UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 2005
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
From the transition period from ________ to ________
Commission file number 000-30285
LIONS PETROLEUM INC.
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(Exact name of small business issuer as specified in its charter)
Delaware N/A
- ------------------------------- -------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
600 17th Street, Suite 2800 South, Denver, CO, 80202, U.S.A.
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(Address of principal executive offices)
(720) 359-1604
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of February 13, 2006, Lions Petroleum Inc. had 10,930,661 shares of common
stock issued and outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)..................................2
Item 2. Management's Discussion and Analysis or Plan of Operation.........10
Item 3. Controls and Procedures...........................................11
PART II: OTHER INFORMATION
Item 6. Exhibits..........................................................11
Signatures.................................................................12
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
2
LIONS PETROLEUM INC.
previously known as ENERGY VISIONS INC. AND SUBSIDIARIES
(an exploration stage company)
BALANCE SHEET
(unaudited and expressed in U.S. dollars)
==============================================================================
December 31,
2005
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ASSETS
Current Assets:
Cash and equivalents $ 35,369
Prepaid expenses and other current assets 74
Deferred oil and gas lease costs 5,865
Deferred tax asset less valuation allowance of $122,072 -
--------------
Total current assets 41,308
Property and equipment, net of accumulated depreciation of $233 545
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Total Assets $ 41,853
=============================================================================
LIABILITIES AND DEFICIENCY IN ASSETS
Current Liabilities:
Accounts payable and accrued expenses $ 90,343
Management and consulting fees payable to related parties 30,280
Short-term advances from related parties 222,386
--------------
Total current liabilities 343,009
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Total Liabilities 343,009
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Commitments and contingencies (Note 6)
Deficiency in assets:
Preferred stock - $.0001 par value; authorized
5,000,000 shares, none issued -
Common stock - $.0001 par value; authorized
50,000,000 shares, issued and outstanding 10,805,661 shares 1,081
Additional paid-in capital 12,214,452
Share subscriptions received 274,100
Accumulated other comprehensive loss (471,831)
Deficit accumulated during the exploration stage (419,172)
Deficit (11,899,786)
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Deficiency in Assets (301,156)
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Total Liabilities and Deficiency in Assets $ 41,853
=============================================================================
See Notes to Financial Statements
3
LIONS PETROLEUM INC.
previously known as ENERGY VISIONS INC. AND SUBSIDIARIES
(an exploration stage company)
STATEMENTS OF OPERATIONS
(unaudited and expressed in U.S. dollars)
==============================================================================
Cumulative,
from
September 21,
(new business
For the three months ended start) to
December 31, December 31,
2005 2004 2005
- ------------------------------------------------------------------------------
Expenses:
Oil and gas expenditures $ 9,563 $ - $ 12,993
Professional fees 56,527 59,109 321,034
General and administrative 22,580 31,916 83,876
Interest and financing costs 100 - 1,036
Depreciation 233 - 233
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Total expenses 89,003 91,025 419,172
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Net loss before provision for
income taxes (89,003) (91,025) (419,172)
Provision for income taxes - - -
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Net loss $ (89,003) $ (91,025) $ (419,172)
==============================================================================
Loss per common share
- basic and diluted $ (0.01) $ (0.63)
==============================================================================
Weighted-average number of common
shares outstanding -basic and diluted 10,805,661 145,631
==============================================================================
See Notes to Financial Statements
4
LIONS PETROLEUM INC.
previously known as ENERGY VISIONS INC. AND SUBSIDIARIES
(an exploration stage company)
STATEMENTS OF COMPREHENSIVE OPERATIONS
(unaudited and expressed in U.S. dollars)
==============================================================================
Cumulative,
from
September 21,
(new business
For the three months ended start) to
December 31, December 31,
2005 2004 2005
- ------------------------------------------------------------------------------
Net loss $ (89,003) $ (91,025) $ (419,172)
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Other comprehensive loss:
Foreign currency translation,
net of income tax benefit - - -
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Comprehensive loss $ (89,003) $ (91,025) $ (419,172)
==============================================================================
See Notes to Financial Statements
5
LIONS PETROLEUM INC.
