SPECIFICATIONS FOR LONG-TERM FIRM
POINT-TO-POINT TRANSMISSION SERVICE
TABLE 1A
REQUEST FOR TRANSMISSION SERVICES
The OASIS Assignment Reference Number (ARef) is: 1424987.
1. |
TERM OF TRANSACTION
|
Start Date: at 0000 hours on June 1, 2006.
|
|
Termination Date: at 0000 hours on June 1, 2036, provided,
however, that service under this agreement shall terminate on the earlier
of: (i) the date mutually agreed upon by the parties; or (ii) the date
Raft River Rural Electric Cooperative terminates the Transmission Provider’s
lease of transmission facilities under Contract No. DE- MS79-84BP91697,
as it may be amended or replaced.
|
|
2. |
DESCRIPTION OF CAPACITY AND ENERGY TO BE
TRANSMITTED BY TRANSMISSION PROVIDER
|
Delivering
Party (Resource) 1 |
POR
Name & Voltage |
POR
Control Area |
Reserved
Capacity (kW) |
POD
Name & Voltage |
POD
Control Area |
Reserved
Capacity (kW) |
Receiving
Party |
Transmission
Customer |
Bridge 34.5 kV | IPC | 12,000 |
Minidoka
PP 138 kV IPC |
IPC | 12,000 | IPC |
Total Reserved Capacity |
12,000
|
3. | POINT OF RECEIPT |
BRIDGE SUBSTATION 34.5 kV | |
Location : the point in the Transmission Provider’s Bridge Substation where the 34.5 kV facilities of the Transmission Provider and Raft River Rural Electric Cooperative, Inc. are connected. It is the Transmission Customer’s responsibility to arrange for the delivery of power from the generation site(s) to this Point of Receipt. | |
Voltage : 34.5 kV | |
Metering : in the Transmission Provider’s Bridge Substation and at the Transmission Customer’s generation site(s) in the 34.5 kV circuits over which such electric power flows. |
___________________________
1
The Resource, POR, POD and the whole transmission path are in the control
area of Idaho Power Company (IPC), who is also the purchaser of the power from
the Resource.
05TX-11399, U.S. Geothermal, Inc. | Page 1 of 4 |
Exhibit A, Table 1A | Effective at 0000 hours |
Specifications for Long-Term Firm Point-To-Point Transmission Service | on June 1, 2006 |
4. |
POINT OF DELIVERY MINIDOKA PP 138 kV – IPC POINT OF DELIVERY Location : in the Government’s Minidoka Power Plant where the 138 kV facilities of the Government and IPC are connected; Voltage : 138 kV; Metering : None. It is the responsibility of the Transmission Customer to assure that metering is implemented consistent with IPC’s requirements. Exceptions : Loss returns are not required by the Transmission Provider at this time. It is the responsibility of the Transmission Customer to work with IPC as the POR and POD Control Area to determine the implementation of loss returns. |
||
5. |
DESIGNATION OF PARTY SUBJECT TO RECIPROCAL
SERVICE OBLIGATION
|
||
6. |
NAMES OF ANY INTERVENING SYSTEMS PROVIDING
TRANSMISSION SERVICE
|
||
7. |
SERVICE AGREEMENT CHARGES
|
||
(a) |
Transmission Charge
PTP-04 Rate Schedule or successor rate schedules. |
||
(1) |
Reservation Fee
Within 30 days after the Transmission Customer signs this Service Agreement, the first annual nonrefundable reservation fee of $12,336 shall be paid to the Transmission Provider. For the second and any subsequent reservation fees, the Transmission Provider will bill the Transmission Customer 30 days prior to their due date. If the deferral or extension of service spans two or more rate periods, the reservation fee will be based on the PTP Rate in effect at the time each payment is due. The Reservation Fee is based on the PTP Rate only and does not include either of the two Ancillary Services that the Transmission Customer is obligated to purchase from the Transmission Provider. |
05TX-11399, U.S. Geothermal, Inc. | Page 2 of 4 |
Exhibit A, Table 1A | Effective at 0000 hours |
Specifications for Long-Term Firm Point-To-Point Transmission Service | on June 1, 2006 |
(2) |
Short Distance Discount (SDD)
[0.6 + (0.4 x transmission distance/75)] |
Path |
Circuit
Miles |
Transmission
Demand (kW) |
SDD Factor |
Bridge - Minidoka | 40.9 | 12,000 | 0.818 2 |
(b) | System Impact and/or Facilities Study Charge(s) | ||
System Impact and/or Facilities Study Charges are not required at this time for service under this Service Agreement. | |||
8. | OTHER PROVISIONS SPECIFIC TO THIS SERVICE AGREEMENT | ||
None. | |||
9. | CREDITWORTHINESS AND PREPAYMENT FOR SERVICE | ||
(a) | The Transmission Provider’s creditworthiness business practices and provisions shall apply, as revised or replaced. | ||
