UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 2014 |
| | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO ___________ |
333-165163
(Commission File Number)
BLACKROCK OIL CORPORATION
(Exact name of registrant as specified in its charter)
| | | 255 Duncan Mill Road, Suite 203 |
| Province of Ontario, Canada | | Toronto, Ontario, Canada M3B 3H9 |
| (Jurisdiction of incorporation or organization) | | (Address of principal executive offices) |
Oliver Xing, President
255 Duncan Mill Road, Suite 203
Toronto, Ontario, Canada M3B 3H9
(416) 510-2991
(Name, telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
| Securities registered pursuant to Section 12(g) of the Act: | Securities registered pursuant to section 15(d) of the Act: |
| NONE | COMMON STOCK |
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report as ofOctober 31, 2014 32,781,666 .
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. YES ☐ NO ☒
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
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 reports), and (2) has been subject to such filing requirements for the past 90 days. YES☐ 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).YESo NOx
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 | ☒ | | |
Indicate by check mark which basis of account the registrant has used to prepare the financial statements included in this filing:
| U.S. GAAP | ☒ |
| | International Reporting Standards as issued by the International Accounting Standards Board | ☐ |
| | Other | ☐ |
| | If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. |
| | Item 17 | ☐ | Item 18 | ☐ |
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. YES ☐ NO ☒
TABLE OF CONTENTS
FORWARD LOOKING STATEMENTS
Blackrock Oil Corporation, or the Company, desires to take advantage of the safe harbour provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbour legislation. This document and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. The words ‘‘believe’’, ‘‘expect’’, ‘‘anticipate’’, ‘‘intends’’, ‘‘estimate’’, ‘‘forecast’’, ‘‘project’’, ‘‘plan’’, ‘‘potential’’, ‘‘will’’, ‘‘may’’, ‘‘should’’, ‘‘expect’’ and similar expressions identify forward-looking statements. Please note in this annual report, ‘‘we’’, ‘‘us’’, ‘‘our’’, ‘‘the Company’’, all refer to the Company.
The forward-looking statements in this document are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.
In addition to these important factors and matters discussed elsewhere herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies, fluctuations in currencies and interest rates, general market conditions, changes in the Company’s operating expenses, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions and other important factors described from time to time in the reports filed by the Company with the Securities and Exchange Commission.
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMNET AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A. Selected financial data.
The following selected financial data for the years ended June 30, 2014 and 2032 is derived from our audited financial statements. The selected financial data, as well as the financial statements and accompanying notes, are prepared in accordance with accounting principles generally accepted in the United States. The Registrant presents its financial statements in United States dollars. All dollar amounts in this Form 20-F are in United States dollars, except where otherwise indicated. You should read the following selected financial data with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and accompanying notes and other financial information included elsewhere in this annual report.
| | | Year endedJune 30, 2014 | | | Year ended June 30, 2013 | |
| | | | | | | |
| Revenue | | $ | - | | | $ | - | |
| Operating expenses | | | 57,579 | | | | 69,076 | |
| Net Income (loss) | | | (57,579 | ) | | | (69,076 | ) |
| | | | | | | | | |
| Income (loss) per share – basic and diluted | | $ | (0.00 | ) | | $ | (0.01 | ) |
| | | | | | | | | |
| Weighted average number of shares outstanding | | | 11,541,666 | | | | 11,541,666 | |
| | | Year endedJune 30, 2014 | | | Year ended June 30, 2013 | |
| Balance Sheet Data | | | | | | |
| Cash and cash equivalent | | $ | 6,336 | | | $ | 17,168 | |
| Total current assets | | | 152,472 | | | | 166,443 | |
| Total assets | | | 152,472 | | | | 166,443 | |
| Total current liabilities | | | 152,805 | | | | 102,438 | |
| Total liabilities | | | 152,805 | | | | 102,438 | |
| Total accumulated deficits | | | (407,623 | ) | | | (350,044 | ) |
| Total shareholders’ equity | | | 13,185 | | | | 64,005 | |
B. Capitalization and indebtedness.
Not applicable.
C. Reasons for the Offer and Use of Proceeds.
Not applicable.
D. Risks Factors.
The risks described below are not the only ones we face. Additional risks that generally apply to publicly traded companies, that are not yet identified or that are currently perceived as immaterial, may also impair our business operations. Our business, operating results and financial condition could be adversely affected by any of the following risks. You should refer to the other information set forth in this document, including our financial statements and the related notes.
This annual report also contains certain forward-looking statements that involve risks and uncertainties. These statements relate to our future plans, objectives, expectations and intentions. These statements may be identified by the use of words such as “expects,” “anticipates,” “intends,” “plans” and similar expressions. Our actual results could differ materially from those discussed in these statements. Factors that could contribute to such differences include, but are not limited to, those discussed below and elsewhere in this annual report.
RISK FACTORS RELATED TO OUR BUSINESS
We have a limited operating history so it may be difficult for you to evaluate our business and its future prospects.
It may be difficult to evaluate our business and prospects because we have a limited operating history. We were incorporated on September 3, 2009 under the laws of the Province of Ontario, Canada. In our five years of operations, we focused our business developments and we only have limited revenue and there is no assurance of future revenue generation. Our operation is still in development stage and is susceptible to all risks associated with start-up company. Our ability to achieve and maintain profitability and positive cash flow is dependent upon:
* our ability to source, analyze, finance and acquire oil and gas properties;
* our ability to generate revenues through the sale of our oil production.
There can be no assurance that we will be able to successfully acquire an oil and gas assets at reasonable cost and generate revenue from
Our auditor has issued a going concern.
Our auditors have issued a going concern opinion. This means that there is substantial doubt that we will be an ongoing business for the next twelve months. Our cumulative loss since inception to June 30, 2014 is $407,623 and will require sufficient financing to continue our business.
Because our sole officer and director will only be devoting limited time to our operations, our operations may be sporadic which may result in periodic interruptions or suspensions of operations. This activity could prevent us from attracting purveyors and clients and result in a lack of revenues that may cause us to suspend or cease operations.
Our sole officer and director, Oliver Xing, will only be devoting limited time to our operations. Oliver Xing will be devoting approximately 15 hours per week of his time to our operations. Because our sole officer and director will only be devoting limited time to our operations, our operations may be sporadic and occur at times which are convenient to him. As a result, operations may be periodically interrupted or suspended which could result in a lack of revenues and a possible cessation of operations.
Because our management does not have technical training or experience in evaluating oil gas assets, we may have to hire qualified personnel. If we can’t locate qualified personnel, we may have to suspend or cease operations which will result in the loss of your investment.
Because our sole officer and director is inexperienced with providing technical evaluation of oil and gas properties, we may have to hire qualified persons to assist him in acquisitions. Our sole officer and director has no direct formal training or experience in this area and as a result may not be fully aware of many of the specific requirements related to working within the industry. Management’s decisions and choices may not take into account standard engineering or managerial approaches companies commonly use. Consequently our operations, earnings and ultimate financial success could suffer irreparable harm due to management’s lack of experience in this industry. As a result we may have to suspend or cease operations which will result in the loss of your investment.
If Oliver Xing, our sole officer and director, should resign or die, we will not have a chief executive officer which could result in our operations suspending. If that should occur, you could lose your investment.
Oliver Xing is our sole officer and director. We are extremely dependent upon him to conduct our operations. If he should resign or die we will not have a chief executive officer. If that should occur, until we find another person to act as our chief executive officer, our operations could be suspended. In that event it is possible you could lose your entire investment.
We may not be able to compete with others in the energy field and as a result may have to suspend or cease operations.
We are small and have not yet begun material operations. As a result we may not be able to compete with other energy development business. If we are unable to compete with other oil companies, we may have to suspend or cease operations - and in that event it is possible you could lose your entire investment.
There arerisksinherentinforeignoperations,suchasadversechangesincurrencyvaluesandforeign regulationsrelatingto our business operations.
Our well and operations are located outsidetheUS andaresubjecttocertainrisksrelatedtotheindirectownershipanddevelopmentofforeignproperties,includingadversechangesincurrencyvalues,foreigntaxes,UStaxesontherepatriationoffundstotheUS,andotherlawsandregulations,anyofwhichmayhaveamaterialadverseeffectonourproperties,financialcondition, resultsofoperations,orcashflows.
Wehavelimitedmanagementandstaffandwillbedependentupon contractarrangements.
We have no full time employee as of June 30, 2014.Weexpectthatwewillcontinuetorequiretheservices ofindependentconsultantsandcontractorstoperformvariousprofessionalservices,includingreservoirengineering,land,legal,environmental,andtaxservices.Wealsoplantopursueallianceswithpartnersintheareasofgeologicalandgeophysicalservicesandprospectgeneration,evaluation,and prospectleasing.Ourdependenceonthirdpartyconsultantsandserviceproviderscreatesanumberofrisks,includingbutnotlimitedto:
| ● | thepossibilitythatsuchthirdpartiesmaynotbeavailabletousasandwhenneeded;and |
| ● | theriskthatwemaynotbeabletoproperlycontrolthetimingandqualityofworkconductedwithrespecttoourprojects. |
Ifweexperiencesignificantdelaysinobtainingtheservicesofsuchthirdpartiesorpoorperformancebysuchparties,ourresultsofoperations maybemateriallyadverselyaffected.
Oilandnaturalgaspricesarevolatile.Adeclineinpricescouldadverselyaffectourfinancialcondition,resultsofoperations,cashflows,accesstocapital,andabilitytogrow.
Ourrevenues,resultsofoperations,futurerateofgrowth,andthecarryingvalueofouroilandgaspropertiesdependheavilyonthepriceswereceiveforthecrudeoilandnaturalgaswesell.Pricesalsoaffecttheamountofcashflowavailableforcapitalexpendituresandourabilitytoborrowmoneyorraiseadditionalcapital.Themarketsforcrudeoilandnaturalgashavehistoricallybeen,andare likelytocontinuetobe,volatileandsubject towidefluctuationsinresponsetonumerousfactors,includingthefollowing:
| | ● | worldwide and domestic supplies of oil and gas, and the productive capacity of the oil and gas industry as a whole; |
| | ● | changes in the supply and the level of consumer demand for such fuels; |
| | ● | overall global and domestic economic conditions; |
| | ● | political conditions in oil, natural gas, and other fuel-producing and fuel-consuming areas; |
| | ● | the extent of US and Canadian domestic oil and gas production and the consumption and importation of such fuels and substitute fuels in US and Canada and other relevant markets; |
| | ● | the availability and capacity of gathering, transportation, processing, and/or refining facilities in regional or localized areas that may affect the realized price for crude oil or natural gas; |
| | ● | the price and level of foreign imports of crude oil, refined petroleum products, and liquefied natural gas; |
| | ● | weather conditions, including effects of weather conditions on prices and supplies in worldwide energy markets; |
| | ● | technological advances affecting energy consumption and conservation; |
| | ● | the ability of the members of the Organization of Petroleum Exporting Countries and other exporting countries to agree to and maintain crude oil prices and production controls; |
| | ● | the competitive position of each such fuel as a source of energy as compared to other energy sources; |
| | ● | strengthening and weakening of the US dollar relative to other currencies; and |
| | ● | the effect of governmental regulations and taxes on the production, transportation, and sale of oil, natural gas, and other fuels. |
Thesefactorsandthe volatilityoftheenergymarketsmakeitextremelydifficult topredictfutureoilandgaspricemovementswithanycertainty, butingeneralweexpectoilandgaspricestocontinuetofluctuatesignificantly.