previously known as ENERGY VISIONS INC. AND SUBSIDIARIES
(an exploration stage company)
STATEMENTS OF CASH FLOWS
(unaudited and expressed in U.S. dollars)
======================================================================================
Cumulative,
from
September 21,
(new business
For the three months ended start) to
December 31, December 31,
2005 2004 2005
- --------------------------------------------------------------------------------------
<s> <c> <c> <c>
Cash flows from operating activities:
Net loss from continuing operations $ (89,003) $ (91,025) $ (419,172)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 233 - 233
Professional fees of related parties 16,966 - 30,280
Commons stock issued for services - - 66,000
Write-off of oil and gas leases 9,563 - 12,993
Changes in operating assets and liabilities:
Increase in accounts receivable - (20,720) -
(Increase) decrease in prepaid expenses
and other current assets 205 44 (32)
Increase in accounts payable and
accrued expenses 1,197 91,081 56,083
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Net cash used in operating activities (60,839) (20,620) (253,615)
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Cash flows from investing activities:
Purchases of property and equipment (778) - (778)
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Cash used in investing activities (778) - (778)
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Cash flows from financing activities:
Proceeds from related parties' advances (3,971) 20,695 15,662
Proceeds from share subscriptions 64,500 - 274,100
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Net cash provided by (used in)
financing activities 60,529 20,695 289,762
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Effect of exchange rate changes on cash - - -
Net increase (decrease) in cash (1,088) 75 35,369
Cash and equivalents at beginning of period 36,457 - -
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Cash and equivalents at end of period $ 35,369 $ 75 $ 35,369
======================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 100 $ - $ 1,036
Income taxes paid $ - $ - $ -
Supplemental schedule of noncash investing and financing activities:
Non-cash transactions:
Shares issued for services $ - $ - $ 66,000
See Notes to Financial Statements
6
NOTES TO FINANCIAL STATEMENTS
December 31, 2005
(Unaudited)
1. Basis of Presentation:
The financial statements at December 31, 2005, and for the three-month periods
ended December 31, 2005 and 2004, are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the interim periods. The financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission, and therefore omit certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America.
The Company believes that the disclosures contained in the financial
statements are adequate to make the information presented not misleading. The
financial statements should be read in conjunction with the financial
statements and notes thereto, together with management's plan of operation and
also the results of operations, contained in the Company's Annual Report on
Form 10-KSB for the fiscal year ending September 30, 2005. The results of
operations for the three-month period ended December 31, 2005, is not
necessarily indicative of the results that may be expected for the fiscal year
ending September 30, 2006.
On February 9, 2005, the Company's Board of Directors approved the issue of
Special Warrants in its capital, to issued and outstanding common shareholders
as of September 20, 2004. On the basis that such Special Warrants grant, to
each holder thereof, the right to acquire, without any additional
consideration, shares in the capital of Energy Ventures Inc. (Canada) which
company changed its name on January 4, 2005, to Pure Energy Visions
Corporation ("EVI Canada") owned by the Company, on the basis of one (1)
common share of EVI Canada for each one (1) common share held by the
shareholder in the Company. Such Special Warrants may be exercised by each
holder thereof during a period of 18 months from the September 20, 2004, the
date of issuance but such Special Warrants shall be exercised automatically on
the day of issuance, by the Ontario Securities Commission, of a receipt for a
final prospectus in respect of the distribution of the securities of EVI
Canada being acquired by the holders of the Special Warrants upon exercise of
such Special Warrants and further, shall be exercised automatically on the
expiry date of the Special Warrants. On December 20, 2005, EVI Canada filed a
preliminary prospectus in Canada and anticipates a final acceptance of that
prospectus in late February or early March 2006.
As a result of the above transaction, the Company has determined that at
September 30, 2004, and at the date of this report it no longer has ownership
of EVI Canada. And the Company, as a result, has no subsidiaries or battery
and fuel cell business at December 31, 2005.
The accompanying financial statements include the accounts of the Company,
which has no subsidiaries, at December 31, 2005. The accompanying financial
statements are expressed in U.S. dollars.