(b) | The Transmission Customer shall make monthly prepayments of the charges specified in paragraph 9(e) of this section. The Transmission Customer shall make the prepayment on or before the 20 th of each month for the subsequent month. Should the 20 th fall on a weekend or Federal holiday, the prepayment must be made on the preceding business day. The first prepayment is due to the Transmission Provider no later than May 20, 2006, for the month of June 2006. | ||
(c) | The Transmission Customer shall wire transfer all prepayments to the Federal Reserve Bank in New York City so that they arrive no later than 2:00 p.m. Eastern Standard or Daylight Time, whichever is in effect. The Transmission Provider will verify that payment has been received at the Federal Reserve Bank. | ||
(d) | The Transmission Customer shall include the following information on all wire transfers under this Agreement: | ||
(1) | ABA number – The ABA number for the Federal Reserve Bank in New York City is 021030004; | ||
(2) | Receiving Bank – “TREAS NYC” designates the Federal Reserve Bank in New York City as the receiving bank; | ||
(3) | Product Code – "TREAS NYC/CTR"; |
2 | The SDD is not available for transmission from secondary points of integration. If a primary point of integration, associated with a SDD is moved to a secondary point of integration, at any time during the month, the SDD shall not be applied for that month. |
05TX-11399, U.S. Geothermal, Inc. | Page 3 of 4 |
Exhibit A, Table 1A | Effective at 0000 hours |
Specifications for Long-Term Firm Point-To-Point Transmission Service | on June 1, 2006 |
(4) | Account – Agency Location Code of 89001401 directs the payment to the BPA Fund in the U.S. Treasury; | ||
(5) | Third Party Information – After “OBI=” the Transmission Customer should indicate “TRANSMISSION PREPAY” in order to identify the payment when it is received. | ||
(e) | The following charges are subject to prepayment: PTP Long Term Firm Transmission Service charges and Ancillary Service Charges. The monthly charge for long-term firm PTP transmission service under this Service Agreement shall be pursuant to the applicable PTP Rate Schedule, or its successor. Ancillary Service Charges shall be pursuant to the applicable ACS Rate Schedule, or its successor, and shall apply to the Ancillary Services in accordance with Exhibit A, Table 3. The amount of prepayment shall be determined using the applicable rates in effect for such service for the relevant month. Successors to the PTP and ACS rate schedules will apply to the prepayment obligations. Should the Transmission Customer purchase either short-term firm or nonfirm PTP transmission service under this Service Agreement, the Transmission Customer shall calculate such charges in accordance with the applicable rate and prepay such charges for each month as described in paragraph 9(b) of this section. | ||
(f) | Prepayment pursuant to paragraph (e) above does not preclude the Transmission Provider from applying adjustments to such payments for other charges consistent with the applicable rate schedules, or to pass through to the Transmission Customer any additional charges not covered in paragraph (e) above for ancillary services which the Transmission Provider may be required to pay to the control area operator. Any such adjustments and charges are subject to payment under the Transmission Provider’s normal transmission billing process. | ||
(g) | If the Transmission Customer fails to make any payment as set forth above or to pay any amount owing on its Wholesale Transmission Bill on or before its due date, then, the Transmission Provider shall have the right to suspend transmission service for the period for which prepayment should have been provided, and, after 60 calendar days following written notice by the Transmission Provider to the Transmission Customer, the Transmission Provider shall have the right to terminate this Agreement. |
05TX-11399, U.S. Geothermal, Inc. | Page 4 of 4 |
Exhibit A, Table 1A | Effective at 0000 hours |
Specifications for Long-Term Firm Point-To-Point Transmission Service | on June 1, 2006 |
EXHIBIT A
SPECIFICATIONS FOR LONG-TERM FIRM
POINT-TO-POINT TRANSMISSION SERVICE
TABLE 1B
REQUEST FOR TRANSMISSION SERVICES
The OASIS Assignment Reference Number (ARef) is: 1434023.
