As Filed With the Securities and Exchange Commission on June 30, 2010
Registration No. 333-165943
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1/A
AMENDMENT NO. 2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PEPPER ROCK RESOURCES CORP.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
1040
(Primary Standard Industrial Classification Code Number)
27-1843986
(I.R.S. Employer Identification Number)
One Lincoln Center, 18 West 140 Butterfield Road,
15th Floor, Oakbrook Terrace, IL, 60181
Telephone: (630) 613-7487
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
National Registered Agents Inc. of NV
1000 East Williams Street, Suite 204
Carson City, Nevada, 89701
Tel: 800-550-6724
(Name, address and telephone number of agent for service)
Please send copies of all correspondence to:
William L. MacDonald
Macdonald Tuskey Corporate & Securities Lawyers
Suite #1210, 777 Hornby Street, Vancouver, B.C., V6Z 1S4, Canada
Telephone: (604) 648-1670, Facsimile: (604)681-4760
Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after this Registration Statement is declared 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, please 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, please check the following box and list
the Securities Act Prospectus number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
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, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
CALCULATION OF REGISTRATION FEE
=============================================================================================================
Title of each class Proposed maximum Proposed maximum
of securities to be Amount to be offering price aggregate offering Amount of
registered(1) registered per share price (US$) registration fee(2)
- -------------------------------------------------------------------------------------------------------------
Common Stock, $0.00001
par value 22,500,000(3) $0.10 $2,250,000
- -------------------------------------------------------------------------------------------------------------
Common Stock, $0.00001
par value 17,500,000(4) $0.10 $1,750,000
- -------------------------------------------------------------------------------------------------------------
Total Registration Fee $285.20(5)
=============================================================================================================
(1) An indeterminate number of additional shares of common stock shall be
issuable pursuant to Rule 416 to prevent dilution resulting from stock
splits, stock dividends or similar transactions and in such an event the
number of shares registered shall automatically be increased to cover the
additional shares in accordance with Rule 416 under the Securities Act.
(2) Estimated in accordance with Rule 457(c) solely for the purpose of
computing the amount of the registration fee based on a bona fide estimate
of the maximum offering price.
(3) Represents shares of our common stock were previously acquired by and
issued to the Selling Shareholders in private transactions directly with us
or with one of our affiliates. All of these shares are offered by the
Selling Shareholders.
(4) Represents shares of our common stock, par value $0.00001 per share, which
we are offering directly through our officers and directors, with a minimum
investment of 5,000 shares.
(5) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON THE DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL 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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON THE
DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
PROSPECTUS
PEPPER ROCK RESOURCES CORP.
40,000,000 SHARES OF COMMON STOCK
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SHAREHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THIS REGISTRATION
STATEMENT IS DECLARED EFFECTIVE BY THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
______________________, 2010
Pepper Rock Resources Corp. (the "COMPANY", "US", "WE", "OUR" is registering a
total of 40,000,000 shares of our common stock. Of the shares being registered,
22,500,000 are being registered for sale by current holders of our common shares
as listed in `Selling Shareholders" further in this Registration Statement (the
"Selling Shareholders"), and 17,500,000 are being registered for sale by us.
DIRECT PUBLIC OFFERING PRICE: $0.10 PER SHARE
SECONDARY SELLING SHAREHOLDER OFFERING PRICE: $0.10 PER SHARE
The offering of the 17,500,000 shares is a "best efforts" offering, which means
that our directors and officers will use their best efforts to sell the common
stock and there is no commitment by any person to purchase any shares. There is
no minimum number of shares required to be sold to close the offering. However,
each individual subscriber must purchase a minimum of 5,000 shares. The offering
period will be open for 30 days and our management at their sole discretion may
terminate the offering at any time prior to the expiration of the initial 30
days of the offering. Our management at their sole discretion may extend the
period for an additional 90 days of the offering if not all 17,500,000 shares
are sold at the end of the initial 30-day offering period. Proceeds from the
sale of the shares will be used to fund the initial stages of the exploration of
our oil and gas properties. This offering will end no later than 120 days from
the offering date. The offering date is the date by which this registration
statement becomes effective. This is a direct participation offering since we,
and not an underwriter, are offering the stock.
We are also registering 22,500,000 previously issued shares of our common stock,
which may be resold from time to time by certain Selling Shareholders. These
shares were acquired by the Selling Shareholders directly from us in private
offerings that were exempt from registration requirements of the Securities Act
of 1933. A registration statement under the Exchange Act relating to these
securities has been filed with the Securities and Exchange Commission. Our
Selling Shareholders may not offer or sell their shares of our common stock
until this registration statement is declared effective. We have been advised by
the Selling Shareholders that they may offer to sell all or a portion of their
shares of common stock being offered in this prospectus from time to time.
Please see "Plan of Distribution" at page 10 for a detailed explanation of how
the securities may be sold. The Selling Shareholders may sell all or a portion
of their shares through public or private transactions at prevailing market
prices or at privately negotiated prices. We will not receive any of the
proceeds from the sale of shares by the Selling Shareholders.
Our common stock is quoted on the OTC Bulletin Board under the symbol: `PEPR'
Neither the Securities and Exchange Commission nor any state regulatory
authority has approved or disapproved of these securities, endorsed the merits
of this offering, or determined that this Prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
AN INVESTMENT IN OUR SECURITIES IS SPECULATIVE. INVESTORS SHOULD BE ABLE TO
AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE THE SECTION ENTITLED "RISK
FACTORS" BEGINNING ON PAGE 10 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY THESE SECURITIES, NOR SHALL THE SELLING SECURITY HOLDERS SELL ANY
OF THESE SECURITIES IN ANY STATE WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER SUCH STATE'S SECURITIES
LAWS.
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this Prospectus. The selling shareholders are offering to sell, and
seeking offers to buy, their common shares, only in jurisdictions where offers
and sales are permitted.
THE DATE OF THIS PROSPECTUS IS _________________________
The following table of contents has been designed to help you find important
information contained in this prospectus. We encourage you to read the entire
prospectus.
