UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 3
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
File No. 333-127813
MAJESTIC OIL & GAS, INC.
(Name of small business issuer in our charter)
Nevada 4600 20-1673271
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation Industrial Classification Identification
or organization) Code Number) Number)
P.O Box 488 Cut Bank, Montana 59427
(Address of principal executive offices) (Zip Code)
Registrant's telephone 406-873-5580
Corporate Creations Network, Inc.
8275 South Eastern Avenue #200-47
Las Vegas, NV 89123
800.672.9110
(Name, address and telephone number of agent for service)
- --------------------------------------------------------------------------------
Approximate date of commencement of proposed sale to the public: From time to
time after this Registration Statement becomes effective.
If any of the Securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box: |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act of 1933, please check the following box
and list the Securities Act of 1933 registration number of the earlier effective
registration statement for the same offering. | |
1
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act of 1933, check the following box and list the Securities Act
of 1933 registration statement number of the earlier effective registration
statement for the same offering. | |
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act of 1933, check the following box and list the Securities Act
of 1933 registration statement number of the earlier effective registration
statement for the same offering. | |
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. | |
CALCULATION OF REGISTRATION FEE
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered registered offering price per aggregate offering registration
unit (1) price fee
Common Stock offered by our 1,640,000 .10 $164,000.00 $15.09
Selling Stockholders (2)
Common Stock underlying 1,640,000 .25 $410,000 $37.72
Warrants offered by our
Selling Stockholders (2))
------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) The selling shareholders will offer their shares at $.10 per share until our
shares are quoted on the OTC Bulletin Board and, assuming we secure this
qualification, thereafter at prevailing market prices or privately negotiated
prices. We will not receive proceeds from the sale of shares from the selling
shareholders.
We hereby amend this registration statement on such date or dates as may be
necessary to delay our effective date until we will file a further amendment
which specifically states that this Registration Statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of 1933
or until this Registration Statement shall become effective on such date as the
Commission, acting pursuant to Section 8(a) may determine.
2
PROSPECTUS
MAJESTIC OIL & GAS, INC.
Selling shareholders are offering up to 1,640,000 shares of common stock. The
selling shareholders will offer their shares at $.10 per share until our shares
are quoted on the OTC Bulletin Board and thereafter at prevailing market prices
or privately negotiated prices. We are also registering an additional 1,640,000
shares of common stock underlying warrants held by our selling stockholders. The
selling shareholders cannot acquire the shares underlying these warrants until
our shares are quoted on the OTC Bulletin Board and will be sold thereafter at
prevailing market prices or privately negotiated prices. If all the warrants are
exercised, we will receive $410,000 in proceeds. We will not receive proceeds
from the sale of shares from the selling shareholders.
Prior to this offering, there has been no market for our securities. Our common
stock is not now listed on any national securities exchange, the NASDAQ stock
market or the Over the Counter Bulletin Board. There is no assurance that our
securities will ever become qualified for quotation on the OTC Bulletin Board.
There is no assurance that the selling shareholders will sell their shares or
that a market for our shares will develop even if our shares are quoted on the
OTC Bulletin Board. Upon effectiveness of this registration statement, we intend
to file a registration statement on Form 8-A. This will require us to file on an
on-going basis quarterly and annual reports with the SEC and will also subject
us to the rules requiring filing and mailing of proxy requests. In addition, our
officers, directors and 10% stockholders will be required to submit reports to
the SEC on their stock ownership and stock trading activity.
THIS OFFERING IS HIGHLY SPECULATIVE AND THESE SECURITIES INVOLVE A HIGH DEGREE
OF RISK AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 9.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this preliminary prospectus is ________, 2006.
3
TABLE OF CONTENTS
-----------------
SUMMARY INFORMATION AND RISK FACTORS...........................................6
RISK FACTORS...................................................................9
Our poor financial condition raises substantial doubt about our ability to
continue as a going concern. Our independent auditors have indicated that
there is substantial doubt about our ability to continue as a going
concern over the next twelve months.........................................9
A substantial decrease in natural gas prices which may occur because
natural gas prices are volatile would decrease our revenues and the value
of our natural gas properties...............................................9
If we cannot replace existing or acquire additional reserves, our revenues
and production will decline................................................10
Compliance with environmental laws and regulations, well blowouts,
pipeline ruptures and other similar events may cause operating losses
which will reduce our revenues.............................................10
Our management decisions are made by our founder and president, Patrick M.
Montalban; if we lose his services, our revenues may be reduced............11
The offering price of $.10 per share has been arbitrarily set by our board
of directors and accordingly does not indicate the actual value of our
business...................................................................11
The person responsible for supervising our day-to-day operations, Mr.
Patrick Montalban, will devote less than full time to our business, which
may result in conflicts of interest........................................11
Because insiders control our activities, they may block or deter actions
that you might otherwise desire that we take and may cause us to act in a
manner that is most beneficial to such insiders and not to outside
shareholders...............................................................12
Because we do not have an audit or compensation committee, shareholders
will have to rely on the entire board of directors, all members of which
are not independent, to perform these functions............................12
USE OF PROCEEDS...............................................................13
DETERMINATION OF OFFERING PRICE...............................................14
DILUTION......................................................................14
SELLING SECURITY HOLDERS......................................................14
PLAN OF DISTRIBUTION..........................................................17
LEGAL PROCEEDINGS.............................................................20
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS.................20
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................21
DESCRIPTION OF SECURITIES.....................................................22
INTEREST OF NAMED EXPERTS AND COUNSEL.........................................23
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
LIABILITIES...................................................................23
DESCRIPTION OF BUSINESS.......................................................23
4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS....................................................................29
DESCRIPTION OF PROPERTY.......................................................31
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................32
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......................33
EXECUTIVE COMPENSATION........................................................35
FINANCIAL STATEMENTS..........................................................36
5
SUMMARY INFORMATION AND RISK FACTORS
You should carefully read all information in the prospectus, including the
financial statements and their explanatory notes, under the Financial Statements
prior to making an investment decision.
Organization
- ------------
We were incorporated in Nevada on April 16, 2002 as M2 Group Energy Corporation
On June 21, 2004, we changed our name to Majestic Oil & Gas, Inc. We are
authorized to issue 100,000,000 shares of common stock of which 6,240,000 shares
are outstanding.
We have a wholly-owned subsidiary, Grizzly Energy, Inc., a Montana corporation
and an affiliate of our President, Mr. Patrick Montalban, which we acquired in
July 2004 for 1,600,000 shares of our common stock. Mr. Patrick Montalban owns
and manages Altamont Oil and Gas, Inc. Mr. Patrick Montalban owns and manages
Grizzly Energy, Inc.
Business
- --------
Our wholly-owned subsidiary, Grizzly Energy, Inc. owns a 25% working interest in
a producing gas well on a state of Montana lease located in Section 36-T29N-R5W,
Pondera County, Montana (Ludwig/State #36-1).
Grizzly Energy acquired the 25% working interest from Altamont Oil and Gas,
Inc., a Montana corporation and an affiliate of our President, Mr. Patrick
Montalban, in July 2004 for 16,000 shares of Grizzly Energy common stock. Mr.
Patrick Montalban owns and manages Altamont Oil and Gas, Inc. Pursuant to an
oral understanding, an opportunity to acquire or develop any oil and gas
property or any working interest therein which becomes known to Mr. Montalban or
Altamont will be first offered to Majestic. Thereafter in July 2004, Majestic
Oil & Gas, Inc. acquired all 16,000 issued and outstanding shares of Grizzly
Energy, Inc. common stock for the issuance of 1,600,000 shares of our common
stock. Altamont retained the remaining 25% interest in this well.
Majestic Oil & Gas, Inc participated in the drilling of the Boucher 27-1 well.We
own a 25% working interest in the this well. The Boucher 27-1 well is located in
Section 27-T29N-5W, Pondera County, Montana.
Our offices are located at 5 W. Main St., Cut Bank, Montana 59427. Our telephone
number is 406-873-5580.
The Offering
- ------------
As of the date of this prospectus, we had 6,240,000 shares of common stock
issued and outstanding.
6
Selling shareholders are offering up to 1,640,000 shares of common stock. The
selling shareholders will offer their shares at $.10 per share until our shares
are quoted on the OTC Bulletin Board and thereafter at prevailing market prices
or privately negotiated prices. We are also registering an additional 1,640,000
shares of common stock underlying warrants held by our selling stockholders. The
selling shareholders cannot acquire the shares underlying these warrants until
our shares are quoted on the OTC Bulletin Board and will be sold thereafter at
prevailing market prices or privately negotiated prices. If all the warrants are
exercised, we will receive $410,000 in proceeds. We will not receive proceeds
from the sale of shares from the selling shareholders.
There is no assurance that our securities will ever become qualified for
quotation on the OTC Bulletin Board. There is no assurance that the selling
shareholders will sell their shares or that a market for our shares will develop
even if our shares are quoted on the OTC Bulletin Board. To be quoted on the OTC
Bulletin Board, a market maker must file an application on our behalf in order
to make a market for our common stock. The current absence of a public market
for our common stock may make it more difficult for you to sell shares of our
common stock that you own.
Our shares will be "penny stocks" as that term is generally defined in the
Securities Exchange Act of 1934. Our shares thus will be subject to rules that
impose sales practice and disclosure requirements on broker-dealers who engage
in certain transactions involving a penny stock.
Because of these regulations, broker-dealers may encounter difficulties in their
attempt to sell shares of our common stock, which may affect the ability of
selling shareholders or other holders to sell their shares in the secondary
market and have the effect of reducing the level of trading activity in the
secondary market. These additional sales practice and disclosure requirements
could impede the sale of our securities, if our securities become publicly
traded. In addition, the liquidity for our securities may be decreased, with a
corresponding decrease in the price of our securities. Therefore, our
shareholders will, in all likelihood, find it difficult to sell their
securities.
March 31, 2006180,285Risk Factors:
Our poor financial condition raises substantial doubt about our ability to
continue as a going concern. A substantial decrease in natural gas prices which
may occur because natural gas prices are volatile would decrease our revenues
and the value of our natural gas properties. If we cannot replace existing or
acquire additional reserves, our revenues and production will decline.
Compliance with environmental laws and regulations, well blowouts, pipeline
ruptures and other similar events may cause operating losses which will reduce
our revenues. The offering price of $.10 per share has been arbitrarily set by
our board of directors and accordingly does not indicate the actual value of our
business. The person responsible for supervising our day-to-day operations, Mr.
7
Patrick Montalban, will devote less than full time to our business, which may
result in conflicts of interest. Sales of our common stock under Rule 144 could
reduce the price of our stock. See "Risk Factors."
8
RISK FACTORS
In addition to the other information provided in this prospectus, you should
carefully consider the following risk factors in evaluating our business before
purchasing any of our common stock.
OUR POOR FINANCIAL CONDITION RAISES SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO
CONTINUE AS A GOING CONCERN. OUR INDEPENDENT AUDITORS HAVE INDICATED THAT THERE
IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN OVER THE
NEXT TWELVE MONTHS.
We are a development stage company. From our inception to March 31, 2006, we
incurred operating losses of $238,910 and had an accumulated deficit of
$238,910. This deficit is primarily the result of $300,000 in expenses
associated with stock issuances in our fiscal year ended December 31, 2002.
180,285
Our ability to continue as a going concern is dependent on our ability to raise
funds to implement our planned development; however we may not be able to raise
sufficient funds to do so. Our independent auditors have indicated that there is
substantial doubt about our ability to continue as a going concern over the next
twelve months. Our poor financial condition could inhibit our ability to achieve
our business plan.
A SUBSTANTIAL DECREASE IN NATURAL GAS PRICES WHICH MAY OCCUR BECAUSE NATURAL GAS
PRICES ARE VOLATILE WOULD DECREASE OUR REVENUES AND THE VALUE OF OUR NATURAL GAS
PROPERTIES.
The prices we receive for our gas are volatile. Our future financial condition
and results of operations, and the value of our natural gas properties, will
depend upon market prices for natural gas. Natural gas prices historically have
been volatile and will likely continue to be volatile in the future. Prices for
natural gas are dictated by supply and demand. The factors affecting supply
include:
o the availability of pipeline capacity; and
o domestic governmental regulations and taxes.
The factors affecting demand include:
o weather conditions;
o the price and availability of alternative fuels;
o the price and level of foreign imports; and
o the overall economic environment.
9
These factors and the volatility of the energy markets make it extremely
difficult to predict future gas price movements with any certainty. Price
fluctuations can reduce our revenues because:
o price decrease will reduce our revenues;
o price decreases may make it more difficult to obtain financing for
our drilling and development operations through sponsored drilling
investment partnerships, borrowing or otherwise; and
o price decreases may make some reserves uneconomic to produce,
reducing our reserves and cash flow.
IF WE CANNOT REPLACE EXISTING OR ACQUIRE ADDITIONAL RESERVES, OUR REVENUES AND
PRODUCTION WILL DECLINE.
The future success of our operations will be largely dependent upon our ability
to replace and expand our gas and oil reserves through the acquisition of
producing properties and the development of natural gas reserves.
Successful acquisition of producing properties generally requires, among other
things, accurate assessments of recoverable reserves, future natural gas prices,
operating costs and potential environmental risks and other liabilities. Such
assessments are necessarily inexact and their accuracy is inherently uncertain.
Development of our natural gas reserves involves the risk that no commercial
production will be obtained or that production will be insufficient to recover
drilling and completion or cleaning and reworking costs. Drilling also may be
curtailed, delayed or canceled as a result of many factors, including, among
other things, unacceptably low prices, title problems, weather conditions, labor
shortages and equipment delivery problems.
Without successful acquisitions and exploitation, exploration and development
operations, we will not be able to replace the reserves depleted by production,
and our revenues will decline over time.
COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS, WELL BLOWOUTS, PIPELINE
RUPTURES AND OTHER SIMILAR EVENTS MAY CAUSE OPERATING LOSSES WHICH WILL REDUCE
OUR REVENUES.
