PINX:GLFE Gulf United Energy, Inc. Quarterly Report 10-Q Filing - 5/31/2012

Effective Date 5/31/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended May 31, 2012
 
OR

¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________________to ____________________

Commission File Number 000-52322

GULF UNITED ENERGY, INC.
(Exact name of registrant as specified in its charter)


Nevada
(State or other jurisdiction of incorporation or organization)
 
P.O. Box 22165, Houston, Texas
(Address of principal executive offices)
20-5893642
 (I.R.S. Employer Identification No.)
 
 
77227-2165  
(Zip Code)
 
Registrant’s telephone number, including area code:
(713) 942-6575

N.A.
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ   No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨
     
Accelerated filer ¨
Non-accelerated filer ¨
     
Smaller reporting company þ
(Do not check if a smaller reporting company)
       

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨ No þ

As of July 10, 2012, there were 551,517,726 shares of the registrant’s common stock, par value $0.001 per share, issued and outstanding.
 
 

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

TABLE OF CONTENTS
 
Part I. Financial Information
   
       
Item 1
Financial Statements
   
       
 
Consolidated Balance Sheets - May 31, 2012 (unaudited) and August 31, 2011
 
F-2
       
 
Consolidated Statements of Operations and Comprehensive Loss (unaudited) - For the Three and Nine  Months Ended May 31, 2012 and 2011 and the Period From Inception (September 19, 2003) through May 31, 2012
 
F-3
       
 
Consolidated Statements of Cash Flows (unaudited) - For the Nine Months Ended May 31, 2012 and 2011 and the Period from Inception (September 19, 2003) through May 31, 2012
 
F-4
       
 
Consolidated Statements of Changes in Stockholders' Equity (Deficiency) and Comprehensive Loss (unaudited) for the Period from Inception (September 19, 2003) through May 31, 2012
F-5
       
 
Notes to the Consolidated Financial Statements (Unaudited)
 
F-6
       
Item 2
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
4
       
Item 3
Quantitative and Qualitative Disclosures About Market Risk
 
8
       
Item 4
Controls and Procedures
 
8
       
 
Part II. Other Information
   
       
Item 1
Legal Proceedings
 
9
       
Item 1A
Risk Factors
 
9
       
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
 
11
       
Item 3
Defaults Upon Senior Securities
 
11
       
Item 4
Mining Safety Disclosures
 
11
       
Item 5
Other Information
 
11
       
Item 6
Exhibits
 
11
       
 
Signatures
 
12
       
 
EX-31.1 (EXHIBIT 31.1)
 
 
       
 
EX-31.2 (EXHIBIT 31.2)
   
       
 
EX-32.1 (EXHIBIT 32.1)
 
 
       
 
EX-32.2 (EXHIBIT 32.2)
 
 
 
 
 

 
Statement Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts included in this Report including, without limitation, statements in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Report, regarding our financial condition, estimated working capital, business strategy, the plans and objectives of our management for future operations and those statements preceded by, followed by or that otherwise include the words “believe”, “expects”, “anticipates”, “intends”, “estimates”, “projects”, “target”, “goal”, “plans”, “objective”, “should”, or similar expressions or variations on such expressions are forward-looking statements. We can give no assurances that the assumptions upon which the forward-looking statements are based will prove to be correct. Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements including, but not limited to, our ability to identify and exploit available corporate acquisition, farm-in and/or joint venture opportunities in the energy sector in Colombia and Peru and, more generally, in Latin America, our ability to establish technical and managerial infrastructure, our ability to raise required capital on acceptable terms and conditions, our ability to take advantage of, and successfully participate in such opportunities, our ability to successfully operate, or influence our joint venture partners’ operation of, the projects in which we participate in a cost effective and efficient way; future economic conditions, political and regulatory stability and changes and volatility in energy prices.  A description of some of the risks and uncertainties that could cause our actual results to differ materially from those described by the forward-looking statements in this Quarterly Report on Form 10-Q appears in the section captioned “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on November 29, 2011 and Item 1A of this Quarterly Report on Form 10-Q.
 
Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this Quarterly Report on Form 10-Q to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
 
 
 

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

PART 1 – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

QUARTERLY REPORT
FINANCIAL STATEMENTS

May 31, 2012
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-1

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Consolidated Balance Sheets
   
May 31,
   
August 31,
 
   
2012
   
2011
 
   
(Unaudited)
   
(Audited)
 
ASSETS
           
Current Assets
           
       Cash
  $ 3,098,921     $ 7,251,657  
       Prepaid expenses
    65,736       4,443  
Total Current Assets
    3,164,657       7,256,100  
                 
       Fixed Assets:
               
       Computer Equipment
    25,391       12,255  
       Software License
    62,563       62,563  
       Less:  Accumulated Depreciation
    (55,765 )     (35,696 )
Net Fixed Assets
    32,189       39,122  
                 
Other Assets
               
       Investments in oil and gas properties (Notes 3 and 8)
    19,288,590       20,160,581  
Total Other Assets
    19,288,590       20,160,581  
                 
Total Assets
  $ 22,485,436     $ 27,455,803  
                 
LIABILITIES
               
Current
               
         Accounts payable and accrued liabilities
  $ 1,157,192     $ 282,286  
         Accounts payable to operators of working interests
    -       974,769  
         Loans payable related parties (Note 6)
    26,574       26,574  
Stockholder loans payable and accrued interest (Net of note discount of
         
         $110,277 at August 31, 2011)  (Note 7)
    -       1,389,634  
Total Current Liabilities
    1,183,766       2,673,263  
                 
Total Liabilities
    1,183,766       2,673,263  
STOCKHOLDERS' EQUITY
               
Preferred Stock, 50,000,000 shares authorized, none issued or outstanding
    -       -  
Common Stock
               
         Authorized:
               
            700,000,000 shares with a par value of $0.001
               
         Issued and Outstanding:
               
           548,517,726  as of May 31, 2012 and
    548,518       454,668  
           454,667,726  as of August 31, 2011
               
Additional paid-in capital
    50,291,808       42,445,865  
Common stock subscribed
    200,000       824,600  
Accumulated other comprehensive loss
    (485 )     (29 )
Deficit Accumulated During The Development Stage
    (29,738,171 )     (18,942,564 )
Total Stockholders' Equity
    21,301,670       24,782,540  
Total Liabilities and Stockholders' Equity
  $ 22,485,436     $ 27,455,803  

The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-2

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)
 
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
                           
Period From
 
                           
Inception
 
                           
(September 19, 2003)
 
   
Three Months Ended May 31,
   
Nine Months Ended May 31,
   
Through
 
   
2012
   
2011
   
2012
   
2011
   
May 31, 2012
 
                               
Revenues
  $ -     $ -     $ -     $ -     $ -  
                                         
Cost of Sales
    -       -       -       -       -  
                                         
Gross Profit
    -       -       -       -       -  
                                         
General and administrative expenses
    1,668,140       1,906,383       3,366,628       3,630,754       8,902,950  
General and administrative expenses - related parties
    53,842       -       187,897       8,000,000       9,274,940  
                                         
Operating Loss
    (1,721,982 )     (1,906,383 )     (3,554,525 )     (11,630,754 )     (18,177,890 )
                                         
Other (Income) and Expense
                                       
Gain on settlement of debt
    -       -       -       -       (3,333 )
Interest expense
    -       234,519       -       1,089,358       1,089,358  
Interest expense - related parties
    220,000       -       220,000       442,184       1,851,374  
Impairment of oil and gas properties
    7,027,032       -       7,027,032       -       7,027,032  
Interest Income
    (697 )     (7,811 )     (5,950 )     (8,625 )     (20,867 )
                                         
Loss from continuing operations
    (8,968,317 )     (2,133,091 )     (10,795,607 )     (13,153,671 )     (28,121,454 )
Gain (Loss) from discontinued operations
    -       30,000       -       350,000       (1,616,717 )
Net Loss
  $ (8,968,317 )   $ (2,103,091 )   $ (10,795,607 )   $ (12,803,671 )   $ (29,738,171 )
                                         
Basic And Diluted Loss per share
                                       
from continuing operations
  $ (0.02 )   $ -     $ (0.02 )   $ (0.04 )   $ (0.24 )
                                         
Basic And Diluted Loss per share
                                       
from discontinued operations
  $ -       -     $ -     $ -     $ (0.01 )
                                         
Basic And Diluted Net Loss per share
  $ (0.02 )   $ -     $ (0.02 )   $ (0.03 )   $ (0.25 )
                                         
Weighted Average Shares Outstanding
    500,470,504       454,389,948       473,465,689       374,967,587       117,601,153  
                                         
Comprehensive Income (Loss)
                                       
Net Loss
  $ (8,968,317 )   $ (2,103,091 )   $ (10,795,607 )   $ (12,803,671 )   $ (29,738,171 )
Currency exchange gain (loss)
    112       -       (456 )     (29 )     (485 )
Net Comprehensive Loss
  $ (8,968,205 )   $ (2,103,091 )   $ (10,796,063 )   $ (12,803,700 )   $ (29,738,656 )
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F-3

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Consolidated Statements of Cash Flow
(Unaudited)
 
               
Period From
 
               
Inception
 
               
(September 19, 2003)
 