TABLE OF CONTENTS
PROSPECTUS SUMMARY 3
THE OFFERING 4
RISK FACTORS 6
USE OF PROCEEDS 15
DETERMINATION OF OFFERING PRICE 16
DILUTION 16
SELLING SECURITY HOLDERS 17
PLAN OF OPERATION 20
DESCRIPTION OF SECURITIES 25
DIVIDEND POLICY 26
INTERESTS OF NAMED EXPERTS AND COUNSEL 27
DESCRIPTION OF OUR BUSINESS 27
REPORTS TO STOCKHOLDERS 35
DESCRIPTION OF PROPERTY AND FACILITIES 35
LEGAL PROCEEDINGS 36
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 37
FINANCIAL STATEMENTS F-1
MANAGEMENT'S DISCUSSION AND ANALYSIS 38
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 45
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 45
EXECUTIVE COMPENSATION 48
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 50
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS 52
DISCLOSURE OF SEC POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES 52
REPORTS TO SECURITY HOLDERS 53
WHERE YOU CAN FIND MORE INFORMATION 53
DEALER PROSPECTUS DELIVERY OBLIGATION 54
2
PROSPECTUS SUMMARY
This Prospectus, and any supplement to this Prospectus include "forward-looking
statements". To the extent that the information presented in this Prospectus
discusses financial projections, information or expectations about our business
plans, results of operations, products or markets, or otherwise makes statements
about future events, such statements are forward-looking. Such forward-looking
statements can be identified by the use of words such as "intends",
"anticipates", "believes", "estimates", "projects", "forecasts", "expects",
"plans" and "proposes". Although we believe that the expectations reflected in
these forward-looking statements are based on reasonable assumptions, there are
a number of risks and uncertainties that could cause actual results to differ
materially from such forward-looking statements. These include, among others,
the cautionary statements in the "Risk Factors" section beginning on Page 10 of
this Prospectus and the "Management's Discussion and Analysis of Financial
Position and Results of Operations" section elsewhere in this Prospectus.
This summary only highlights selected information contained in greater detail
elsewhere in this Prospectus. This summary may not contain all of the
information that you should consider before investing in our common stock. You
should carefully read the entire Prospectus, including "Risk Factors" beginning
on Page 10, and the consolidated financial statements, before making an
investment decision
All dollar amounts refer to US dollars unless otherwise indicated.
OUR BUSINESS
We are an exploration stage corporation. We are engaged in the acquisition and
exploration of mining and oil and gas properties. Our principal executive office
is located at One Lincoln Centre, 18 West 140 Butterfield Road -15th Floor,
Oakbrook Terrace, IL 60181. Our telephone number is 630-613-7487 and our
registered agent for service of process is the National Registered Agents Inc.
of NV, located at 1000 East William Street, Suite 204, Carson City, Nevada
89701. Our fiscal year end is July 31.
We are an exploration stage company and are primarily engaged in the exploration
and development of oil and gas properties. We originally acquired rights to
mineral properties in Nevada which we refer to as the Pepper Rock Mining Claims,
but have decided to abandon exploration on these claims and focus on our oil and
gas properties. We have entered into a joint venture agreement with Oxalis
Energy Group, Inc., to develop a natural gas property within the Adams - Bagett
Ranch near Ozona, Texas. This property is described in detail in a section
titled "Description of Properties" further in this Prospectus.
3
THE OFFERING
The 22,500,000 shares of our common stock being registered by this Prospectus
for the Selling Shareholders represent approximately 37% of our issued and
outstanding common stock as of June 29, 2010. We are also offering 17,500,000
shares of our common stock in a direct offering. If we sell all 17,500,000
shares, they will account for approximately 22% of our issued and outstanding
common shares after the close of the offering.
Securities Offered: 40,000,000 shares of our common stock of which
22,500,000 are being offered by the Selling
Shareholders and 17,500,000 are being offered
by us in a direct offering.
Price Per Share: We are offering the 17,500,000 shares of our
common stock at a price of $0.10 per share.
The Selling Shareholders may sell all or a
portion of their shares through public or
private transactions at prevailing market
prices or at privately negotiated prices
Maximum and Minimum Number of No minimum. The Selling Shareholders may sell
Securities to be Sold in this up to 22,500,000 shares of our common stock
Offering: and we are offering a maximum of 17,500,000
shares of our common stock.
Securities Issued and As of June 29, 2010 we had 60,800,000 issued
to be Issued: and outstanding shares of our common stock,
and no issued and outstanding convertible
securities.
Our common stock is quoted on the OTC Bulletin
Board under the symbol "PEPR.OB". Trading of
securities on the OTC Bulletin Board is often
sporadic and investors may have difficulty
buying and selling or obtaining market
quotations, which may have a depressive effect
on the market price for our common stock.
Proceeds: We will not receive any proceeds from the sale
of our common stock by the Selling
Shareholders. If we sell all of the 17,500,000
shares we are offering, we will receive
proceeds of $1,750,000 minus any offering
expenses.
Terms of the Offering This is a BEST EFFORTS OFFERING. This is a no
minimum offering. Accordingly, as shares are
sold we will use the money raised for our
business. Each individual subscriber must
purchase a minimum of 5,000 shares. We cannot
be certain that we will be able to sell enough
shares to sufficiently fund our operations.
4
Plan of Distribution This is a direct public offering, with no
commitment by anyone to purchase any shares.
Our shares in this offering will be offered
and sold by Mr. Philip Kueber, our director
and officer.
SUMMARY OF FINANCIAL DATA
The following table sets forth selected financial information, which should be
read in conjunction with the information set forth in the "Management's
Discussion and Analysis of Financial Position and Results of Operations" section
and the accompanying financial statements and related notes included elsewhere
in this Prospectus.
Period from
inception on
Nine Months Ended Year ended May 9, 2008 to
April 30, 2010 July 31, 2009 April 30, 2010
-------------- ------------- --------------
(unaudited) (unaudited)
($) ($) ($)
Revenues -- -- --
Expenses 33,549 45,097 126,949
Net Profit (Loss) (33,549) (45,097) (126,949)
Net Profit (Loss) per share (0.00) (0.00) --
As at Year ended Year ended
April 30, 2010 July 31, 2009 July 31, 2008
-------------- ------------- -------------
(unaudited)
($) ($) ($)
Working Capital (Deficiency) (61,849) (7,501) 32,796
Total Assets 7,869 940 32,921
Total Current Liabilities 69,718 8,441 125
5
RISK FACTORS
The purchase of the shares of common stock being offered pursuant to this
prospectus is speculative and involves a high degree of risk. An investment in
our common stock may result in a complete loss of the invested amount.
RISK FACTORS
In addition to other information in this report, the following risk factors
should be carefully considered in evaluating our business because such factors
may have a significant impact on our business, operating results, liquidity and
financial condition. As a result of the risk factors set forth below, actual
results could differ materially from those projected in any forward-looking
statements. Additional risks and uncertainties not presently known to us, or
that we currently consider to be immaterial, may also impact our business,
operating results, liquidity and financial condition. If any such risks occur,
our business, operating results, liquidity and financial condition could be
materially affected in an adverse manner. Under such circumstances, the trading
price of our securities could decline, and you may lose all or part of your
investment.
RISKS ASSOCIATED WITH OUR BUSINESS
WE ARE AN EXPLORATION STAGE CORPORATION, LACK A BUSINESS HISTORY AND HAVE LOSSES
THAT WE EXPECT TO CONTINUE INTO THE FUTURE. IF THE LOSSES CONTINUE WE WILL HAVE
TO SUSPEND OPERATIONS OR CEASE FUNCTIONING.
