UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2006
[ ] 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.
- -----------------------------------------------------------------
(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.
------------------------------------------------------------
(Address of principal executive offices)
(720) 359-1604
--------------------------
(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 August 14, 2006, Lions Petroleum Inc. had 12,094,251 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..............................................2
Item 2. Management's Discussion and Analysis or Plan of Operation .......11
Item 3. Controls and Procedures..........................................13
PART II: OTHER INFORMATION
Item 5. Other Information................................................13
Item 6. Exhibits.........................................................13
Signatures................................................................14
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial information set forth below with respect to our statements of
operations for the three and nine month periods ended June 30, 2006 and 2005
is unaudited. This financial information, in the opinion of management,
includes all adjustments consisting of normal recurring entries necessary for
the fair presentation of such data. The results of operations for the nine
month period ended June 30, 2006 are not necessarily indicative of results to
be expected for any subsequent period.
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)
==============================================================================
June 30,
2006
- ------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and equivalents $ 47,595
Prepaid expenses and other current assets 115
Deferred oil and gas lease costs 4,374
Deferred tax asset less valuation allowance of $239,965 -
-------------
Total current assets 52,084
Property and equipment, net of accumulated depreciation of $1,167 4,081
Deferred oil and gas lease costs 8,809
- ------------------------------------------------------------------------------
Total Assets $ 64,974
==============================================================================
LIABILITIES AND DEFICIENCY IN ASSETS
Current Liabilities:
Accounts payable and accrued expenses $ 194,541
Management and consulting fees payable to related parties 5,782
Short-term advances from related parties 127,951
-------------
Total current liabilities 328,274
- ------------------------------------------------------------------------------
Total Liabilities 328,274
- ------------------------------------------------------------------------------
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 12,084,251 1,208
Additional paid-in capital 12,891,965
Share subscriptions received 3,150
Accumulated other comprehensive loss (471,831)
Deficit accumulated during the exploration stage (788,006)
Deficit (11,899,786)
- ------------------------------------------------------------------------------
Deficiency in Assets (263,300)
- ------------------------------------------------------------------------------
Total Liabilities and Deficiency in Assets $ 64,974
==============================================================================
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,
2004
(new business
For the three months ended For the nine months ended start) to
June 30, June 30 June 30 June 30, June 30,
2006 2005 2006 2005 2006
- --------------------------------------------------------------------------------------------------------
Revenue $ - $ - $ - $ - $ -
- --------------------------------------------------------------------------------------------------------
Expenses:
Oil and gas expenditures 814 - 14,026 - 17,456
Professional fees 145,034 10,459 268,932 58,564 533,439
General and administrative 26,790 43,334 80,921 149,470 142,217
Interest and financing costs 92,279 - 92,792 - 93,728
Depreciation 453 - 1,166 - 1,166
- --------------------------------------------------------------------------------------------------------
Total expenses 265,370 53,793 457,837 208,034 788,006
- --------------------------------------------------------------------------------------------------------
Net loss before provision
for income taxes (265,370) (53,793) (457,837) (208,034) (788,006)
Provision for income taxes - - - - -
- --------------------------------------------------------------------------------------------------------
Net loss $ (265,370) $ (53,793) $ (457,837) $ (208,034) $ (788,006)
========================================================================================================
Net loss per common share
- basic and diluted $ (0.02) $ (0.17) $ (0.04) $ (1.03)
========================================================================================================
Weighted-average number of
common shares outstanding
- basic and diluted 11,925,761 317,060 11,239,679 202,774
========================================================================================================
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,
2004
(new business
For the three months ended For the nine months ended start) to
June 30, June 30 June 30 June 30, June 30,
2006 2005 2006 2005 2006
- ----------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c>
Net loss $ (265,370) $ (53,793) $ (457,837) $ (208,034) $ ( 788,006)
- ----------------------------------------------------------------------------------------------------------
Other comprehensive loss:
Foreign currency translation,
net of income tax benefit - - - - -
- ----------------------------------------------------------------------------------------------------------
Comprehensive loss $ (265,370) $ (53,793) $ (457,837) $ (208,034) $ ( 788,006)
==========================================================================================================
See Notes to Financial Statements
5
LIONS PETROLEUM INC.