   
Nine Months Ended May 31,
   
Through
 
   
2012
   
2011
   
May 31, 2012
 
Cash Flows From Operating Activities
                 
   Net loss for the period
  $ (10,795,607 )   $ (12,803,671 )   $ (29,738,171 )
Adjustments to reconcile net loss to net cash used by
                 
   operating activities:
                       
   Depreciation expense
    20,069       16,009       55,766  
   Increase in deposit
    -       (4,668 )     -  
   Common stock issued for prepaid expenses/services
    14,625       -       14,625  
   Expenses/services paid by issuance of common stock
    219,500       9,086,800       10,260,500  
   Accrued interest added to shareholder loans
    -       9,021       731,355  
   Stock based compensation
    218,339       -       293,111  
   Loan discount amortization
    110,277       1,193,551       1,809,023  
   Non-cash portion of interest expense
    -       -       3,333  
   Gain on settlement of debt
    -       -       (3,333 )
   Foreign currency translation loss
    (456 )     346       (485 )
   Impairment of investment in joint venture projects
    -       -       1,951,210  
   Impairment of oil and gas properties
    7,027,032       -       7,027,032  
Change in operating assets and liabilities
                       
   Payroll taxes receivable
    -       39,153       -  
   Prepaid expenses
    (36,918 )     (286,664 )     (41,361 )
   Accounts payable and accrued liabilities
    874,906       (493,199 )     981,960  
Net cash used by operating activities
    (2,348,233 )     (3,243,322 )     (6,655,435 )
Cash Flows From Investing Activities
                       
     Capital Expenditures
    (13,136 )     (6,628 )     (87,954 )
     Investment in oil and gas projects
    (7,129,810 )     (10,571,290 )     (22,494,391 )
     Advances to and investment in joint venture properties
    -       -       (250,000 )
Net cash used by investing activities
    (7,142,946 )     (10,577,918 )     (22,832,345 )
                         
Cash Flows From Financing Activities
                       
     Proceeds from sale of common stock
    6,838,354       25,822,119       33,274,023  
     Proceeds of bridge financing
    -       3,800,000       3,800,000  
     Principal payment on bridge financing
    -       (3,800,000 )     (3,800,000 )
     Increase in loans payable to related parties
    -       -       226,574  
     Proceeds from (payments on) shareholder loans
    (1,499,911 )     (2,189,685 )     913,896  
Net cash provided by financing activities
    5,338,443       23,632,434       32,586,701  
(Decrease)/Increase In Cash During The Period
    (4,152,736 )     9,811,194       3,098,921  
Cash, Beginning Of Period
    7,251,657       19,679       -  
                         
Cash, End Of Period
  $ 3,098,921     $ 9,830,873     $ 3,098,921  

The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-4

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) and Comprehensive Loss
Period from Inception (September 19, 2003) through May 31, 2012
(Unaudited)
 
                                 
DEFICIT
       
                           
ACCUMULATED
   
ACCUMULATED
       
   
COMMON SHARES
   
ADDITIONAL
   
COMMON
   
OTHER
   
DURING THE
       
         
PAR
   
PAID-IN
   
SHARES
   
COMPREHENSIVE
   
DEVELOPMENT
       
   
NUMBER
   
VALUE
   
CAPITAL
   
SUBSCRIBED
   
LOSS
   
STAGE
   
TOTAL
 
Balance, September 19,
                                         
2003 (date of inception)
    -     $ -     $ -     $ -     $ -     $ -     $ -  
Capital stock issued for cash:
                                                       
October 2003 at $0.001
    2,500,000       2,500       -       -       -       -       2,500  
November 2003 at $0.005
    160,000       160       640       -       -       -       800  
December 2003 at $0.005
    1,400,000       1,400       5,600       -       -       -       7,000  
June 2004 at $0.01
    1,000,000       1,000       9,000       -       -       -       10,000  
July 2004 at $0.25
    23,000       23       5,727       -       -       -       5,750  
Net loss for the period
    -       -       -       -       -       (15,880 )     (15,880 )
Balance, August 31, 2004
    5,083,000       5,083       20,967       -       -       (15,880 )     10,170  
Net loss for the year
    -       -       -       -       -       (16,578 )     (16,578 )
Balance, August 31, 2005
    5,083,000       5,083       20,967       -       -       (32,458 )     (6,408 )
November 10, 2005 Stock
                                                       
Split Adjustment
    20,332,000       20,332       (20,332 )     -       -       -       -  
Net loss for the year
    -       -       -       -       -       (31,577 )     (31,577 )
Balance, August 31, 2006
    25,415,000       25,415       635                       (64,035 )     (37,985 )
Capital stock issued for investment:
                                                       