1. | TERM OF TRANSACTION |
Start Date: at 0000 hours on December 1, 2008. | |
Termination Date: at 0000 hours on December 1, 2010, provided, however, that service under this agreement shall terminate on the earlier of: (i) the date mutually agreed upon by the parties; or (ii) the date Raft River Rural Electric Cooperative terminates the Transmission Provider’s lease of transmission facilities under Contract No. DE-MS79-84BP91697, as it may be amended or replaced. | |
2. | DESCRIPTION OF CAPACITY AND ENERGY TO BE TRANSMITTED BY TRANSMISSION PROVIDER |
Delivering
Party (Resource) 1 |
POR
Name & Voltage |
POR
Control Area |
Reserved
Capacity (kW) |
POD
Name & Voltage |
POD
Control Area |
Reserved
Capacity (kW) |
Receiving
Party |
Transmission
Customer |
Bridge 34.5 kV | IPC | 12,000 |
Minidoka
PP 138 kV- IPC |
IPC | 12,000 | IPC |
Total Reserved Capacity |
12,000
|
3. | POINT OF RECEIPT |
BRIDGE SUBSTATION 34.5 kV | |
Location : the point in the Transmission Provider’s Bridge Substation where the 34.5 kV facilities of the Transmission Provider and Raft River Rural Electric Cooperative, Inc. are connected. It is the Transmission Customer’s responsibility to arrange for the delivery of power from the generation site(s) to this Point of Receipt. | |
Voltage: 34.5 kV | |
Metering: in the Transmission Provider’s Bridge Substation and at the Transmission Customer’s generation site(s) in the 34.5 kV circuits over which such electric power flows. |
___________________________
1
The Resource, POR, POD and the whole transmission path are in the control
area of Idaho Power Company (IPC), who is also the purchaser of the power from
the Resource.
05TX-11399, U.S. Geothermal, Inc. | Page 1 of 4 |
Exhibit A, Table 1B | Effective at 0000 hours |
Specifications for Long-Term Firm Point-To-Point Transmission Service | on December 1, 2008 |
4. | POINT OF DELIVERY |
MINIDOKA PP 138 kV – IPC POINT OF DELIVERY | |
Location: in the Government’s Minidoka Power Plant where the 138 kV facilities of the Government and IPC are connected; | |
Voltage: 138 kV; | |
Metering: None. It is the responsibility of the Transmission Customer to assure that metering is implemented consistent with IPC’s requirements. | |
Exceptions: Loss returns are not required by the Transmission Provider at this time. It is the responsibility of the Transmission Customer to work with IPC as the POR and POD Control Area to determine the implementation of loss returns. | |
5. | DESIGNATION OF PARTY SUBJECT TO RECIPROCAL SERVICE OBLIGATION |
U.S. Geothermal, Inc. | |
6. | NAMES OF ANY INTERVENING SYSTEMS PROVIDING TRANSMISSION SERVICE |
None. | |
7. | SERVICE AGREEMENT CHARGES |
Service under this Agreement will be subject to some combination of the charges detailed in Tables 1, 2 and 3 of this exhibit. (The appropriate charges for transactions will be determined in accordance with the terms and conditions of the Tariff.) |
(a) |
Transmission Charge
PTP-04 Rate Schedule or successor rate schedules. |
||
(1) |
Reservation Fee
Within 30 days after the Transmission Customer signs this Service Agreement, the first annual nonrefundable reservation fee of $12,336 shall be paid to the Transmission Provider. For the second and any subsequent reservation fees, the Transmission Provider will bill the Transmission Customer 30 days prior to their due date. If the deferral or extension of service spans two or more rate periods, the reservation fee will be based on the PTP Rate in effect at the time each payment is due. The Reservation Fee is based on the PTP Rate only and does not include either of the two Ancillary Services that the Transmission Customer is obligated to purchase from the Transmission Provider. |
05TX-11399, U.S. Geothermal, Inc. | Page 2 of 4 |
Exhibit A, Table 1B | Effective at 0000 hours |
Specifications for Long-Term Firm Point-To-Point Transmission Service | on December 1, 2008 |
(2) |
Short Distance Discount (SDD)
[0.6 + (0.4 x transmission distance/75)] |
Path |
Circuit
Miles |
Transmission
Demand (kW) |
SDD Factor |
Bridge -
Minidoka |
40.9 | 12,000 | 0.818 2 |
(b) | System Impact and/or Facilities Study Charge(s) | ||
System Impact and/or Facilities Study Charges are not required at this time for service under this Service Agreement. | |||
8. | OTHER PROVISIONS SPECIFIC TO THIS SERVICE AGREEMENT | ||
None. | |||
9. | CREDITWORTHINESS AND PREPAYMENT FOR SERVICE | ||