2. Going Concern:
The Company is in the business of the ownership and exploration of oil and gas
properties and effective September 21, 2004, commenced an exploration stage
period. The Company and its operations are subject to all of the risks
inherent in an emerging business enterprise. The accompanying financial
statements have been prepared assuming the Company will continue as a going
concern. As shown in the financial statements, the Company incurred losses of
$89,003 and $91,025 for the three-month periods ended December 31, 2005 and
2004, respectively, and $12,318,958 since its inception in 1996. The Company
has had limited revenue during those periods. There is no assurance that the
Company will not encounter substantial delays and expenses related to
financing the successful completion of its seismic testing and drilling
program and/or other unforeseen difficulties. The Company will be required to
expand its management and administrative capabilities in order to manage the
aforementioned items as well as respond to competitive conditions, and will
require additional funds. The Company anticipates the need to raise funds
through equity financing. Such additional funds may not be available on terms
acceptable to the
7
NOTES TO FINANCIAL STATEMENTS
December 31, 2005
(Unaudited)
Company. These factors indicate that the Company may not be able to continue
as a going concern. The financial statements do not include adjustments that
might result from the outcome of this uncertainty.
3. Due To Related Parties:
At December 31, 2005, $30,280 is owed to three directors and officers in
respect of unpaid management and consulting fees.
At December 31, 2005, $94,000 is owed to EVI Canada, primarily with respect to
that company's assumptions of debt associated with the historical battery and
fuel cell business. The Company has agreed to issue to EVI Canada a yet to be
determined amount of common shares equal to $94,000. In addition, $128,386 is
owed to Lions Petroleum Corp., a private Nevada corporation ("Lions Nevada")
primarily in respect of approximately $113,000 advanced by that company to EVI
Canada with respect to the spin-off of EVI Canada. The Company may issue an
amount of shares of our common stock to Lions Nevada to satisfy this debt or
may settle the debt by some other agreed upon settlement.
4. Stock Options and Stock Incentive Plan:
The Company has a 2001 stock option plan under which options to purchase
shares of common stock may be granted to certain officers, directors and
service providers. By resolution of the Board of Directors, all stock options
that were outstanding as at close of business on September 30, 2004, were
cancelled. No new stock options were issued subsequently.
On April 25, 2005, the Company adopted the '2005 Stock Incentive Plan For
Employees And Consultants' ("Plan") and on April 29, 2005 filed an S8
registration statement respecting such Plan. A maximum of 5,000,000 shares of
common stock may be issued pursuant to the Plan to employees and consultants
of the Company. During the fiscal year ended September 30, 2005, 650,000
common shares of the Company were issued pursuant to the Plan, all at $0.10
per common share.
5. Common and Preferred Stock
On August 8, 2005, a majority of the Company's common stock shareholders
approved, by written consent, the issuance of an aggregate of 10,000,000
shares of common stock and 2,000,000 shares of Series A convertible preferred
stock. The shareholders authorized the issuance of 5,000,000 common shares
each to Dale M. Paulson, President, CEO and Director, and Gordon L. Wiltse,
CFO, Secretary and Director. As of the date of this filing, a certificate of
designation of rights and preferences for the Series A convertible preferred
stock has not been filed with the State of Delaware, but management intends to
file a certificate of designation within the next 90 days. After the
certificate of designation has been filed, the Company will issue 1,000,000
Series A convertible preferred shares to each of Messrs. Dale M. Paulson and
Gordon L. Wiltse, which share issues were also approved by a majority of the
shareholders on August 8, 2005. Each Series A convertible preferred share is
convertible into five common shares of the Company.
6. Contingent Liability and Commitment:
As of December 31, 2005, the guarantee of the Company and of the president and
chief executive officer of EVI (Canada) in regards to an unused factoring
agreement, remains in effect.
On August 31, 2005, the Company executed a settlement agreement with EVI
Canada to resolve outstanding issues related to the spin-off of EVI Canada.
Under the terms of the settlement agreement EVI Canada agreed to assume
8
NOTES TO FINANCIAL STATEMENTS
December 31, 2005
(Unaudited)
debt and contingent liabilities that were associated with the battery and fuel
cell business. EVI Canada agreed to assume approximately $450,000 of debt
owed to third parties, and agreed to be responsible for unresolved litigation
that existed at September 30, 2004. However, management cannot guarantee that
EVI Canada will be able to satisfy these obligations and the Company may
remain liable for them.