We were incorporated on May 29, 2008, and have only started our proposed
business but have not realized any revenues. We have no business history upon
which an evaluation of our future success or failure can be made. Our net loss
since inception to April 30, 2010 was $126,949 and we anticipate that we will
continue to incur losses related to our operations. Our ability to achieve and
maintain profitability and positive cash flow is dependent upon:
* our ability to find a profitable exploration property;
* our ability to generate revenues; and
* our ability to reduce exploration costs.
There can be no assurance that we will be able to achieve any of the above and
if our losses continue we will have to suspend operations or cease functioning.
WE WILL NEED A SIGNIFICANT AMOUNT OF CAPITAL TO CARRY OUT OUR PROPOSED BUSINESS
PLAN, AND UNLESS WE ARE ABLE TO RAISE SUFFICIENT FUNDS, WE MAY BE FORCED TO
DISCONTINUE OUR OPERATIONS.
In order to meet our funding obligations under our agreement with Oxalis on the
Adams - Baggett Property, further described below in this Prospectus under
"Description of Property", and carry out development activities on any acquired
properties, we will require $500,000 a month in payments to Oxalis aimed at
drilling wells on the Adams - Baggett Property. As of April 30, 2010 we had
$7,519 in cash in our bank accounts.
6
Our ability to obtain the necessary financing to carry out our business plan is
subject to a number of factors, including the market price of oil and gas,
general market conditions and investor acceptance of our business plan. These
factors may make the timing, amount, terms and conditions of such financing
unattractive or unavailable to us. If we are unable to raise sufficient funds,
we will have to significantly reduce our spending, delay or cancel our planned
activities or substantially change our current corporate structure. There is no
guarantee that we will be able to obtain any funding or that we will have
sufficient resources to conduct our operations as projected, any of which could
mean that we will be forced to discontinue our operations.
BECAUSE OF THE SPECULATIVE NATURE OF EXPLORATION OF OIL AND GAS PROPERTIES, WE
MAY NEVER DISCOVER A COMMERCIALLY EXPLOITABLE QUANTITY OF OIL AND GAS, OUR
BUSINESS MAY FAIL AND INVESTORS MAY LOSE THEIR ENTIRE INVESTMENT.
We are in the very early exploration stage and cannot guarantee that our
exploration work will be successful, or that any oil and gas will be found, or
that any production of oil and gas will be realized. The search for oil and gas
as a business is extremely risky. We can provide investors with no assurance
that exploration on our properties will establish that commercially exploitable
reserves of oil and gas exist on our property. Additional potential problems
that may prevent us from discovering any reserves of oil and gas on our property
include, but are not limited to, unanticipated problems relating to exploration
and additional costs and expenses that may exceed current estimates. If we are
unable to establish the presence of commercially exploitable reserves of oil and
gas on our property our ability to fund future exploration activities will be
impeded, we will not be able to operate profitably and investors may lose all of
their investment in our company.
BECAUSE OF THE UNIQUE DIFFICULTIES AND UNCERTAINTIES INHERENT IN OIL AND GAS
EXPLORATION VENTURES, WE FACE A HIGH RISK OF BUSINESS FAILURE.
Potential investors should be aware of the difficulties normally encountered by
new oil and gas exploration companies and the high rate of failure of such
enterprises. The likelihood of success must be considered in light of the
problems, expenses, difficulties, complications and delays encountered in
connection with the exploration of the oil and gas properties that we plan to
undertake. These potential problems include, but are not limited to,
unanticipated problems relating to exploration, and additional costs and
expenses that may exceed current estimates. The expenditures to be made by us in
the exploration of the oil and gas claim may not result in the discovery of oil
and gas deposits. Problems such as unusual or unexpected formations and other
conditions are involved in oil and gas exploration and often result in
unsuccessful exploration efforts. If the results of our exploration do not
reveal viable commercial oil and gas deposits, we may decide to abandon our
claims. If this happens, our business will likely fail.
7
BECAUSE OF THE INHERENT DANGERS INVOLVED IN OIL AND GAS EXPLORATION, THERE IS A
RISK THAT WE MAY INCUR LIABILITY OR DAMAGES AS WE CONDUCT OUR BUSINESS.
The search for oil and gas involves numerous hazards. As a result, we may become
subject to liability for such hazards, including pollution, cave-ins and other
hazards against which we cannot insure or against which we may elect not to
insure. At the present time we have no coverage to insure against these hazards.
The payment of such liabilities may have a material adverse effect on our
financial position.
WE HAVE NO KNOWN RESERVES AND WE MAY NOT FIND ANY OIL OR GAS AND EVEN IF WE FIND
OIL OR GAS IT MAY NOT BE IN ECONOMIC QUANTITIES. IF WE FAIL TO FIND ANY OIL OR
GAS OR IF WE ARE UNABLE TO FIND OIL OR GAS IN ECONOMIC QUANTITIES, WE WILL HAVE
TO SUSPEND OPERATIONS.
We have no proven oil and gas reserves. Even if we find oil or gas, it may not
be of sufficient quantity so as to warrant recovery. Additionally, even if we
find oil or gas in sufficient quantity to warrant recovery it ultimately may not
be recoverable. Finally, even if any oil or gas is recoverable, we do not know
that this can be done at a profit. Failure to locate oil or gas in economically
recoverable quantities will cause us to suspend operations.
WE MAY BE ADVERSELY AFFECTED BY FLUCTUATIONS IN OIL AND GAS PRICES. IF PRICES
DECREASE, WE MAY BE UNABLE TO ACHIEVE PROFITABILITY.
The value and price of our shares of common stock, our financial results, and
our exploration, development and mining activities, if any, may be significantly
adversely affected by declines in the price of oil and gas. Oil and gas prices
fluctuate widely and are affected by numerous factors beyond our control such as
weather, interest rates, exchange rates, inflation or deflation, fluctuation in
the value of the United States dollar and foreign currencies, global and
regional supply and demand, and the political and economic conditions of oil and
gas producing countries throughout the world.
The prices used in making resource estimates for oil or gas projects are
disclosed, and generally use significantly lower prices than daily prices quoted
in the news media. The percentage change in the price of oil and gas cannot be
directly related to the estimated resource quantities, which are affected by a
number of additional factors. For example, a 10% change in price may have little
impact on the estimated resource quantities, or it may result in a significant
change in the amount of resources. If prices decrease, we may be unable to
achieve profitability.
WE RELY ON ESTIMATES TO DETERMINE WHETHER OR NOT TO INVEST IN A PARTICULAR OIL
OR GAS PROJECT OR PROPERTY, WHICH MAY AFFECT THE VIABILITY OF OUR PROPOSED
OPERATIONS.
The information we use to evaluate oil and gas projects or properties is based
on estimates that involve a great deal of uncertainty. The process of estimating
oil and gas reserves is complex and requires us to make significant decisions
and assumptions in evaluating the reliability of available geological,
geophysical, engineering and economic data for each property. Different
engineers may make different estimates of reserves, cash flows or other
variables based on the same available data.