Sustaineddeclinesinoilandgaspriceswouldnotonlyreduceourrevenuesbutalsocouldreducetheamountofoilandgasthatwecanproduce economicallyand,asaresult,couldhaveamaterialadverseeffectonourfinancialcondition,resultsofoperations,cashflows,andreserves.Further,oilandgaspricesdonotnecessarilymoveintandem.Pricesforsalesofouroilproduction areprimarilyaffectedbyglobaloilprices,andthevolatilityofthosepriceswillaffectfutureoilrevenues.
Competition intheoilandnaturalgasindustry isintense,andmanyofourcompetitorshavegreaterfinancial,technical,andotherresourcesthanwedo.
Wefaceintensecompetitionfrommajoroilandgascompaniesandindependentoilandgasexplorationandproductioncompanieswhoseekoilandgasinvestmentsthroughouttheworld,aswellastheequipment,expertise,labor,andmaterialsrequiredtoexplore,develop,andoperatecrudeoil andnaturalgasproperties.Manyofourcompetitorshavefinancial,technical,andotherresourcesvastlyexceedingthoseavailabletous,andmanycrudeoilandnaturalgaspropertiesaresoldinacompetitivebiddingprocessinwhichourcompetitorsmaybeableandwillingtopaymorefordevelopment prospectsandproductiveproperties,orinwhichourcompetitorshavetechnologicalinformationorexpertisethatisnotavailabletoustoevaluateand successfullybidfortheproperties.Inaddition,shortagesofequipment,labor,ormaterialsasaresultofintensecompetitionmayresultinincreasedcosts ortheinabilitytoobtainthoseresources asneeded.Wemaynotbesuccessfulinacquiring,exploring,anddevelopingprofitablepropertiesinthefaceof thiscompetition.
Wealsocompeteforhumanresources.Theneedfortalentedpeopleacrossalldisciplinesintheindustryhasgrown,whilethenumberoftalentedpeopleavailablehasnotgrownatthesamepace,andinmanycases,isdecliningduetothedemographicsoftheindustry.
Ouroperationsaresubjecttocomplexlawsandregulations,includingenvironmentalregulationsthatresultinsubstantialcostsandother risks.
Legislationandregulationsaffectingtheindustryareunderconstantreviewforamendmentorexpansion,raisingthepossibilityofchangesthatmaybecomemorestringentand,asaresult,mayaffect,amongotherthings,thepricingormarketingofcrudeoilandnaturalgas production.Noncompliancewithstatutesandregulationsandmorevigorousenforcementofsuchstatutesandregulationsbyregulatoryagenciesmayleadtosubstantialadministrative,civil,andcriminalpenalties,includingtheassessmentofnaturalresourcedamages,theimpositionofsignificantinvestigatoryandremedialobligations,andmayalsoresultinthesuspensionorterminationofouroperations.Theoverallregulatoryburdenontheindustryincreasesthecosttoplace,design,drill,complete,install,operate,andabandonwellsandrelatedfacilitiesand,inturn,decreasesprofitability.
Governmentalauthoritiesregulatevariousaspectsofdrillingforandtheproductionofcrudeoilandnaturalgas,includingthepermitandbonding requirementsofdrillingwells,thespacingofwells,theunitizationorpoolingofinterestsincrudeoilandnaturalgasproperties,rights-of-wayand easements,environmentalmatters,occupationalhealthandsafety,thesharingofmarkets,productionlimitations,plugging,abandonment,and restorationstandards,andoilandgasoperations.Publicinterestinenvironmentalprotectionhasincreasedinrecentyears,andenvironmental organizationshaveopposed,withsomesuccess,certainprojects.Undercertaincircumstances,regulatoryauthoritiesmaydenyaproposedpermitor right-of-waygrantorimposeconditionsofapprovaltomitigatepotentialenvironmentalimpacts,whichcould,ineithercase,negativelyaffectourabilitytoexploreordevelopcertainproperties.Governmentalauthoritiesalsomayrequireanyofourongoingorplannedoperationsontheirleasesorlicensestobedelayed,suspended,orterminated.Anysuchdelay,suspension,orterminationcouldhaveamaterialadverseeffectonouroperations.
Ouroperationsarealsosubjecttocomplexandconstantlychangingenvironmentallawsandregulationsadoptedbyfederal,state,tribal,andlocalgovernmentalauthoritiesinjurisdictionswhereweareengagedinexplorationorproductionoperations.Newlawsorregulations,orchangestocurrentrequirements,couldresultinmaterialcostsorclaimswithrespecttopropertiesweownorhaveowned.Wewillcontinuetobesubjecttouncertainty associatedwithnewregulatoryinterpretationsandinconsistentinterpretationsbetweenvariousregulatoryagencies.Underexistingorfutureenvironmentallawsandregulations,wecouldincursignificantliability,includingjointandseveralliabilityorstrictliabilityunderfederal,state,and tribalenvironmentallawsfornoiseemissionsandfordischargesofcrudeoil,naturalgas,andassociatedliquidsorotherpollutantsintotheair,soil,surfacewater,orgroundwater.Wecouldberequiredtospendsubstantialamountsoninvestigations,litigation,andremediationforthesedischargesand othercomplianceissues.Anyunpermittedreleaseofpetroleumorotherpollutantsfromouroperationscouldresultnotonlyincleanupcostsbutalso naturalresources,realorpersonalproperty,andothercompensatorydamagesandcivilandcriminalliability.Existingenvironmentallawsor regulations,ascurrentlyinterpretedorenforced,orastheymaybeinterpreted,enforced,oralteredinthefuture,mayhaveamaterialadverseeffecton us.
Legislativeandregulatoryinitiativesrelatedtoglobalwarmingandclimatechangecouldhaveanadverseeffectonouroperationsandthedemandforcrudeoilandnaturalgas.
Duetoconcernsabouttherisksofglobalwarmingandclimatechange,anumberofvariousnationalandregionallegislativeandregulatoryinitiativestolimitgreenhousegasemissionsarecurrentlyinvariousstagesofdiscussionorimplementation.Forexample,theUSEnvironmental ProtectionAgencyhasbeenadoptingandimplementingvariousrulesregulatinggreenhousegasemissionsundertheUSCleanAirAct,theUSCongresshasfromtimeto timeconsideredotherlegislativeinitiativestoreduceemissionsofgreenhousegases,andalmostone-halfofthestateshavealreadytakenlegalmeasurestoreduceemissionsofgreenhousegases,primarilythroughtheplanneddevelopmentofgreenhousegasemission inventoriesand/orregionalgreenhousegascapandtradeprograms.Mostofthesecapandtradeprogramsworkbyrequiringmajorsourcesofemissions,suchaselectricpowerplants,ormajorproducersoffuels,suchasrefineriesandgasprocessingplants,toacquireandsurrenderemissionallowances. Thenumberofallowancesavailableforpurchaseisreducedeachyearinanefforttoachievetheoverallgreenhousegasemissionreductiongoal.
Legislativeandregulatoryprogramstoreduceemissionsofgreenhousegasescouldrequireustoincursubstantiallyincreasedcapital,operating,maintenance,andcompliancecosts,suchascoststopurchaseandoperateemissionscontrolsystems,coststoacquireemissionsallowances,andcoststo complywithnewregulatoryorreportingrequirements.Anysuchlegislativeorregulatoryprogramscouldalsoincreasethecostofconsuming,and therebyreducedemandfor,theoilandnaturalgas weproduce.Consequently,legislativeandregulatoryprogramstoreduceemissionsofgreenhousegasescouldhaveanadverseeffectonourbusiness,financialcondition,resultsofoperations,andcashflows.
Inaddition,therehasbeenpublicdiscussionthatclimatechangemaybeassociatedwithmoreextremeweatherconditions,suchasincreased frequencyandseverityofstorms,droughts,andfloods.Extremeweatherconditionscaninterferewithourdevelopmentandproductionactivities,increaseourcostsofoperationsorreducetheefficiencyofouroperations,andpotentiallyincreasecostsforinsurancecoverageintheaftermathofsuchconditions.Significantphysicaleffectsofclimatechangecouldalsohaveanindirecteffectonourfinancingandoperationsbydisruptingthetransportationorprocessrelatedservicesprovidedbymidstreamcompanies,servicecompanies,orsupplierswithwhomwehaveabusinessrelationship.Wemaynotbeabletorecoverthroughinsurancesomeoranyofthedamages,losses,orcoststhatmayresultfrompotentialphysicaleffectsofclimatechange.
Thisreportcontainsestimatesofourprovedandprobablereservesandtheestimatedfuturenetrevenuesfromourprovedreserves.Theseestimatesarebaseduponvariousassumptions,includingassumptionsrequiredbytheSECrelatingtooilandgasprices,drillingandoperatingexpenses, capitalexpenditures,taxes,andavailabilityoffunds.Theprocessofestimatingoilandgasreservesiscomplex.Theprocessinvolvessignificantdecisionsandassumptionsintheevaluationofavailablegeological,geophysical,engineering,andeconomicdataforeachreservoir.Actualfutureproduction,oilandgasprices,revenues,taxes,developmentexpenditures,operatingexpenses,andquantitiesofrecoverableoilandgasreserveswillmostlikelyvaryfromtheseestimates.Anysignificantvariationofanynaturecouldmateriallyaffecttheestimatedquantitiesandpresentvalueofourprovedreserves,andtheactualquantitiesandpresentvaluemaybesignificantlylessthanwehavepreviouslyestimated.Inaddition,we mayadjustestimatesofprovedreservestoreflectproductionhistory,resultsofexplorationanddevelopmentdrilling,prevailingoilandnaturalgasprices,coststodevelopandoperateproperties,andotherfactors,manyofwhicharebeyondourcontrol.Ourpropertiesmayalsobesusceptibletohydrocarbon drainage from productionbyoperatorsonadjacentproperties.Probablereservesarelesscertaintoberecoveredthanprovedreserves.