formerly known as ENERGY VISIONS INC. AND SUBSIDIARIES
(an exploration stage company)
CONSOLIDATED STATEMENTS OF DEFICIENCY IN ASSETS
(expressed in U.S. dollars)
==========================================================================================================================
Deficit Accumulated
Accumulated Other Stockholders'
Additional Share During the Comprehensive Equity
Common Stock Paid-In Subscriptions Exploration Income (Deficiency
Shares Amount Capital Received Deficit Stage (Loss) in assets)
- --------------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c> <c> <c> <c>
Balance at
September 30,
2003 (restated) 103,494 $ 10 $ 10,574,692 $ - $ (13,184,921) $ - $ (273,842) $ (2,884,061)
Issuance of
common stock
for investment
in private
corporation 35,000 4 1,049,996 - - - - 1,050,000
Issuance of
common stock
for services 7,137 1 237,330 - - - - 237,331
Issuance of
warrants re debt - - 34,273 - - - - 34,273
Foreign currency
translation - - - - - - (197,989) (197,989)
Net income (loss) - - - - 1,285,135 (4,574) - 1,280,561
-------------- --------- ------------ ------------ -------------- ------------ -------------- -------------
Balance at
September 30,
2004 145,631 15 11,896,291 - (11,899,786) (4,574) (471,831) (479,885)
Issuance of
common stock
for services 10,650,030 1,065 64,935 - - - - 66,000
Issuance of
common stock
for oil and gas
leases 10,000 1 10,499 - - - - 10,500
Share
subscriptions
received - - - 209,600 - - - 209,600
Net income (loss) - - 242,727 - - (325,595) - (82,868)
-------------- --------- ------------ ------------ -------------- ------------ -------------- -------------
Balance at
September 30,
2005 10,805,661 1,081 12,214,452 209,600 (11,899,786) (330,169) (471,831) (276,653)
Share
subscriptions
received - - - 64,500 - - - 64,500
Net income (loss) - - - - - (89,003) - (89,003)
-------------- --------- ------------ ------------ -------------- ------------ -------------- -------------
Balance at
December 31,
2005 10,805,661 1,081 12,214,452 274,100 (11,899,786) (419,172) (471,831) (301,156)
Issuance of
common stock
for services 325,000 33 32,467 - - - - 32,500
Issuance of
common stock
for share
subscriptions 648,200 64 324,036 - - - - 324,100
Fractional
shares re
1 for 200
consolidation 190 - - - - - - -
Share
subscriptions
received - - - (124,100) - - - (124,100)
Net income (loss) - - - - - (103,464) - (103,464)
-------------- --------- ------------ ------------ -------------- ------------ -------------- -------------
Balance at
March 31, 2006 11,779,051 1,178 12,570,955 150,000 (11,899,786) (522,636) (471,831) (172,120)
Issuance of
common stock
for services 105,200 10 78,853 - - - - 78,863
Issuance of
common stock
for share
subscriptions 200,000 20 149,980 - - - - 150,000
Noncash
compensatory
charge on
warrants and
piggyback
warrants - - 92,177 - - - - 92,177
Share
subscriptions
received - - - (146,850) - - - (146,850)
Net income (loss) - - - - - (265,370) - (265,370)
-------------- --------- ------------ ------------ -------------- ------------ -------------- -------------
Balance at
June 30, 2006 12,084,251 $ 1,208 $ 12,891,965 $ 3,150 $ (11,899,786) $ (788,066) $ (471,831) $ (263,300)
============== ========= ============ ============ ============== ============ ============== =============
See Notes to Financial Statements.