8
Geologic and engineering data is used to determine the probability that a
reservoir of oil and gas exists at a particular location, and whether or not oil
and gas may be recoverable from it. Recoverability is ultimately subject to the
accuracy of such data including, but not limited to, the geological
characteristics of the reservoir; its structure, pressure and fluid properties;
the size and boundaries of the drainage area; and the anticipated rate of
pressure depletion. The evaluation of these and other factors is based upon
available seismic data, computer modeling, well tests and information obtained
from the production of oil and gas on adjacent or similar properties. Still,
actual recovery from a reservoir may differ from estimated recovery.
Estimates also include numerous assumptions relating to operating conditions and
economic factors, including the price at which recovered oil and natural gas can
be sold; the costs of recovery; future operating costs; development costs;
workover and remedial costs, which are costs associated with operations on a
producing well to restore or increase production; prevailing environmental
conditions associated with drilling and production sites; the availability of
enhanced recovery techniques; the ability to transport oil and natural gas to
markets; and governmental and other regulatory factors such as taxes and
environmental laws. Economic factors beyond our control, such as interest rates
and exchange rates, can also impact the value of such estimates. Some of these
assumptions are inherently subjective, and the accuracy of estimates relies in
part on the ability of our management, engineers and other advisors to make
accurate assumptions. As a result, there is no guarantee that any investment we
make in an oil or gas project or property will be successful since our estimates
will be inherently imprecise.
SUPPLIES NEEDED FOR EXPLORATION MAY NOT ALWAYS BE AVAILABLE. IF WE ARE UNABLE TO
SECURE EXPLORATION SUPPLIES WE MAY HAVE TO DELAY OUR ANTICIPATED BUSINESS
OPERATIONS.
Competition and unforeseen limited sources of supplies needed for our proposed
exploration work could result in occasional spot shortages of supplies of
certain products, equipment or materials. There is no guarantee we will be able
to obtain certain products, equipment and/or materials as and when needed,
without interruption, or on favorable terms. Such delays could affect our
anticipated business operations and increase our expenses.
MANAGEMENT LACKS FORMAL TRAINING IN OIL AND GAS EXPLORATION. OUR BUSINESS,
EARNINGS AND ULTIMATE FINANCIAL SUCCESS COULD SUFFER IRREPARABLE HARM AS A
RESULT OF MANAGEMENT'S LACK OF EXPERIENCE IN THE INDUSTRY.
Our officer and director has no professional accreditation or formal training in
the business of oil and gas exploration. With no direct training or experience
in these areas our management may not be fully aware of many of the specific
requirements related to working within this industry. Decisions so made without
this knowledge may not take into account standard engineering management
approaches that experienced exploration corporations commonly make.
Consequently, our business, earnings and ultimate financial success could suffer
irreparable harm as a result of management's lack of experience in the industry.
9
WE FACE STRONG COMPETITION FROM OTHER OIL AND GAS COMPANIES, WHICH COULD HARM
OUR BUSINESS AND OUR ABILITY TO OPERATE PROFITABLY.
Oil and gas exploration is a highly competitive business. Other oil and gas
companies will compete with us by bidding for licenses, properties and services
that we will need to operate our business in the locations in which we plan to
operate. As prices of oil and natural gas on the commodities markets rise, we
expect this competition to become increasingly intense. Additionally, other
companies engaged in our line of business may compete with us from time to time
in obtaining capital from investors.
Oil and gas properties have limited lives and, as a result, we may seek to alter
and expand our operations through the acquisition of new interests. However, the
available supply of desirable oil and gas properties is limited in North
America, which is where we would consider conducting our exploration activities.
The major oil and gas companies are often better positioned to obtain the rights
to exploratory acreage for which we may compete. Similarly, our competitors may
have a competitive advantage because they conduct their own refining and
petroleum marketing operations, have access to greater resources than us and are
able to more easily recruit and retain qualified employees.
Oil and natural gas exploration and development activities are also dependent on
the availability of drilling and related equipment, transportation, power and
technical support in particular areas and our access to these facilities may be
limited due to fierce competition. Shortages and/or the unavailability of
necessary equipment or other facilities may impair our activities, either by
delaying them, increasing our costs or otherwise. If we are unable to adequately
address our competition, including, but not limited to, finding ways to secure
profitable oil- and gas-producing properties on terms that we consider
acceptable, our ability to operate profitably could suffer.
OUR BUSINESS IS SUBJECT TO ENVIRONMENTAL LEGISLATION AND ANY CHANGES IN SUCH
LEGISLATION COULD PREVENT US FROM EARNING REVENUES.
The oil and gas industry is subject to many laws and regulations that govern the
protection of the environment, health and safety and the management,
transportation and disposal of hazardous substances. These laws and regulations
may require the removal or remediation of pollutants and may impose civil and
criminal penalties for any violations thereof. Some of the laws and regulations
authorize the recovery of natural resource damages by the government, injunctive
relief and the imposition of stop, control, remediation and abandonment orders.
Complying with environmental and natural resource laws and regulations may
increase our operating costs as well as restrict the scope of our operations.
Any regulatory changes that impose additional environmental restrictions or
requirements on us could affect us in a similar manner. If the costs of such
compliance or changes exceed our budgeted costs, we may not be able to earn
revenues.
10
RISKS ASSOCIATED WITH OUR COMMON STOCK
WE DO NOT INTEND TO PAY DIVIDENDS ON ANY INVESTMENT IN THE SHARES OF OUR STOCK.
We have never paid any cash dividends and currently do not intend to pay any
dividends for the foreseeable future. To the extent that we require additional
funding currently not provided for in our financing plan, our funding sources
may prohibit the payment of a dividend. Because we do not intend to declare
dividends, any gain on an investment in our company will need to come through an
increase in the stock's price. This may never happen and investors may lose all
of their investment in us.
BECAUSE WE CAN ISSUE ADDITIONAL SHARES OF COMMON STOCK, PURCHASERS OF OUR COMMON
STOCK MAY INCUR IMMEDIATE DILUTION AND MAY EXPERIENCE FURTHER DILUTION.
We are authorized to issue up to 500,000,000 shares of common stock, of which
60,800,000 shares are issued and outstanding. Our board of directors has the
authority to cause us to issue additional shares of common stock, and to
determine the rights, preferences and privileges of such shares, without consent
of any of our stockholders. Consequently, the stockholders may experience more
dilution in their ownership of our stock in the future.
A DECLINE IN THE PRICE OF OUR COMMON STOCK COULD AFFECT OUR ABILITY TO RAISE
FURTHER WORKING CAPITAL, IT MAY ADVERSELY IMPACT OUR ABILITY TO CONTINUE
OPERATIONS AND WE MAY GO OUT OF BUSINESS.