We face operating hazards and environmental risks which could subject us to
litigation or prevent us from producing natural gas from our wells which could
destroy our business. We are subject to all risks normally incident to the
development, production and transmission of natural gas, including pipeline
leaks, uncontrollable flows of gas, oil, brine or well fluids into the
environment, fires, explosions, cratering, pollution and other environmental
risks. The occurrence of any of these hazards could, nonetheless, result in
substantial losses due to damage or destruction of gas and oil wells, formations
or production facilities, damage or injury to property and persons or suspension
of operations. Although Altemont maintains $1,000,000 of insurance coverage, we
maintain no insurance coverage. Altemont's insurance policies, however, have
standard exclusions. Losses can occur from an uninsurable risk or in amounts
more than existing insurance coverage. The occurrence of an event, which is not
insured or not fully insured, would reduce our cash and our earnings and could
destroy our business.
10
OUR MANAGEMENT DECISIONS ARE MADE BY OUR FOUNDER AND PRESIDENT, PATRICK M.
MONTALBAN; IF WE LOSE HIS SERVICES, OUR REVENUES MAY BE REDUCED.
The success of our business is dependent upon the expertise of our founder and
president, Patrick M. Montalban. Because Mr. Montalban is currently essential to
our operations, you must rely on his management decisions. Our founder and
president, Patrick M. Montalban will continue to control our business affairs
after the offering. We have not obtained any key man life insurance relating to
our founder and president, Patrick M. Montalban. If we lose his services, we may
not be able to hire and retain another President with comparable experience. As
a result, the lost services of our Founder and President, Patrick M. Montalban
could reduce our revenues.
THE OFFERING PRICE OF $.10 PER SHARE HAS BEEN ARBITRARILY SET BY OUR BOARD OF
DIRECTORS AND ACCORDINGLY DOES NOT INDICATE THE ACTUAL VALUE OF OUR BUSINESS.
The offering price of $.10 per share is not based upon earnings or operating
history, does not reflect the our actual value, and bears no relation to our
earnings, assets, book value, net worth or any other recognized criteria of
value. No independent investment banking firm has been retained to assist in
determining the offering price for the shares. Accordingly, the offering price
should not be regarded as an indication of any future market price of our stock.
See "How We Set the Price for the Securities in this Offering" at page 28.
THE PERSON RESPONSIBLE FOR SUPERVISING OUR DAY-TO-DAY OPERATIONS, MR. PATRICK
MONTALBAN, WILL DEVOTE LESS THAN FULL TIME TO OUR BUSINESS, WHICH MAY RESULT IN
CONFLICTS OF INTEREST.
The person supervising our day-to-day operations is Mr. Patrick Montalban. In
this capacity, he currently devotes approximately 50% of his time to our
business and anticipates that during the next 12 months he will continue to
devote approximately 75% of his time to our business. Mr. Montalban may have
conflicts in allocating his time between our business and his other activities.
SALES OF OUR COMMON STOCK UNDER RULE 144 COULD REDUCE THE PRICE OF OUR STOCK.
As of December 31, 2005, there were 1,415,000 shares of our common stock held by
non-affiliates and 4,645,000 shares of our common stock held by affiliates, all
of which are restricted as per Rule 144 of the Securities Act of 1933 defines as
restricted securities for total outstanding shares of 6,055,000 No shares have
been sold pursuant to Rule 144 of the Securities Act of 1933.
11
Once this registration statement is effective, the shares of our common stock
being offered by our selling shareholders will be freely tradable without
restrictions under the Securities Act of 1933, except for any shares held by our
"affiliates," which will be restricted by the resale limitations of Rule 144
under the Securities Act of 1933. All of our shares will be eligible for resale
no later than 90 days after this registration statement is declared effective,
assuming the volume and method of sale limitations in Rule 144 can be satisfied
to the extent required.
In addition to the shares available for resale under this registration
statement, as a result of the provisions of Rule 144, all of the restricted
securities could be available for sale in a public market, if developed,
beginning 90 days after the date of this prospectus. The availability for sale
of substantial amounts of common stock under Rule 144 could reduce prevailing
market prices for our securities.
BECAUSE INSIDERS CONTROL OUR ACTIVITIES, THEY MAY BLOCK OR DETER ACTIONS THAT
YOU MIGHT OTHERWISE DESIRE THAT WE TAKE AND MAY CAUSE US TO ACT IN A MANNER THAT
IS MOST BENEFICIAL TO SUCH INSIDERS AND NOT TO OUTSIDE SHAREHOLDERS.
Our Officers and Directors, Mr. Montalban and Mr. Mitchell and their affiliates
control more than 72.7% of our common stock, and we do not have any non-employee
directors. As a result, these insiders effectively control all matters requiring
director and stockholder approval, including the election of directors, the
approval of significant corporate transactions, such as mergers and related
party transaction. Our insiders also have the ability to block, by their
ownership of our stock, an unsolicited tender offer. This concentration of
ownership could have the effect of delaying, deterring or preventing a change in
control of our company that you might view favorably and may cause us to act in
a manner that is most beneficial to such insiders and not to outside
shareholders.
BECAUSE WE DO NOT HAVE AN AUDIT OR COMPENSATION COMMITTEE, SHAREHOLDERS WILL
HAVE TO RELY ON THE ENTIRE BOARD OF DIRECTORS, ALL MEMBERS OF WHICH ARE NOT
INDEPENDENT, TO PERFORM THESE FUNCTIONS.
We do not have an audit or compensation committee comprised of independent
directors. Indeed, we do not have any audit or compensation committee. These
functions are performed by the board of directors as a whole. No members of the
board of directors are independent directors. Thus, there is a potential
conflict in that board members who are management will participate in
discussions concerning management compensation and audit issues that may affect
management decisions.
12
SPECIAL INFORMATION REGARDING FORWARD LOOKING STATEMENTS
Some of the statements in this prospectus are "forward-looking statements."
These forward-looking statements involve certain known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by these forward-looking statements. These
factors include, among others, the factors set forth above under "Risk Factors."
The words "believe," "expect," "anticipate," "intend," "plan," and similar
expressions identify forward-looking statements. We caution you not to place
undue reliance on these forward-looking statements. However, the Private
Securities Litigation Reform Act of 1995 is not available to us as a
non-reporting issuer. Further, Section 27A(b)(1)(C) of the Securities Act and
Section 21E(b)(1)(C) provide that the safe harbor for forward looking statements
does not apply to statements made by companies such as ours that issue penny
stock. Further, Section 27A(b)(2)(D) of the Securities Act and Section
21E(b)(2)(D) of the Securities Exchange Act expressly state that the safe harbor
for forward looking statements does not apply to statements made in connection
with an initial public offering.
USE OF PROCEEDS
We will not receive any proceeds from the sale of shares offered by the selling
shareholders. We will receive up to $410,000 upon the exercise of the Warrants.
The table below depicts how we will utilize the proceeds of this Offering in the
event that 800,000 and 1,640,000 shares are purchased through Warrant Exercise.
Purpose 800,000 Shares Percent 1,640,000 Shares Percent
- ----------------------------------------------------------------------------------------------------------------------
Drilling of wells in the Lake Francis $200,000 100% $410,000 100%
Field [1]
- ----------------------------------------------------------------------------------------------------------------------
TOTAL: $200,000 100% $410,000 100%
[1] We propose to use the proceeds from the $410,000 to drill four wells in the
Lake Frances Gas Field. The drilling and completion costs for each well is
approximately $99,000. To the extent we receive less than $200,000 upon Warrant
exercise, we will apply the proceeds to drill one well, or if not sufficient
proceeds to do so, will retain the proceeds as working capital.
The amounts set forth above are estimates developed by management for the
allocations of the net proceeds of the Warrant exercises based upon the current
state of our business operations, our plans and current economic and industry
conditions.
The actual allocation of funds will depend on our success and growth. If results
do not meet our requirements, we will reallocate the proceeds among the other
contemplated uses of proceeds, as prudent business practices dictate.
13
No proceeds will be paid as compensation to officers and directors.
Pending application by us of the net proceeds of the Warrant exercise, such
proceeds may be invested in short-term, interest-bearing instruments.
DETERMINATION OF OFFERING PRICE
Our management has determined the offering price for the selling shareholders'
shares which was selected the price at which these shares were sold to
non-affiliated investors in our recently completed private placement, in
accordance with management's discussions with the selling shareholders. This was
also based upon our anticipated opening price if our stock becomes qualified for
quotation on the OTCBB given our current net revenues and current net asset
value. However, we have no written or oral agreement with any of our selling
shareholders on this matter. The offering price has been arbitrarily determined
and does not bear any relationship to our assets, results of operations, or book
value, or to any other generally accepted criteria of valuation. Prior to this
offering, there has been no market for our securities. See "How We Set the Price
for the Securities in this Offering" at page 28.
DILUTION
Not applicable. We are not offering any shares in this registration statement.
All shares are being registered on behalf of our selling shareholders.
SELLING SECURITY HOLDERS
The selling security holders named below are selling the securities. The table
assumes that all of the securities will be sold in this offering. However, any
or all of the securities listed below may be retained by any of the selling
security holders, and therefore, no accurate forecast can be made as to the
number of securities that will be held by the selling security holders upon
termination of this offering. These selling security holders acquired their
shares by purchase exempt from registration primarily under Regulation S and
with respect to our 22 US investors, under Section 4(2) of the 1933 Act. We
believe that the selling security holders listed in the table have sole voting
and investment powers with respect to the securities indicated. No selling
stockholder is an affiliate of a broker-dealer. We will not receive any proceeds
from the sale of the securities by the selling security holders.
14
- ---------------------------------- ------------ -------------- --------------------- ----------------- ------------
Name Total Total Shares Percentage Before Percentage Rela-
Shares Shares Registered Offering (1) After Offering tion-ship
Owned under (2) to us
Warrants
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Dr. Michael 100,000 100,000 200,000 1.6 0
Fitzmaurice
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
J. Thomas Johnston 150,000 150,000 300,000 2.3 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Albert Matter 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Jim Turner 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Catherine Okulitch 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Michael T. 250,000 250,000 3.9 0 Attorney
Williams [Law Firm]
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Jerry Williamson 30,000 30,000 60,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
John A. Miller 30,000 30,000 60,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Brian W. & Leanne 50,000 50,000 100,000 * 0
Kavanagh
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Elsie Johnston 20,000 20,000 40,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
E. W. Whiteside 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Roger Garriock 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Doran Aisenstat 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Jasson Aisenstat 20,000 20,000 40,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Thomas Vandersluis 40,000 40,000 80,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Jason Berg 40,000 40,000 80,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Elizabeth J. 10,000 10,000 20,000 * 0
Anderson
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
B. & B. Ventures 10,000 10,000 20,000 * 0
Ltd Co.
[Business: a
private business
holding company -
Principal: Doug
Allen (3)]
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
15
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Carla Barringer 5,000 5,000 10,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Steve Bucher 5,000 5,000 10,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Dan W. Burns 15,000 15,000 30,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Chen Kuo-Hsien 20,000 20,000 40,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Cheng Rose 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Gabriel Clark 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
J. Gary Dekker 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Scott Dorian 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
John Anthony Eland 40,000 40,000 80,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Mike Elhard 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Debbie Fillippeli 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Kerry-Lynne Donna 10,000 10,000 20,000 * 0
Findlay
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Bruce Johnson 12,000 12,000 24,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Dean Johnson 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Robert G. Olson 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Brian Fletcher 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Chi Wa Pang 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Tamara Hall 150,000 150,000 300,000 2.3 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Greg Hardy 100,000 100,000 200,000 1.6 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
George M. Jackson 5,000 5,000 10,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Gregory A. Jackson 20,000 20,000 40,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Steven D. Paquin 5,000 5,000 10,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Edgar Rahal 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
KGL Capital 10,000 10,000 20,000 * 0
Corporation
[private
investment
company; Kelly
Lohn, principal
(3)]
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
16
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Juanita L. Leach 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Pezhman Sharifi 20,000 20,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Harley Mayers 30,000 30,000 60,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Beverly Montalban 100,000 100,000 200,000 1.6 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Ken Suen 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Teepy L. C. Tang 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Tanya Thompson 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Rudy Vermeer 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Judy Vermulm 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Gus C. Wahlroth 10,000 10,000 20,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Leo Wong 30,000 30,000 60,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Ronald V. Luedtke 5,000 5,000 10,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Dan Mitchell 45,000 45,000 90,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
Dan F. Whetstone 23,000 23,000 46,000 * 0
- -------------------- ------------- ------------ -------------- --------------------- ----------------- ------------
[1] Calculation excludes exercise of warrants
[2] Assuming sale of all shares registered hereunder
[3] Persons listed as Principal are the natural persons that have the ultimate
voting or investment control over the shares held by this selling stockholder.
* Less than 1%
PLAN OF DISTRIBUTION
Our common stock is currently not quoted on any market. No market may ever
develop for our common stock, or if developed, may not be sustained in the
future. Accordingly, our shares should be considered totally illiquid, which
inhibits investors' ability to resell their shares.
17
Selling shareholders are offering up to 1,640,000 shares of common stock. The
selling shareholders will offer their shares at $.10 per share until our shares
are quoted on the OTC Bulletin Board and thereafter at prevailing market prices
or privately negotiated prices. We are also registering an additional 1,640,000
shares of common stock underlying warrants held by our selling stockholders. The
selling shareholders cannot acquire the shares underlying these warrants until
our shares are quoted on the OTC Bulletin Board and will be sold thereafter at
prevailing market prices or privately negotiated prices. We will not receive
proceeds from the sale of shares from the selling shareholders.
The securities offered by this prospectus will be sold by the selling
shareholders. We are not aware of any underwriting arrangements that have been
entered into by the selling shareholders. The distribution of the securities by
the selling shareholders may be effected in one or more transactions that may
take place in the over-the-counter market, including broker's transactions or
privately negotiated transactions.