6
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,
2004
(new business
For the three months ended For the nine months ended start) to
June 30, June 30 June 30 June 30, June 30,
2006 2005 2006 2005 2006
- ----------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c>
Cash flows from operating activities:
Net loss from continuing operations $ (265,370) $ (53,793) $ (457,837) $ (208,034) $ (788,006)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 453 - 1,166 - 1,166
Professional fees of related parties (2,500) - (7,532) - 5,782
Common stock issued for services 78,864 10,000 111,364 10,000 177,364
Noncash compensatory charge on
warrants and piggyback warrants 92,177 - 92,177 - 92,177
Write-off of oil and gas leases 814 - 14,026 - 17,456
Changes in operating assets and liabilities:
Increase in accounts receivable - 2,208 - (18,512) -
(Increase) decrease in prepaid
expenses and other current assets 163 - 165 44 (72)
Increase in accounts payable
and accrued expenses 119,405 (15,918) 105,395 96,490 160,281
- ----------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
operating activities 24,006 (57,503) (141,076) (120,012) (333,852)
- ----------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (970) - (5,248) - (5,248)
Purchases of oil and gas leases (11,782) - (11,782) - (11,782)
- ----------------------------------------------------------------------------------------------------------
Cash used in investing activities (12,752) - (17,030) - (17,030)
- ----------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Issue of common shares 150,000 - 474,100 - 474,100
Proceeds from related parties'
advances - net (94,108) (2,034) (98,406) 20,857 (78,773)
Proceeds from share subscriptions
- net (146,850) 87,500 (206,450) 146,445 3,150
- ----------------------------------------------------------------------------------------------------------
Net cash provided by
financing activities (90,958) 85,466 169,244 167,302 398,477
- ----------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash - - - - -
Net increase (decrease) in cash (79,704) 27,963 11,138 47,290 47,595
Cash and equivalents at
beginning of period 127,299 19,327 36,457 - -
- ----------------------------------------------------------------------------------------------------------
Cash and equivalents (bank
overdraft) at end of period $ 47,595 $ 47,290 $ 47,595 $ 47,290 $ 47,595
==========================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the
period for interest $ 102 $ - $ 615 $ - $ 615
Income taxes paid $ - $ - $ - $ - $ -
Supplemental schedule of noncash investing and financing activities:
Shares issued for services $ 78,864 $ - $ 111,364 $ - $ 177,364
See Notes to Financial Statements
7
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
(Unaudited)
1. Basis of Presentation:
The financial statements at June 30, 2006, and for the nine-month periods
ended June 30, 2006 and 2005, 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 nine-month period ended June 30, 2006, 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 were exercised automatically
on May 1, 2006, the day of issuance, by the Ontario Securities Commission, of
a receipt ("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. Certificates have now been
issued re the common shares of EVI Canada.
As a result of the above transaction, the Company 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 battery and fuel cell business as
at June 30, 2006.
The accompanying financial statements include the accounts of the Company
which has no subsidiaries at June 30, 2006. 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
$457,837 and $208,034 for the nine-month periods ended June 30, 2006 and 2005,
and $12,899,786 since its inception in 1996. Such values include in the
current year six-month period and in the period from inception, a noncash
compensatory charge in the amount of $92,279 in respect of the issue of
warrants and piggyback warrants. 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 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.
8
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
(Unaudited)
3. Due To Related Parties:
At June 30, 2006, $5,782 is owed to two directors and officers in respect of
unpaid management fees.
At June 30, 2006, $127,951 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. We may issue an amount of shares of our common stock to Lions Nevada
to satisfy this debt or we 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 a Form S-8
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. In the six months to March 31, 2006, a further 325,000
common shares were issued pursuant to the Plan, all at $0.10 per common share.
In the three months to June 30, 2006, the Board of Directors approved the
issue of a further 118,200 common shares pursuant to the Plan, 114,000 at
$0.75 per share and 4,200 at Cdn. $0.83333 per share. 105,200 of such shares
were issued in the three months ended June 30, 2006 and it is anticipated that
the remaining 13,000 common shares will be issued in the final three months of
the fiscal year.
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. The common shares were issued on November 2, 2005. 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.