Thepresentvalueoffuturenetcashflowsfromourprovedreservesisnotnecessarilythesameasthecurrentmarketvalueofourestimatedoilandnaturalgasreserves.Webasetheestimateddiscountedfuturenetcashflowsfromourprovedreservesontheaverage,first-day-of-the-monthpriceduringthe12-monthperiodprecedingthemeasurementdate,inaccordancewithSECrules.However,actualfuturenetcashflowsfromouroiland naturalgaspropertiesalsowillbeaffectedbyfactorssuchas:
| ● | actualpriceswereceiveforoilandnaturalgas; |
| ● | actualcostsofdevelopmentandproductionexpenditures; |
| ● | theamountandtimingofactualproduction; |
| ● | supplyofanddemandforoilandnaturalgas;and |
| ● | changesingovernmentalregulationsortaxation,includingseveranceandexcisetaxes. |
Thetimingofproductionfromoilandnaturalgaspropertiesandofrelatedexpensesaffectsthetimingofactualfuturenetcashflowsfromprovedreserves,andthustheiractualpresentvalue.Inaddition,the10%discountfactorrequiredbytheSECtobeusedtocalculatediscountedfuturenetcashflowsforreportingpurposesmaynotbethemostappropriatediscountfactorinviewofactualinterestrates,costsofcapital,andotherrisksto whichourbusinessortheoilandnaturalgasindustryingeneralaresubject.
SECrulescouldlimitourabilitytobookadditionalprovedundevelopedreservesinthefuture.
SECrulesrequirethat,subjecttolimitedexceptions,provedundevelopedreservesmayonlybebookediftheyrelatetowellsscheduledtobedrilledwithinfiveyearsafterthedateofbooking.Thisrequirementmaylimitourabilitytobookadditionalprovedundevelopedreservesaswepursuedrillingprogramsonourundevelopedproperties in the future.Inaddition,wemayberequiredtowritedownourprovedundevelopedreservesifwedonotdrillthescheduledwellswithintherequiredfive-yeartimeframe in the future.
Substantialcapitalisrequiredforour business.
Ourexploration,development,andacquisitionactivitiesrequiresubstantialcapitalexpenditures. Ourcashflowsfromoperationsarenotsufficienttofundourplannedcapitalexpenditures,we may need toraiseadditionalcapitalthroughdebt,equity,orotherfinancings.Debtorequityfinancingmaynot alwaysbeavailabletousinsufficientamountsoronacceptableterms.
Ifwearenotabletoreplacereserves,we willnotbeabletosustainproduction.
Ourfuturesuccessdependslargelyuponourabilitytofind,develop,oracquireadditionaloilandgasreservesthatareeconomicallyrecoverable.Unlesswereplacethereservesweproducethroughsuccessfulexploration,development,oracquisitionactivities,ourreserveswilldeclineovertime.Recoveryofanyadditionalreserveswillrequiresignificantcapitalexpendituresandsuccessfuldrillingoperations.Wemaynotbeabletosuccessfully findandproducereserveseconomicallyinthefuture.Inaddition,wemaynotbeabletoacquireprovedreservesatacceptablecosts.
Futurepricedeclinesmayresultinwrite-downsofourassetcarryingvalues.
Wefollowthesuccessfuleffortsmethodofaccountingforouroilandgasoperations.Underthismethod,allpropertyacquisitioncostsandcosts ofexploratoryanddevelopmentwellsarecapitalizedwhenincurred,pendingdeterminationofwhetherprovedreserveshavebeendiscovered.Ifprovedreservesarenotdiscoveredwithanexploratorywell,thecostsofdrillingthewellareexpensed.
Thecapitalizedcostsofouroilandnaturalgasproperties,onadepletionpoolbasis,cannotexceedtheestimated undiscountedfuturenetcashflowsofthatdepletionpool.Ifnetcapitalizedcostsexceedundiscountedfuturenetrevenues,wegenerallymustwritedownthecostsofeachdepletionpooltotheestimateddiscountedfuturenetcashflowsofthatdepletionpool.Asignificantdeclineinoilornaturalgaspricesfromcurrentlevels,orotherfactors,couldcauseafutureimpairmentwrite-downofcapitalizedcostsandanon-cashchargeagainstfutureearnings.Onceincurred,awrite-downofoilandnaturalgaspropertiescannotbereversedatalaterdate,evenifoilornaturalgaspricesincrease.
Oilandgasdrillingandproducingoperationsarehazardousandexposeustoenvironmentalliabilities.
Oilandgasoperationsaresubjecttomanyrisks,includingwellblowouts,crateringandexplosions,pipefailure,fires,formationswithabnormalpressures,uncontrollableflowsofoil,naturalgas,brine,orwellfluids,andotherenvironmentalhazardsandrisks.Ourdrillingoperationsinvolverisksfromhighpressuresandfrommechanicaldifficultiessuchasstuckpipes,collapsedcasings,andseparatedcables.Ifanyoftheserisksoccur,wecouldsustainsubstantial lossesasaresultof:
| ● | severedamage to,ordestructionof,property,naturalresources,andequipment; |
| ● | pollutionorotherenvironmentaldamage; |
| ● | clean-up responsibilities; |
| ● | regulatoryinvestigationsandpenalties;and |
Ourliabilityforenvironmentalhazardsmayincludethosecreatedeitherbythepreviousownersofpropertiesthatwepurchaseorleaseorby acquiredcompaniespriortothedateweacquirethem.We willmaintaininsuranceagainstsome,butnotall,oftherisksdescribedabove.Ourinsurancemaynotbeadequatetocovercasualtylossesorliabilities,andinthefuturewemaynotbeabletoobtaininsuranceatpremiumlevelsthatjustifyitspurchase.
Weaknessineconomicconditionsoruncertaintyinfinancialmarketsmayhavematerialadverseimpactsonourbusiness.
US, Canadian andglobaleconomiesandfinancialsystemshaverecentlyexperiencedturmoilandupheavalcharacterizedbyextremevolatilityanddeclinesinpricesofsecurities,diminishedliquidityandcreditavailability,inabilitytoaccesscapitalmarkets,thebankruptcy,failure,collapse,or saleoffinancialinstitutions,increasedlevelsofunemployment,andanunprecedentedlevelofgovernmentintervention.Althoughsome economiesappeartohavestabilizedandbeguntorecover,theextentandtimingofrecovery,andwhetheritcanbesustained,areuncertain.Continued weaknessintheUS, Canadian orotherlargeeconomiescouldmateriallyadverselyaffectourbusiness,financialcondition,resultsofoperations,andcashflows.
Currencyexchangeratefluctuationsmaynegativelyaffectouroperatingresults.
TheexchangeratesbetweentheCanadiandollarandtheUSdollar havechangedinrecentperiodsandmayfluctuatesubstantiallyinthefuture.WeexpectthatamajorityofourrevenueswillbedenominatedinCanadian dollarsinthefuture.However,theUSdollarhasstrengthenedagainsttheCanadiandollar,whichhashad,andmaycontinuetohave,anegativeimpactonourrevenuesgeneratedintheCanadiandollar,aswellasouroperatingincomeandnetincome.AnyappreciationoftheUSdollaragainstthe Canadiandollarislikelytohaveanegativeimpactonourrevenue,operatingincome,andnetincome.
Since we are a Canadian company and all of our assets, officers, directors are located in Canada, you may not be able to enforce any United States judgment for claims you may bring against us.
We have been organized under the laws of the Province of Ontario, Canada. All of our assets are located outside the United States. In addition, our sole officer and director are residents of Canada. While a cross boarder treatise exists between the United States and Canada relating to the enforcement of foreign judgments, the process of such is cumbersome and in some cases has prevented the enforcement of judgments. As a result, while actions may be brought in Canada, it may be impossible for you to affect service of process within the United States upon us or these persons or to enforce against us or these persons any judgments in civil and commercial matters, including judgments under United States federal securities laws. In addition, a Canadian court may not permit you to bring an original action in Canada or to enforce in Canada a judgment of a U.S. court based upon civil liability provisions of U.S. federal securities laws.
Our operating results may be impacted by foreign exchange rates.
Substantially all of our revenue is expected to be earned in Canadian dollars. A significant portion of our expenses is incurred in Canadian dollars. Changes in the value of the Canadian dollar relative to the U.S. dollar may result in currency translation gains and losses and could adversely affect our operating results. To date, foreign currency exposure has been minimal. However, in the future we may consider hedging all or a significant portion of our annual estimated Canadian dollar expenses to minimize our Canadian dollar exposure.
RISK FACTORS RELATED TO OWNING OUR STOCK
Control by existing shareholder, anti-takeover effects
As of June 30, 2014, Oliver Xing, our President and Chief Executive Officer and director, personally and indirectly through his spouse, beneficially owned approximately 9,250,000 shares or 80.14 % of our outstanding common shares. As a result, Mr. Xing can exert substantial influence over us and influence most matters requiring shareholder approval, including the election of directors, and thereby exercise significant control over our affairs. The voting power of Mr. Xing under certain circumstances could have the effect of delaying or preventing a change in our control, the effect of which may be to deprive you of a control premium that might otherwise be realized in connection with our acquisition.
No Established Public Trading Market
Our shares are qualified to begin trading on the Over the Counter Bulletin Board (OTCBB) on March 2011, however, at present our shares has only been very thinly traded, and there is no assurance that a significant trading market will develop, or if developed, that such market will be sustained.
Possible Volatility of Stock Price
Many factors could affect the market price of our common shares. These factors include but are not limited to:
| | ● | Variations in our operating results; |
| | ● | Variations in industry growth rate; |
| | ● | Changes in government policies regarding solar energy legislations, administrative policies; |
| ● | Adjustments by governments or its agencies in Feed-in-tariff rate for solar energy in Ontario; |
| | ● | General economic conditions in the markets; |
| | ● | Change in market sentiments about renewable energy and etc. |
Our common stock trades in the over-the-counter market on the OTCBB. As a result, an investor may find it more difficult to dispose of, or to obtain accurate quotations as to the value of, our common stock. Because our common stock is subject to federal securities rules affecting penny stock, the market liquidity for our common stock may be adversely affected.
Our common stock could become subject to additional sales practice requirements for low priced securities. Our common stock could become subject to Rule 15g-9 under the Securities Exchange Act of 1934, which imposes additional sales practice requirements on broker-dealers that sell our shares of common stock to persons other than established customers and “accredited investors” or individuals with net worth in excess of $1,000,000 or annual incomes exceeding $200,000 or $300,000 together with their spouses.