(a) | The Transmission Provider’s creditworthiness business practices and provisions shall apply, as revised or replaced. | ||
(b) | The Transmission Customer shall make monthly prepayments of the charges specified in paragraph 9(e) of this section. The Transmission Customer shall make the prepayment on or before the 20 th of each month for the subsequent month. Should the 20 th fall on a weekend or Federal holiday, the prepayment must be made on the preceding business day. The first prepayment is due to the Transmission Provider no later than November 20, 2008, for the month of December 2008. | ||
(c) | The Transmission Customer shall wire transfer all prepayments to the Federal Reserve Bank in New York City so that they arrive no later than 2:00 p.m. Eastern Standard or Daylight Time, whichever is in effect. The Transmission Provider will verify that payment has been received at the Federal Reserve Bank. | ||
(d) | The Transmission Customer shall include the following information on all wire transfers under this Agreement: | ||
(1) | ABA number – The ABA number for the Federal Reserve Bank in New York City is 021030004 ; | ||
(2) | Receiving Bank – “ TREAS NYC ” designates the Federal Reserve Bank in New York City as the receiving bank; | ||
(3) | Product Code – " TREAS NYC/CTR "; |
2 | The SDD is not available for transmission from secondary points of integration. If a primary point of integration, associated with a SDD is moved to a secondary point of integration, at any time during the month, the SDD shall not be applied for that month. |
05TX-11399, U.S. Geothermal, Inc.
Page
3 of 4
Exhibit A, Table 1B
Effective at 0000 hours
Specifications for Long-Term Firm Point-To-Point
Transmission Service
on December 1, 2008
(4) | Account – Agency Location Code of 89001401 directs the payment to the BPA Fund in the U.S. Treasury; | ||
(5) | Third Party Information – After “OBI=” the Transmission Customer should indicate “ TRANSMISSION PREPAY ” in order to identify the payment when it is received. | ||
(e) | The following charges are subject to prepayment: PTP Long Term Firm Transmission Service charges and Ancillary Service Charges. The monthly charge for long-term firm PTP transmission service under this Service Agreement shall be pursuant to the applicable PTP Rate Schedule, or its successor. Ancillary Service Charges shall be pursuant to the applicable ACS Rate Schedule, or its successor, and shall apply to the Ancillary Services in accordance with Exhibit A, Table 3. The amount of prepayment shall be determined using the applicable rates in effect for such service for the relevant month. Successors to the PTP and ACS rate schedules will apply to the prepayment obligations. Should the Transmission Customer purchase either short-term firm or nonfirm PTP transmission service under this Service Agreement, the Transmission Customer shall calculate such charges in accordance with the applicable rate and prepay such charges for each month as described in paragraph 9(b) of this section.. | ||
(f) | Prepayment pursuant to paragraph (e) above does not preclude the Transmission Provider from applying adjustments to such payments for other charges consistent with the applicable rate schedules, or to pass through to the Transmission Customer any additional charges not covered in paragraph (e) above for ancillary services which the Transmission Provider may be required to pay to the control area operator. Any such adjustments and charges are subject to payment under the Transmission Provider’s normal transmission billing process. | ||
(g) | If the Transmission Customer fails to make any payment as set forth above or to pay any amount owing on its Wholesale Transmission Bill on or before its due date, then, the Transmission Provider shall have the right to suspend transmission service for the period for which prepayment should have been provided; and, after 60 calendar days following written notice by the Transmission Provider to the Transmission Customer, the Transmission Provider shall have the right to terminate this Agreement. |
05TX-11399, U.S. Geothermal, Inc. | Page 4 of 4 |
Exhibit A, Table 1B | Effective at 0000 hours |
Specifications for Long-Term Firm Point-To-Point Transmission Service | on December 1, 2008 |
EXHIBIT A
SPECIFICATIONS FOR LONG-TERM FIRM
POINT-TO-POINT TRANSMISSION SERVICE
TABLE 1C
REQUEST FOR TRANSMISSION SERVICES
The OASIS Assignment Reference Number (ARef) is: 1434025.