The selling shareholders may pledge all or a portion of the securities owned as
collateral for margin accounts or in loan transactions, and the securities may
be resold pursuant to the terms of such pledges, margin accounts or loan
transactions. Upon default by such selling shareholders, the pledge in such loan
transaction would have the same rights of sale as the selling shareholders under
this prospectus. The selling shareholders may also enter into exchange traded
listed option transactions, which require the delivery of the securities listed
under this prospectus. After our securities are qualified for quotation on the
over the counter bulletin board, the selling shareholders may also transfer
securities owned in other ways not involving market makers or established
trading markets, including directly by gift, distribution, or other transfer
without consideration, and upon any such transfer the transferee would have the
same rights of sale as such selling shareholders under this prospectus.
In addition to the above, each of the selling shareholders will be affected by
the applicable provisions of the Securities Exchange Act of 1934, including,
without limitation, Regulation M, which may limit the timing of purchases and
sales of any of the securities by the selling shareholders or any such other
person. We have instructed our selling shareholders that they many not purchase
any of our securities while they are selling shares under this registration
statement.
Upon this registration statement being declared effective, the selling
shareholders may offer and sell their shares from time to time until all of the
shares registered are sold; however, this offering may not extend beyond two
years from the initial effective date of this registration statement.
There can be no assurances that the selling shareholders will sell any or all of
the securities. In various states, the securities may not be sold unless these
securities have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and is complied with.
18
All of the foregoing may affect the marketability of our securities. Pursuant to
oral promises we made to the selling shareholders, we will pay all the fees and
expenses incident to the registration of the securities.
Should any substantial change occur regarding the status or other matters
concerning the selling shareholders, or us we will file a post-effective
amendment to this registration statement disclosing such matters.
Should any substantial change occur regarding the status or other matters
concerning the selling shareholders or us, we will file a post-effective
amendment disclosing such matters.
OTC Bulletin Board Considerations
- ---------------------------------
To be quoted on the OTC Bulletin Board, a market maker must file an application
on our behalf in order to make a market for our common stock. We have engaged in
preliminary discussions with an NASD Market Maker to file our application on
Form 211 with the NASD, but as of the date of this prospectus, no filing has
been made. Based upon our counsel's prior experience, we anticipate that after
this registration statement is declared effective, it will take approximately 2
- - 8 weeks for the NASD to issue a trading symbol.
The OTC Bulletin Board is separate and distinct from the NASDAQ stock market.
NASDAQ has no business relationship with issuers of securities quoted on the OTC
Bulletin Board. The SEC's order handling rules, which apply to NASDAQ-listed
securities, do not apply to securities quoted on the OTC Bulletin Board.
Although the NASDAQ stock market has rigorous listing standards to ensure the
high quality of its issuers, and can delist issuers for not meeting those
standards, the OTC Bulletin Board has no listing standards. Rather, it is the
market maker who chooses to quote a security on the system, files the
application, and is obligated to comply with keeping information about the
issuer in its files. The NASD cannot deny an application by a market maker to
quote the stock of a company. The only requirement for inclusion in the bulletin
board is that the issuer be current in its reporting requirements with the SEC.
Although we anticipate listing on the OTC Bulletin board will increase liquidity
for our stock, investors may have greater difficulty in getting orders filled
because it is anticipated that if our stock trades on a public market, it
initially will trade on the OTC Bulletin Board rather than on NASDAQ. Investors'
orders may be filled at a price much different than expected when an order is
placed. Trading activity in general is not conducted as efficiently and
effectively as with NASDAQ-listed securities.
Investors must contact a broker-dealer to trade OTC Bulletin Board securities.
Investors do not have direct access to the bulletin board service. For bulletin
board securities, there only has to be one market maker.
19
Bulletin board transactions are conducted almost entirely manually. Because
there are no automated systems for negotiating trades on the bulletin board,
they are conducted via telephone. In times of heavy market volume, the
limitations of this process may result in a significant increase in the time it
takes to execute investor orders. Therefore, when investors place market orders
- - an order to buy or sell a specific number of shares at the current market
price - it is possible for the price of a stock to go up or down significantly
during the lapse of time between placing a market order and getting execution.
Because bulletin board stocks are usually not followed by analysts, there may be
lower trading volume than for NASDAQ-listed securities.
LEGAL PROCEEDINGS
We are not aware of any pending or threatened legal proceedings in which we are
involved.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
The board of directors elects our executive officers annually. A majority vote
of the directors who are in office is required to fill vacancies. Each director
shall be elected for the term of one year, and until his successor is elected
and qualified, or until his earlier resignation or removal. Our directors and
executive officers are as follows:
- ----------------------------------- ---------- ---------------------------------
Name Age Position
- ----------------------------------- ---------- ---------------------------------
Patrick M. Montalban 48 President, CEO and director
- ----------------------------------- ---------- ---------------------------------
Danny M. Mitchell 77 Vice President and director
- ----------------------------------- ---------- ---------------------------------
Mr. Patrick M. Montalban has been our President, CEO, and director since our
inception. He has been President, CEO and director of our wholly-owned
subsidiary Grizzly Energy Inc. from August 2002 to date. He has been President,
CEO and director of Altamont Oil and Gas which owns and operates gas producing
wells in Montana from April 1999 to date. From September 2000 to January 2002 he
was Director, President and CEO of Mountainview Energy Ltd. a publicly listed
oil and gas company on the CDNX. From January 1999 to date, he has
beenVice-President of Exploration and Production and Director for Montalban Oil
& Gas Operations, Inc, a company primarily engaged in the business of the
exploration and production of oil and gas properties. Previously, Mr. Montalban
was a director, Executive Vice President and Chief Operating Officer of
Quicksilver Resources, Inc., formerly MSR Exploration Ltd., and predecessor
companies from July 1983 to January 1999. Between January, 1990 and January,
1999, Mr. Montalban was director, President and Chief Operating Officer of Gypsy
Highview Gathering System Inc., a gas gathering, compression and pipeline
company and subsidiary of Quicksilver Resources Inc. Mr. Montalban is currently
a director Great Northern Drilling Company a private oil and gas company. He is
a petroleum geologist who obtained a BA in Geology from the University of
Montana in 1981. He devotes 75% of his time to our business.
20
Mr. Danny Mack Mitchell has been our Vice President and director since our
inception. He has been President and CEO and director of Comanche Drilling
Company from 1961 to date. Comanche Drilling Co. owned and operates oil and gas
wells in the State of Montana from 1959 to date. Comanche Drilling has drilled
over 2000 wells in the Northern Rockies from 1961 to July 2000. From 1965 to
July 2000 he was President and CEO of Danco a private Pipe and Sales Company.
From 1986 to July 2000 he was owner President and CEO and director of Tulsa Tool
Works. Tulsa Tool Works manufactured and fabricated oil field equipment. He is a
Mechanical Engineer who obtained a BS in Mechanical Engineer from Gonzaga
University in 1959.
Directors serve for a one-year term. Our bylaws currently provide for a board of
directors comprised of a minimum of one director.
Board Committees
- ----------------
We currently have no compensation committee or other board committee performing
equivalent functions. Currently, all members of our board of directors
participate in discussions concerning executive officer compensation.
Family Relationships
- --------------------
There are no family relationships among our officers or directors.
Legal Proceedings
- -----------------
No officer, director, or persons nominated for such positions, promoter or
significant employee has been involved in legal proceedings that would be
material to an evaluation of our management.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth the ownership, as of the date of this
registration statement, of our common stock by each person known by us to be the
beneficial owner of more than 5% of our outstanding common stock, our directors,
and our executive officers and directors as a group. To the best of our
knowledge, the persons named have sole voting and investment power with respect
to such shares, except as otherwise noted. There are not any pending or
anticipated arrangements that may cause a change in control.
21
- ------------------------------ -------------------------------- ----------------
Name and Address Number of Shares of Common Percentage
Stock
- ------------------------------ -------------------------------- ----------------
Patrick M. Montalban [1] 4,600,000 72
P.O Box 488 Cut Bank,
Montana 59427
- ------------------------------ -------------------------------- ----------------
Danny Mitchell 45,000 .7
P.O Box 488 Cut Bank,
Montana 59427
- ------------------------------ -------------------------------- ----------------
All officers and directors 4,645,000 72.7
as a group [two persons]
- ------------------------------ -------------------------------- ----------------
[1] Includes 1,600,000 shares owned by Altamont Oil & Gas, Inc. of which Mr.
Montalban is the sole beneficial owner and principal.
This table is based upon information derived from our stock records. Unless
otherwise indicated in the footnotes to this table and subject to community
property laws where applicable, it believes that each of the shareholders named
in this table has sole or shared voting and investment power with respect to the
shares indicated as beneficially owned. Applicable percentages are based upon
6,055,000 shares of common stock outstanding as of the date of this registration
statement.
DESCRIPTION OF SECURITIES
The following description as a summary of the material terms of the provisions
of our articles of incorporation and bylaws is qualified in its entirety. The
articles of incorporation and bylaws have been filed as exhibits to the
registration statement of which this prospectus is a part.
Common Stock
- ------------
We are authorized to issue 100,000,000 shares of common stock with no par value
per share. As of the date of this registration statement, there were 6,055,000
shares of common stock issued and outstanding held by 52 shareholders of record.
Each share of common stock entitles the holder to one vote, either in person or
by proxy, at meetings of shareholders. The holders are not permitted to vote
their shares cumulatively. Accordingly, the shareholders of our common stock who
hold, in the aggregate, more than fifty percent of the total voting rights can
elect all of our directors and, in such event, the holders of the remaining
minority shares will not be able to elect any of the such directors. The vote of
the holders of a majority of the issued and outstanding shares of common stock
entitled to vote thereon is sufficient to authorize, affirm, ratify or consent
to such act or action, except as otherwise provided by law.
Holders of common stock are entitled to receive ratably such dividends, if any,
as may be declared by the board of directors out of funds legally available. We
have not paid any dividends since our inception, and we presently anticipate
that all earnings, if any, will be retained for development of our business. Any
future disposition of dividends will be at the discretion of our Board of
Directors and will depend upon, among other things, our future earnings,
operating and financial condition, capital requirements, and other factors.
22
Holders of our common stock have no preemptive rights or other subscription
rights, conversion rights, redemption or sinking fund provisions. Upon our
liquidation, dissolution or winding up, the holders of our common stock will be
entitled to share ratably in the net assets legally available for distribution
to shareholders after the payment of all of our debts and other liabilities.
There are not any provisions in our Articles of Incorporation or our by-laws
that would prevent or delay change in our control.
INTEREST OF NAMED EXPERTS AND COUNSEL
Our Financial Statements as of December 31, 2005, and the results of operations
and cash flows for the years ended December 31, 2005 and 2004, and the period
from inception (April 16, 2002) to December 31, 2005 are audited by EideBailly,
LLP, Billings, Montana, as experts in accounting and auditing.
The legality of the shares offered under this registration statement is being
passed upon by Williams Law Group, P.A., Tampa FL. Williams Law Group, P.A. owns
250,000 shares of our common stock, which shares are being registered in this
registration statement.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES LIABILITIES
Our by-laws, subject to the provisions of Nevada Corporation Law, contain
provisions which allow the corporation to indemnify any person against
liabilities and other expenses incurred as the result of defending or
administering any pending or anticipated legal issue in connection with service
to us if it is determined that person acted in good faith and in a manner which
he reasonably believed was in the best interest of the corporation. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to our directors, officers and controlling persons, we have been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.
DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
23
We were incorporated in Nevada on April 16, 2002 as M2 Group Energy Corporation
On June 21, 2004, we changed our name to Majestic Oil & Gas, Inc. We are
authorized to issue 100,000,000 shares of common stock of which 6,085,000 shares
are outstanding.
Our wholly-owned subsidiary, Grizzly Energy, Inc. owns a 25% working interest in
a producing gas well on a state of Montana lease located in Section 36-T29N-R5W,
Pondera County, Montana (Ludwig/State #36-1). It currently has gas reserves of
95.04 million cubic feet of Proved Net Producing Reserves, which are reserves
established based upon actual production. Net Reserves are gross reserves less
taxes, royalties and all expenses.
Majestic Oil & Gas, Inc participated in the drilling of the Boucher 27-1 with
Altamont and our 33% of the proportionate share of the drilling and completion
costs were $32,186.67. For this expenditure, we earned a 25% working interest.
The Boucher 27-1 well is located in Section 27-T29N-5W, Pondera County, Montana.
This well currently has gas reserves of 96.40 million cubic feet of Proved Net
Producing Reserves.
Grizzly Energy acquired the 25% working interest from Altamont Oil and Gas,
Inc., a Montana corporation and an affiliate of our President, Mr. Patrick
Montalban, in July 2004 for 16,000 shares of Grizzly Energy common stock. Mr.
Patrick Montalban owns and manages Altamont Oil and Gas, Inc. Mr. Patrick
Montalban owns and manages Grizzly Energy, Inc. Thereafter in July 2004,
Majestic Oil & Gas, Inc. acquired all 16,000 issued and outstanding shares of
Grizzly Energy, Inc. common stock for the issuance of 1,600,000 shares of our
common stock. Prior to the sale to Majestic Oil & Gas, Inc, Altamont Oil & Gas,
Inc incurred an expense of $120,000 in the acquisition of a 50% Working Interest
in this well. Altamont retained the remaining 25% interest in this well.
Business
- --------
We are engaged in the exploration, development, acquisition and operation of gas
properties. Because gas exploration and development and development requires
significant capital and because our assets and resources are limited, we
participate in the gas industry through the purchase of interests in either
producing wells or gas exploration and development and production projects.
24
These two wells are operated by Altamont.
Estimates of proved reserves may vary and, as a result, revenues from production
may vary significantly from our expectations. We base our estimates of our
proved natural gas reserves and future net revenues from those reserves upon
analyses that rely upon various assumptions, including those required by the
Securities and Exchange Commission, as to natural gas prices, taxes, development
expenses, capital expenses, operating expenses and availability of funds. There
are numerous uncertainties inherent in estimating quantities of reserves of gas
and in projecting future rates of production and the timing of development
expenditures, including many factors beyond the our control. The reserve
estimates in this prospectus are based on various assumptions, including, for
example, constant gas prices, operating expenditures and the availability of
funds, and, therefore, are inherently imprecise indications of future net cash
flows. Actual future production, cash flows, taxes, operating expenses,
development expenditures and quantities of recoverable gas reserves may vary
substantially from those in the estimates. Any significant variance in these
assumptions could materially affect the estimated quantity and value of reserves
set forth in this prospectus. Additionally, our reserves may be subject to
downward or upward revision based upon actual production performance, results of
future development and exploration, prevailing gas prices and other factors,
many of which are beyond our control.