Rule 15g-9 requires a broker-dealer to make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. Consequently, the rule may affect the ability of broker-dealers to sell our securities and may affect the ability of our shareholders to sell any of our securities in the secondary market; generally define a “penny stock” to be any non-Nasdaq equity security that has a market price less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions; requires broker dealers to deliver, prior to a transaction in a penny stock, a risk disclosure document relating to the penny stock market.
Disclosure is also required to be made about compensation payable to both the broker-dealer and the registered representative and current quotations for the securities. In addition, the rule requires that broker dealers deliver to customers monthly statements that disclose recent price information for the penny stock held in the account and information on the limited market in penny stocks.
ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company.
The Company was incorporated under the laws of the Province of Ontario, Canada on September 3, 2009. The Company intends to commence business operations by acquiring proved-developed-producing oil assets in Western Canada. The Company has not generated any revenue for the period of September 3, 2009 to June 30, 2014, and only generated $164,975 revenue for the year ended June 30, 2011, and generated no revenue in the years ended June 30, 2012, June 30, 2013 and June 30, 2014. The Company only generated $11,177 in interest income for the year ended June 30, 2014. Management believes the Company’s operations are subject to all risks inherent in the establishment of a new business enterprise because its revenue is still an immaterial amount and there is no assurance that future revenue will be generated.
B. Business Overview.
We were incorporated in the Province of Ontario, Canada on September 3, 2009. We intend to explore, develop and operate oil assets in Western Canada. We maintain our statutory registered agent’s office and our business office is located at 255 Duncan Mill Road, Suite 203, Toronto, Ontario M3B 3H9. Our telephone number is (416) 510-2991.
We have no plans to change our planned business activities or to combine with another business, and we are not aware of any events or circumstances that might cause these plans to change. We are a development stage company and our plan of operation is prospective and there is no assurance that we will begin profitable operations.
We intend to raise additional financing and acquire proved-developed-producing light oil assets in Western Canada by executing our growth strategy to build shareholder value.
Our Strategy
Ourstrategiesto createshareholdervalue encompass three steps:
| i) | Acquire Proved Developed and Producing light oil assets with optimization potentials. We willsource, identify, analyze and acquire producing light oil assets with significant optimization opportunities. Once we have acquired a producing asset we will increase production by de-bottleneck the obsticles in production by investing optimization capital. |
| ii) | Drill and operate low risk production wells (off-set, re-entry and recompletion) to increase oil production with measured risks; |
| iii) | Acquire light oil land with identified resources to develop a large resources play. |
Wearecommittedto a measured-risk optimization capital and growth strategyandfocusedondeterminingthemostefficientwaytocreategreatestvalueandhighestreturnsforourshareholders.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A. Operating Results
The following discussion should be read in conjunction with our financial statements and the accompanying notes appearing elsewhere in this annual report.
Our financial statements are prepared in accordance with U.S. generally accepted accounting principles. Our functional currency is the Canadian dollar. Our financial statements are reported in United States dollars.
Sources of Revenue
For the year ended June 30, 2014, our revenue is $nil (June 30, 2013 - $nil). We had no revenue generated due to we concentrated our efforts substantially in evaluating our business strategies and selecting the best approach to build shareholder value. We expect the situation will change in the fiscal year 2015, and we are actively securing financing and evaluating acquisition targets. However, there can be no assurance that we will be successful in our business strategy.
Revenue Recognition
We recognize revenue when oil or gas is sold at a fixed or determinable price, persuasive evidence of an agreement exists, delivery has occurred and title has transferred, and collectability is reasonably assured.
Operating Results
The following is management’s discussion and analysis of our financial condition and results of its operations for the fiscal years ended June 30, 2014 and 2013. Because we are an emerging company, the comparisons between our financial statements may not be meaningful and may not necessarily be indicative of our future results of operation.
Revenues
For the year ended June 30, 2014, we have generated no revenue other than $11,177 in interest income (June 30, 2013 - $10,042 in interest income). The reason that we did not generate any revenue is due to the facts thatwe concentrated our efforts in analyzing the situation and selecting a better alternative to build up shareholder value. The Company believes it is prudent to conserve cash and assess the impact in the long run than simply venture out to expend the cash and lose its investment.
Legal fee
Legal fees for the year ended June 30, 2014 were $nil (June 30, 2013 - $nil) due to the Company having completed its filings, and has had no material legal issues upon which to consult lawyer.
General and administrative expenses
General and administrative expenses include compensation expense, business travel, expenses of a general nature in up-keeping the Company. For the year ended June 30, 2014, the general and administrative expenses were $60,259 (June 30, 2012 - $61,887).
Financial Condition, Liquidity and Capital Resources
At June 30, 2014, the Company had total assets of $152,472 (June 30, 2013 - $166,433) consisting of cash and cash equivalents of $6,336 (June 30, 2013 - $17,168), accounts receivable of $5,530 (June 30, 2013 - $950) and tax receivable of $35 (June 30, 2012 - $995), and note receivable of $140,571 (June 30, 2013 - $147,330).
Operations used $67,918 cash for the fiscal year ended June 30, 2014 (June 30, 2013 - $63,703). Funds used in operations primarily relate to general and administrative expenses.
Investing activities used $nil for the fiscal year ended June 30, 2014 and $177,330 for the year ended June 30, 2013. Funds used in investing activities primarily relate to the increase in notes receivable in 2013.
Financing activities provided $57,086 for the fiscal year ended June 30, 2014 (June 30, 2013 - $30,144), which is due to an increase in loan payable to related party.
B. Liquidity and capital resources
We have financed our operations from our inception to June 30, 2014 from the issuance of equity securities and, to a lesser extent, from non-interest bearing loans from our founder, President and Chief Executive Officer Oliver Xing.
For the fiscal year ended June 30, 2014 and 2013, we did not sell any securities to raise funds. From September 3, 2009 to June 30, 2010, we sold approximately 1,541,66 shares of our common shares through private placements with investors and raised $314,049. The offering was conducted pursuant to the exemption provided by Regulation S, under the Securities Act of 1933.
As of June 30, 2014, we had approximately $6,336 of cash and cash equivalents (June 30, 2013 - $17,168).
To provide working capital for its operations and project development, the Company will need to raise new funds. The Company intends to raise additional capital through the issuance of common shares, through bank loans and through the issuance of related party debt. In addition, from time to time in the past, Oliver Xing, the President of the Company, personally advanced non-interest-bearing loans to the Company for the day-to-day operations of the Company. It is contemplated that it will continue to raise capital primarily in private placements through investors. No assurance, however, can be given that the Company’s future capital requirements will be obtained. The Company’s access to capital is always dependent upon future financial market conditions, especially those pertaining to early-stage companies. There can be no guarantee that the Company will be successful in obtaining future financing, when necessary, on economically acceptable terms.
For the next year ending June 30, 2015, the Company anticipates that it will pay for its administrative and operational costs from existing working capital, from current revenue stream, if any, and from private placements through investors. Due to the development nature of our business, the Company believes it is difficult to estimate its development cash needs, but the Company believes it can raise sufficient working capital to cover its operation requirements, however, no assurances can be given that the Company will be able to raise cash from additional financing efforts. If the Company is unable to obtain sufficient funds from future financing, or from current revenues, the Company’s operation could be materially negatively affected, its operation could be forced into suspension.
C. Research and development, patents and licenses
We are not involved in any research and development and have no registered patents or licenses. In the fiscal year ended June 30, 2014 and 2013, and for the period of September 3, 2009 to June 30, 2014, the Company did not have any research, development or patent expenses.
D. Trend information
For the next year, we intend to continue our tight cost control in order to potentially achieve profitability. See Item 5A. “Operating and Financial Review and Prospects - Results of Operation” for additional trend information.
E. Off-balance sheet arrangements
The Company does not have any off-balance sheet arrangements.
F. Tabular disclosure of contractual obligations
The Company does not have any contractual obligations of the type required to be disclosed in this section.
G. Safe Harbor
We are projecting increased expenses.
We are projecting increased expenses for the fiscal year ending June 30, 2015 as our development stage business grows. It is expected that these expenses will be caused primarily by:
| * | cost to start-up and operate new start-up business |
| * | marketing costs |
| * | increased personnel and office costs |
| * | Oil assets evaluating and acquisition costs |
| * | legal and accounting costs |
We are in the emerging stage.
We have a limited operating history since our operations on September 3, 2009. Consistent with other early-stage companies, expenditures are heavily weighted professional fees, general business development expenses and etc. We realize that these expenditures are necessary in order to maintain our various stringent filing obligations and to compete for customers more effectively and to develop a profitable company capable of surviving and prospering well into the future.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management.
Set forth below are particulars respecting our directors and executive officers as of June 30, 2013, and each person’s business experience.
| Name | | Business Address | | Position |
| Oliver Xing | | 255 Duncan Mill Road | | Chief Executive Officer, |
| | | Suite 203 | | President, Secretary |
| | | Toronto, Ontario | | Chief Financial Officer |
| | | Canada M3B 3H9 | | Director |
Since our inception on September 3, 2009, Oliver Xing has been our president, principal executive officer, secretary, treasurer, principal financial officer, principal accounting officer and sole member of the board of directors. Since May 17, 2010, Mr. Xing has been president, principal executive officer, secretary, treasurer, principal financial officer, principal accounting officer and sole director of CN Resources, Inc., an exploration stage company located in Toronto, Ontario, Canada. From February, 2006 to May 2007, Mr. Xing was a Director, Chief Executive Officer and Chief Financial Officer of Arehada Mining Limited (formerly Dragon Capital Corporation), a Toronto Stock Exchange listed company. Since March 18, 2005, Mr. Xing has been the managing partner of CRR Capital Markets, Inc. an exempt market dealer located in Ontario, Canada. Further, since 1996, Mr. Xing has been a business consultant to Toronto based corporations. Since February 16, 1996, Mr. Xing has been a Chartered Accountant in Ontario, Canada.
Compensation
The Company has accrued total compensation of $60,000 to Oliver Xing for the fiscal year ended June 30, 2014 (June 30, 2013 was $60,000) for all services provided to the Company by Oliver Xing at the capacity as President, Chief Executive Officer and Chief Financial Officer, and Corporate Secretary. There is no stock option or other compensation for Oliver Xing.
Summary Compensation Table
| | | | | | | | | | | | | | | | | | Non- | | | Non-
qualified | | | | | | | |
| | | | | | | | | | | | | | | | | | Equity | | | Deferred | | | | | | | |
| Name | | | | | | | | | | | | | | | | | Incentive | | | Compensa | | | All | | | | |
| and | | | | | | | | | | | Stock | | | Option | | | Plan | | | tion | | | Other | | | | |
| Principal | | | | | Salary | | | Bonus | | | Awards | | | Awards | | | Compensation | | | Earnings | | | Compensation | | | Total | |
| Position | | Year | | | (US$) | | | (US$) | | | (US$) | | | (US$) | | | (US$) | | | (US$) | | | (US$) | | | (US$) | |
| (a) | | (b) | | | (c) | | | (d) | | | (e) | | | (f) | | | (g) | | | (h) | | | (i) | | | (j) | |
| Oliver Xing | | | 2014 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 60,000 | | | | 60,000 | |
| President | | | 2013 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 60,000 | | | | 60,000 | |
| | | | 2012 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 60,000 | | | | 60,000 | |
We have no employment agreement with any of our officers. We do not contemplate entering into any employment agreements until such time as we begin profitable operations.