1. | TERM OF TRANSACTION |
Start Date: at 0000 hours on December 1, 2008. | |
Termination Date: at 0000 hours on December 1, 2010, provided, however, that service under this agreement shall terminate on the earlier of: (i) the date mutually agreed upon by the parties; or (ii) the date Raft River Rural Electric Cooperative terminates the Transmission Provider’s lease of transmission facilities under Contract No. DE-MS79-84BP91697, as it may be amended or replaced. | |
2. | DESCRIPTION OF CAPACITY AND ENERGY TO BE TRANSMITTED BY TRANSMISSION PROVIDER |
Delivering
Party (Resource) 1 |
POR
Name & Voltage |
POR
Control Area |
Reserved
Capacity (kW) |
POD
Name & Voltage |
POD
Control Area |
Reserved
Capacity (kW) |
Receiving
Party |
Transmission
Customer |
Bridge 34.5 kV | IPC | 12,000 |
Minidoka
PP 138 kV- IPC |
IPC | 12,000 | IPC |
Total Reserved Capacity |
12,000
|
3. | POINT OF RECEIPT |
BRIDGE SUBSTATION 34.5 kV | |
Location: the point in the Transmission Provider’s Bridge Substation where the 34.5 kV facilities of the Transmission Provider and Raft River Rural Electric Cooperative, Inc. are connected. It is the Transmission Customer’s responsibility to arrange for the delivery of power from the generation site(s) to this Point of Receipt. | |
Voltage: 34.5 kV | |
Metering: in the Transmission Provider’s Bridge Substation and at the Transmission Customer’s generation site(s) in the 34.5 kV circuits over which such electric power flows. |
___________________________
1
The Resource, POR, POD and the whole transmission path are in the control
area of Idaho Power Company (IPC), who is also the purchaser of the power from
the Resource.
05TX-11399, U.S. Geothermal, Inc. | Page 1 of 4 |
Exhibit A, Table 1C | Effective at 0000 hours |
Specifications for Long-Term Firm Point-To-Point Transmission Service | on December 1, 2008 |
4. | POINT OF DELIVERY |
MINIDOKA PP 138 kV – IPC POINT OF DELIVERY | |
Location: in the Government’s Minidoka Power Plant where the 138 kV facilities of the Government and IPC are connected; | |
Voltage: 138 kV; | |
Metering: None. It is the responsibility of the Transmission Customer to assure that metering is implemented consistent with IPC’s requirements. | |
Exceptions: Loss returns are not required by the Transmission Provider at this time. It is the responsibility of the Transmission Customer to work with IPC as the POR and POD Control Area to determine the implementation of loss returns. | |
5. | DESIGNATION OF PARTY SUBJECT TO RECIPROCAL SERVICE OBLIGATION |
U.S. Geothermal, Inc. | |
6. | NAMES OF ANY INTERVENING SYSTEMS PROVIDING TRANSMISSION SERVICE |
None. | |
7. | SERVICE AGREEMENT CHARGES |
Service under this Agreement will be subject to some combination of the charges detailed in Tables 1, 2 and 3 of this exhibit. (The appropriate charges for transactions will be determined in accordance with the terms and conditions of the Tariff.) |
(a) |
Transmission Charge
PTP-04 Rate Schedule or successor rate schedules. |
||
(1) |
Reservation Fee
Within 30 days after the Transmission Customer signs this Service Agreement, the first annual nonrefundable reservation fee of $12,336 shall be paid to the Transmission Provider. For the second and any subsequent reservation fees, the Transmission Provider will bill the Transmission Customer 30 days prior to their due date. If the deferral or extension of service spans two or more rate periods, the reservation fee will be based on the PTP Rate in effect at the time each payment is due. The Reservation Fee is based on the PTP Rate only and does not include either of the two Ancillary Services that the Transmission Customer is obligated to purchase from the Transmission Provider. |
05TX-11399, U.S. Geothermal, Inc. | Page 2 of 4 |
Exhibit A, Table 1C | Effective at 0000 hours |
Specifications for Long-Term Firm Point-To-Point Transmission Service | on December 1, 2008 |
(2) |
Short Distance Discount (SDD)
[0.6 + (0.4 x transmission distance/75)] |
Path |
Circuit
Miles |
Transmission
Demand (kW) |
SDD Factor |
Bridge - Minidoka | 40.9 | 12,000 | 0.818 2 |
(b) | System Impact and/or Facilities Study Charge(s) | ||
System Impact and/or Facilities Study Charges are not required at this time for service under this Service Agreement. | |||
8. | OTHER PROVISIONS SPECIFIC TO THIS SERVICE AGREEMENT | ||
None. | |||
9. | CREDITWORTHINESS AND PREPAYMENT FOR SERVICE | ||
(a) | The Transmission Provider’s creditworthiness business practices and provisions shall apply, as revised or replaced. | ||