Geologic Data
- -------------
Both of the wells in which we have working interests are located in the Lake
Frances Prospect. The Lake Frances Prospect is approximately 10,000 acres inoil
and gas leases. The Prospect is located less than three and one half miles west
of the Williams Gas Field which has so far produced 4.7 billion cubic feet of
gas. The Lake Frances Field is owned in majority and 100% operated by Altamont
Oil & Gas, Inc, which is a company owned and managed by Patrick M. Montalban.
Geologic data indicate structural and stratagraphic traps are found along the
Lake Frances trend. The Bow Island Sandstones are approximately 100 to 115
million years old and were deposited during the Cretaceous Period. The Lake
Frances Bow Island is genetically a Typical Bow Island Reservoir. The
depositional environment is considered to be that of a transgressive, regressive
Marine, Shoreline or Near Shelf Sandstone Bar trending in a north to northwest
direction. The nature of the trap is a stratagraphic pinchout. During the Bow
Island deposition there were numerous transgressive, regressive events, which
created discontinuous lenses of sandstone interbedded with shales.
The production zones in the Lake Frances Area are the lst Bow Island "A"
Sandstone, 2nd Bow Island Sandstone, 3rd Bow Island Sandstone and 4th Bow Island
"A" and "C" Sandstone. The lithology for the lst Bow Island is Sandstone, grey,
fine grained, quartzose, well sorted, rounded grains, micaceous in parts.
Average thickness on the lst Bow Island is Sandstone, grey, fine to medium
grained, grains (glauconitic). Average thickness in the 4th Bow Island is 8 feet
with porosity's averaging from 18% to 22%. The geological sample description of
the lst Bow Island in the angular to rounded, many black chert grains, trace
fine pyrite and green glauconitic, calcareous.
25
Each Sandstone has its own porosity and permeability characteristics. When
comparing the 4th Bow Island in the Williams Gas Field, it is a continuous
reservoir over a large area. The 4th Bow Island in the Lake Frances Field has
also proved to be a continuous reservoir with the drilling and completion of the
Boucher 27-1 well. Every well that has been drilled in the Lake Frances Area has
produced from the same 4th Bow Island "C" Sandstone. The drive mechanism for the
Bow Island is pressure depletion. The character of Bow Island Gas is 900 to 910
BTU dry sweet methane gas.
Title to Properties
- -------------------
We believe that we hold good and indefeasible title to our properties, in
accordance with standards generally accepted in the natural gas industry. A
title examination has been performed with respect to substantially all of our
producing properties. Each of our leased properties represents a material
portion of our holdings; and a title dispute could have adverse consequences for
our production and retention of revenues from production of natural gas.
Our properties are subject to royalties and other customary outstanding
interests. Our properties are also subject to operating agreements and current
taxes. We do not believe that any of these burdens will materially interfere
with the use of our properties.
Natural Gas Reserves
- --------------------
The following table summarize information regarding our estimated proved natural
gas reserves as of the dates indicated. All of our reserves are located in the
United States. We base our estimates relating to our proved natural gas reserves
and future net revenues of natural gas reserves upon reports prepared by Citadel
Engineering Ltd, Petroleum Consultants. In accordance with SEC guidelines, we
make the standardized and Proved Producing Reserves - 10% discount estimates of
future net cash flows from proved reserves using natural gas sales prices in
effect as of the dates of the estimates which are held constant throughout the
life of the properties. We based our estimates of proved reserves upon the
following end of the year prices: Year ended December 31, 2005
Natural gas (per Million Cubic Feet) $ 11.22
Reserve estimates are imprecise and may change as additional information becomes
available. Furthermore, estimates of natural gas reserves, of necessity, are
projections based on engineering data. There are uncertainties inherent in the
interpretation of this data as well as the projection of future rates of
production and the timing of development expenditures. Reservoir engineering is
a subjective process of estimating underground accumulations of natural gas that
cannot be measured in an exact way and the accuracy of any reserve estimate is a
function of the quality of available data and of engineering and geological
interpretation and judgment. Reserve reports of other engineers might differ
from the reports of our consultant, Citadel Engineering Ltd, Petroleum
Consultants. Results of drilling, testing and production subsequent to the date
of the estimate may justify revision of this estimate. The amounts and timing of
26
future operating and development costs may also differ from those used. You
should not construe the estimated Proved Producing Reserves - 10% Discount
values as representative of the fair market value of our proved natural gas
properties. Proved Producing Reserves - 10% Discount values are based upon
projected cash inflows at a 10% discount, which do not provide for change in
natural gas prices or for escalation of expenses and capital costs. The
meaningfulness of these estimates depends upon the accuracy of the assumptions
upon which they were based. We evaluate natural gas reserves at constant
temperature and pressure. A change in either of these factors can affect the
measurement of natural gas reserves. We deduct operating costs, development
costs and production-related and ad valorem taxes in arriving at the estimated
future cash flows. We make no provision for income taxes, and base the estimates
on operating methods and conditions prevailing as of the dates indicated. We
cannot assure you that these estimates are accurate predictions of future net
cash flows from natural gas reserves or their present value.
Natural Gas Sales
- -----------------
We sell the natural gas we produce to gas transmission companies. As customary
in the industry, virtually all of our contract pricing provisions are tied to a
market index, with certain adjustments based on, among other factors, whether a
well delivers to a gathering or transmission line, quality of natural gas and
prevailing supply and demand conditions, so that the price of the natural gas
fluctuates to remain competitive with other available natural gas supplies. As a
result, our revenues from the sale of natural gas will suffer if market prices
decline and benefit if they increase. At this date, we do not currently engage
in hedging transactions and do not have any contracts with future gas production
under fixed price contracts.
At March 31, 2006, the weighted net average price of natural gas we produced
sold at prices averaging approximately $6.47 per Million Cubic Feet.
A variety of factors affect the market for natural gas, including the
availability of other domestic production, natural gas imports, the availability
and price of alternative fuels, the proximity and capacity of natural gas
pipelines, general fluctuations in the supply and demand for natural gas and the
effects of state and federal regulations on natural gas production and sales. In
particular, gas production and related operations are or have been subject to
price controls, taxes and other laws and regulations relating to the gas
industry. Failure to comply with such laws and regulations can result in
substantial penalties. The regulatory burden on the gas industry increases the
our cost of doing business and affects its profitability. Although we believe we
are in compliance with all applicable laws and regulations, because such laws
and regulations are frequently amended or reinterpreted, we are unable to
predict the future cost or impact of complying with such laws and regulations.
27
How We Set the Price for the Securities in this Offering
- --------------------------------------------------------
The price of the shares we are offering was arbitrarily determined based upon
the price per share in our private offering preceding this registration
statement. The offering price bears no relationship whatsoever to our assets,
earnings, book value or other criteria of value. The factors considered were:
o our limited operating history
o the proceeds to be raised by the offering solely through Warrant
exercise
o the price we believe a purchaser is willing to pay for our stock
Competition
- -----------
The oil and gas industry is highly competitive in all its phases. Properties in
which we have an interest will encounter strong competition from many other oil
and gas producers, including many that possess substantial financial resources,
in acquiring economically desirable producing properties and exploratory
drilling prospects, and in obtaining equipment and labor to operate and maintain
their properties.
We are a very small company in our industry. Many of our current and potential
competitors have significantly greater name recognition and more established
operations and relationships with persons and entities involved in the gas
drilling and production business. We compete based upon our management's
experience in the industry.
Government Regulation
- ---------------------
The federal government and various state and local governments have adopted laws
and regulations regarding the protection of human health and the environment.
These laws and regulations may require the acquisition of a permit by operators
before drilling commences, prohibit drilling activities on certain lands lying
within wilderness areas, wetlands, or where pollution might cause serious harm,
and impose substantial liabilities for pollution resulting from drilling
operations, particularly with respect to operations in onshore and offshore
waters or on submerged lands. These laws and regulations may increase the costs
of drilling and operating wells. Because these laws and regulations change
frequently, the costs of compliance with existing and future environmental
regulations cannot be predicted with certainty. We do not currently plan to
engage or anticipate that in the future we will engage in exploration and
production activities on federal land.
The transportation and certain sales of natural gas in interstate commerce are
heavily regulated by agencies of the federal government. Production of any oil
and gas by properties in which we have an interest will be affected to some
degree by state regulations. States have statutory provisions regulating the
production and sale of oil and gas, including provisions regarding
deliverability. Such statutes, and the regulations promulgated in connection
therewith, are generally intended to prevent waste of oil and gas and to protect
correlative rights to produce oil and gas between owners of a common reservoir.
State regulatory authorities may also regulate the amount of oil and gas
produced by assigning allowable rates of production to each well or proration
unit.
28
Any exploration or production on Federal land will have to comply with the
Federal Land Management Planning Act which has the effect generally of
protecting the environment. Any exploration or production on private property
whether owned or leased will have to comply with the Endangered Species Act and
the Clean Water Act. The costs of complying with environmental concerns under
any of these acts varies on a case by case basis. In many instances the cost can
be prohibitive to development. Environmental costs associated with a particular
project must be factored into the overall cost evaluation of whether to proceed
with the project.
Research and Development Expenditures
- -------------------------------------
Since inception, we have not incurred any expenditures in research or
development.
Employees
- ---------
We have one part-time employees, Mr. Patrick Montalban, our President and CEO
and Mr. Danny Mitchell, Vice President. The person supervising our day-to-day
operations is Mr. Patrick Montalban. In this capacity, he currently devotes
approximately 50% of his time to our business and anticipates that during the
next 12 months he will continue to devote approximately 75% of his time to
Majestic Oil & Gas. As our business develops, if we raise additional funds and
drill or participate in additional wells, Mr. Montalban may devote 100% of his
time to our business. Mr. Montalban may have conflicts in allocating his time
between our business and his other activities.
We have no collective bargaining agreements. We consider our relationship with
our employees to be excellent.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
- --------
The following discussion of our financial condition and results of operations
should be read in conjunction with the financial statements and notes appearing
elsewhere in the prospectus.
It is difficult for us to forecast our revenues or earnings accurately. We
believe that future period-to-period comparisons of our operating results may
not be meaningful and should not be relied upon as an indication of future
performance as we have and will have no backlog of orders. Our operating results
in one or more future quarters may fall below investor expectations which,
assuming our common stock trades on a recognized market, would almost certainly
cause the future trading price of our common stock to decline. You should read
the following discussion together with the consolidated financial statements and
their accompanying notes, included elsewhere in the prospectus.
29
We are engaged in the exploration, development, acquisition and operation of gas
properties. Because gas exploration and development and development requires
significant capital and because our assets and resources are limited, we
participate in the gas industry through the purchase of interests in either
producing wells or gas exploration and development and production projects.
Based upon our management's experience in the industry and on recent events,
including increasing global demand for energy and energy disruptions caused by
natural disasters, we believe the trend in oil and gas prices will remain
relatively stable or decrease slightly, but over the long-term are more likely
to increase. We expect to continue to generate positive net income from
operations in the future, although our revenue and expenses will increase as we
expand our drilling and ownership activities.
Operating Results
- -----------------
Fiscal year ended December 31, 2005 vs. fiscal year ended December 31, 2004.
- ------------------------ ------------------ ------------------ -----------------
Fiscal year ended Fiscal year ended Percentage change
December 31, 2005 December 31, 2004
- ------------------------ ------------------ ------------------ -----------------
Revenue $148,697 $57,983 257%
- ------------------------ ------------------ ------------------ -----------------
Expenses $82,316 $44,261 186%
- ------------------------ ------------------ ------------------ -----------------
Net Income $66,381 $13,722 484%
- ------------------------ ------------------ ------------------ -----------------
Our revenues from period to period increased because we owned income producing
assets for a longer period of time during the fiscal year ended December 31,
2005.
Our expenses from period to period increased due primarily to increases in taxes
and royalties as well as in depreciation and amortization and administrative as
our scope of operations increased.
Three months ended March 31, 2006 vs. Three months ended March 31, 2005
- ------------------------ ------------------ ------------------ -----------------
Three months ended Three months ended Percentage change
March 31, 2006 March 31, 2005
- ------------------------ ------------------ ------------------ -----------------
Revenue $21,632 $35,101 (38%)
- ------------------------ ------------------ ------------------ -----------------
Expenses $25,501 $15,791 161%
- ------------------------ ------------------ ------------------ -----------------
Net Income (Loss) $3,869) $19,310 (597%)
- ------------------------ ------------------ ------------------ -----------------
Our revenues decreased for the three months ended March 31, 2006 vs. the three
months ended March 31, 2005 because of a decrease in production volumes. This in
turn led to a decrease in revenues, which directly affects our production tax
and royalty burden.
30
Our expenses increased for the three months ended March 31, 2006 vs. the three
months ended March 31, 2005 with increases in legal and accounting and small
decreases in taxes and royalties due to the fees paid to EideBailly, LLC for the
auditing of our financial statements for the period ending December 31, 2005. In
addition, filing fees were incurred for the filing of this registration
statement.
Liquidity and Capital Resources
We are a development stage company. From our inception to March 31, 2006, we
incurred operating losses of $238,910 and had a an accumulated deficit of
$$238,910. This deficit is primarily the result of $300,000 in expenses
associated with stock issuances in our fiscal year ended December 31, 2002. In
addition, as of March 31, 2006, we had $180,285 of current cash available. Our
cash resources of $180,285 are sufficient to satisfy our cash requirements over
the next 12 months.