The compensation discussed herein addresses all compensation awarded to, earned by, or paid to our named executive officers.
There are no other stock option plans, retirement, pension, or profit sharing plans for the benefit of our officers and directors other than as described herein.
Compensation of Directors
The member of our board of directors is not compensated for his services as a director. The board has not implemented a plan to award options to any directors. There are no contractual arrangements with any member of the board of directors. We have no director’s service contracts. In the future and when we are financially permitted, we do intend to reimburse independent directors, if any, for out-of-pocket expenses for attending board meetings.
Long-Term Incentive Plan Awards
We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.
Indemnification
Our articles of incorporation do not provide for indemnification. Our by-Law does provide indemnification for our Director and Officer of the Corporation.
B. Board Practices.
While not required, each of the Company’s directors is a resident of Canada and holds office until the Company’s annual meeting or until his successor is duly elected or appointed. Officers are appointed annually by the Board of Directors to serve at the Board’s will. The Company has no contracts with any of its Directors that provide for payments upon termination.
C. Employees.
As of June 30, 2014, we have no full time or part-time employee nor have we entered any negotiation with anyone concerning any employment with the Company. We believe that we are a new start-up development stage company the current practice of using independent contractor(s) only on needed basis can better preserve company’s cash and reduce costs. However, we may hire full-time or part-time employee in the next twelve months if such need arises and we have determined that it is financially possible for the Company to do so.
D. Share Ownership.
The following table sets forth, as of the date of this report, the total number of shares owned beneficially by each of our directors, officers and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares. The stockholders listed below have direct or indirect ownership of their shares and possesses sole voting and dispositive power with respect to the shares.
The percentage of beneficial ownership is as stated below and total issued and outstanding shares at the date of this report is 11,541,666 common shares.
| | | Number of | | | | | Percent | |
| Name of owner | | Shares | | | Position | | of Class | |
| | | | | | | | | |
| Oliver Xing | | | 6,000,000 | | | President, President, Principal Executive | | | 51.99 | % |
| | | | | | | Officer, Secretary, Treasurer, Principal | | | | |
| | | | | | | Financial Officer, Principal Accounting | | | | |
| | | | | | | Officer and sole director | | | | |
| | | | | | | | | | | |
| Early Bird Capital Corporation | | | 2,250,000 | | | Oliver Xing, our sole officer and director | | | 25.99 | % |
| | | | | | | owns 100% of the voting shares of Early | | | | |
| | | | | | | Bird Capital Corporation | | | | |
| | | | | | | | | | | |
| 1547698 Ontario Limited | | | 1,000,000 | | | 1547698 Ontario Limited is owned by | | | 8.66 | % |
| | | | | | | He Zheng who is the wife of Oliver Xing, | | | | |
| | | | | | | our president. He Zheng currently holds | | | | |
| | | | | | | 100% of the voting shares of 1547698 | | | | |
| | | | | | | Ontario Limited. | | | | |
| | | | | | | | | | | |
All Officers and Directors
as a Group (1 person) | | | 10,000,000 | | | | | | 86.64 | % |
There are no options outstanding to purchase our shares of common stock.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders.
The Company is not aware of any beneficial owners of 5% or more of the Company’s common stock other than those disclosed in Item 6.D above.
B. Related Party Transactions.
All transactions with related parties have occurred in the normal course of operations and are recorded at the amount as agreed and exchanged.
For the year ended June 30, 2014, the Company accrued a total of $24,000 management fee (including compensation for office, telephone and office supplies) and a total of $36,000 for consulting fee which is included in General and administrative fee category to compensate the president for all services rendered to the Company at the capacity as the President, Chief executive Officer, Chief Financial Officer and Secretary of the Company. The total compensation for the year ended June 30, 2014 is the same as for the year ended June 30, 2013 and June 30, 2012.
As of June 30, 2014, the President had loaned the Company $148,689 (June 30, 2013 - $91,768). The loan is non-interest bearing, due upon demand and unsecured.
ITEM 8. FINANCIAL INFORMATION
A. Financial Statements and Other Financial Information.
This annual report on Form 20-F contains the financial information set forth under Item 18.
B. Significant Changes.
There are no significant changes in the Company’s business practice, strategy and operation in the year ended June 30, 2014 and for the period of inception on September 3, 2009 to June 30, 2014.
Legal Proceedings
The Company is not a party to any pending or ongoing legal proceeding nor is the company aware of any threatened or anticipated material legal proceeding against it.
Dividend Policy
The Company has not paid and does not plan to pay any cash dividends on its capital stock. The Company currently intends to retain any future earnings, if any, to fund growth, and therefore does not expect to pay any cash dividends in the foreseeable future.
ITEM 9. THE OFFER AND LISTING
Price History of Shares
The Company’s common shares are qualified to be traded in the United States on the OTC Markets. However, as of June 30, 2014, active trading has not commenced, so there is no information or data available to report. Even though our stock is listed on the OTCQB, if traded, the trading price and trading volume can be sporadic. No active established market established within or outside the United States existed for our common stock.
Offering
There was no stock offering for the year ended June 30, 2014.
ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
Not Applicable.
B. Memorandum and Articles of Incorporation and Bylaws
Incorporated by reference from the Company’s registration statement on F-1, as amended.
C. Material Contracts
The Company has no material contracts with anyone.
D. Exchange Controls
The Company is an Ontario corporation. Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors. There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, royalties and other payments to non-resident holders of the Canadian securities.
There are no limitations under the laws of Canada or in the controlling documents of the Company on the right of foreigners to hold or vote securities of the Company, except that the Investment Canada Act may require review and approval by the Minister of Industry (Canada) of certain acquisitions of “control” of the Company by a “non-Canadian.” The threshold for acquisitions of control is generally defined as being one-third or more of the voting shares of the Company. ”Non-Canadian” generally means an individual who is not a Canadian citizen, or a corporation, partnership, trust or joint venture that is ultimately controlled by non-Canadians.
E. Taxation
Canadian Federal Income Tax Consequences
The following is a brief summary of some of the principal Canadian federal income tax consequences to a U.S. Holder (as defined below) of the Company’s common shares who deals at arm’s length with and is not affiliated with the Company, holds the shares as capital property and who, for the purposes of the Income Tax Act (Canada) and the Canada–United States Income Tax Convention, is at all relevant times resident or deemed to be resident in the United States and is not nor is deemed to be in Canada and does not carry on business in Canada.
This summary is of a general nature only and is not, and should not be interpreted as, legal or tax advice to any particular U.S. Holder and no representation is made with respect to the Canadian income tax consequences to any particular person. Accordingly, U.S. Holders are advised to consult their own tax advisers with respect to their particular circumstances.
Under the Income Tax Act (Canada) and pursuant to the Canada-United States Income Tax Convention, a U.S. Holder of common shares will be subject to a 15 percent withholding tax on dividends paid or credited or deemed by the Income Tax Act (Canada) to have been paid or credited on such shares. The withholding tax rate is 5 percent, where the U.S. Holder is a corporation that beneficially owns at least 10 percent of the voting shares of the Company.
In general, a U.S. Holder will not be subject to Canadian income tax on capital gains arising on the disposition of the Company common shares unless (i) at any time in the five-year period immediately preceding the disposition, 25 percent or more of the shares of any class or series of the capital stock of the Company were owned (or were under option or subject to an interest in) by the U.S. Holder, by persons with whom the U.S. Holder did not deal at arm’s length and (ii) the value of the common shares of the Company at the time of the disposition derives principally from real property (as defined in the Canada-United States Income Tax Convention) situated in Canada.
United States Federal Income Tax Consequences
The following is a general discussion of certain possible U.S. federal income tax consequences, under current law, generally applicable to a U.S. Holder of common shares of the Company. This discussion is of a general nature only and does not take into account the particular facts and circumstances, with respect to U.S. federal income tax issues, of any particular U.S. Holder. This discussion does not cover any state, local or foreign tax consequences. (See “Taxation – Canadian Federal Income Tax Consequences”, above).
The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time and which are subject to differing interpretations. This discussion does not consider the potential effects, both adverse and beneficial, of any proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time.
This discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any U.S. Holder or prospective U.S. Holder of common shares of the Company, and no opinion or representation with respect to the U.S. federal income tax consequences to any such U.S. Holder or prospective U.S. Holder is made. Accordingly, U.S. Holders and prospective U.S. Holders of common shares of the Company should consult their own financial advisor, legal counsel or accountant regarding the U.S. federal, state, local and foreign tax consequences of purchasing, owning and disposing of common shares of the Company.
U.S. Holders
As used herein, a “U.S. Holder” means a holder of common shares of the Company who is (i) a citizen or individual resident of the U.S., (ii) a corporation or partnership created or organized in or under the laws of the U.S. or of any political subdivision thereof, (iii) an estate whose income is taxable in the U.S. irrespective of source or (iv) a trust subject to the primary supervision of a court within the U.S. and control of a U.S. fiduciary as described Section 7701(a)(30) of the Code.
Persons Not Covered
This summary does not address the U.S. federal income tax consequences to persons (including persons who are U.S. Holders) subject to special provisions of U.S. federal income tax law, including (i) tax-exempt organizations, (ii) qualified retirement plans, (iii) individual retirement accounts and other tax-deferred accounts, (iv) financial institutions, (v) insurance companies, (vi) real estate investment trusts, (vii) regulated investment companies, (viii) broker-dealers, (ix) persons or entities that have a “functional currency” other than the U.S. dollar, (x) persons subject to the alternative minimum tax, (xi) persons who own their common shares of the Company as part of a straddle, hedging, conversion transaction, constructive sale or other arrangement involving more than one position, (xii) persons who acquired their common shares of the Company through the exercise of employee stock options or otherwise as compensation for services, (xiii) persons that own an interest in an entity that owns common shares of the Company, (xiv) persons who own, exercise or dispose of any options, warrants or other rights to acquire common shares of the Company, or (xv) persons who own their common shares of the Company other than as a capital asset within the meaning of Section 1221 of the Code.