  January 2007 at $0.735 per share
    185,000       185       135,790       -       -       -       135,975  
  July 2007 at $0.735 per share
    750,000       750       550,500       -       -       -       551,250  
Net loss for the year
    -       -       -       -       -       (257,804 )     (257,804 )
Balance, August 31, 2007
    26,350,000       26,350       686,925                       (321,839 )     391,436  
Net loss for the year
    -       -       -       -       -       (378,039 )     (378,039 )
Balance, August 31, 2008
    26,350,000       26,350       686,925                       (699,878 )     13,397  
Net loss for the year
    -       -       -       -       -       (1,353,766 )     (1,353,766 )
Balance, August 31, 2009
    26,350,000       26,350       686,925       -       -       (2,053,644 )     (1,340,369 )
Capital stock issued for settlement
                                                       
 of name issue:
                                                       
  January 2010 at $0.01 per share
    50,000       50       450       -       -       -       500  
Capital stock issued to buy
                                                       
 subsidiary:
                                                       
  March 2010 at $0.032 per share
    300,000       300       9,300       -       -       -       9,600  
Capital stock issued for cash:
                                                       
  March 2010 at $0.01 per share
    59,750,000       59,750       527,750       -       -       -       587,500  
Capital stock issued for services:
                                                       
  March 2010 at $0.01 per share
    20,750,000       20,750       186,750       -       -       -       207,500  
  April 2010 at $0.01 per share
    1,500,000       1,500       13,500       -       -       -       15,000  
Capital stock issued for oil and
                                                       
 gas properties:
                                                       
  March 2010 at $0.01 per share
    40,000,000       40,000       384,000       200,000       -       -       624,000  
Capital stock issued for loan
                                                       
 conversion:
                                                       
  March 2010 at $0.01 per share
    20,000,000       20,000       180,000       200,000       -       -       400,000  
Shareholder loan interest forgiven
    -       -       631,444       -       -       -       631,444  
Capital stock issued with short-
                                                       
 term debt:
                                                       
  April 2010 at $0.065 per share
    17,500,000       17,500       671,894       -       -       -       689,394  
  May 2010 at $0.065 per share
    5,000,000       5,000       191,970       -       -       -       196,970  
  June 2010 at $0.087  per share
    2,500,000       2,500       113,810       -       -       -       116,310  
  July 2010 at $0.075  per share
    3,000,000       3,000       125,571       -       -       -       128,571  
  July 2010 at $0.120  per share
    500,000       500       26,773       -       -       -       27,273  
  August 2010 at $0.120 per share
    500,000       500       26,773       -       -       -       27,273  
Capital stock issued for oil and
                                                       
 gas properties:
                                                       
  June 2010 at $0.01  per share
    20,000,000       20,000       180,000       (200,000 )     -       -       -  
  July 2010 at $0.052  per share
    56,000,000       56,000       2,856,000       -       -       -       2,912,000  
Capital stock issued for loan
                                                       
 conversion:
                                                       
  June 2010 at $0.01  per share
    20,000,000       20,000       180,000       (200,000 )     -       -       -  
Net loss for the period
    -       -       -       -       -       (2,315,199 )     (2,315,199 )
Balance, August 31, 2010
    293,700,000       293,700       6,992,910       -       -       (4,368,843 )     2,917,767  

The accompanying notes are an integral part of these consolidated financial statements.
 
F-5

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) and Comprehensive Loss
Period from Inception (September 19, 2003) through May 31, 2012
(Unaudited)
 
                                 
DEFICIT
       
                           
ACCUMULATED
   
ACCUMULATED
       
   
COMMON SHARES
   
ADDITIONAL
   
COMMON
   
OTHER
   
DURING THE
       
         
PAR
   
PAID-IN
   
SHARES
   
COMPREHENSIVE
   
DEVELOPMENT
       
   
NUMBER
   
VALUE
   
CAPITAL
   
SUBSCRIBED
   
LOSS
   
STAGE
   
TOTAL
 
                                           
                                           
Capital stock issued for services:
                                         
  September 2010 at $0.06 per share
    2,500,000       2,500       147,500       -       -       -       150,000  
  October 2010 at $0.057 per share
    1,200,000       1,200       67,200       -       -       -       68,400  
  December 2010 at $0.081 per share
    40,000,000       40,000       7,960,000       -       -       -       8,000,000  
  January 2011 at $0.063 per share
    2,700,000       2,700       167,400       (170,100 )     -       -       -  
  February 2011 at $0.15 per share
    304,000       304       60,496       -       -       -       60,800  
  March 2011 at $0.30 per share
    125,000       125       37,375       (37,500 )     -       -       -  
  March 2011 at $0.26 per share
    2,000,000       2,000       515,000       -       -       -       517,000  
  July 2011 at $0.162 per share
    -       -       -       824,600       -       -       824,600  
Capital stock issued for cash:
                                                       