(b) | The Transmission Customer shall make monthly prepayments of the charges specified in paragraph 9(e) of this section. The Transmission Customer shall make the prepayment on or before the 20 th of each month for the subsequent month. Should the 20 th fall on a weekend or Federal holiday, the prepayment must be made on the preceding business day. The first prepayment is due to the Transmission Provider no later than November 20, 2008, for the month of December, 2008. | ||
(c) | The Transmission Customer shall wire transfer all prepayments to the Federal Reserve Bank in New York City so that they arrive no later than 2:00 p.m. Eastern Standard or Daylight Time, whichever is in effect. The Transmission Provider will verify that payment has been received at the Federal Reserve Bank. | ||
(d) | The Transmission Customer shall include the following information on all wire transfers under this Agreement: | ||
(1) | ABA number – The ABA number for the Federal Reserve Bank in New York City is 021030004 ; | ||
(2) | Receiving Bank – “TREAS NYC” designates the Federal Reserve Bank in New York City as the receiving bank; | ||
(3) | Product Code – "TREAS NYC/CTR" ; | ||
2 | The SDD is not available for transmission from secondary points of integration. If a primary point of integration, associated with a SDD is moved to a secondary point of integration, at any time during the month, the SDD shall not be applied for that month. |
05TX-11399, U.S. Geothermal, Inc. | Page 3 of 4 |
Exhibit A, Table 1C | Effective at 0000 hours |
Specifications for Long-Term Firm Point-To-Point Transmission Service | on December 1, 2008 |
(4) | Account – Agency Location Code of 89001401 directs the payment to the BPA Fund in the U.S. Treasury; | ||
(5) | Third Party Information – After “OBI=” the Transmission Customer should indicate “ TRANSMISSION PREPAY ” in order to identify the payment when it is received. | ||
(e) | The following charges are subject to prepayment: PTP Long Term Firm Transmission Service charges and Ancillary Service Charges. The monthly charge for long-term firm PTP transmission service under this Service Agreement shall be pursuant to the applicable PTP Rate Schedule, or its successor. Ancillary Service Charges shall be pursuant to the applicable ACS Rate Schedule, or its successor, and shall apply to the Ancillary Services in accordance with Exhibit A, Table 3. The amount of prepayment shall be determined using the applicable rates in effect for such service for the relevant month. Successors to the PTP and ACS rate schedules will apply to the prepayment obligations. Should the Transmission Customer purchase either short-term firm or nonfirm PTP transmission service under this Service Agreement, the Transmission Customer shall calculate such charges in accordance with the applicable rate and prepay such charges for each month as described in paragraph 9(b) of this section. | ||
(f) | Prepayment pursuant to paragraph (e) above does not preclude the Transmission Provider from applying adjustments to such payments for other charges consistent with the applicable rate schedules, or to pass through to the Transmission Customer any additional charges not covered in paragraph (e) above for ancillary services which the Transmission Provider may be required to pay to the control area operator. Any such adjustments and charges are subject to payment under the Transmission Provider’s normal transmission billing process. | ||
(g) | If the Transmission Customer fails to make any payment as set forth above or to pay any amount owing on its Wholesale Transmission Bill on or before its due date, then, the Transmission Provider shall have the right to suspend transmission service for the period for which prepayment should have been provided; and, after 60 calendar days following written notice by the Transmission Provider to the Transmission Customer, the Transmission Provider shall have the right to terminate this Agreement. |
05TX-11399, U.S. Geothermal, Inc. | Page 4of 4 |
Exhibit A, Table 1C | Effective at 0000 hours |
Specifications for Long-Term Firm Point-To-Point Transmission Service | on December 1, 2008 |
EXHIBIT A
SPECIFICATIONS FOR LONG-TERM FIRM
POINT-TO-POINT TRANSMISSION SERVICE
TABLE 2
DIRECT ASSIGNMENT AND USE-OF-FACILITIES CHARGES
Facilities Charges are not required at this time for the service associated with Exhibit A, Tables 1A, 1B, and 1C.