On March 30, 2006 the Company authorized the issue of 648,200 Units in respect
of a private placement. The terms of such private placement provided that a
subscriber would receive for a cash consideration of $0.50 per Unit, a) a
common share of the Company, b) a warrant ("Warrant") and c) a piggyback
warrant ("Piggyback Warrant"). Each Warrant entitles the purchaser to
subscribe for one additional common share in the capital of the Corporation
("Warrant Common Share") at a price of U.S. $1.00 per share during the 1 (one)
year period that commences upon the date of issuance of the Units. Each
Piggyback Warrant entitles the holder thereof, provided the holder has
exercised his/her rights to acquire Warrant Common Shares, to subscribe for
one additional common share in the capital of the Corporation at a price of
U.S. $2.00 per common share during the 2 (two) year period that commences with
the date of issuance of the Units. The Units were actually issued on April 3,
2006.
9
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
(Unaudited)
On April 18, 2006 the Company authorized the issue of 200,000 New Units in
respect of a second private placement. The terms of such private placement
provided that a subscriber would receive for a cash consideration of $0.75 per
New Unit, a) a common share of the Company, b) a warrant ("New Warrant"). Each
New Warrant entitles the purchaser to subscribe for one additional common
share in the capital of the Corporation at a price of U.S. $1.25 per share
during the 2 (two) year period that commences upon May 5, 2006, the date of
issuance of the New Units.
At June 30, 2006, there were 1,496,400 Warrants, Piggyback Warrants and New
Warrants outstanding with terms as aforesaid.
6. Contingent Liability and Commitment:
As of June 30, 2006, 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 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. Approximately $357,000 of such debt has since
been extinguished by the issue of common shares of EVI Canada. However,
management cannot guarantee that EVI Canada will be able to satisfy the
balance of these obligations and we may remain liable for them.
10
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 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. Currently,
oil and gas prices are rising in the international market and management
believes this market change will improve our chances of success in oil and
gas.
On June 13, 2006, Lions Petroleum acquired five Saskatchewan petroleum and
natural gas leases representing 452.83 hectares, or 1,119 acres, in the
Williston Basin located in Southern Saskatchewan. These leases were acquired
from the Saskatchewan Geology and Petroleum Lands Branch by Scott Land & Lease
Ltd., who transferred the leases to Lions Petroleum. We paid $10,755 to
acquire these leases and have additionally paid lease rents of $1,027 through
March 31, 2007. Each lease has a five year term, expiring on March 31, 2012.
We intend to perform two-dimensional and three-dimensional seismic testing on
this leased property.
The Williston Basin is a large sedimentary basin situated along the edge of
the Rocky Mountains in Western North Dakota, Eastern Montana and South
Saskatchewan. Light to medium crude oil and natural gas have been produced in
the Williston Basin. However, the acreage subject to the oil and gas leases
is undeveloped acreage, which means wells have not been drilled that would
permit the production of commercial quantities of oil and gas.
In June 2006 we signed a participation letter of agreement with SunCoast
Technical Services, Inc., a private Texas company, for the Bennett Prospect
located in Lavaca County, Texas. This agreement has not closed as of the date
of this filing while due diligence related to the title to the leases is
completed, but management believes it will close within the next 60 days.
Pursuant to the letter of agreement we agreed to participate in the drilling
of two 3-D seismic defined gas wells. We agreed to purchase a 12.5% working
interest of a $200,000 project and paid approximately $38,888 for our
participation, currently held in escrow. If a commercial well is completed,
then we may realize an approximate net revenue interest of 9.13%. We also
agreed to pay our proportionate share of the project's 27.0% royalty and
overriding royalty, and approximately 13.89% of the actual drilling and
completion costs of any gas well started.
We also own a hydrocarbon lease of 259 hectares of undeveloped land located in
the Wolverine shallow gas area of northwestern Alberta, Canada, which expires
January 24, 2007.
11
We are actively seeking new opportunities in the oil and gas sector and are
primarily interested in business opportunities in Saskatchewan, Alberta, Texas
and Montana.