We need an additional minimum of $1,000,000 to finance our planned expansion in
the next 12 months, which funds will be used for drilling of development gas
wells in the Lake Frances and Williams Fields. We hope to be able to raise
additional funds from an offering of our stock in the future. However, this
offering may not occur, or if it occurs, may not raise the required funding. We
may also consider securing debt financing. We may not raise other equity or debt
financing sufficient to fund this amount. If we don't raise or generate these
funds, the implementation of our short-term business plan will be delayed or
eliminated.
Our ability to continue as a going concern is dependent on our ability to raise
funds to implement our planned development; however we may not be able to raise
sufficient funds to do so. Our independent auditors have indicated that there is
substantial doubt about our ability to continue as a going concern over the next
twelve months. Our poor financial condition could inhibit our ability to achieve
our business plan.
Commitments and Contingencies
- -----------------------------
On July 1, 2004, the Company entered into an operating agreement with Altamont
Oil & Gas, Inc., through which Altamont Oil & Gas, Inc. will operate the wells
in which the we have acquired a working interest. Our share of monthly operating
costs will be deducted from its monthly share of production revenue.
DESCRIPTION OF PROPERTY
Our offices are located at 33 1st Avenue SW, Cut Bank, Montana 59427. Our
telephone number is 406-873-5580. Our offices are in good condition and are
sufficient to conduct our operations. This space is provided by our president at
no cost.
31
We do not intend to renovate, improve, or develop properties. We are not subject
to competitive conditions for property and currently have no property in insure.
We have no policy with respect to investments in real estate or interests in
real estate and no policy with respect to investments in real estate mortgages.
Further, we have no policy with respect to investments in securities of or
interests in persons primarily engaged in real estate activities.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At formation, we issued 3,000,000 shares of its common stock to Patrick M.
Montalban, our President, CEO and director for his work in the formation and
organization. This was recorded as a $300,000 charge to organizational expenses
during the period from inception April 16, 2002 to December 31, 2002.
Grizzly Energy acquired a 25% working interest from Altamont Oil and Gas, Inc.,
a Montana corporation and an affiliate of our President, Mr. Patrick Montalban,
in July 2004 for 16,000 shares of Grizzly Energy common stock. Mr. Patrick
Montalban owns and manages Altamont Oil and Gas, Inc. Thereafter in July 2004,
Majestic Oil & Gas, Inc. acquired all 16,000 issued and outstanding shares of
Grizzly Energy, Inc. common stock for the issuance of 1,600,000 shares of our
common stock. Prior to the sale to Majestic Oil & Gas, Inc, Altamont Oil & Gas,
Inc. incurred an expense of $120,000 in the acquisition of a 50% Working
Interest in this well. Altamont retained the remaining 25% interest in this
well.
The purpose of this transaction was to acquire the working interest.
During the period from inception April 16, 2002 to December 31, 2002, we paid
consulting fees totaling $28,000 to Patrick M. Montalban, President, CEO and
director, for studies of various oil and natural gas prospects.
Majestic Oil & Gas, Inc. participated in the drilling of the Boucher 27-1, on
May 24, 2004,with Altamont Oil & Gas Inc., an affiliate, which is a bonded
operator with the Board of Oil and Gas of the state of Montana, and our 33% of
the proportionate share of the drilling and completion costs were $32,186.67.
For this expenditure, we earned a 25% working interest. The purpose of this
transaction was to acquire the working interest.
Altamont Oil & Gas, Inc. is the operator of the wells in which we own our
working interests. As the operator of the wells, Altamont is responsible for
remitting production taxes to the taxing authorities and royalty payments to the
royalty interest owners. We pay Altamont a fee of $250 per month per well as an
operating fee. The purpose of this transaction was to obtain the services of an
experienced operator necessary for the operation of the wells in which we have a
working interest.
We believe the transactions and agreements with related parties were comparable
to terms we could have obtained from non-affiliated parties.
32
We have adopted an oral policy that any opportunity to acquire or develop any
oil and gas property or any working interest therein which becomes known to Mr.
Montalban or Altamont will be first offered to us. As we would then develop the
property or interest, and not Altamont, we would bear all the costs and receive
all the profits from these properties or interests, if acquired.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
- ------------------
There is no established public trading market for our securities and a regular
trading market may not develop, or if developed, may not be sustained. A
shareholder in all likelihood, therefore, will not be able to resell his or her
securities should he or she desire to do so when eligible for public resales.
Furthermore, it is unlikely that a lending institution will accept our
securities as pledged collateral for loans unless a regular trading market
develops. We have no plans, proposals, arrangements, or understandings with any
person with regard to the development of a trading market in any of our
securities.
Options, Warrants, Convertible Securities
- -----------------------------------------
We have the following warrants outstanding:
1,640,000 shares of our common stock at a price of $.25 per share, exercisable
for up to one year after the first day of trading..
Penny Stock Considerations
- --------------------------
Our shares will be "penny stocks" as that term is generally defined in the
Securities Exchange Act of 1934 to mean equity securities with a price of less
than $5.00. Our shares thus will be subject to rules that impose sales practice
and disclosure requirements on broker-dealers who engage in certain transactions
involving a penny stock.
Under the penny stock regulations, a broker-dealer selling a penny stock to
anyone other than an established customer or accredited investor must make a
special suitability determination regarding the purchaser and must receive the
purchaser's written consent to the transaction prior to the sale, unless the
broker-dealer is otherwise exempt. Generally, an individual with a net worth in
excess of $1,000,000 or annual income exceeding $100,000 individually or
$300,000 together with his or her spouse is considered an accredited investor.
In addition, under the penny stock regulations the broker-dealer is required to:
o Deliver, prior to any transaction involving a penny stock, a
disclosure schedule prepared by the Securities and Exchange
Commissions relating to the penny stock market, unless the
broker-dealer or the transaction is otherwise exempt;
33
o Disclose commissions payable to the broker-dealer and our registered
representatives and current bid and offer quotations for the
securities;
o Send monthly statements disclosing recent price information
pertaining to the penny stock held in a customer's account, the
account's value and information regarding the limited market in
penny stocks; and
o Make a special written determination that the penny stock is a
suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction, prior to conducting any penny
stock transaction in the customer's account.
Because of these regulations, broker-dealers may encounter difficulties in their
attempt to sell shares of our common stock, which may affect the ability of
selling shareholders or other holders to sell their shares in the secondary
market and have the effect of reducing the level of trading activity in the
secondary market. These additional sales practice and disclosure requirements
could impede the sale of our securities, if our securities become publicly
traded. In addition, the liquidity for our securities may be decreased, with a
corresponding decrease in the price of our securities. Our shares in all
probability will be subject to such penny stock rules and our shareholders will,
in all likelihood, find it difficult to sell their securities.
OTC Bulletin Board Qualification for Quotation
- ----------------------------------------------
To have our shares of common stock on the OTC Bulletin Board, a market maker
must file an application on our behalf in order to make a market for our common
stock. We have engaged in preliminary discussions with an NASD Market Maker to
file our application on Form 211 with the NASD, but as of the date of this
prospectus, no filing has been made. Based upon our counsel's prior experience,
we anticipate that after this registration statement is declared effective, it
will take approximately 2 - 8 weeks for the NASD to issue a trading symbol.
Holders
- -------
As of the date of this registration statement, we had 59 holders of record of
our common stock.
Dividends
- ---------
We have not declared any cash dividends on our common stock since our inception
and do not anticipate paying such dividends in the foreseeable future. We plan
to retain any future earnings for use in our business. Any decisions as to
future payments of dividends will depend on our earnings and financial position
and such other facts, as the board of directors deems relevant.
34
Reports to Shareholders
- -----------------------
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934 and will file
periodic reports, proxy statements, and other information with the Securities
and Exchange Commission through December 31, 2005, assuming this registration
statement is declared effective before that date. Thereafter, we will continue
as a voluntary reporting company and will not be subject to the proxy statement
or other information requirements of the 1934 Act. We are not required under
Section 12(g) or otherwise to become a mandatory 1934 Act filer due to the fact
we have less than 300 shareholders. If we subsequently decide to cease filing
reports, our securities can no longer be quoted on the OTC Bulletin Board. We
will voluntarily send an annual report to shareholders containing audited
financial statements.
Where You Can Find Additional Information
- -----------------------------------------
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 with respect to the common stock in this offering. This
prospectus, which constitutes a part of the registration statement, does not
contain all the information set forth in the registration statement. For further
information about us and the shares of common stock to be sold in the offering,
please refer to the registration statement and the exhibits and schedules
thereto. The registration statement and exhibits may be inspected, without
charge, and copies may be obtained at prescribed rates, at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The registration statement and other information filed
with the SEC are also available at the web site maintained by the SEC at
http://www.sec.gov.
EXECUTIVE COMPENSATION
We paid no compensation to Mr. Montalban in fiscal years ended December 31, 2003
and 2004. We have no agreements concerning compensation with Mr. Montalban.
Board Compensation
- ------------------
We paid no compensation to Mr. Montalban in fiscal years ended December
31, 2005 and 2004. We have no agreements concerning compensation with Mr.
Montalban.
35
FINANCIAL STATEMENTS
MAJESTIC OIL & GAS, INC.
UNAUDITED BALANCE SHEETS
MARCH 31, 2006 AND 2005
March 31, March 31,
2006 2005
UNAUDITED UNAUDITED
------------ ------------
ASSETS
Cash and cash equivalents $ 180,285 $ 95,557
Trade receivables 10,319 41,373
------------ ------------
Total Current Assets 190,604 136,930
------------ ------------
PROPERTY AND EQUIPMENT
Oil and gas properties,
using the full cost method of
accounting:
Properties being amortized 192,187 192,187
Less accumulated depletion,
amortization and impairment (39,000) (19,000)
------------ ------------
Net Property and Equipment 153,187 173,187
------------ ------------
Total Assets $ 343,791 $ 310,117
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Production taxes and royalties payable $ 3,701 $ 13,229
Common stock, no par value-
Authorized Shares - 100,000,000
Issued & Outstanding: 6,240,000 shares $ 624,000 $ 624,000
(Deficit) accumulated during the
development stage (283,910) (327,112)
------------ ------------
$ 343,791 $ 310,117
============ ============
F-1 (i)
MAJESTIC OIL & GAS, INC.
UNAUDITED INCOME STATEMENTS
THREE MONTHS ENDED MARCH 31, 2006 AND 2005, AND INCEPTION (APRIL 16, 2002) TO
MARCH 31, 2006
Inception
Three Months Three Months (April 16, 2002)
Ended Ended to
March 31, 2006 March 31, 2005 March 31, 2006
UNAUDITED UNAUDITED UNAUDITED
-------------- -------------- ---------------
REVENUE $ 21,632 $ 35,101 $ 228,312
-------------- -------------- ---------------
EXPENSES
Organization expenses -- -- 301,115
Taxes & royalties 5,438 7,774 63,708
Legal, accounting and filing fees 12,037 425 51,477
Depletion and amortization 5,000 5,000 39,000
Consulting -- -- 28,000
Administrative staff 1,615 1,615 10,034
Transfer Agent Fees 450 150 5,833
Well operating fees 468 402 5,512
Travel -- -- 2,699
Phone and utilities 218 186 1,504
Engineering -- -- 1,500
Office Expenses 275 240 907
Field Expenses -- -- 661
Bank Charges -- -- 358
Currency exchange (gain) loss -- -- (86)
-------------- -------------- ---------------
25,501 15,791 512,222
-------------- -------------- ---------------
NET INCOME (LOSS) $ (3,869) 19,310 $ (283,910)
-------------- -------------- ---------------
EARNINGS PER SHARE
Net Income, basic and diluted $ (0.00) $ 0.00
-------------- --------------
Weighted average number of shares
outstanding 6,240,000 6,240,000
Diluted potential shares -
stock warrants -- --
-------------- --------------
Adjusted weighted average shares 6,240,000 6,240,000
-------------- --------------
F-2 (ii)
MAJESTIC OIL & GAS, INC.
UNAUDITED STATEMENTS OF CASH FLOW
THREE MONTHS ENDED MARCH 31, 2006 AND 2005, AND INCEPTION (APRIL 16, 2002) TO
MARCH 31, 2006
Inception
Three Months Three Months (April 16, 2002)
Ended Ended Through
March 31, 2006 March 31, 2005 March 31, 2006
UNAUDITED UNAUDITED UNAUDITED
---------------- ---------------- ----------------
OPERATING ACTIVITIES
Net income (loss) $ (3,869) $ 19,310 $ (283,910)
Changes and credits to net income (loss)
not affecting cash
Depletion and amortization 5,000 5,000 39,000
Organizational expenses paid with
stock -- -- 300,000
Legal fees paid with stock -- -- 25,000
Changes in assets and liabilities
Trade receivables 22,390 6,352 (10,319)
Production taxes and royalties payable (5,968) 11,232 3,701
Other -- -- --
---------------- ---------------- ----------------
NET CASH FROM (USED FOR)
OPERATING ACTIVITIES 17,553 41,894 73,472
---------------- ---------------- ----------------
INVESTING ACTIVITIES
Additions to property and equipment -- -- (32,187)
---------------- ---------------- ----------------
NET CASH USED FOR INVESTING
ACTIVITIES -- -- (32,187)
---------------- ---------------- ----------------
FINANCING ACTIVITIES
Proceeds from issuance of stock -- -- 139,000
---------------- ---------------- ----------------
NET CASH USED FROM FINANCING
ACTIVITIES -- -- 139,000
---------------- ---------------- ----------------
NET CHANGE IN CASH AND CASH
EQUIVALENTS 17,553 41,894 180,285
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 162,732 53,663 --
---------------- ---------------- ----------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 180,285 $ 95,557 $ 180,285
---------------- ---------------- ----------------
F-3 (iii)
MAJESTIC OIL & GAS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005
NOTE 1 - BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES
Principle Business Activity
Majestic Oil & Gas, Inc. (Company) is a development stage enterprise and its
operations consist of oil and natural gas development and production in the
Rocky Mountain region. The financial statements and notes to the financial
statements are the representation of the Company's management, who is
responsible for their integrity and objectivity. The accounting policies of the
Company are in accordance with generally accepted accounting principles and
conform to the standards applicable to development stage enterprises. These
interim financial statements include all necessary adjustments which in the
opinion of management are necessary in order to make the financial statements
not misleading.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Those estimates and assumptions
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported revenue and expenses. Actual
results could differ from these estimates.
Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
Earnings Per Share of Common Stock
Basic earnings per share is determined using net income divided by the weighted
average shares outstanding during the period. Diluted earnings per share is
computed by dividing net income by the weighted average shares outstanding,
assuming all dilutive potential common shares were issued.
Oil & Gas Properties
The Company utilizes the full cost method of accounting for oil and gas
properties. Accordingly, all costs associated with the acquisition, exploration
and development of oil and gas reserves (including costs of abandoned
leaseholds, delay lease rentals, dry hole costs, geological and geophysical
costs, certain internal costs associated directly with acquisition, drilling and
well equipment inventory, exploration and development activities, estimated
dismantlement and abandonment costs, site restoration and environmental exit
costs, etc.) are capitalized.
All capitalized costs of oil and gas properties, net of estimated salvage
values, plus the estimated future costs to develop proved reserves, are
amortized on the unit-of-production method using estimates of proved reserves.
Investments in unproved properties and major development projects are not
amortized until proved reserves associated with the projects can be determined
or until impairment occurs. If the results of an assessment indicate that the
properties are impaired, the amount of the impairment is added to the
capitalized costs to be amortized.
(continued on next page)
F-4 (iv)
MAJESTIC OIL & GAS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005
In addition, the capitalized costs are subject to a "ceiling test" which
basically limits such costs to the aggregate of the "estimated present value,"
discounted at a 10-percent interest rate, of future net revenues from proved
reserves, based on current economic and operating condition, plus the lower of
cost or fair market value of unproved properties.
Gains or losses are not recognized upon the sale or other disposition of oil and
gas properties, except in extraordinary transactions.
Revenue Recognition
The Company owns working interests in producing wells. Production from the wells
is sold based on volumetric calculations at a contractual price. Revenue is
recognized based on volumes sold to the purchaser. The Company recognizes
revenue monthly based on its working interest share of production. The Company
recognizes its working interest share of well operating costs, production taxes
and royalties when incurred.
Note 2 - Organization and Development of the Company
The Company was formed on April 16, 2002 as a corporation. The Company is a
development stage enterprise and it is management's intention that operations
will ultimately consist of oil and natural gas development and production in the
Rocky Mountain region. The accompanying financial statements reflect
organizational activities and limited oil and gas development and production
activities and they are not necessarily indicative of what the financial
statements will reflect once the intended operations of the Company are fully
underway.
The Company intends to register with the Securities and Exchange Commission and
subsequently trade its outstanding shares of stock on the OTC Bulletin Board.
Although the Company's management intends to pursue the registration process
with all due diligence and speed, approval of the Company's registration
statements has not yet occurred, and there is no guarantee that the shares will
quoted and traded on the OTC Bulletin Board or any other public exchange.
F-5 (v)
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2005 AND 2004,
AND
INCEPTION (APRIL 16, 2002) TO DECEMBER 31, 2005
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
Table of Contents
- --------------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet F-2
Income F-3
Changes in Stockholders' Equity F-4
Cash Flows F-5
Notes to Financial Statements F-6 through F-10
SUPPLEMENTAL INFORMATION
Disclosures about Oil and Gas Producing
Activities and Properties - Unaudited F-11 through F-13
[LETTERHEAD OF EIDE BAILLY]
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
The Stockholders and Board of Directors
Majestic Oil & Gas, Inc. and Subsidiary (A Development Stage Company)
Cut Bank, Montana
We have audited the accompanying consolidated balance sheet of Majestic Oil &
Gas, Inc. and Subsidiary (A Development Stage Company) as of December 31, 2005,
and the related consolidated statements of income, changes in stockholders'
equity, and cash flows for the years ended December 31, 2005 and 2004, and the
period from inception (April 16, 2002) to December 31, 2005. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
consideration of internal controls 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 do not express such
an opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Majestic Oil & Gas,
Inc. and Subsidiary (A Development Stage Company) as of December 31, 2005, and
the results of their operations and their cash flows for the years ended
December 31, 2005 and 2004, and the period from inception (April 16, 2002) to
December 31, 2005, in conformity with U.S. generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, as a development stage company, the Company has suffered
recurring losses from operations that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Eide Bailly LLP
- -------------------
Eide Bailly LLP
Billings, Montana
March 8, 2006
F-1
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2005
- --------------------------------------------------------------------------------
2005
---------
ASSETS
Cash and cash equivalents $ 162,732
Trade receivables 32,709
---------
Total current assets 195,441
---------
PROPERTY AND EQUIPMENT
Oil and gas properties, using the full cost method of accounting:
Properties being amortized 192,187
Less accumulated depletion, amortization and impairment (34,000)
---------
Net property and equipment 158,187
---------
Total assets $ 353,628
=========
LIABILITIES
Production taxes and royalties payable $ 9,669
---------
STOCKHOLDERS' EQUITY
Common stock, no par value-
Authorized, 100,000,000 shares
Issued and outstanding, 6,240,000 shares in 2005 624,000
(Deficit) accumulated during the development stage (280,041)
---------
343,959
---------
Total liabilities and stockholders' equity $ 353,628
=========
See notes to consolidated financial statements.
F-2
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2005 AND 2004,
AND THE PERIOD FROM INCEPTION (APRIL 16, 2002) TO DECEMBER 31, 2005
- --------------------------------------------------------------------------------
Inception
Year Ended Year Ended (April 16, 2002)
December 31, December 31, to December 31,
2005 2004 2005
---------- ---------- ----------
REVENUE $ 148,697 $ 57,983 $ 206,680
---------- ---------- ----------
EXPENSES
Organization expenses -- 1,115 301,115
Taxes and royalties 43,363 14,907 58,270
Legal, accounting and filing fees 3,755 6,224 39,440
Depletion and amortization 20,000 14,000 34,000
Consulting -- -- 28,000
Administrative staff 6,459 1,960 8,419
Transfer agent fees 1,800 3,583 5,383
Well operating fees 3,419 1,625 5,044
Travel 1,687 -- 2,699
Engineering -- -- 1,500
Phone and utilities 1,060 226 1,286
Field expenses 361 300 661
Office supplies 412 168 632
Bank charges -- 153 358
Currency exchange (gain) loss -- -- (86)
---------- ---------- ----------
82,316 44,261 486,721
---------- ---------- ----------
NET INCOME (LOSS) $ 66,381 $ 13,722 $ (280,041)
========== ========== ==========
EARNINGS PER SHARE
Net income, basic and diluted $ 0.01 $ 0.00
========== ==========
Weighted average number of shares
outstanding 6,240,000 5,304,770
Dilutive potential shares-
stock warrants -- --
---------- ----------
Adjusted weighted average shares 6,240,000 5,304,770
========== ==========
See notes to consolidated financial statements.
F-3
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2005 AND 2004, AND THE
PERIOD FROM INCEPTION (APRIL 16, 2002) TO DECEMBER 31, 2003
- --------------------------------------------------------------------------------
(Deficit)
Accumulated
Common Stock During
------------------------ Development
Shares Amount Stage Total
--------- --------- --------- ---------
BEGINNING BALANCE, INCEPTION -- $ -- $ -- $ --
(APRIL 16, 2002) TO
DECEMBER 31, 2003
Common stock issued 4,205,000 420,500 -- 420,500
Net loss -- -- (360,144) (360,144)
--------- --------- --------- ---------
BALANCE, DECEMBER 31, 2003 4,205,000 420,500 (360,144) 60,356
Common stock issued 2,035,000 203,500 -- 203,500
Net income -- -- 13,722 13,722
--------- --------- --------- ---------
BALANCE, DECEMBER 31, 2004 6,240,000 624,000 (346,422) 277,578
Common stock issued -- -- -- --
--------- --------- --------- ---------
Net income -- -- 66,381 66,381
BALANCE, DECEMBER 31, 2005 6,240,000 $ 624,000 $(280,041) $ 343,959
========= ========= ========= =========
See notes to consolidated financial statements.
F-4
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2005 AND 2004,
AND THE PERIOD FROM INCEPTION (APRIL 16, 2002) TO DECEMBER 31, 2005
- --------------------------------------------------------------------------------
Inception
Year Ended Year Ended (April 16, 2002)
December 31, December 31, to December 31,
2005 2004 2005
--------- --------- ---------
OPERATING ACTIVITIES
Net income (loss) $ 66,381 $ 13,722 $(280,041)
Changes and credits to net income
(loss) not affecting cash
Depletion and amortization 20,000 14,000 34,000
Organizational expenses paid
with stock -- -- 300,000
Legal fees paid with stock -- -- 25,000
Changes in assets and liabilities
Trade receivables 15,016 (35,881) (32,709)
Production taxes and royalties payable 7,672 1,997 9,669
--------- --------- ---------
NET CASH USED FOR
OPERATING ACTIVITIES 109,069 (6,162) 55,919
--------- --------- ---------
INVESTING ACTIVITIES
Additions to property and equipment -- (32,187) (32,187)
--------- --------- ---------
NET CASH USED FOR
INVESTING ACTIVITIES -- (32,187) (32,187)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of
common stock -- 43,500 139,000
--------- --------- ---------
NET CASH FROM
FINANCING ACTIVITIES -- 43,500 139,000
--------- --------- ---------
NET CHANGE IN CASH AND
CASH EQUIVALENTS 109,069 5,151 162,732
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 53,663 48,512 --
--------- --------- ---------
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 162,732 $ 53,663 $ 162,732
========= ========= =========
See notes to consolidated financial statements.
F-5
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
- --------------------------------------------------------------------------------
NOTE 1 - BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES
Principal Business Activity and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Majestic Oil & Gas, Inc. and its wholly owned subsidiary, Grizzly Energy, Inc.
All material inter-company transactions and balances between the entities have
been eliminated.
Majestic Oil & Gas, Inc. (Company) is a development stage enterprise and its
operations consist of oil and natural gas development and production in the
Rocky Mountain region. The financial statements and notes to the financial
statements are the representation of the Company's management, who is
responsible for their integrity and objectivity. The accounting polices of the
Company are in accordance with generally accepted accounting principles and
conform to the standards applicable to development stage enterprises.
Going Concern
The Company is in the development stage and has incurred losses since its
inception that have resulted in an accumulated deficit. Also, management of the
Company believes it will require additional financing that it has not yet
secured in order to emerge from the development stage. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management intends to vigorously pursue financing either from creditors or from
a future stock offering. However, such financing may not occur, or if it does
occur, may not raise sufficient funds to emerge from the development stage.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Those estimates and assumptions
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported revenue and expenses. Actual
results could differ from these estimates.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between financial and income tax reporting. The
deferred tax assets and liabilities, if any, represent the future tax return
consequences of those differences, which will either be taxable or deductible
when the assets and liabilities are recovered or settled.
Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
Trade Receivables
The Company is subject to credit risk associated with the purchases of its
produced natural gas. Exposure to this risk is controlled through credit
approvals and monitoring procedures. Collateral is not required. The Company
believes all trade receivables currently outstanding are collectible,
accordingly, no allowance for doubtful accounts has been established.
(continued on next page)
F-6
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
- --------------------------------------------------------------------------------
Earnings per Share of Common Stock
Basic earnings per share is determined using net income divided by the weighted
average shares outstanding during the period. Diluted earnings per share is
computed by dividing net income by the weighted average shares outstanding,
assuming all dilutive potential common shares were issued. The effect of
outstanding common stock warrants was anti-dilutive for 2005 and 2004.
Oil and Gas Properties
The Company utilizes the full cost method of accounting for oil and gas
properties. Accordingly, all costs associated with the acquisition, exploration
and development of oil and gas reserves (including costs of abandoned
leaseholds, delay lease rentals, dry hole costs, geological and geophysical
costs, certain internal costs associated directly with acquisition, drilling and
well equipment inventory, exploration and development activities, estimated
dismantlement and abandonment costs, site restoration and environmental exit
costs, etc.) are capitalized.
All capitalized costs of oil and gas properties, net of estimated salvage
values, plus the estimated future costs to develop proved reserves, are
amortized on the unit-of-production method using estimates of proved reserves.
Investments in unproved properties and major development projects are not
amortized until proved reserves associated with the projects can be determined
or until impairment occurs. If the results of an assessment indicate that the
properties are impaired, the amount of the impairment is added to the
capitalized costs to be amortized.
In addition, the capitalized costs are subject to a "ceiling test" which
basically limits such costs to the aggregate of the "estimated present value,"
discounted at a 10-percent interest rate, of future net revenues from proved
reserves, based on current economic and operating conditions, plus the lower of
cost or fair market value of unproved properties.
Gains or losses are not recognized upon the sale or other disposition of oil and
gas properties, except in extraordinary transactions.
Revenue Recognition
Revenue from the sale of oil and gas production is recognized when deliveries
occur.
NOTE 2 - ORGANIZATION AND DEVELOPMENT OF THE COMPANY
The Company was formed on April 16, 2002 as a corporation. The Company is a
development stage enterprise and it is management's intention that operations
will ultimately consist of oil and natural gas development and production in the
Rocky Mountain region. The accompanying financial statements reflect
organizational activities and limited oil and gas development and production
activities and they are not necessarily indicative of what the financial
statements will reflect once the intended operations of the Company are fully
underway.
The Company intends to register with the Securities and Exchange Commission and
subsequently trade its outstanding shares of stock on the OTC Bulletin Board.
Although the Company's management intends to pursue the registration process
with all due diligence and speed, approval of the Company's registration
statement has not yet occurred, and there is no guarantee that the shares will
quoted and traded on the OTC Bulletin Board or any other public exchange.
(continued on next page)
F-7
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
- --------------------------------------------------------------------------------
NOTE 3 - NON-CASH TRANSACTIONS AND BUSINESS COMBINATION
At formation, the Company issued 3,000,000 shares of its common stock to Patrick
M. Montalban, President, CEO and director to the Company for his work in the
formation and organization of the Company. This was recorded as a $300,000
charge to organizational expenses during the period from inception (April 16,
2002) to December 31, 2002.