05TX-11399, U.S. Geothermal, Inc. | Page 1 of 4 |
Exhibit A, Table 2 | Effective at 0000 hours |
Specifications for Long-Term Firm Point-To-Point Transmission Service | on June 1, 2006 |
EXHIBIT A
SPECIFICATIONS FOR LONG-TERM FIRM
POINT-TO-POINT TRANSMISSION SERVICE
TABLE 3
ANCILLARY SERVICE CHARGES
This Table 3 is subject to the ACS-04 Rate Schedule or successor rate schedules. For transmission service that requires use of the Transmission Provider’s control area, the first two services below must be purchased from the Transmission Provider, and the Transmission Customer must make arrangements for the provision of other ancillary services in compliance with the Transmission Provider’s Open Access Transmission Tariff (tariff), as it may be amended. To the extent that ancillary or control area services are provided by a control area operator other than the Transmission Provider, or by any entity other than the Transmission Provider, and such services are billed to the Transmission Provider, the Transmission Provider will pass on such costs to the Transmission Customer, and the Transmission Customer agrees to pay such charges. The information specified below is applicable only to service provided pursuant to Tables 1A, 1B, and 1C, which are included in Exhibit A at the time this Contract 05TX-11399 is originally executed. If the Transmission Customer requests additional service not specified in such tables at the time this contract is originally executed, or if such original service is revised or assigned, whether or not such revision or assignment of service is documented this Service Agreement, the provisions of the Transmission Provider’s Open Access Transmission Tariff, as it may be amended or replaced, shall determine the applicability of the ancillary services described therein to the services requested.
Provided By | Contract No. | ||
1. |
SCHEDULING, SYSTEM CONTROL AND
DISPATCH
(See above) |
As determined
by control area operator |
|
2. |
REACTIVE SUPPLY AND VOLTAGE
CONTROL
(See above) |
As determined
by control area operator |
|
3. |
REGULATION & FREQUENCY RESPONSE
(Only for customers serving load in Transmission Provider’s Control Area) |
Not Applicable | |
4. |
ENERGY IMBALANCE SERVICE
(Only for customers serving load in Transmission Provider’s Control Area who do not receive requirements power service from BPA) |
Not Applicable | |
5. | OPERATING RESERVE – SPINNING RESERVE | As Applicable | |
6. | OPERATING RESERVE – SUPPLEMENTAL RESERVE | As Applicable |
05TX-11399, U.S. Geothermal, Inc. | Page 1 of 4 |
Exhibit A, Table 3 | Effective at 0000 hours |
Specifications for Long-Term Firm Point-To-Point Transmission Service | on June 1, 2006 |
EXHIBIT B
NOTICES
1. NOTICES RELATING TO PROVISIONS OF THE SERVICE AGREEMENT
Any notice or other communication related to this Service Agreement, other than notices of an operating nature (section 2 below), shall be in writing and shall be deemed to have been received if delivered in person, First Class mail, by telefax or sent by overnight delivery service.