A prolonged decline in the price of our common stock could result in a reduction
in the liquidity of our common stock and a reduction in our ability to raise
capital. Because we may attempt to acquire a significant portion of the funds we
need in order to conduct our planned operations through the sale of equity
securities, a decline in the price of our common stock could be detrimental to
our liquidity and our operations because the decline may cause investors to not
choose to invest in our stock. If we are unable to raise the funds we require
for all our planned operations, we may be forced to reallocate funds from other
planned uses and may suffer a significant negative effect on our business plan
and operations, including our ability to develop new products and continue our
current operations. As a result, our business may suffer, and not be successful
and we may go out of business. We also might not be able to meet our financial
obligations if we cannot raise enough funds through the sale of our common stock
and we may be forced to go out of business.
OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE
SECURITIES AND EXCHANGE COMMISSION'S PENNY STOCK REGULATIONS WHICH MAY LIMIT A
STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK.
Our stock is a penny stock. The Securities and Exchange Commission has adopted
Rule 15g-9 which generally defines "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. Our securities are
covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established
11
customers and "accredited investors". The term "accredited investor" refers
generally to institutions with assets in excess of $5,000,000 or individuals
with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document in a form prepared
by the SEC which provides information about penny stocks and the nature and
level of risks in the penny stock market. The broker-dealer also must provide
the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules; the broker-dealer must 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. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.
FINRA SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER'S ABILITY TO BUY
AND SELL OUR STOCK.
In addition to the "penny stock" rules promulgated by the Securities and
Exchange Commission, the Financial Industry Regulatory Authority (FINRA) has
adopted rules that require that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the investment is
suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the FINRA believes that there is a high probability that
speculative low priced securities will not be suitable for at least some
customers. The FINRA requirements make it more difficult for broker-dealers to
recommend that their customers buy our common stock, which may limit your
ability to buy and sell our stock.
OUR SECURITY HOLDERS MAY FACE SIGNIFICANT RESTRICTIONS ON THE RESALE OF OUR
SECURITIES DUE TO STATE "BLUE SKY" LAWS.
Each state has its own securities laws, often called "blue sky" laws, which (i)
limit sales of securities to a state's residents unless the securities are
registered in that state or qualify for an exemption from registration, and (ii)
govern the reporting requirements for broker-dealers doing business directly or
indirectly in the state. Before a security is sold in a state, there must be a
registration in place to cover the transaction, or the transaction must be
exempt from registration. The applicable broker must be registered in that
state.
12
We do not know whether our securities will be registered or exempt from
registration under the laws of any state. A determination regarding registration
will be made by those broker-dealers, if any, who agree to serve as the
market-makers for our common stock. There may be significant state blue sky law
restrictions on the ability of investors to sell, and on purchasers to buy, our
securities. You should therefore consider the resale market for our common stock
to be limited, as you may be unable to resell your shares without the
significant expense of state registration or qualification.
RISKS RELATED TO OUR FINANCIAL RESULTS AND NEED FOR ADDITIONAL FINANCING
OUR AUDITORS' REPORTS CONTAIN A STATEMENT THAT OUR NET LOSS AND LIMITED WORKING
CAPITAL RAISE SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING
CONCERN.
Our independent registered public accountants have stated in their report,
included in our annual report on Form 10-K filed with the Securities and
Exchange Commission on October 29, 2009, that our significant operating losses
and working capital deficiency raise substantial doubt about our ability to
continue as a going concern. We had net loss of $45,097 for the year ended July
31, 2009 and $25,104 for the period from May 29, 2008 (inception) to July 31,
2008. We will be required to raise substantial capital to fund our capital
expenditures, working capital and other cash requirements since our current cash
assets are exhausted. We are currently searching for sources of additional
funding, including potential joint venture partners, while we continue the
initial exploration phase on our mining claims. The successful outcome of future
financing activities cannot be determined at this time and there are no
assurances that, if achieved, we will have sufficient funds to execute our
intended business plan or generate positive operational results.
WE WILL NEED ADDITIONAL CAPITAL TO ACHIEVE OUR CURRENT BUSINESS STRATEGY AND OUR
INABILITY TO OBTAIN ADDITIONAL FINANCING WILL INHIBIT OUR ABILITY TO EXPAND OR
EVEN MAINTAIN OUR EXPLORATION AND DEVELOPMENT EFFORTS.
In addition to our current accumulated deficit, we expect to incur additional
losses in the foreseeable future. Until we are able to determine if there are
oil or gas deposits available for extraction on our properties, we are unlikely
to be profitable. Consequently, we will require substantial additional capital
to continue our exploration and development activities. There is no assurance
that we will not incur additional and unplanned expenses during our continuing
exploration and development activities. When additional funding is required, we
intend to raise funds either through private placements or public offerings of
our equity securities. There is no assurance that we will be able to obtain
additional financing through private placements and/or public offerings
necessary to support our working capital requirements. To the extent that funds
generated from any private placements and/or public offerings are insufficient,
we will have to raise additional working capital through other sources, such as
bank loans and/or financings. No assurance can be given that additional
financing will be available, or if available, will be on acceptable terms.
13
If we are unable to secure adequate sources of funds, we may be forced to delay
or postpone the exploration, development and research of our properties, and as
a result, we might be required to diminish or suspend our business plans. These
delays in development would have an adverse effect on our ability to generate
revenues and could require us to possibly cease operations. In addition, such
inability to obtain financing on reasonable terms could have a negative effect
on our business, operating results or financial condition to such extent that we
are forced to restructure, file for bankruptcy protection, sell assets or cease
operations, any of which could put your investment dollars at significant risk.
WE ARE INCURRING INCREASED COSTS AS A RESULT OF BEING A PUBLICLY-TRADED COMPANY.
As a public company, we incur significant legal, accounting and other expenses
that we did not incur as a private company. In addition, the Sarbanes-Oxley Act
of 2002, as well as new rules subsequently implemented by the Securities and
Exchange Commission, have required changes in corporate governance practices of
public companies. These new rules and regulations have increased our legal and
financial compliance costs and have made some activities more time-consuming and
costly. For example, as a result of becoming a public company, we have created
additional board committees and have adopted policies regarding internal
controls and disclosure controls and procedures. In addition, we have incurred
additional costs associated with our public company reporting requirements.
These new rules and regulations have made it more difficult and more expensive
for us to obtain director and officer liability insurance, which we currently
cannot afford to do. As a result of the new rules, it may become more difficult
for us to attract and retain qualified persons to serve on our board of
directors or as executive officers. We cannot predict or estimate the amount of
additional costs we may incur as a result of being a public company or the
timing of such costs and/or whether we will be able to raise the funds necessary
to meet the cash requirements for these costs.
BECAUSE WE MAY NEVER EARN REVENUES FROM OUR OPERATIONS, OUR BUSINESS MAY FAIL
AND THEN INVESTORS MAY LOSE ALL OF THEIR INVESTMENT IN OUR COMPANY.