7. Subsequent Events
In January 2006, the Company issued an aggregate of 125,000 shares pursuant to
the 2005 Stock Incentive Plan For Employees And Consultants, all at $0.10 per
common share.
9
In this report references to "Lions," "we," "us," and "our" refer to Lions
Petroleum Inc.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Securities and Exchange Commission ("SEC") encourages companies to
disclose forward-looking information so that investors can better understand
future prospects and make informed investment decisions. This report contains
these types of statements. Words such as "may," "will," "expect," "believe,"
"anticipate," "estimate," "project," or "continue" or comparable terminology
used in connection with any discussion of future operating results or
financial performance identify forward-looking statements. You are cautioned
not to place undue reliance on the forward-looking statements, which speak
only as of the date of this report. All forward-looking statements reflect
our present expectation of future events and are subject to a number of
important factors and uncertainties that could cause actual results to differ
materially from those described in the forward-looking statements.
PART I: FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Executive Overview
We are in the early stages of engaging in exploration and development of oil
and gas. We plan to identify, acquire and develop working interest
percentages that do not meet the requirements of larger producers and
developers in underdeveloped oil and gas projects in Canada and the Western
United States. Our ability to achieve profitability will be substantially
dependent on the prevailing prices for natural gas and oil. Market factors,
such as, worldwide or regional demand for energy compared to the domestic and
foreign supply affect pricing of oil and gas. Weather, political conditions
and governmental regulations also may affect the price of oil and gas.
In August 2005 we purchased two hydrocarbon leases for 1,295 hectares of
undeveloped land located in the Wolverine shallow gas area of North Western
Alberta, Canada. However, leases representing four sections of land,
approximately 1,036 hectares, expired on January 24, 2006. The remaining
lease representing 259 hectares expires January 24, 2007. This acreage has
not been proved and is undeveloped acreage, which means wells have not been
drilled that would permit the production of commercial quantities of oil and
gas.
Management is evaluating the options for the most efficient development of the
Wolverine lease. The first step will be to contract a firm to complete
seismic testing on the property to determine the viability of the property.
After the seismic testing is completed, management will determine the possible
drilling sites. At that point, management will need to determine whether it
is prudent to have third party contractors complete all of or a portion of the
drilling program so as to minimize the financial risk to us. Management
anticipates that the majority of the development on the lease will be
contracted work and, therefore, we do not expect to hire any new employees for
this project. However, if management decides to develop the leases
unilaterally, then additional monies must be raised to complete the drilling
program.
We may encounter substantial delays and expenses related to the development of
this property. Drilling activities are subject to many risks, including the
risk that no commercially productive reservoirs will be found. We cannot be
sure that new wells drilled by us will be productive or that we will recover
all or any portion of our investment. The cost of drilling, completing and
operating wells is often uncertain. Our drilling operations may be curtailed,
delayed or canceled as a result of a number of factors beyond our control,
such as title problems, weather conditions, compliance with governmental
requirements, and/or shortages or delays in the delivery of drilling equipment
or services. In addition, we will be subject to hazards and risks inherent in
drilling for and producing and transporting oil and natural gas, including
fires, natural disasters, explosions, encountering geological formations with
abnormal pressures, blowouts, craterings, spills and uncontrollable flows of
oil, natural gas or well fluids.
10
Plan of Operation
Our auditors have expressed doubt that we can continue as a going concern
without additional funding. We recorded a net gain of $1,280,561 for the year
ended September 30, 2004, primarily as the result of the gain upon the
disposal of our historical battery and fuel cell business. However, for the
year ended September 30, 2005, we recorded a net loss of $325,595 and for the
three month period ended December 31, 2005, we recorded a net loss of $89,003.
We have not recorded revenue since we commenced our exploration stage in
September 2004.