Distribution on Common Shares of the Company
U.S. Holders receiving distributions (including constructive distributions) with respect to common shares of the Company are required to include in gross income for U.S. federal income tax purposes the gross amount of such distributions, equal to the U.S. dollar value of such distributions on the date of receipt (based on the exchange rate on such date), to the extent that the Company has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s U.S. federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder’s U.S. federal taxable income by those who itemize deductions. (See more detailed discussion at “Foreign Tax Credit” below). To the extent that distributions from the Company exceed current or accumulated earnings and profits of the Company, such distributions will be treated first as a return of capital, to the extent of the U.S. Holder’s adjusted basis in the common shares, and thereafter as gain from the sale or exchange of the common shares of the Company. (See more detailed discussion at “Disposition of Common Shares of the Company” below)
In the case of foreign currency received as a distribution that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss. However, an individual whose realized gain does not exceed $200 will not recognize that gain, to the extent that there are no expenses associated with the transaction that meet the requirements for deductibility as a trade or business expense (other than travel expenses in connection with a business trip) or as an expense for the production of income.
Dividends paid on the common shares of the Company generally will not be eligible for the “dividends received deduction” allowed to corporate shareholders receiving dividends from certain U.S. corporations. Under certain circumstances, a U.S. Holder that is a corporation and that owns shares representing at least 10% of the total voting power and the total value of the Company’s outstanding shares may be entitled to a 70% deduction of the “U.S. source” portion of dividends received from the Company (unless the Company qualifies as a “Foreign Personal Holding Company” or a “Passive Foreign Investment Company” as defined below). The availability of the dividends received deduction is subject to several complex limitations which are beyond the scope of this discussion, and U.S. Holders of common shares of the Company should consult their own financial advisor, legal counsel or accountant regarding the dividends received deduction.
Certain information reporting and backup withholding rules may apply with respect to certain payments related to the Company’s common shares. In particular, a payer or middleman within the U.S., or in certain cases outside the U.S., will be required to withhold 31% (which rate is scheduled for periodic adjustment) of any payments to a U.S. Holder of the Company’s common shares of dividends on, or proceeds from the sale of, such common shares within the U.S., if a U.S. Holder fails to furnish its correct taxpayer identification number or
otherwise fails to comply with, or establish an exemption from, the backup withholding tax requirements. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a refund or a credit against the U.S. Holder’s U.S. federal income tax liability, provided the required information is furnished to the IRS. U.S. Holders should consult their own financial advisor, legal counsel or accountant regarding the information reporting and backup withholding rules applicable to the Company’s common shares.
Foreign Tax Credit
A U.S. Holder who pays (or has withheld from distributions) Canadian or other foreign income tax with respect to the ownership of common shares of the Company may be entitled, at the option of the U.S. Holder, to either receive a deduction or a tax credit for U.S. federal income tax purposes with respect to such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces U.S. federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid by (or withheld from distributions to) the U.S. Holder during that year.
There are significant and complex limitations that apply to the foreign tax credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s U.S. income tax liability that the U.S. Holder’s “foreign source” income bears to his or its worldwide taxable income. In applying this limitation, the various items of income and deduction must be classified as either “foreign source” or “U.S. source.” Complex rules govern this classification process. In addition, this limitation is calculated separately with respect to specific classes of income such as “passive income,” “high withholding tax interest,” “financial services income,” “shipping income,” and certain other classifications of income. Dividends distributed by the Company will generally constitute “foreign source” income, and will be classified as “passive income” or, in the case of certain U.S. Holders, “financial services income” for these purposes.
In addition, U.S. Holders that are corporations and that own 10% or more of the voting stock of the Company may be entitled to an “indirect” foreign tax credit under Section 902 of the Code with respect to the payment of dividends by the Company under certain circumstances and subject to complex rules and limitations. The availability of the foreign tax credit and the application of the limitations with respect to the foreign tax credit are fact specific, and each U.S. Holder of common shares of the Company should consult their own financial advisor, legal counsel or accountant regarding the foreign tax credit rules.
Disposition of Common Shares of the Company
A U.S. Holder will recognize gain or loss upon the sale or other taxable disposition of common shares of the Company equal to the difference, if any, between (i) the amount of cash plus the fair market value of any property received, and (ii) the shareholder’s tax basis in the common shares of the Company. This gain or loss will be capital gain or loss if the common shares are a capital asset in the hands of the U.S. Holder, which will be long-term capital gain or loss if the common shares of the Company are held for more than one year.
Preferential tax rates apply to long-term capital gains of U.S. Holders that are individuals, estates or trusts. Deductions for net capital losses are subject to significant limitations. For U.S. Holders that are not corporations, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted. For U.S. Holders that are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.
Currency Exchange Gains or Losses
U.S. holders generally are required to calculate their taxable incomes in United States dollars. Accordingly, a U.S. holder who purchases common shares of the Company with Canadian dollars will be required to determine the tax basis of such shares in United States dollars based on the exchange rate prevailing on the settlement date of the purchase (and may be required to recognize the unrealized gain or loss, if any, in the Canadian currency surrendered in the purchase transaction). Similarly, a U.S. holder receiving dividends or sales proceeds from common shares of the Company in Canadian dollars will be required to compute the dividend income or the amount realized on the sale, as the case may be, in United States dollars based on the exchange rate prevailing at the time of receipt in the case of dividends and on the settlement date in the case of sales on an established securities exchange. Gain or loss, if any, recognized on a disposition of Canadian currency in connection with the described transactions generally will be treated as ordinary gain or loss.
Other Considerations for U.S. Holders
In the following circumstances, the above sections of this discussion may not describe the U.S. federal income tax consequences to U.S. Holders resulting from the ownership and disposition of common shares of the Company:
Foreign Personal Holding Company
If at any time during a taxable year (i) more than 50% of the total voting power or the total value of the Company’s outstanding shares is owned, directly or indirectly, by five or fewer individuals who are citizens or residents of the U.S. and (ii) 60% (or 50% in certain cases) or more of the Company’s gross income for such year is “foreign personal holding company income” as defined in Section 553 of the Code (e.g., dividends, interest, royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions), the Company may be treated as a “Foreign Personal Holding Company” (“FPHC”) In that event, U.S. Holders of common shares of the Company would be required to include in gross income for such year their allocable portions of such “foreign personal holding company income” to the extent the Company does not actually distribute such income.
The Company does not believe that it currently qualifies as a FPHC. However, there can be no assurance that the Company will not be considered a FPHC for the current or any future taxable year.
Foreign Investment Company
If (i) 50% or more of the total voting power or the total value of the Company’s outstanding shares is owned, directly or indirectly, by citizens or residents of the U.S., U.S. partnerships or corporations, or U.S. estates or trusts (as defined by the Code Section 7701(a)(30)), and (ii) the Company is found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest therein, the Company may be treated as a “Foreign Investment Company” (“FIC”) as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging common shares of the Company to be treated as ordinary income rather than capital gain.
The Company does not believe that it currently qualifies as a FIC. However, there can be no assurance that the Company will not be considered a FIC for the current or any future taxable year.
Controlled Foreign Corporation
If more than 50% of the total voting power or the total value of the Company’s outstanding shares is owned, directly or indirectly, by citizens or residents of the U.S., U.S. partnerships or corporations, or U.S. estates or trusts (as defined by the Code Section 7701(a)(30)), each of which own, directly or indirectly, 10% or more of the total voting power of the Company’s outstanding shares (each a “10% Shareholder”), the Company could be treated as a “Controlled Foreign Corporation” (“CFC”) under Section 957 of the Code.
The classification of the Company as a CFC would affect many complex results, including that 10% Shareholders of the Company would generally (i) be treated as having received a current distribution of the Company’s “Subpart F income” and (ii) would also be subject to current U.S. federal income tax on their pro rata shares of the Company’s earnings invested in “U.S. property.” The foreign tax credit may reduce the U.S. federal income tax on these amounts for such 10% Shareholders (See more detailed discussion at “Foreign Tax Credit”
above). In addition, under Section 1248 of the Code, gain from the sale or other taxable disposition of common shares of the Company by a U.S. Holder that is or was a 10% Shareholder at any time during the five-year period ending with the sale is treated as ordinary income to the extent of earnings and profits of the Company attributable to the common shares sold or exchanged.
If the Company is classified as both, a Passive Foreign Investment Company, as described below, and, a CFC, the Company generally will not be treated as a Passive Foreign Investment Company with respect to 10% Shareholders. This rule generally will be effective for taxable years of 10% Shareholders beginning after 1997 and for taxable years of the Company ending with or within such taxable years of 10% Shareholders.
The Company does not believe that it currently qualifies as a CFC. However, there can be no assurance that the Company will not be considered a CFC for the current or any future taxable year. The CFC rules are very complicated, and U.S. Holders should consult their own financial advisor, legal counsel or accountant regarding the CFC rules and how these rules may impact their U.S. federal income tax situation.
Passive Foreign Investment Company
The Code contains rules governing “Passive Foreign Investment Companies” (“PFIC”) which can have significant tax effects on U.S. Holders of foreign corporations. Section 1297 of the Code defines a PFIC as a corporation that is not formed in the U.S. and, for any taxable year, either (i) 75% or more of its gross income is “passive income” or (ii) the average percentage, by fair market value (or, if the corporation is not publicly traded and either is a controlled foreign corporation or makes an election, by adjusted tax basis), of its assets that produce or are held for the production of “passive income” is 50% or more. ”Passive income” includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions. However, gains resulting from commodities transactions are generally excluded from the definition of passive income if “substantially all” of a merchant’s, producer’s or handler’s business is as an active merchant, producer or handler of such commodities.
For purposes of the PFIC income test and the assets test, if a foreign corporation owns (directly or indirectly) at least 25% by value of the stock of another corporation, such foreign corporation shall be treated as if it (a) held a proportionate share of the assets of such other corporation, and (b) received directly its proportionate share of the income of such other corporation. Also, for purposes of such PFIC tests, passive income does not include any interest, dividends, rents or royalties that are received or accrued from a “related” person to the extent such amount is properly allocable to the income of such related person which is not passive income. For these purposes, a person is related with respect to a foreign corporation if such person “controls” the foreign corporation or is controlled by the foreign corporation or by the same persons that control the foreign corporation. For these purposes, “control” means ownership, directly or indirectly, of stock possessing more than 50% of the total voting power of all classes of stock entitled to vote or of the total value of stock of a corporation.