  December 2010 at $0.20 per share
    3,875,000       3,875       746,915       -       -       -       750,790  
  January 2011 at $0.20 per share
    9,750,000       9,750       1,878,553       25,000       -       -       1,913,303  
  February 2011 at $0.30 per share
    83,388,726       83,389       23,074,637       -       -       -       23,158,026  
  March 2011 at $0.020 per share
    125,000       125       24,875       (25,000 )     -       -       -  
Capital stock subscribed for services:
                                                       
  September 2010 at $0.063 per share
    -       -       -       170,100       -       -       170,100  
  February 2011 at $0.30 per share
    -       -       -       37,500       -       -       37,500  
Capital stock issued with short-
                                                       
 term debt:
                                                       
  September 2010 at $0.043 per share
    6,500,000       6,500       272,073       -       -       -       278,573  
  October 2010 at $0.047 per share
    1,000,000       1,000       45,524       -       -       -       46,524  
  October 2010 at $0.043 per share
    1,500,000       1,500       62,787       -       -       -       64,287  
  November 2010 at $0.047  per share
    1,500,000       1,500       68,286       -       -       -       69,786  
  Januuary 2011 at $0.047 per share
    1,500,000       1,500       68,286       (69,786 )     -       -       -  
  February 2011 at $0.047 per share
    1,000,000       1,000       45,524       (46,524 )     -       -       -  
  March 2011 at $0.047 per share
    1,000,000       1,000       46,752       (47,752 )     -                  
Capital stock subscribed with
                                                       
 short-term debt:
                                                       
  November 2010 at $0.047  per share
    -       -       -       139,572       -       -       139,572  
  November 2010 at $0.049  per share
    -       -       -       24,490       -       -       24,490  
Capital stock issued for oil and
                                                       
 gas properties:
                                                       
  November 2010 at $0.09  per share
    1,000,000       1,000       89,000       -       -       -       90,000  
Compensation expense paid by
                                                       
  stock option and grant issuance
    -       -       74,772       -       -       -       74,772  
Net loss
    -       -       -       -       -       (14,573,721 )     (14,573,721 )
     Other comprehensive loss -
                                                       
Cumulative currency transalation adjustment
                              (29 )             (29 )
Total comprehensive loss
    -       -       -       -       -       -       (14,573,750 )
Balance, August 31, 2011
    454,667,726       454,668       42,445,865       824,600       (29 )     (18,942,564 )     24,782,540  

The accompanying notes are an integral part of these consolidated financial statements.
 
F-6

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) and Comprehensive Loss
Period from Inception (September 19, 2003) through May 31, 2012
(Unaudited)
 
                                 
DEFICIT
       
                           
ACCUMULATED
   
ACCUMULATED
       
   
COMMON SHARES
   
ADDITIONAL
   
COMMON
   
OTHER
   
DURING THE
       
         
PAR
   
PAID-IN
   
SHARES
   
COMPREHENSIVE
   
DEVELOPMENT
       
   
NUMBER
   
VALUE
   
CAPITAL
   
SUBSCRIBED
   
LOSS
   
STAGE
   
TOTAL
 
                                           
                                           
Capital stock issued for services:
                                         
  September 2011 at $0.162 per share
    5,100,000       5,100       819,500       (824,600 )     -       -       -  
  November 2011 at $0.117 per share
    500,000       500       58,000       -       -       -       58,500  
Capital stock issued for cash:
                                                       
  April 2012 at $0.08 per share
    88,250,000       88,250       6,750,104       -       -       -       6,838,354  
Capital stock subscribed for interest expense:
                                                       
  April 2012 at $0.08 per share
    -       -       -       200,000       -       -       200,000  
Compensation expense paid by stock option and grant issuance
    -       -       218,339       -       -       -       218,339  
Net loss
    -       -       -       -       -       (10,795,607 )     (10,795,607 )
     Other comprehensive loss -
                                                       
Cumulative currency transalation adjustment
                                     (456              (456
Total comprehensive loss
    -       -       -       -       -       -       (10,796,063 )
Balance, May 31, 2012
    548,517,726     $ 548,518     $ 50,291,808     $ 200,000     $ (485 )   $ (29,738,171 )   $ 21,301,670  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-7

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Notes to the Consolidated Financial Statements
 May 31, 2012
(Unaudited)