We have no history of revenues from operations. We have never had significant
operations and have no significant assets. We have yet to generate positive
earnings and there can be no assurance that we will ever operate profitably. We
have a limited operating history and are in the exploration stage. The success
of our company is significantly dependent on the uncertain events of the
discovery and exploitation of oil and gas reserves on our properties or selling
the rights to exploit those oil and gas reserves. If our business plan is not
successful and we are not able to operate profitably, then our stock may become
worthless and investors may lose all of their investment in our company.
Prior to completion of the exploration stage, we anticipate that we will incur
increased operating expenses without realizing any revenues. We therefore expect
to incur significant losses into the foreseeable future. We recognize that if we
are unable to generate significant revenues from the exploration of our oil and
gas claims in the future, we will not be able to earn profits or continue
operations. There is no history upon which to base any assumption as to the
likelihood that we will prove successful, and we can provide no assurance that
we will generate any revenues or ever achieve profitability. If we are
unsuccessful in addressing these risks, our business will fail and investors may
lose all of their investment in our company.
14
Please read this prospectus carefully. You should rely only on the information
contained in this prospectus. We have not authorized anyone to provide you with
different information. You should not assume that the information provided by
the prospectus is accurate as of any date other than the date on the front of
this prospectus.
USE OF PROCEEDS
The 22,500,000 shares of common stock offered hereby by the Selling Shareholders
are being registered for the account of the Selling Shareholders identified in
this Prospectus. All net proceeds from the sale of this common stock will go to
the respective Selling Shareholders who offer and sell their shares of common
stock. We will not receive any part of the proceeds from such sales of common
stock.
The net proceeds to us from the sale of up to 17,500,000 shares offered at a
public offering price of $0.10 per share will vary depending upon the total
number of shares sold. Regardless of the number of shares sold, we expect to
incur offering expenses estimated at approximately $40,000, $35,000 for legal
and accounting (incurred), and $5,000 for other costs in connection with this
offering (estimated transfer agent fees, filing fee, etc.). The table below
shows the intended net proceeds from this offering we expect to receive for
scenarios where we sell various amounts of the shares. Since we are making this
offering without any minimum requirement, there is no guarantee that we will be
successful at selling any of the securities being offered in this prospectus.
Accordingly, the actual amount of proceeds we will raise in this offering, if
any, may differ.
PERCENT OF NET PROCEEDS RECEIVED
20% 40% 70% 100%
---------- ---------- ----------- -----------
Shares Sold 3,500,000 7,000,000 12,250,000 17,500,000
Gross Proceeds $ 350,000 $ 700,000 $ 1,225,000 $ 1,750,000
Less Offering Expenses $ (40,000) $ (40,000) $ (40,000) $ (40,000)
Net Offering Proceeds $ 310,000 $ 660,000 $ 1,185,000 $ 1,710,000
The Use of Proceeds set forth below demonstrates how we intend to use the funds
under the various percentages of amounts of the related offering. All amounts
listed below are estimates.
20% 40% 70% 100%
---------- ---------- ----------- -----------
Professional Fees $ 50,000 $ 50,000 $ 50,000 $ 50,000
Development of Adam's Ranch Property $ 200,000 $ 490,000 $ 967,000 $1,492,000
General and Administrative Expenses $ 30,000 $ 60,000 $ 84,000 $ 84,000
Working Capital $ 30,000 $ 60,000 $ 84,000 $ 84,000
Our offering expenses are comprised of legal and accounting expenses and
transfer agent fees. Our officer and director will not receive any compensation
for his efforts in selling our shares.
15
We intend to use the proceeds of this offering in the manner and in order of
priority set forth above. We do not intend to use the proceeds to acquire assets
or finance the acquisition of other businesses. At present, no material changes
are contemplated. Should there be any material changes in the projected use of
proceeds in connection with this offering, we will issue an amended prospectus
reflecting the new uses.
In all instances, after the effectiveness of this registration statement, we
will need some amount of working capital to maintain its general existence and
comply with its public reporting obligations. In addition to changing
allocations because of the amount of proceeds received, we may change the use of
proceeds because of required changes in our business plan. Investors should
understand that we have wide discretion over the use of proceeds. Therefore,
management decisions may not be in line with the initial objectives of investors
who will have little ability to influence these decisions.
There is no commitment by any person to purchase any or all of the shares of
common stock offered by this prospectus and, therefore, there can be no
assurance that the offering will be totally subscribed for the sale of the
maximum 17,500,000 shares of common stock being offered.
DETERMINATION OF OFFERING PRICE
The Selling Shareholders will sell their shares at prevailing market prices or
privately negotiated prices. The number of securities that may be actually sold
by a Selling Shareholder will be determined by each Selling Shareholder. The
Selling Shareholders are under no obligation to sell all or any portion of the
securities offered, nor are the Selling Shareholders obligated to sell such
shares immediately under this Prospectus. A security holder may sell securities
at any price depending on privately negotiated factors such as a shareholders'
own cash requirements, or objective criteria of value such as the market value
of our assets.
We have arbitrarily established the offering price of the common stock and it
should not be considered to bear any relationship to our assets, book value or
net worth and should not be considered to be an indication of our value.
Among the factors considered by our management were:
* the market price for our common stock on the OTC Bulletin Board;
* the potential of our oil and gas properties;
* the proceeds to be raised by the offering; and
* our cash requirements relative to our business operations.
DILUTION
All of the 22,500,000 shares of our common stock to be sold by the Selling
Shareholders are currently issued and outstanding, and will therefore not cause
dilution to any of our existing stockholders.
16
Dilution represents the difference between the offering price and the net
tangible book value per share immediately after completion of this offering. Net
tangible book value is the amount that results from subtracting total
liabilities and intangible assets from total assets. Dilution arises mainly as a
result of our arbitrary determination of the offering price of the shares being
offered. Dilution of the value of the shares you purchase is also a result of
the lower book value of the shares held by our existing stockholder.
As at April 30, 2010, our last financial statement date, our total net tangible
book value was $238,151, or approximately $0.0039 per share based on 60,800,000
shares issued and outstanding to account for 3,000,000 shares for which
subscription was received, but which were not yet issued on April 30, 2010. The
proceeds from the sale of the new shares being offered (up to a maximum of
17,500,000) will vary depending on the total number of shares actually sold in
the offering. If all 17,500,000 shares offered hereunder are sold, there would
be a total of 78,300,000 common shares issued and outstanding. Dividing our net
tangible book value, after the sale of the 17,500,000 shares of our common stock
by the number of shares outstanding after the sale of the maximum offering
results in a per share net tangible book value of approximately $1,948,151 or
$0.0249 per share.
Therefore, the shareholders who purchase shares in this offering will suffer an
immediate dilution in the book value of their shares of approximately $0.0751
per share and our present shareholders will receive an immediate book value
increase of approximately $0.021 per share.