U.S. Holders owning common shares of a PFIC are subject to the highest rate of tax on ordinary income in effect for the applicable taxable year and to an interest charge based on the value of deferral of tax for the period during which the common shares of the PFIC are owned with respect to certain “excess distributions” on and dispositions of PFIC stock under Section 1291 of the Code. However, if the U.S. Holder makes a timely election to treat a PFIC as a qualified electing fund (“QEF”) with respect to such shareholder’s interest therein, the above-described rules generally will not apply. Instead, the electing U.S. Holder would include annually in his gross income his pro rata share of the PFIC’s ordinary earnings and net capital gain regardless of whether such income or gain was actually distributed. A U.S. Holder of a QEF can, however, elect to defer the payment of U.S. federal income tax on such income inclusions. In addition, subject to certain limitations, U.S. Holders owning, actually or constructively, marketable (as specifically defined) stock in a PFIC will be permitted to elect to mark that stock to market annually, rather than be subject to the tax regime of Section 1291 of Code as described above. Amounts included in or deducted from income under this alternative (and actual gains and losses realized upon disposition, subject to certain limitations) will be treated as ordinary gains or losses.
The Company believes that it was not a PFIC for its fiscal year ended December 31, 2014 and does not believe that it will be a PFIC for the fiscal year ending December 31, 2014. There can be no assurance that the Company’s determination concerning its PFIC status will not be challenged by the IRS, or that it will be able to satisfy record keeping requirements that will be imposed on QEFs in the event that it qualifies as a PFIC.
The PFIC rules are very complicated, and U.S. Holders should consult their own financial advisor, legal counsel or accountant regarding the PFIC rules and how these rules may impact their U.S. federal income tax situation.
F. Dividends and Paying Agents
Not Applicable.
G. Statement by Experts
Not Applicable.
H. Documents on Display
Documents filed as exhibits to this annual report are described in Item 18(b).
I. Subsidiary Information
The Company has no subsidiaries.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not Applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not Applicable.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not Applicable.
ITEM 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Chief Financial Officer has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Financial Officer has concluded that, as of June 30, 2014, these disclosure controls and procedures were not effective to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rule and forms; and (ii) accumulated and communicated to our management, as appropriate to allow timely decisions regarding required disclosure, primarily due to the Company’s minimal financial staff which prevents us from segregating duties, which management believes is a material weakness in our internal controls and procedures. We intend to address such weakness and work with our outside advisors to improve our controls and procedures as and when the circumstances of the Company permit this.
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed by the Chief Executive Officer, who is also the Chief Financial Officer, and effected by our Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Forward looking statements regarding the effectiveness of internal controls during future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Management completed an assessment of the effectiveness of the Company’s internal control over financial reporting (“ICFR”) as of June 30, 2014, using the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) framework as contemplated by Rule 13a-15(c). Based on this assessment, the Company concluded that it did not have effective internal controls over financial reporting as of June 30, 2014. The Company’s assessment of the effectiveness of the ICFR at June 30, 2013 identified certain material weaknesses as of that date.
| 1. | Weakness: It is not possible to adequately segregate incompatible duties among the officers of the Company, because the Company only has one executive management position--Chief Executive Officer and Chief Financial Officer--which are both fulfilled by one person. |
| | |
| | Remediation: Appoint a separate Chief Financial Officer, in addition to the current Chief Executive Officer, to formally segregate the duties of maintaining accounting records and preparing financial statements, from the executive duties of the current officer, when financially possible for the Company to do so. |
| | |
| 2. | Weakness: The Company is small, with only one officer (who is also a director), thereby creating a risk of override of existing controls by management. |
| | |
| | Remediation: Appoint a separate Chief Financial Officer for expenditures and other dispositions of assets. |
| | |
| 3. | Weakness: The Company maintains limited audit evidence in documentary form which is used to test the operating effectiveness of control activities. |
| | |
| | Remediation: Increase the documentation of expenditures and receipts, under the joint supervision of the newly appointed Chief Financial Officer, and the Chief Executive Officer, to insure all receipts and third-party services conform to contract terms, and maintain adequate documents to the extent feasible and reasonable. |
The Company intends to add additional levels of executive management and personnel to remediate the weaknesses, in the specific manners described in paragraphs 1 through 3 above, as and when the Company has sufficient financial resources to effect the remediation.
Changes in Internal Control over Financial Reporting
As disclosed above, in fiscal 2014, the Company completed its assessment of its ICFR in place for the year ended June 30, 2014, using the COSO framework. Although the assessment was completed, there were no changes in the ICFR during the 2014 fiscal year that have materially affected, or are reasonably likely to materially affect, the Company’s ICFR.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
The Audit Committee is responsible for reviewing the Company’s financial reporting procedures, internal controls, and the performance of the Company’s external auditors. The functions of the Audit Committee also include selecting, appointing, retaining, compensating and overseeing our independent auditors, deciding upon and approving in advance the scope of audit and non-audit assignments and related fees, reviewing accounting principles we use in financial reporting, and reviewing the adequacy of our internal control procedures, including the internal audit function. The committee is also responsible for reviewing the annual financial statements prior to their approval by the Board of Directors.
The Board has only one Director, Oliver Xing, and has not established a formal Audit Committee and does not presently have a financial expert as defined in relevant SEC rules. However, the Company will try to remedy the situation by seeking a qualified financial expert who can also be regarded as an independent director as soon as financial possible or an opportunity arises for recruiting such a financial expert.
ITEM 16B. CODE OF ETHICS
The Company has not yet formally adopted a code of ethics applicable to all employees and directors. However, the Company recognizes the importance of formally establishing the Code of Ethics and will endeavor to adopt such Code of Ethics in the future.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Company accrued $4,000 audit fees to MaloneBailey, LLP, Certified Public Accountants during the fiscal year ended at June 30, 2014 (2013 – $4,000) due to change in Auditors of the Company in the year. Audit fees consist of audit work performed in the preparation of financial statements and services that are normally provided in connection with statutory and regulatory filings.
There is no tax preparation fee or related services fee paid or payable for the year ended June 30, 2014 (June 30, 2013 – $nil).
There is no other services paid or payable to our Auditors for the year ended June 30, 2014 (June 30, 2013 – $nil).
Policy on pre-approval of Audit and non-audit services of independent Auditors
The Audit Committee’s policy is to approve all audit and audit-related services. Permissible non-audit services are pre-approved according to fee amount threshold. Permissible non-audit services may include tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to an initial estimated budget. The Audit Committee may also pre-approve particular services on a case-by-case basis.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE
Not Applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not Applicable.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Our Auditors are Malone Bailey, LLP. There is no change in our independent Auditors in fiscal year 2014.
ITEM 16G. CORPORATE GOVERNANCE
Not Applicable.
PART III
ITEM 17. FINANCIAL STATEMENTS
Financial Statements
The financial statements set forth under Item 18 are included as part of this annual report.
ITEM 18. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
REPORT OF INDEPENDEN REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Blackrock Oil Corporation
We have audited the accompanying balance sheets of Blackrock Corporation (the “Company”) as of June 30, 2014 and 2013, and the related statements of operations, stockholders’ deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our 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 about whether the financial statements are free of material misstatement. 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 effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 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 financial position of the Blackrock Corporation as of June 30, 2014 and 2013 and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that Blackrock Corporation will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred cumulative losses since inception and has negative working capital, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
October 16, 2014
BLACKROCK OIL CORPORATION
(f/k/a: ONTARIO SOLAR ENERGY CORPORATION)
Balance Sheets
| | | June 30 | | | June 30 | |
| | | 2014 | | | 2013 | |
| | | | | | | |
| Assets | | | | | | |
| | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | | $ | 6,336 | | | $ | 17,168 | |
| Accounts receivable | | | 5,530 | | | | 950 | |
| Tax receivable | | | 35 | | | | 995 | |
| Note receivable | | | 140,571 | | | | 147,330 | |
| Total current assets | | | 152,472 | | | | 166,443 | |
| | | | | | | | | |
| Total assets | | $ | 152,472 | | | $ | 166,443 | |
| | | | | | | | | |
| Liabilities and Stockholders' Equity | | | | | | | | |
| | | | | | | | | |
| Liabilities | | | | | | | | |
| Current liabilities | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 4,116 | | | $ | 10,670 | |
| Loans payable - related party | | | 148,689 | | | | 91,768 | |
| Total current liabilities | | | 152,805 | | | | 102,438 | |
| | | | | | | | | |
| Stockholders' equity | | | | | | | | |
| Common stock, unlimited number of shares authorized without par value, 11,541,666 issued and outstanding | | | 414,049 | | | | 414,049 | |
| Accumulated other comprehensive income | | | 6,759 | | | | - | |
| Accumulated deficit during the development period | | | (407,623 | ) | | | (350,044 | ) |
| | | | 13,185 | | | | 64,005 | |
| | | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 165,990 | | | $ | 166,443 | |
See accompanying notes to financial statements
| BLACK OIL CORPORATION |
| (f/k/a: ONTARIO SOLAR ENERGY CORPORATION) |
| Statements of Operations |
| For the years ended June 30, 2014 and 2013 |
| | | | Year ended | | | | Year ended | |
| | | | June 30 | | | | June 30 | |
| | | | 2014 | | | | 2013 | |
| | | | | | | | | |
| Revenue | | $ | — | | | $ | — | |
| | | | | | | | | |
| Operating expenses | | | | | | | | |
| Legal fees and professional | | | 3,497 | | | | — | |
| Audit and accounting fees | | | 5,000 | | | | 11,684 | |
| Interest income | | | (11,177 | ) | | | (10,042 | ) |
| FX Exchange (gain) loss | | | — | | | | 5,547 | |
| General and administrative expenses | | | 60,259 | | | | 61,887 | |
| Total operating expenses | | | 57,579 | | | | 69,076 | |
| | | | | | | | | |
| Net income (loss) for the periods | | $ | (57,579 | ) | | $ | (69,076 | ) |
| | | | | | | | | |
| Effect of foreign currency transaltion | | $ | (6,759 | ) | | | — | |
| | | | | | | | | |
| Comprehensive net loss | | $ | (64,338 | ) | | $ | (69,076 | ) |
| | | | | | | | | |
| Income (loss) per common stock - basic and diluted | | $ | (0.01 | ) | | $ | (0.01 | ) |
| | | | | | | | | |
| Weighted average common share outstanding - Basic and diluted | | | 11,541,666 | | | | 11,541,666 | |
See accompanying notes to financial statements
BLACKROCK OIL CORPORATION
(f/k/a: ONTARIO SOLAR ENERGY CORPORATION)
Statements of Cash Flows
For the years ended June 30, 2014 and 2013
| | | Year ended | | | Year ended | |
| | | June 30 | | | June 30 | |
| | | 2014 | | | 2013 | |
| Cash Flows From Operating Activities | | | | | | | | |
| Net (loss) for the period | | | (57,579 | ) | | $ | (69,076 | ) |
| Adjustments to reconcile net (loss) to net cash | | | | | | | | |
| Changes in operating assets and liabilities | | | | | | | | |
| decrease in accounts receivable | | | (4,580 | ) | | | (950 | ) |
| decrease in accounts payable and accrued liabilities | | | (6,719 | ) | | | 5,454 | |
| decrease in tax receivable | | | 960 | | | | 869 | |
| Net cash used in operating activities | | | (67,918 | ) | | | (63,703 | ) |
| | | | | | | | | |
| Cash Flows From Investing Activities | | | | | | | | |
| Issuance of Note Receivable | | | - | | | | (147,330 | ) |
| Net cash used in investing activities | | | - | | | | (147,330 | ) |
| | | | | | | | | |
| Cash Flows From Financing Activities | | | | | | | | |
| Increase in payable to related party | | | 57,086 | | | | 30,114 | |
| Net cash provided by financing activities | | | 57,086 | | | | 30,114 | |
| | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | (10,832 | ) | | | (180,919 | ) |
| Cash and cash equivalents, beginning of the period | | | 17,168 | | | | 198,087 | |
| Cash and cash equivalents, end of the period | | | 6,336 | | | $ | 17,168 | |
| | | | | | | | | |
| Foreign currency translation | | | 6,759 | | | | - | |
See accompanying notes to financial statements
BLACKROCK OIL CORPORATION
(f/k/a: ONTARIO SOLAR ENERGY CORPORATION)
Statements of Stockholders' Equity
| | | | | | | | | | | | Accumulated | | | | |
| | | Common Stock | | | Accumulated | | | Other Comprehensive | | | Total Stockholders' | |
| | | Shares | | | Amount | | | Deficit | | | Income | | | Equity | |
| Balance, June 30, 2012 | | | 11,541,666 | | | $ | 414,049 | | | $ | (280,968 | ) | | $ | - | | | $ | 133,081 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net loss | | | - | | | | - | | | | (69,076 | ) | | | - | | | | (69,076 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance, June 30, 2013 | | | 11,541,666 | | | | 414,049 | | | | (350,044 | ) | | | - | | | | 64,005 | |
| | | | | | | | | | | | | | | | | | | | | |
| Foreign currency translation | | | - | | | | - | | | | - | | | | 6,759 | | | | 6,759 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net loss | | | - | | | | - | | | | (57,579 | ) | | | - | | | | (57,579 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance, June 30, 2014 | | | 11,541,666 | | | $ | 414,049 | | | $ | (407,623 | ) | | $ | 6,759 | | | $ | 13,185 | |
See accompanying notes to financial statements
BLACKROCK OIL CORPORATION
(f/k/a: Ontario Solar Energy Corporation)
Notes to the Financial Statements
June 30, 2014 and 2013
1. ORGANIZATION AND BUSINESS OPERATIONS
Blackrock Oil Corporation (“the Company”) was incorporated under the laws of the Province of Ontario, Canada on September 3, 2009. The Company intends to commence business operations by engaging in exploration, development and acquisition of light oil in Western Canada. The Company has not generated any revenue in 2014 and only generated $164,975 in revenue since inception. Consequently its operations are subject to all risks inherent in the establishment of a new business enterprise.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and are presented in US dollars. The financial statements reflect all adjustments that, in the opinion of management, are necessary in order to make the financial statements not misleading.