For the undeveloped acreage for which we hold oil and gas and hydrocarbon
leases, the process will include the completion of seismic and geological
testing to determine the viability of the property. After the seismic testing
is completed, then we will determine the possible drilling sites. We intend
to hire third party contractors to 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 a property will be
contracted work and, therefore, we do not expect to hire any new employees for
any project. However, if management decides to develop any property
unilaterally, then additional monies must be raised to complete the drilling
program.
We may encounter substantial delays and expenses related to the development of
any 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.
Plan of Operation
Our auditors have expressed doubt that we can continue as a going concern
without additional funding. We have not recorded revenue since we commenced
our exploration stage in September 2004 and we recorded a net loss of $457,837
for the nine month period ended June 30, 2006 ("2006 nine month period"). The
net loss includes a charge of $92,279 due to the application of U.S. GAAP
principles which required recognition of non-cash compensatory charges related
to outstanding warrants. These warrants were issued in two private placement
offerings discussed below.
In the first offering, closed March 2006, we sold 648,200 units for $0.50.
Each unit consisted of one share of common stock, one warrant to purchase one
additional common share at $1.00 during a one year period, and one piggy back
warrant to purchase one additional share for $2.00 during a two year period,
if the first warrant has been exercised. In the second private offering we
sold 200,000 units at $0.75. Each unit consisted of one share of common stock
and one warrant to purchase one additional common share at $1.25 during a two
year period.
At June 30, 2006, we had an aggregate of 1,496,400 warrants outstanding. If
all of the warrants sold in the offerings are exercised per their terms, we
may realize aggregate proceeds of $2,195,000. However, the warrant holders
have complete discretion as to when or if the warrants are exercised and we
cannot guarantee that the warrant holders will exercise any of the warrants.
Management anticipates that we will fund our exploration stage with proceeds
from sales of our common stock. We anticipate that we will raise funds during
the next twelve months through private placements of our common stock pursuant
to exemptions from the registration requirements provided by Canadian, United
States and state and provincial 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,
then our stockholders may experience dilution in the value per share of their
common stock.
To avoid depleting our cash, during the 2006 nine month period we issued an
aggregate of 430,200 shares of common stock pursuant to our 2005 Stock
Incentive Plan for Employees and Consultants for professional consulting
services. We have no employees and we do not expect to hire any new employees
because we intend to contract out our field operations. However, we
anticipate that we will require services from independent contractors in the
future.
12
We may not be able to raise sufficient funding from stock sales for long term
operations and, if so, we may be forced to delay our business plans until
adequate funding is obtained. 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.
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 third 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 5. OTHER INFORMATION
Special Warrants
On February 9, 2005, we issued special warrants to our then shareholders to
effectively spin-off the operations of Pure Energy Visions Corporation,
formerly Energy Ventures Inc. (Canada) ("Pure Energy Canada"). The special
warrants, as amended, provided for an expiration date of the earlier of the
date of issuance of a receipt by the Ontario Securities Commission for a final
prospectus of Pure Energy Canada related to the underlying common shares of
the special warrants, or the date 21 months from the September 20, 2004 date
of issuance. On May 1, 2006, Pure Energy Canada received the receipt by the
Ontario Securities Commission for a final prospectus and the underlying shares
of the special warrants have been issued.
ITEM 6. EXHIBITS
Part I Exhibits
No. Description
- ---- ------------
31.1 Chief Executive Officer Certification
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)
13
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, as amended (Incorporated by
reference to exhibit 4.1 to Form 10-QSB filed May 22, 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 (Incorporated by reference to exhibit 10.3 of Form
10-QSB filed February 15, 2006)
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)
10.5 Form of Saskatchewan Petroleum and Natural Gas Lease and Transfer
Agreement, dated June 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: August 11, 2006 By: ____________________________________
Dale M. Paulson
President and Director
Chief Executive Officer
/s/ Gordon L. Wiltse
Date: August 11, 2006 By: ____________________________________
Gordon L. Wiltse
Chief Financial Officer, Secretary
and Director