The following table demonstrates two scenarios to illustrate the per share
dilution effect of the offering of the new shares. The first scenario assumes
the completion of this offering by the sale of 50% of the maximum of 17,500,000
shares (8,750,000 shares) of common stock for gross proceeds of $875,000, and
the second scenario assumes the completion of the maximum offering of 17,500,000
shares of common stock for gross proceeds of $1,750,000.
50% 100%
8,7500,000 17,500,000
shares shares
-------- --------
Initial public offering price per share $ 0.10 $ 0.10
Net tangible book value per share as of April 30, 2010 $ 0.0039 $ 0.0039
Increase in net tangible book value per share
attributable to new investors $ 0.0112 $ 0.0210
Net tangible book value per share after offering $ 0.0151 $ 0.0249
Dilution per share to new investors $ 0.0849 $ 0.0751
SELLING SHAREHOLDERS
The 7 Selling Shareholders are offering for sale of 22,500,000 shares of our
issued and outstanding common stock obtained the stock which they are
registering in separate private transactions with Curtis Daye, our former sole
17
director and officer, on March 4, 2010. We initially issued the stock to Mr.
Daye on May 29, 2008 for total consideration of $6,500.
The Selling Shareholders have the option to sell their shares at prevailing
market prices or privately negotiated prices.
The following table provides information as of June 29, 2010 regarding the
beneficial ownership of our common stock by each of the Selling Shareholders,
including:
* the number of shares owned by each prior to this offering;
* the number of shares being offered by each;
* the number of shares that will be owned by each upon completion of the
offering, assuming that all the shares being offered are sold;
* the percentage of shares owned by each; and
* the identity of the beneficial holder of any entity that owns the
shares being offered.
Percentage
Maximum Owned upon
Shares Owned Numbers of Beneficial Completion
Prior to this Shares Being Ownership After of the
Name of Selling Shareholder Offering (1) Percent (2) Offered Offering Offering (2)
- --------------------------- ------------ ----------- ------- -------- ------------
Med Ventures Ltd. (3) 3,750,000 6.2% 3,750,000 0 0
Hayward Management, Inc. (4) 3,750,000 6.2% 3,750,000 0 0
Alabaster Limited (5) 3,750,000 6.2% 3,750,000 0 0
Armada International, Inc. (6) 3,750,000 6.2% 3,750,000 0 0
Gravhaven Limited (7) 3,750,000 6.2% 3,750,000 0 0
Nuria Investment Ltd. (8) 3,750,000 6.2% 3,750,000 0 0
---------- ---- ----------
TOTAL 22,500,000 37% 22,500,000
========== ==== ==========
- ----------
(1) The number and percentage of shares beneficially owned is determined to the
best of our knowledge in accordance with the Rules of the SEC and. the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares
as to which the selling security holder has sole or shared voting or
investment power and also any shares which the selling security holder has
the right to acquire within 60 days of the date of this Prospectus.
(2) The percentages are based on 60,800,000 shares of our common stock issued
and outstanding and as at June 29, 2010.
(3) Kent Ltd., has sole dispositive and voting control over securities held by
Med Ventures Ltd.
(4) Jonathan Marshall has sole dispositive and voting control over securities
held by Hayward Management, Inc.
18
(5) Roberto Rodriguez Bernal has sole dispositive and voting control over
securities held by Alabaster Limited.
(6) Cameron Frater has sole dispositive and voting control over securities held
by Armada International, Inc.
(7) Kent Ltd., has sole dispositive and voting control over securities held by
Gravhaven Limited.
(8) Naomi Johnston has sole dispositive and voting control over securities held
by Nuria Investment Ltd.
Except as otherwise noted in the above list, the named party beneficially owns
and has sole voting and investment power over all the shares or rights to the
shares. The numbers in this table assume that none of the Selling Shareholders
will sell shares not being offered in this Prospectus or will purchase
additional shares, and assumes that all the shares being registered will be
sold.
Other than as described above, none of the Selling Shareholders or their
beneficial owners has had a material relationship with us other than as a
security holder at any time within the past three years, or has ever been one of
our officers or directors or an officer or director of our predecessors or
affiliates.
None of the Selling Shareholders are broker-dealers or affiliates of a
broker-dealer.
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PLAN OF DISTRIBUTION
OFFERING OF 17,500,000 SHARES OF OUR COMMON STOCK
This is a self-underwritten offering. We are offering to the public 17,500,000
shares of common stock on a "$1,750,000 maximum" basis at a purchase price of
$0.10 per share. This Prospectus is part of a prospectus that permits Mr. Philip
Kueber, our president and chief executive officer, to sell the shares directly
to the public, with no commission or other remuneration payable to him. There
are no plans or arrangements to enter into any contracts or agreements to sell
the shares with a broker or dealer. Mr. Kueber will sell the shares and intends
to offer them to friends, family members, acquaintances, and business
associates. In offering the securities on our behalf, he will rely on the safe
harbor from broker dealer registration set out in Rule 3a4-1 under the
Securities Exchange Act of 1934.
Mr. Kueber will not register as broker-dealers pursuant to Section 15 of the
Securities Exchange Act of 1934, in reliance upon Rule 3a4-1, which sets forth
those conditions under which a person associated with an issuer may participate
in the offering of the issuer's securities and not be deemed to be a
broker-dealer.
1. Mr. Kueber is not subject to a statutory disqualification, as that
term is defined in Section 3(a)(39) of the Act, at the time of his
participation; and,
2. Mr. Kueber will not be compensated in connection with his
participation by the payment of commissions or other remuneration
based either directly or indirectly on transactions in securities; and
3. Mr. Kueber is not, nor will he be at the time of participation in the
offering, an associated person of a broker-dealer; and
4. Mr. Kueber meets the conditions of paragraph (a)(4)(ii) of Rule 3a4-1
of the Exchange Act, in that he (A) primarily performs, or is intended
primarily to perform at the end of the offering, substantial duties
for or on behalf of our company, other than in connection with
transactions in securities; and (B) is not a broker or dealer, or been
an associated person of a broker or dealer, within the preceding
twelve months; and (C) has not participated in selling and offering
securities for any issuer more than once every twelve months other
than in reliance on Paragraphs (a)(4)(i) or (a)(4)(iii).
Our officers, directors, control persons and affiliates of same do not intend to
purchase any shares in this offering.
We will not use public solicitation or general advertising in connection with
the offering. We will use our best efforts to find purchasers for the shares
offered by this prospectus within a period of 30 days from the date of the
prospectus, subject to an extension for an additional period not to exceed 90
days.
20
RESALE OF 22,500,000 SHARES BY SELLING SHAREHOLDERS
We are registering certain securities on behalf of the Selling Shareholders. The
22,500,000 issued common shares can be sold by the Selling Shareholders at
prevailing market prices or privately negotiated prices. These sales may be at
fixed or negotiated prices.