(b) Going Concern
The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company incurred a loss of $57,579 for the year ended June 30, 2014 and incurred net loss for the year ended June 30, 2013 of $69,076.The Company has resulted an accumulated deficit of $407,623 from inception on September 3, 2009 to June 30, 2014, further losses are anticipated in the development of its business raising substantial doubt about the Company's ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating 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. Management intends to finance operating costs over the next twelve months with existing cash on hand and with loans from a director and/or private placements of common stock. However, there is no certainty that financing will be successful or will be on terms favourable to the Company.
(c) Use of Estimates and Assumptions
The preparation of financial statements in conformity with US 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 financial statements and the reported amounts of revenues and expenses during the year. Financial statement items subject to significant management judgment include revenue recognition; the completeness of accounts payable and accrued liabilities, and allowance for doubtful accounts. While management believes that the estimates and assumptions are reasonable and appropriate in the circumstances, actual results may differ.
BLACKROCK OIL CORPORATION
(f/k/a: Ontario Solar Energy Corporation)
Notes to the Financial Statements
June 30, 2014 and 2013
(d) Revenue Recognition
The Company recognizes revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (“SAB 101”) as modified by Securities and Exchange Commission Staff Accounting Bulletin No. 104 (codified within ASC Topic 605). Under SAB 101, revenue is recognized at the point of passage to the customer of title and risk of loss, there is persuasive evidence of an arrangement, the sales price is fixed or determinable, and collection of the resulting receivable is reasonably assured. For consulting services, revenue is recognized as services are provided.
(e) Stock-Based Compensation
The Company accounts for its stock-based compensation in accordance with ASC Topic 718, “Share-Based Payment” (“ASC 718”). Under ASC 718, the Company recognizes compensation costs related to share-based payment transactions in the financial statements based on the fair value of the equity (or liability) instruments issued over the period that an employee is expected to provide service in exchange for the award, based on the vesting terms of the specific stock compensation awards. Stock issued to non-employees is valued based on the fair value of the services received or the fair value of the stock given up.
Since the Company’s inception to June 30, 2014, the Company has not established a stock based compensation arrangement. However, the Company may, in the future, decide to establish a stock-based compensation to encourage talented individuals to join in and be retained by the Company.
(f) Income Taxes
The Company accounts for its income taxes under the liability method specified by ASC Topic 740, “Accounting for Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the effective tax rates which will be in effect when these differences reverse. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard imposed by ASC 740 to allow recognition of such an asset.
(g) Fair Value of Financial Instruments
Fair value is defined under ASC Topic 820, “Fair Value Measurement and Disclosures”, as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for an asset or liability in an orderly transaction between participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on the levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value. The levels are as follows:
| | ● | Level 1 | - | Quoted prices in active markets for identical assets or liabilities; |
| | | | | |
| | ● | Level 2 | - | Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or corroborated by observable market data or substantially the full term of the assets or liabilities; and |
| | | | | |
| | ● | Level 3 | - | Unobservable inputs that are supported by little or no market activity and that are significant to the value of the assets or liabilities. |
BLACKROCK OIL CORPORATION
(f/k/a: Ontario Solar Energy Corporation)
Notes to the Financial Statements
June 30, 2014 and 2013
The Company’s financial instruments consist of cash and cash equivalents. Cash and cash equivalents was determined to be a Level 1 fair value measurement. The carrying amounts of cash and cash equivalents, accounts receivables, accounts payable and accrued liabilities and loans payable due to related party approximate their respective fair values because of the short maturities of these instruments.
(h) Foreign Currency Transactions
The Company's functional is the Canadian dollars and reporting currency is the United States dollar. Foreign currency transactions are remeasured into the Company’s reporting currency with amounts resulting from changes in exchange rates being reported in income.
(i) Comprehensive Income (Loss)
The Company has adopted ASC Topic 830, “Reporting Comprehensive Income (Loss)” (“ASC 830”), which establishes standards for reporting and presentation of comprehensive income (loss), its components and accumulated balances. Comprehensive income (loss) is defined to include all changes in equity (shareholders’ deficiency) except those resulting from investments by or distributions to owners. Among other disclosures, ASC 830 requires that all items that are required to be recognized under the current accounting standards as a component of comprehensive income (loss) be reported in a financial statement that is displayed with the same prominence as other financial statements. ASC 830 requires that items be included in other comprehensive income (loss) according to their nature, such as: foreign currency items, change in the fair value of derivative financial instruments and unrealized gains and losses on certain debt and equity securities. Comprehensive income (loss) is displayed in the statements of stockholders’ equity and in the balance sheets as a component of stockholders’ equity.
(j) Basic and Diluted Net Loss per Share
The Company computes net loss per share in accordance with ASC Topic 260, “Earnings per Share” (“ASC 260”). ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the statement of operations. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all potentially dilutive common shares outstanding during the period. Diluted EPS excludes all potentially dilutive shares if their effect is anti-dilutive.
(k) Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
BLACKROCK OIL CORPORATION
(f/k/a: Ontario Solar Energy Corporation)
Notes to the Financial Statements
June 30, 2014 and 2013
(l) Accounts Receivable
Trade and other accounts receivable are carried at face value less any provisions for uncollectible accounts considered necessary. Bad debt expense is recognized based on management’s estimate of likely losses per year, and an estimate of current year uncollectible amounts.
3. RECENT ACCOUNTING PRONOUNCEMENTS
The company has limited operations and is considered in the development stage. In the year ended June 30, 2014, the Company has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the company to remove the inception to date information and all references to development stage.
4. INCOME TAXES
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740, “Accounting for Income Taxes” (“ASC 740”) as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefits of net operating losses have 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 the future years.
As of June 30, 2014, the Company had net operating loss carry forwards of approximately $304,000 that may be available to reduce future years' taxable income through 2034. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.
5. RELATED PARTY TRANSACTIONS
During the period from inception to June 30, 2014, the President has taken initiative to organize, source, secure funding for the Company, provide consulting and management services to the Company and provide necessary office space for the Company. The Company has booked related party transactions of consulting fees of $36,000 (June 30, 2013 – $36,000) and management fees of $24,000 (June 30, 2013 - $24,000).
As of June 30, 2014, the President had loaned the Company $148,689 (June 30, 2013 - $91,911). The loan is non-interest bearing, due on demand and unsecured.
6. NOTE RECEIVABLE
During the current fiscal year, the Company loaned a third party $150,000 in Canadian funds. The note was valued at US $140,571 upon issuance. The note bears 8% interest and is due on demand. As of June 30, 2014, the Company has an interest receivable of $5,530 and is included in accounts receivable in the balance sheet.
BLACKROCK OIL CORPORATION
(f/k/a: Ontario Solar Energy Corporation)
Notes to the Financial Statements
June 30, 2014 and 2013
7. SUBSEQUENT EVENTS
Subsequent to the year ended June 30, 2014, on August 28, 2014, the Company issued 15,000,000 restricted common stocks from treasury to settle outstanding related party debt in the amount of $150,000. On September 4, 2014, the Company issued 5,200,000 common shares for gross proceeds of $1,050,000, on September 5, 2014, the Company issued 1,000,000 common stocks for gross proceeds of $200,000 and on September 12, 2014 the Company issued 40,000 common shares for gross proceeds of $10,000. No fees or commissions were paid to anyone in raising the equity capital. As of the date of October 31, the Company has total issued, non-assessable and fully paid common stocks of 32,781,666.
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf on October 31, 2014.
| | BLACKROCK OIL CORPORATION |
| | (the “Registrant”) |
| | | |
| | BY: | OLIVER XING |
| | | Oliver Xing |
| | | President, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, Treasurer and sole member of the Board of Directors |
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