Note 1 – Organization and Basis of Presentation

Gulf United Energy, Inc. (“Gulf United” or the “Company”), together with its 100% owned subsidiaries, is an international oil and gas exploration company concentrating on opportunities in South America. The Company currently has limited operations and is a development stage company as defined by the Financial Accounting Standards Board (FASB) Accounting Standards for Development Stage Entities.   The Company was incorporated in the State of Nevada on September 19, 2003.   Gulf United’s asset portfolio includes participation in two hydrocarbon exploration blocks operated by SK Innovation Co. Ltd. (“SK Innovation” – Formerly SK Energy, Ltd.).   SK Innovation is a subsidiary of SK Innovation Group, one of South Korea’s top five industrial conglomerates.  SK Innovation is Korea’s largest petroleum refiner and is currently active in 29 blocks in 16 countries.  The Company also has a participating interest in Block XXIV Peru and the Peru TEA operated by Upland Oil and Gas.

Interim Financial Statements

In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) which are necessary to provide a fair presentation of operating results for the interim periods presented. The Company assumes that the users of the interim financial information herein have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosures needed for a fair presentation may be determined in that context.  Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. These consolidated financial statements should be read in connection with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2011, filed on November 29, 2011.  The results of operations presented for the quarter ended May 31, 2012 are not necessarily indicative of the results to be expected for the year.  Interim financial data presented herein are unaudited.

These financial statements have been prepared on a going concern basis. The Company has incurred losses since inception resulting in an accumulated deficit of $29,738,171 and further losses are anticipated in the development of our business raising substantial doubt about the Company’s ability to continue as a going concern. Our ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.  The Company raised substantial equity and debt during the year ended August 31, 2011.  Notwithstanding, we do not have any credit facilities available with financial institutions, stockholders or third party investors, and will continue to rely on best efforts debt and equity financings.  There is no assurance that we can raise additional debt or equity capital from external sources.  The Company has no control over the amount of funds that it may receive in financings and the time frame in which they may be received. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

 
F-8

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Notes to the Consolidated Financial Statements
May 31, 2012
(Unaudited)



Note 2 – Summary of Significant Accounting Policies

Basis of Accounting
 
The Company maintains its accounts on the accrual method of accounting in accordance GAAP. The accompanying consolidated financial statements of the Company have been prepared in accordance with GAAP and the rules of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments necessary for a fair presentation of consolidated financial position and the results of operations have been reflected herein.

Concentration of Credit Risk
 
Financial instruments which potentially subject the Company to concentration of credit risk at this time consist principally of cash.  The Company places its cash with high credit quality financial institutions.  At times, such amounts may exceed FDIC limits; however, these deposits typically may be redeemed upon demand and therefore bear minimal risk.  In monitoring this credit risk, the Company periodically evaluates the stability of the financial institutions.

Use of Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  Certain of our more critical accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, terms of existing contracts, and our observance of trends in the industry and information available from other outside sources, as appropriate. Different, reasonable estimates could have been used in the current period.  Additionally, changes in accounting estimates are reasonably likely to occur from period to period. These, and other, factors could have a material impact on the presentation of our financial condition, changes in financial condition or results of operations.

Cash
 
Cash includes cash in a demand deposit account and a money market account with a Houston bank.  In addition, the Company has established a cash account in Bogota, Colombia as required by local regulations.  This account is maintained in Colombian pesos.

Fair Value of Financial Instruments
 
The Company’s financial instruments consist of cash, accounts payable, accrued liabilities and debt.  It is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these instruments. The fair value of these financial instruments approximates their carrying values.

The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest and discount rates that approximate prevailing market rates.  In determining fair values, there are three levels of inputs used to determine value.  Level 1 inputs are quoted prices in active markets for identical assets and liabilities.  Level 2 inputs are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.  Level 3 inputs are unobservable inputs which include risk inherent in the asset or liability.

Software License and Fixed Assets
 
The value of the software license and other fixed assets (computer equipment) is stated at cost. Depreciation is computed using the straight-line method over the thirty six-month estimated useful life of the software and other fixed assets.
 
 
F-9

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Notes to the Consolidated Financial Statements
May 31, 2012
(Unaudited)


Any costs associated with maintenance and upgrades will be charged to expense as incurred. When the asset is retired or otherwise disposed of, the costs and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income for the period; significant renewals and betterments are capitalized.  Deductions are made for retirements resulting from renewals or betterments.