If to the Transmission Customer: | If to the Transmission Provider: |
If by First Class Mail: | |
U.S. Geothermal, Inc. | Bonneville Power Administration |
1509 Tyrell Lane - Suite B | P.O. Box 61409 |
Boise, ID 83706 | Vancouver, WA 98666-1409 |
Attention: Mr. Robert A. Cline | Attention: Transmission Account Executive |
Vice President, Engineering | for U.S. Geothermal - TM/OPP2 |
Phone: (208) 424-1027 | Phone: (360) 619-6010 |
Fax: (208) 424-1030 | Fax: (360) 619-6940 |
If by Overnight Delivery Service: | |
Bonneville Power Administration | |
8100 NE Parkway Drive - Suite 50 | |
Vancouver, WA 98662 | |
Attention: Transmission Account Executive | |
for U.S. Geothermal – TM/OPP2 |
2. |
NOTICES OF AN OPERATING NATURE
Any notice, request, or demand of an operating nature by the Transmission Provider or the Transmission Customer shall be made either orally or in writing by telefax or sent by First Class mail or overnight delivery service. |
If to the Transmission Customer: | If to the Transmission Provider: |
U.S. Geothermal, Inc. | Bonneville Power Administration |
1509 Tyrell Lane - Suite B | P.O. Box 491 |
Boise, ID 83706 | Vancouver, WA 98666-0491 |
Attention: Mr. Robert A. Cline, | Attention: Real-Time Scheduling Desk |
Vice President, Engineering | EMERGENCY ONLY |
Phone: (208) 424-1027 | Phone: Contact Idaho Power Company |
Fax: (208) 424-1030 | Fax: Contact Idaho Power Company |
3. |
SCHEDULING AGENT
Not applicable for service as specified in Exhibit A, Tables 1A, 1B, and 1C. |
05TX-11399, U.S. Geothermal, Inc. | Page 1 of 4 |
Exhibit B | Effective at 0000 hours |
Notices | on June 1, 2006 |
Exhibit 31.1
U.S.GEOTHERMAL INC. AND SUBSIDIARIES
CERTIFICATIONS
I, Daniel J. Kunz, Chief Executive Officer of U.S. Geothermal Inc. (the “Company”) certify that:
1 | I have reviewed this annual report on Form 10-KSB of the Company; | |
2 | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; | |
3 | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report; | |
4 | The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d- 15(e)) for the Company and we have: | |
a | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | |
b | [omitted with consent of SEC]; | |
c | evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and | |
d | disclosed in this annual report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and | |
5 | The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions): |
a | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and | |
b | any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. |
Date: July 12, 2005 | |
/s/ Daniel J. Kunz | |
Daniel J. Kunz
Chief Executive Officer |
Exhibit 31.2
U.S. GEOTHERMAL INC. AND SUBSIDIARIES
CERTIFICATIONS
I, Kerry D. Hawkley, Chief Financial Officer of U.S. Geothermal Inc. (the “Company”) certify that:
1. | I have reviewed this annual report on Form 10-KSB of the Company; | |
2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report; | |
4. | The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) for the Company and we have: | |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | |
b. | [omitted with consent of SEC]; | |
c. | evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and | |
d. | disclosed in this annual report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and | |
5. | The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and | |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. |
Date: July 12, 2005 | |
/s/ Kerry D. Hawkley | |
Kerry D. Hawkley
Chief Financial Officer |
Exhibit 32.1
U.S.GEOTHERMAL INC. AND SUBSIDIARIES
CERTIFICATIONS
I, Daniel J. Kunz, Chief Executive Officer of U.S. Geothermal Inc. (the “Company”) certify in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
1. |
The Company’s annual report on Form 10-KSB
for the fiscal year ended March 31, 2005 (“report”), which
this certification accompanies, fully complies with the requirements of
Section 15(d) of the Securities Exchange Act of 1934, as amended; and
|
|
2. |
The information contained in the report fairly presents,
in all material respects, the financial condition and results of operations
of the Company.
|
Date: July 12, 2005 | |
/s/ Daniel J. Kunz | |
Daniel J. Kunz
Chief Executive Officer |
Exhibit 32.2
U.S. GEOTHERMAL INC. AND SUBSIDIARIES
CERTIFICATIONS
I, Kerry D. Hawkley, Chief Financial Officer of U.S. Geothermal Inc. (the “Company”) certify in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
1. |
The Company’s annual report on Form 10-KSB
for the fiscal year ended March 31, 2005 (“report”), which
this certification accompanies, fully complies with the requirements of
Section 15(d) of the Securities Exchange Act of 1934, as amended; and
|
|
2. |
The information contained in the report fairly presents,
in all material respects, the financial condition and results of operations
of the Company.
|
Date: July 12, 2005 | |
/s/ Kerry D. Hawkley | |
Kerry D. Hawkley
Chief Financial Officer |