During the year ended December 31, 2003, the Company issued 250,000 shares of
its common stock to Michael Williams, Esq. in payment of legal fees incurred
related to the registration of the Company with the Securities and Exchange
Commission. This was recorded as a $25,000 charge to legal expenses during the
year ended December 31, 2003.
On July 1, 2004, the Company acquired 100% of the outstanding stock of Grizzly
Energy, Inc. (Grizzly) from Altamont Oil & Gas, Inc., an entity related through
common ownership and management. Grizzly was acquired in a stock-for-stock
exchange where 100% of the outstanding shares of Grizzly were acquired for
1,600,000 shares of the Company. At the time of acquisition, Grizzly owned a
single asset: a 25% working interest in the State 36-1 well, a producing gas
well in Pondera County, Montana. The primary reason for the acquisition of
Grizzly was to expand the Company's holdings of producing gas properties. The
purchase price was based on proved reserves in place as supported by an
independent petroleum engineer's study. The Company's operating results include
the operating results of Grizzly beginning July 1, 2004 through December 31,
2004. The condensed balance sheet of Grizzly as of July 1, 2004 was as follows:
ASSETS
Oil and gas properties $ 160,000
=========
LIABILITIES AND STOCKHOLDER'S EQUITY
Stockholder's equity $ 160,000
=========
The proforma operating results of the Company for the year ended December 31,
2004 would have been as follows, had Grizzly's operations been combined with the
Company's:
2004
--------
Revenue $ 79,883
Expenses (36,669)
--------
Net income $ 43,214
========
Earnings (loss) per share $ 0.01
========
(continued on next page)
F-8
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
- --------------------------------------------------------------------------------
NOTE 4 - COMMON STOCK WARRANTS
The Company has issued common stock warrants to the stockholders that purchased
common stock from the Company for cash. These warrants entitle the holders to
purchase additional shares of common stock from the Company for $0.25 per share.
As of December 31, 2005, there were a total of 1,390,000 warrants issued and
outstanding, and these warrants have no expiration date. The warrants were
issued 1:1 for each common share purchased for cash as follows: during the year
ended December 31, 2005 no warrants were issued, during the year ended December
31, 2004 a total of 435,000 warrants were issued, and during the period from
inception (April 16, 2002) through December 31, 2005 a total of 1,390,000
warrants were issued.
NOTE 5 - RELATED PARTY TRANSACTIONS
During the period from inception (April 16, 2002) to December 31, 2002, the
Company paid consulting fees totaling $28,000 to Patrick M. Montalban,
President, CEO and director to the Company, for studies of various oil and
natural gas prospects. There has been no other cash compensation paid to Mr.
Montalban during the period from inception (April 16, 2002) through December 31,
2005 for his services to the Company. Refer to Note 3 - Non-Cash Transactions
for a description of stock issued to Mr. Montalban for his services in forming
the Company.
Altamont Oil & Gas, Inc. (Altamont), an entity related through common ownership
and management, is the operator of the wells in which the Company owns its
working interests. As the operator of the wells, Altamont is responsible for
remitting production taxes to the taxing authorities and royalty payments to the
royalty interest owners. The Company also acquired 100% of the outstanding stock
of Grizzly Energy, Inc. from Altamont Oil & Gas, Inc. (See Note 3.)
NOTE 6 - INCOME TAXES
Net deferred tax assets consist of the following components as of December 31,
2005 and 2004:
2005 2004
--------- ---------
Deferred tax assets
Net operating loss carry-forward $ 95,000 $ 118,000
Less valuation allowance (95,000) (118,000)
--------- ---------
$ -- $ --
========= ========
During the years ended December 31, 2005 and 2004, the Company recorded
valuation allowances that reduce the total deferred tax assets to zero.
Realization of deferred tax assets is dependent upon sufficient future taxable
income during the period that the carry-forwards are expected to be available to
reduce taxable income. Because the Company is in the development stage, and may
not achieve its desired level of profitability in its intended area of
operation, a valuation allowance has been established that reduce the deferred
tax asset to zero in all periods presented. There was no other activity in the
valuation allowance during the years ended December 31, 2005 and 2004, or during
the period from inception (April 16, 2002) to December 31, 2005.
Operating loss carry-forwards for tax purposes expire in the years 2017 through
2019.
(continued on next page)
F-9
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
- --------------------------------------------------------------------------------
The provision for income taxes for the years ended December 31, 2005 and 2004,
and the period from inception (April 16, 2002) to December 31, 2005 consisted of
the following:
Period From
Year Year Inception
Ended Ended (April 16, 2002)
December 31, December 31, to
2005 2004 December 31, 2005
-------- -------- --------
Current expense $ -- $ -- $ --
Current tax (provision) benefit (23,000) (5,000) 95,000
Deferred tax (provision) benefit 23,000 5,000 (95,000)
-------- -------- --------
$ -- $ -- $ --
======== ======== =========
The effective tax rate reconciliation is as follows:
Period From
Year Year Inception
Ended Ended (April 16, 2002)
December 31, December 31, to
2005 2004 December 31, 2005
-------- -------- --------
Tax expense (benefit) on book income
computed at 34% $ 23,000 $ 5,000 $(95,000)
Increases (decreases) in taxes resulting from:
Changes in valuation allowance (23,000) (5,000) 95,000
-------- -------- --------
Income tax expense (benefit), as adjusted
$ -- $ -- $ --
======== ======== ========
Effective tax rate 0.00% 0.00% 0.00%
======== ======== ========
NOTE 7 - COMMITMENTS AND CONTINGENCIES
On July 1, 2004, the Company entered into an operating agreement with Altamont
Oil & Gas, Inc., through which Altamont Oil & Gas, Inc. will operate the wells
in which the Company has acquired a working interest. The payments received by
the Company for its share of monthly production revenue from Altamont Oil & Gas,
Inc. are net of its share of monthly operating costs and production royalty
payments, both of which are paid directly by Altamont Oil & Gas, Inc.
NOTE 8 - OIL AND GAS PROPERTY ACQUISITIONS
On June 10, 2004, the Company acquired a 25% working interest the Boucher 27-1
well in Pondera County, Montana from an unrelated third party for $32,187. The
Boucher 27-1 well is a producing gas well.
On July 1, 2004, the Company acquired 100% of the outstanding stock of Grizzly
Energy, Inc. from Altamont Oil & Gas, Inc., an entity related through common
ownership and management. Grizzly Energy, Inc. was acquired in a stock-for-stock
exchange where 100% of the outstanding shares of Grizzly Energy, Inc. were
acquired for 1,600,000 shares of the Company. Grizzly Energy, Inc. owns a 25%
working interest in the State 36-1 well, a producing gas well in Pondera County,
Montana. (See Note 3.)
F-10
SUPPLEMENTARY INFORMATION
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
SUPPLEMENTARY INFORMATION
DISCLOSURE OF OIL & GAS PRODUCING ACTIVITIES AND PROPERTIES - UNAUDITED
DECEMBER 31, 2005 AND 2004
- --------------------------------------------------------------------------------
OIL AND GAS PRODUCING ACTIVITIES AND PROPERTIES
Net capitalized costs related to the Company's oil and gas producing activities
are summarized as follows as of December 31, 2005, and 2004:
2005 2004
--------- ---------
Proved properties $ 192,187 $ 192,187
Unproved properties -- --
--------- ---------
Total 192,187 192,187
Less accumulated depletion,
depreciation, amortization
and impairment (34,000) (14,000)
--------- ---------
Net capitalized costs $ 158,187 $ 178,187
========= =========
Costs incurred in oil and gas property acquisition, exploration and development
activities, including capital expenditures are summarized as follows for the
years ended December 31, 2005 and 2004, the period from April 16, 2002
(Inception) to December 31, 2005:
Period From
Year Year Inception
Ended Ended (April 16, 2002)
December 31, December 31, to
2005 2004 December 31, 2005
----------- ----------- -----------
Property acquisition costs:
Proved $ 192,187 $ 192,187 $ 192,187
Unproved -- -- --
Exploration costs -- -- --
Development costs -- -- --
----------- ----------- -----------
$ 192,187 $ 192,187 $ 192,187
=========== =========== ===========
(continued on next page)
F-11
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
SUPPLEMENTARY INFORMATION
DISCLOSURE OF OIL & GAS PRODUCING ACTIVITIES AND PROPERTIES - UNAUDITED
DECEMBER 31, 2005 AND 2004
- --------------------------------------------------------------------------------
The Company's results of operations from oil and gas producing activities
(excluding corporate overhead and financing costs) are presented below for the
years ended December 31, 2005 and 2004, the period from April 16, 2002
(Inception) to December 31, 2005:
Period From
Year Year Inception
Ended Ended (April 16, 2002)
December 31, December 31, to
2005 2004 December 31, 2005
----------- ----------- -----------
Oil and gas sales $ 148,697 $ 57,983 $ 206,680
Production costs (47,143) (16,832) (63,975)
Depletion, depreciation
and amortization (20,000) (14,000) (34,000)
----------- ----------- -----------
81,554 27,151 108,705
Income tax provision -- -- --
----------- ----------- -----------
$ 81,554 $ 27,151 $ 108,705
=========== =========== ===========
Estimated Quantities of Proved Oil and Gas Reserves (Unaudited)
The reserve information presented below is based upon reports prepared by the
independent petroleum engineering firm of Citadel Engineering Ltd. The Company
emphasizes that reserve estimates are inherently imprecise and that estimates of
new discoveries are more imprecise than those of mature producing oil and gas
properties. Accordingly, these estimates are expected to change as future
information becomes available. All of the Companies reserves are located in the
United States.
Proved oil and gas reserves are the estimated quantities of crude oil, natural
gas, and natural gas liquids which geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions.
The standardized measure of discounted future net cash flows is computed by
applying year-end prices of oil and gas to the estimated future production of
proved oil and gas reserves, less estimated future expenditures to be incurred
in developing and producing the proved reserves, less estimated future income
tax expenses to be incurred on pretax net cash flows less tax basis of the
properties and available credits, and assuming continuation of existing economic
conditions. The estimated future net cash flows are then discounted using a rate
of 10 percent a year to reflect the estimated timing of the future cash flows.
(continued on next page)
F-12
MAJESTIC OIL & GAS, INC. AND SUBSIDIARY
(A Development Stage Company)
SUPPLEMENTARY INFORMATION
DISCLOSURE OF OIL & GAS PRODUCING ACTIVITIES AND PROPERTIES - UNAUDITED
DECEMBER 31, 2005 AND 2004
- --------------------------------------------------------------------------------
Presented below is a summary of the changes in estimated proved reserves of the
Company for the years ended December 31, 2005. The Company did not own any oil
and gas reserves prior to that year.
Oil Gas
(Bbls) (Mcf)
---------- ----------
Proved reserves
Beginning of the year -- 165,094
Revisions of previous estimates -- --
Improved recovery -- --
Purchases of reserves in place -- --
Extensions and discoveries -- --
Production -- (20,442)
---------- ----------
Sales of reserves in place -- --
End of the year -- 144,652
========== ==========
All of the proved reserves currently owned by the Company are proved developed
reserves. Proved developed reserves are those expected to be recovered through
existing wells, equipment, and operating methods.
Standardized Measure of Discounted Future
Net Cash Flows at December 31, 2005
Future cash inflows $ 1,852,000
Future production costs (176,000)
Future development costs --
Future income tax expenses (158,000)
-----------
Future net cash flows 1,518,000
10% annual discount for estimated
timing of cash flows (609,000)
-----------
Standardized measures of discounted future
net cash flows relating to proved oil and
gas reserves $ 909,000
===========
The following reconciles the change in the standardized measure of discounted
future net cash flow during 2005:
Beginning of the year $ 426,000
Net change in prices and production costs 588,000
Net change in estimated future development costs 15,000
Sales of oil and gas produced, net of
production costs (120,000)
---------
End of the year $ 909,000
=========
F-13
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
37
PROSPECTUS
MAJESTIC OIL & GAS, INC.
Selling shareholders are offering up to 1,640,000 shares of common stock. The
selling shareholders will offer their shares at $.10 per share until our shares
are quoted on the OTC Bulletin Board and thereafter at prevailing market prices
or privately negotiated prices. We are also registering an additional 1,640,000
shares of common stock underlying warrants held by our selling stockholders. The
selling shareholders cannot acquire the shares underlying these warrants until
our shares are quoted on the OTC Bulletin Board and will be sold thereafter at
prevailing market prices or privately negotiated prices. We will not receive
proceeds from the sale of shares from the selling shareholders.
We have paid all expenses for registering the securities for a cost currently
estimated at $25,000.
Our common stock is not now listed on any national securities exchange, the
NASDAQ stock market or the Over the Counter Bulletin Board.
Dealer Prospectus Delivery Obligation
- -------------------------------------
Until _________ (90 days from the date of this prospectus) all dealers that
effect transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the
dealers' obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
38
PART II-INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Articles of Incorporation and By-laws, subject to the provisions of Nevada
law, contain provisions that allow the corporation to indemnify any person under
certain circumstances.
Nevada law provides the following:
17-16-851. Authority to indemnify.
(a) Except as otherwise provided in this section, a corporation may
indemnify an individual who is a party to a proceeding because he is a director
against liability incurred in the proceeding if:
(i) He conducted himself in good faith; and
(ii) He reasonably believed that his conduct was in or at least Not
opposed to the corporation's best interests; and
(iii) In the case of any criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful; or
(iv) He engaged in conduct for which broader indemnification has been
made permissible or obligatory under a provision of the articles of
incorporation, as authorized by W.S. 17-16-202(b)(v).
(b) A director's conduct with respect to an employee benefit plan for a
purpose he reasonably believed to be in the interests of the participants in and
beneficiaries of the plan is conduct that satisfies the requirement of paragraph
(a)(ii) of this section.