Impairment of Long-lived Assets

The Company evaluates impairment when events or circumstances indicate that a long-lived asset’s carrying value may not be recovered.  These events include market declines, decisions to sell an asset and adverse changes in the legal or business environment.  If events or circumstances indicate that a long-lived asset’s carrying value may not be recoverable, the Company estimates the future undiscounted cash flows from the asset for which the lowest level of separate cash flows may be determined, to determine if the asset is impaired.  If the total undiscounted future cash flows are less than the carrying amount for the asset, the Company estimates the fair value of the asset through reference to sales data for similar assets, or by using a discounted cash flow approach.  The asset’s carrying value is then adjusted downward to the estimated fair value.  These cash flow estimates and assumptions could change significantly either positively or negatively.  In June 2012, the Company announced that a determination had been made to cease efforts to test and complete the Tamandua #1 well on the CPO-4 prospect in Colombia.  As a result of the determination to cease efforts to complete the Tamandua #1 well, the Company recorded an impairment charge of $7,027,032 to write off costs attributable to the drilling of the Tamandua #1 well on the Company’s CPO-4 block.  As of May 31, 2012, the Company had recorded approximately $960,000 of total expected costs of $2.5 million on the Cachirre #1 well.  See “Note 10 – Subsequent events.”  None of these costs were impaired at May 31, 2012.

Inflation
 
The Company's results of operations have not been significantly affected by inflation and management does not expect inflation to have a significant effect on its operations in the foreseeable future.

Oil and gas properties
 
The Company follows the full cost method of accounting for its oil and gas properties, whereby all costs incurred in connection with the acquisition, exploration for and development of petroleum and natural gas reserves, if any, are capitalized. Such costs include costs of acquisition, geological and geophysical activities, rentals on non-producing leases, drilling, completing and equipping of oil and gas wells and administrative costs directly attributable to those activities and asset retirement costs. Disposition of oil and gas properties will be accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves, if any, of oil and gas, in which case the gain or loss will be recognized in the consolidated statements of operations.

As of May 31, 2012, the Company had oil and gas property investments in the amount of $19,288,590 that are excluded from depletion because reserves have not been proven to be associated with those properties.  If any proved reserves are found and when its quantity can be estimated, costs in excess of the present value of estimated future net revenues will be charged to impairment expense. The Company will apply the full cost ceiling test on a quarterly basis on the date of the latest consolidated balance sheet presented. It is not known at this time if any recoverable reserves of oil and gas exist.

In June 2012, the Company announced that a determination had been made to cease efforts to test and complete the Tamandua #1 well on the CPO-4 prospect in Colombia.  As a result of the determination to cease efforts to complete the Tamandua #1 well, the Company recorded an impairment charge of $7,027,032 to write off costs attributable to the drilling of the Tamandua #1 well on the Company’s CPO-4 block. As of May 31, 2012, the Company had recorded approximately $960,000 of total expected costs of $2.5 million on the Cachirre #1 well.  See “Note 10 – Subsequent events.”  None of these costs were impaired at May 31, 2012.

Asset retirement costs will be recognized when an asset is placed in service and will be included in the amortization base and will be amortized over proved reserves, if any, using the units of production method.  Depletion of proved oil and gas properties will be calculated on the units-of-production method based upon estimates of proved reserves, if any. Such calculations include the estimated
 
 
F-10

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Notes to the Consolidated Financial Statements
May 31, 2012
(Unaudited)

future costs to develop proved reserves, if any. Costs of unproved properties are not included in the costs subject to depletion. These costs will also be assessed quarterly for impairment.  

Asset Retirement Obligation
 
GAAP requires that an asset retirement obligation (ARO) associated with the retirement of a tangible long-lived asset be recognized as a liability in the period in which it is incurred and becomes determinable. Under this method, when liabilities for dismantlement and abandonment costs, excluding salvage values, are initially recorded, the carrying amount of the related oil and natural gas properties is increased.
 
The fair value of the ARO asset and liability is measured using expected future cash outflows discounted at the Company’s credit-adjusted risk-free interest rate. Accretion of the liability is recognized each period using the interest method of allocation, and the capitalized cost is depleted using the units of production method.  Should either the estimated life or the estimated abandonment costs of a property change materially upon the Company’s quarterly review, a new calculation is performed using the same methodology of taking the abandonment cost and inflating it forward to its abandonment date and then discounting it back to the present using the Company’s credit-adjusted, risk-free rate.
 
The carrying value of the asset retirement obligation is adjusted to the newly calculated value, with a corresponding offsetting adjustment to the asset retirement cost related to oil and gas property accounts.  At May 31, 2012, the Company had no material asset retirement obligations.