Management estimates that we will require approximately $20,000 to perform the
initial seismic and geology study on the Wolverine property to determine if it
is viable for development of gas and/or oil. Management anticipates that we
will fund this stage of our exploration stage with proceeds from sales of our
common stock. We have raised $275,100 as of January 9, 2006, from the sale of
subscriptions for our common stock; however, we may not be able to raise
sufficient funding from stock sales for long term operations. We believe debt
financing will not be an alternative for funding in the exploration stage due
to the risky nature of this type of enterprise. The lack of tangible assets
until such time as an economically viable well can be demonstrated places debt
financing beyond the credit-worthiness required by most banks or typical
investors of corporate debt.
Management anticipates that we will acquire more oil and gas properties;
however, we currently do not have revenues or funding for these purchases. We
anticipate that we will raise funds within the next twelve months for
acquisitions and operations through private placements of our common stock
pursuant to exemptions from the registration requirements provided by
Canadian, United States and state securities laws. The purchasers and manner
of issuance will be determined according to our financial needs and the
available exemptions. We also note that if we issue more shares of our common
stock our stockholders may experience dilution in the value per share of their
common stock.
We have no employees and we do not expect any new employees due to the fact
that we intend to contract out the field operations.
Off-balance Sheet Arrangements
None.
ITEM 3. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in our filings under the Exchange
Act is recorded, processed, summarized and reported within the periods
specified in the rules and forms of the SEC. This information is accumulated
and communicated to our executive officers to allow timely decisions regarding
required disclosure. Our Chief Executive Officer and Chief Financial Officer
evaluated the effectiveness of our disclosure controls and procedures as of
the end of the period covered by this report. Based on that evaluation, they
concluded that our disclosure controls and procedures were effective.
Also, these executive officers determined that there were no changes made in
our internal controls over financial reporting during the first quarter of our
2006 fiscal year that have materially affected, or are reasonably likely to
materially affect our internal control over financial reporting.
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS
Part I Exhibits
No. Description
- ---- ------------
31.1 Chief Executive Officer Certification
11
31.2 Chief Financial Officer Certification
32.1 Section 1350 Certification
Part II Exhibits
No. Description
- ---- -----------
3.1 Certificate of Incorporation of O.P.D. Acquisitions, Inc. (Incorporated
by reference to exhibit 2.1 of Form 10-SB filed November, 4, 2000, as
amended)
3.2 O.P.D. Acquisitions, Inc. Amendment to the Certificate of Incorporation
(Incorporated by reference to exhibit 2.1A of Form 10-SB filed November,
4, 2000, as amended)
3.3 Energy Ventures Inc. Amendment to Articles of Incorporation
(Incorporated by reference to exhibit 3.3 of Form 10-KSB filed January
13, 2006)
3.4 Energy Visions Inc. Amendment to Articles of Incorporation, dated
October 21, 2004 (Incorporated by reference to exhibit 3.3 for Form
10-KSB, filed March 17, 2005)
3.5 Bylaws of Energy Ventures Inc. (Incorporated by reference to exhibit 2.1
of Form 10-SB filed November 4, 2000, as amended)
4.1 Form of Special Warrant Certificate (Incorporated by reference to
exhibit 4.1 of Form 10-KSB filed January 13, 2006)
4.2 Lions Petroleum Inc. 2005 Stock Incentive Plan for Employees and
Consultants (Incorporated by reference to exhibit 4.1 to Form S-8, File
No. 333-124486, filed April 29, 2005)
10.1 Agreement between Lions Petroleum and Duna Resources Ltd., dated August
12, 2005 (Incorporated by reference to exhibit 10.1 to Form 10-QSB,
filed November 10, 2005)
10.2 Form of Management Services Agreement (Incorporated by reference to
exhibit 10.2 of Form 10-KSB filed January 13, 2006)
10.3 Consulting Agreement between Lions Petroleum and Duane D. Fadness, dated
October 25, 2005
10.4 Settlement Agreement between Lions Petroleum and Pure Energy Visions
Corporation, dated August 31, 2005 (Incorporated by reference to
exhibit 10.4 of Form 10-KSB filed January 13, 2006)
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LIONS PETROLEUM INC.
/s/ Dale M. Paulson
Date: February 14, 2006 By: ____________________________________
Dale M. Paulson
President and Director
Chief Executive Officer
/s/ Gordon L. Wiltse
Date: February 14, 2006 By: ____________________________________
Gordon L. Wiltse
Chief Financial Officer, Secretary
and Director
12