(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
(d) Unless ordered by a court under W.S. 17-16-854(a)(iii) a corporation
may not indemnify a director under this section:
(i) In connection with a proceeding by or in the right of the
corporation, except for reasonable expenses incurred in connection with the
proceeding if it is determined that the director has met the standard of conduct
under subsection (a) of this section; or
39
(ii) In connection with any proceeding with respect to conduct for
which he was adjudged liable on the basis that he received a financial benefit
to which he was not entitled.
(e) Repealed By Laws 1997, ch. 190,ss.3.
17-16-852. Mandatory indemnification.
A corporation shall indemnify a director who was wholly successful, on the
merits or otherwise, in the defense of any proceeding to which he was a party
because he was a director of the corporation against reasonable expenses
incurred by him in connection with the proceeding.
17-16-853. Advance for expenses.
(a) A corporation may, before final disposition of a proceeding, advance
funds to pay for or reimburse the reasonable expenses incurred by a director who
is a party to a proceeding because he is a director if he delivers to the
corporation:
(i) A written affirmation of his good faith belief that he has met the
standard of conduct described in W.S. 17-16-851 or that the proceeding involves
conduct for which liability has been eliminated under a provision of the
articles of incorporation as authorized by W.S. 17-16-202(b)(iv); and
(ii) His written undertaking to repay any funds if he is not entitled
to mandatory indemnification under W.S. 17-16-852 and it is ultimately
determined that he has not met the standard of conduct described in W.S.
17-16-851.
(iii) Repealed By Laws 1997, ch. 190,ss.3.
(b) The undertaking required by paragraph (a)(ii) of this section shall be
an unlimited general obligation of the director but need not be secured and may
be accepted without reference to the financial ability of the director to make
repayment.
(c) Authorizations under this section shall be made:
(i) By the board of directors:
(A) If there are two (2) or more disinterested directors, by a
majority vote of all the disinterested directors (a majority of whom shall for
such purpose constitute a quorum) or by a majority of the members of a committee
of two (2) or more disinterested directors appointed by such a vote; or
40
(B) If there are fewer than two (2) disinterested directors, by
the vote necessary for action by the board in accordance with W.S. 17-16-824(c),
in which authorization directors who do not qualify as disinterested directors
may participate; or
(ii) By the shareholders, but shares owned by or voted under the
control of a director who at the time does not qualify as a disinterested
director may not be voted on the authorization.
17-16-854. Court-ordered indemnification and advance for expenses.
(a) A director who is a party to a proceeding because he is a director may
apply for indemnification or an advance for expenses to the court conducting the
proceeding or to another court of competent jurisdiction. After receipt of an
application and after giving any notice it considers necessary, the court shall:
(i) Order indemnification if the court determines that the director is
entitled to mandatory indemnification under W.S. 17-16-852;
(ii) Order indemnification or advance for expenses if the court
determines that the director is entitled to indemnification or advance for
expenses pursuant to a provision authorized by W.S. 17-16-858(a); or
(iii) Order indemnification or advance for expenses if the court
determines, in view of all the relevant circumstances, that it is fair and
reasonable:
(A) To indemnify the director; or
(B) To advance expenses to the director, even if he has not met
the standard of conduct set forth in W.S. 17-16-851(a), failed to comply with
W.S. 17-16-853 or was adjudged liable in a proceeding referred to in W.S.
17-16-851(d)(i) or (ii), but if he was adjudged so liable his indemnification
shall be limited to reasonable expenses incurred in connection with the
proceeding.
(b) If the court determines that the director is entitled to
indemnification under paragraph (a)(i) of this section or to indemnification or
advance for expenses under paragraph (a)(ii) of this section, it shall also
order the corporation to pay the director's reasonable expenses incurred in
connection with obtaining court-ordered indemnification or advance for expenses.
If the court determines that the director is entitled to indemnification or
advance for expenses under paragraph (a)(iii) of this section, it may also order
the corporation to pay the director's reasonable expenses to obtain
court-ordered indemnification or advance for expenses.
41
17-16-855. Determination and authorization of indemnification.
(a) A corporation may not indemnify a director under W.S. 17-16-851 unless
authorized for a specific proceeding after a determination has been made that
indemnification of the director is permissible because he has met the standard
of conduct set forth in W.S. 17-16-851.
(b) The determination shall be made:
(i) If there are two (2) or more disinterested directors, by the board
of directors by majority vote of all the disinterested directors (a majority of
whom shall for such purpose constitute a quorum), or by a majority of the
members of a committee of two (2) or more disinterested directors appointed by
such a vote;
(ii) Repealed By Laws 1997, ch. 190,ss.3.
(iii) By special legal counsel:
(A) Selected in the manner prescribed in paragraph (i) of this
subsection; or
(B) If there are fewer than two (2) disinterested directors,
selected by the board of directors (in which selection directors who do not
qualify as disinterested directors may participate); or
(iv) By the shareholders, but shares owned by or voted under the
control of a director who at the time does not qualify as a disinterested
director may not be voted on the determination.
(c) Authorization of indemnification shall be made in the same manner as
the determination that indemnification is permissible, except that if there are
fewer than two (2) disinterested directors, authorization of indemnification
shall be made by those entitled under paragraph (b)(iii) of this section to
select special legal counsel.
17-16-856. Officers.
(a) A corporation may indemnify and advance expenses under this subarticle
to an officer of the corporation who is a party to a proceeding because he is an
officer of the corporation:
42
(i) To the same extent as a director; and
(ii) If he is an officer but not a director, to such further extent as
may be provided by the articles of incorporation, the bylaws, a resolution of
the board of directors or contract, except for:
(A) Liability in connection with a proceeding by or in the right
of the corporation other than for reasonable expenses incurred in connection
with the proceeding; or
(B) Liability arising out of conduct that constitutes:
(I) Receipt by him of a financial benefit to which he is not
entitled;
(II) An intentional infliction of harm on the corporation or
the shareholders; or
(III) An intentional violation of criminal law.
(iii) A corporation may also indemnify and advance expenses to a
Current or former officer, employee or agent who is not a director to the
Extent, consistent with public policy that may be provided by its articles of
incorporation, bylaws, general or specific action of its board of directors or
contract.
(b) The provisions of paragraph (a)(ii) of this section shall apply to an
officer who is also a director if the basis on which he is made a party to the
proceeding is an act or omission solely as an officer.
(c) An officer of a corporation who is not a director is entitled to
mandatory indemnification under W.S. 17-16-852, and may apply to a court under
W.S. 17-16-854 for indemnification or an advance for expenses, in each case to
the same extent to which a director may be entitled to indemnification or
advance for expenses under those provisions.
Our Articles and By-Laws also provide for indemnification to the fullest extent
permitted under Nevada law.
With regard to the foregoing provisions, or otherwise, we have been advised that
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities Act of 1933, as amended,
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or
paid by a director, officer or controlling person of the Corporation in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by a controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by us is against
public policy as expressed in the Securities Act of 1933, as amended, and will
be governed by the final adjudication of such case.
43
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table is an itemization of all expenses, without
consideration to future contingencies, incurred or expected to be incurred by
our Corporation in connection with the issuance and distribution of the
securities being offered by this prospectus. Items marked with an asterisk (*)
represent estimated expenses. We have agreed to pay all the costs and expenses
of this offering. Selling security holders will pay no offering expenses.
- -------------------------------------------------- -----------------------------
ITEM AMOUNT
- -------------------------------------------------- -----------------------------
SEC Registration Fee* $ 100
- -------------------------------------------------- -----------------------------
Legal Fees and Expenses $5,000
- -------------------------------------------------- -----------------------------
Accounting Fees and Expenses* $15,000
- -------------------------------------------------- -----------------------------
Miscellaneous* $4,900
- -------------------------------------------------- -----------------------------
Total* $25,000
- -------------------------------------------------- -----------------------------
* Estimated Figure
RECENT SALES OF UNREGISTERED SECURITIES
At formation, the Company issued 3,000,000 shares of its common stock to Patrick
M. Montalban, President, CEO and director to the Company for his work in the
formation and organization of the Company. This was recorded as a $300,000
charge to organizational expenses during the period from inception (April 16,
2002) to December 31, 2002.
During the year ended December 31, 2003, the Company issued 250,000 shares of
its common stock to Michael Williams, Esq. in payment of legal fees incurred
related to the registration of the Company with the Securities and Exchange
Commission. This was recorded as a $25,000 charge to legal expenses during the
year ended December 31, 2003.
On July 1, 2004, the Company acquired 100% of the outstanding stock of Grizzly
Energy, Inc. from Altamont Oil & Gas, Inc., an entity related through common
ownership and management. Grizzly Energy, Inc. was acquired in a stock-for-stock
exchange where 100% of the outstanding shares of Grizzly Energy, Inc. were
acquired for 1,600,000 shares of the Company. Grizzly Energy, Inc. owns a 25%
working interest in the State 36-1 well, a producing gas well in Pondera County,
Montana.
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We relied upon Section 4(2) of the Securities Act of 1933, as amended for the
above issuances. We believed that Section 4(2) was available because:
o None of these issuances involved underwriters, underwriting
discounts or commissions;
o We placed restrictive legends on all certificates issued;
o No sales were made by general solicitation or advertising;
o Sales were made only to accredited investors; and
o All investors were officers, directors, affiliates or legal counsel
Between July 1, 2004 and September 1, 2004, we made sales of 1,640,000 shares of
common stock and 1,640,000 Warrants at an aggregate price of $.10 per
Share/Warrant combination for total proceeds of $164,000.
With respect to the US sales, we relied upon Section 4(2) of the Securities Act
of 1933, as amended for the above issuances. We believed that Section 4(2) was
available because:
o None of these issuances involved underwriters, underwriting
discounts or commissions;
o We placed restrictive legends on all certificates issued;
o No sales were made by general solicitation or advertising;
o Sales were made only to accredited investors or investors we had
reason to believe possessed the knowledge and sophistication to
understand the merits and risks of this investment; and
o All investors were personally known to our officers, directors, or
their affiliates
We relied upon Regulation S of the Securities Act of 1933, as amended for the
above issuances to non US citizens or residents.
We believed that Regulation S was available because:
o None of these issuances involved underwriters, underwriting
discounts or commissions;
o We placed Regulation S required restrictive legends on all
certificates issued;
o No offers or sales of stock under the Regulation S offering were
made to persons in the United States;
o No direct selling efforts of the Regulation S offering were made in
the United States.
EXHIBITS
Item 3
1 Amended Articles of Incorporation of Majestic Oil & Gas, Inc.
2 By-laws of Majestic Oil & Gas, Inc.
45
Item 4
1 Form of common stock Certificate of the Majestic Oil & Gas, Inc. (1)
Item 5
1 Legal Opinion of Williams Law Group, P.A.
Item 10
1 Grizzly Share Exchange Agreement
2 Operating Agreements with Altemont.
3 Appraisal Reserve reports on wells
Item 22
1. Articles of Incorporation of Grizzly Energy, Inc.
2. By-laws of Grizzly Energy, Inc.
Item 23
1 Consent of Eide Bailly LLP.*
2 Consent of Williams Law Group, P.A. (included in Exhibit 5.1)
*Filed Herewith
All other Exhibits called for by Rule 601 of Regulation SB-2 or SK are not
applicable to this filing.
(1) Information pertaining to our common stock is contained in our Articles of
Incorporation and By-Laws.
UNDERTAKINGS
The undersigned Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
46
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed
that which was registered) any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
(ss.230.424(b) of this chapter) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
2. For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
3. File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) For determining liability of the undersigned small business issuer
under the Securities Act to any purchaser in the initial distribution of the
securities, the undersigned small business issuer undertakes that in a primary
offering of securities of the undersigned small business issuer pursuant to this
registration statement, regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the undersigned small
business issuer will be a seller to the purchaser and will be considered to
offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned
small business issuer relating to the offering required to be filed
pursuant to Rule 424 (ss.230.424 of this chapter);
(ii) Any free writing prospectus relating to the offering prepared
by or on behalf of the undersigned small business issuer or used or
referred to by the undersigned small business issuer;
(iii) The portion of any other free writing prospectus relating to
the offering containing material information about the undersigned
small business issuer or its securities provided by or on behalf of
the undersigned small business issuer; and
47
(iv) Any other communication that is an offer in the offering made
by the undersigned small business issuer to the purchaser.
Each prospectus filed pursuant to Rule 424(b)(ss.230.424(b) of this chapter) as
part of a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A (ss.230.430A of this chapter), shall be deemed to be part
of and included in the registration statement as of the date it is first used
after effectiveness. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a
document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such first use, supersede or
modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document
immediately prior to such date of first use.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on our behalf by the undersigned, in the City of Cut
Bank, State of Montana on May 22, 2006.
Majestic Oil & Gas, Inc.
By: /s/ Patrick M. Montalban
------------------------
Name: Patrick M. Montalban
--------------------
Title: Chief Executive Officer
53
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
- ---------------------------- -------------------------- -------------------------- --------------------------
Title Name Date Signature
- ---------------------------- -------------------------- -------------------------- --------------------------
Principal Executive Patrick M. 5-22-2006 /s/ Patrick M.
Officer Montalban Montalban
- ---------------------------- -------------------------- -------------------------- --------------------------
Principal Patrick M. 5-22-2006 /s/ Patrick M.
Accounting Officer Montalban Montalban
- ---------------------------- -------------------------- -------------------------- --------------------------
Principal Financial Patrick M. 5-22-2006 /s/ Patrick M.
Officer Montalban Montalban
- ---------------------------- -------------------------- -------------------------- --------------------------
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
- ---------------------------- -------------------------- -------------------------- --------------------------
SIGNATURE NAME TITLE DATE
- ---------------------------- -------------------------- -------------------------- --------------------------
/s/ Patrick M. Patrick M. Director 1-12-2006
Montalban Montalban
- ---------------------------- -------------------------- -------------------------- --------------------------
/s/ Dan Mitchell Dan Mitchell Director 1-12-2006
- ---------------------------- -------------------------- -------------------------- --------------------------
54