Basic Loss per Share

The Company is required to provide basic and diluted earnings (loss) per common share information.  The basic net loss per common share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding.  Diluted net loss per common share is computed by dividing the net loss applicable to common stockholders, adjusted on an "as if converted" basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the period ended May 31, 2012, there were no potentially dilutive securities issued, therefore, diluted net loss per common share equals basic net loss per share.  Common stock subscribed was not included in diluted earnings per share because the results were anti-dilutive. During the twelve months ended August 31, 2011, the Company issued five-year warrants to purchase up to 1 million shares of common stock at an exercise price of $0.30.  In addition, in June 2011 the Company adopted the 2011 Stock Incentive Plan (the “2011 Plan”)  under which the Company may issue stock grants and stock options to Company employees, directors and consultants up to 45,000,000 shares which may not exceed 1,000,000 shares to any individual during any fiscal year.  These stock grants and stock options generally vest over a three-year period, beginning on the first anniversary from the date of each grant.  As of May 31, 2012, the Company has granted, to employees and independent directors of the Company, a total of 1,950,000 shares in restricted stock grants and stock options to purchase 3,500,000 shares at a weighted average exercise price of $0.31 per share.
 
Potential dilutive securities as of May 31, 2012 have been considered, but the potential dilutive effect of these securities is not believed to be material and would be anti-dilutive.  The Company reported net losses in the nine months ended May 31, 2012 as well as a cumulative net loss; accordingly, the effects of any additional shares would be anti-dilutive.  The weighted average number of common and common equivalent shares outstanding was 473,465,689 and 374,967,587 for the nine months ended May 31, 2012 and 2011, respectively.
 
Principles of Consolidation
 
The accompanying consolidated financial statements include the accounts of Gulf United Energy, Inc. and its wholly-owned subsidiaries, Gulf United Energy del Peru, Ltd., Gulf United Energy Cuenca Trujillo, Ltd. and Gulf United Energy de Colombia, Ltd. as of May 31, 2012.  All significant inter-company transactions and balances have been eliminated in the consolidation.

Accounting for Uncertain Tax Positions

GAAP provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an entity’s financial statements.  GAAP requires an entity to recognize the financial statement impact of a tax position when it is more likely that not that the position will be sustained upon examination. The Company believes that all significant tax positions utilized by the Company will more likely than not be sustained upon examination.  As of the period ended May 31, 2012, the

 
F-11

 
GULF UNITED ENERGY, INC. AND SUBSIDIARIES
(A Development Stage Company)

Notes to the Consolidated Financial Statements
May 31, 2012
(Unaudited)


tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are from the fiscal year 2008 forward (with limited exceptions). Tax penalties and interest, if any, would be accrued as incurred and would be classified as tax expense in the consolidated statements of operations and comprehensive loss.

Stock-Based Compensation Arrangements

GAAP requires all share-based payments to employees, including grants of employee stock options, to be based on their fair values.  In accordance with the provisions of GAAP, share-based compensation cost is measured at the grant date, based on the calculated fair value of the award.  The Company recognizes compensation cost net of a forfeiture rate and recognizes the compensation cost for only those awards expected to vest on a straight-line basis over the requisite service period of the award, which is generally the vesting term.  The Company estimated the forfeiture rate based on its historical experience and its expectations of future forfeitures.  We currently expect no forfeitures. This stock-based compensation is recognized as general and administrative expense over the employee’s requisite service period (generally the vesting period of the equity award). We apply the fair value method in accounting for stock option grants using the Black-Scholes Method.
 
We grant restricted stock and stock options to employees and directors as incentive compensation. The restricted stock and options generally vest over three years, beginning on the first anniversary of the grant date. The vesting of these shares and options is dependent upon the continued service of the grantees with the Company. Upon the occurrence of a change in control, each outstanding share of restricted stock and stock option will immediately vest.
 
The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The following summarizes the assumptions used in the option-pricing model and the method for determining the assumptions:
 
      Method of Determining Assumptions  
 
Risk-free rate
1.67%;
0.89%
U.S. treasury yield for 5-year treasury notes in effect at June 14, 2011 and November 1, 2011, respectively.
 
 
Expected years until exercise
5.00
Full option term
 
 
Expected stock volatility
100%;
94%
Historical Gulf United Energy, Inc. volatility at August 31, 2011 and November 1, 2011, respectively.
 
 
Dividend yield
   -
Historical record and plan
 

At May 31, 2012, total compensation cost related to non-vested options and awards granted to employees and independent directors not yet recognized is approximately $1,103,000 and is expected to be recognized over a period of less than three years.

Stock Options

Information relating to stock options is summarized as follows:
         
Weighted
   
Weighted
       
   
Number of
   
Average
   
Average
       
   
Shares
   
Exercise
   
Contractual
   
Aggregate
 
   
Underlying
   
Price per
   
Life in
   
Intrinsic
 
   
Options
   
Share
   
Years
   
Value
 
   
Balance outstanding  - August 31, 2011
    3,000,000     $ 0.32       4.6     $ 725,764  
Granted
    500,000       0.27       5.0       89,694  
Exercised
    -                          
Forfeited
    -