The Selling Shareholders may sell some or all of their securities in one or more
transactions, including block transactions:
* on such public markets as the securities may be trading;
* in privately negotiated transactions;
* in any combination of these methods of distribution.
The sales price to the public may be:
* the market price prevailing at the time of sale;
* a price related to such prevailing market price; or
* such other price as the Selling Shareholders determine.
We are bearing all costs relating to the registration of certain securities. The
Selling Shareholders, however, will pay any commissions or other fees payable to
brokers or dealers in connection with any sale of certain securities.
The Selling Shareholders must comply with the requirements of the Securities Act
and the Exchange Act in the offer and sale of certain securities. In particular,
during such times as the Selling Shareholders may be deemed to be engaged in a
distribution of certain securities, and therefore be considered to be an
underwriter, they must comply with applicable laws and may, among other things:
* not engage in any stabilization activities in connection with our
securities;
* furnish each broker or dealer through which common stock may be
offered, such copies of this Prospectus, as amended from time to time,
as may be required by such broker or dealer; and
* not bid for or purchase any of our securities or attempt to induce any
person to purchase any of our securities other than as permitted under
the Exchange Act.
Our common stock is quoted on the OTC Bulletin Board, under the trading symbol
"PEPR.OB". The market for our stock is highly volatile. We cannot assure you
that there will be a market in the future for our common stock.
Trading in stocks quoted on the OTC Bulletin Board is often thin and
characterized by wide fluctuations in trading prices, due to many factors that
may have little to do with a company's operations or business prospects. The OTC
Bulletin Board should not be confused with the NASDAQ market. OTC Bulletin Board
companies are subject to far fewer restrictions and regulations than are
companies traded on the NASDAQ market. Moreover, the OTC Bulletin Board is not a
stock exchange, and trading of securities on the OTC Bulletin Board is often
21
more sporadic than the trading of securities listed on a quotation system like
the NASDAQ Small Cap or a stock exchange. In the absence of an active trading
market: (a) investors may have difficulty buying and selling or obtaining market
quotations; (b) market visibility for our common stock may be limited; and (c) a
lack of visibility for our common stock may have a depressive effect on the
market price for our common stock.
None of the Selling Shareholders will engage in any electronic offer, sale or
distribution of the shares. Further, neither we nor any of the Selling
Shareholders have any arrangements with a third party to host or access our
Prospectus on the Internet.
In the event of the transfer by any selling stockholder of his or her shares to
any pledgee, donee or other transferee, we will amend this prospectus and the
registration statement of which this prospectus forms a part by the filing of a
post-effective amendment in order to have the pledgee, donee or other transferee
in place of the selling stockholder who has transferred his or her shares.
In effecting sales, brokers and dealers engaged by the Selling Shareholders may
arrange for other brokers or dealers to participate. Brokers or dealers may
receive commissions or discounts from the Selling Shareholders or, if any of the
broker-dealers act as an agent for the purchaser of such shares, from the
purchaser in amounts to be negotiated which are not expected to exceed those
customary in the types of transactions involved. Broker-dealers may agree with
the Selling Shareholders to sell a specified number of the shares of common
stock at a stipulated price per share. Such an agreement may also require the
broker-dealer to purchase as principal any unsold shares of common stock at the
price required to fulfill the broker-dealer commitment to the Selling
Shareholders if such broker-dealer is unable to sell the shares on behalf of the
Selling Shareholders. Broker-dealers who acquire shares of common stock as
principal may thereafter resell the shares of common stock from time to time in
transactions which may involve block transactions and sales to and through other
broker-dealers, including transactions of the nature described above. Such sales
by a broker-dealer could be at prices and on terms then prevailing at the time
of sale, at prices related to the then-current market price or in negotiated
transactions. In connection with such re-sales, the broker-dealer may pay to or
receive from the purchasers of the shares, commissions as described above.
The Selling Shareholders and any broker-dealers or agents that participate with
the Selling Shareholders in the sale of the shares of common stock may be deemed
to be "underwriters" within the meaning of the Securities Act in connection with
these sales. In that event, any commissions received by the broker-dealers or
agents and any profit on the resale of the shares of common stock purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act.
From time to time, the Selling Shareholders may pledge their shares of common
stock pursuant to the margin provisions of their customer agreements with their
brokers. Upon a default by a selling stockholder, the broker may offer and sell
the pledged shares of common stock from time to time. Upon a sale of the shares
of common stock, the Selling Shareholders intend to comply with the prospectus
delivery requirements, under the Securities Act, by delivering a prospectus to
each purchaser in the transaction. We intend to file any amendments or other
22
necessary documents in compliance with the Securities Act which may be required
in the event any selling stockholder defaults under any customer agreement with
brokers.
To the extent required under the Securities Act, a post effective amendment to
this registration statement will be filed, disclosing, the name of any
broker-dealers, the number of shares of common stock involved, the price at
which the common stock is to be sold, the commissions paid or discounts or
concessions allowed to such broker-dealers, where applicable, that such
broker-dealers did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus and other facts material to
the transaction.
We and the Selling Shareholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations under it, including, without
limitation, Rule 10b-5 and, insofar as the Selling Shareholders are distribution
participants and we, under certain circumstances, may be a distribution
participant, under Regulation M. All of the foregoing may affect the
marketability of the common stock.
All expenses of the registration statement including, but not limited to, legal,
accounting, printing and mailing fees are and will be borne by us. Any
commissions, discounts or other fees payable to brokers or dealers in connection
with any sale of the shares of common stock will be borne by the Selling
Shareholders, the purchasers participating in such transaction, or both.
REGULATION M
During such time as the Selling Shareholders may be engaged in a distribution of
any of the securities being registered by this Prospectus, the Selling
Shareholders are required to comply with Regulation M under the Exchange Act. In
general, Regulation M precludes any selling security holder, any affiliated
purchaser and any broker-dealer or other person who participates in a
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase, any security that is the subject of the distribution
until the entire distribution is complete.
Regulation M defines a "distribution" as an offering of securities that is
distinguished from ordinary trading activities by the magnitude of the offering
and the presence of special selling efforts and selling methods. Regulation M
also defines a "distribution participant" as an underwriter, prospective
underwriter, broker, dealer, or other person who has agreed to participate or
who is participating in a distribution.
Regulation M prohibits, with certain exceptions, participants in a distribution
from bidding for or purchasing, for an account in which the participant has a
beneficial interest, any of the securities that are the subject of the
distribution. Regulation M also governs bids and purchases made in order to
stabilize the price of a security in connection with a distribution of the
security. We have informed the Selling Shareholders that the anti-manipulation
provisions of Regulation M may apply to the sales of their shares offered by
this Prospectus, and we have also advised the Selling Shareholders of the
requirements for delivery of this Prospectus in connection with any sales of the
shares offered by this Prospectus.
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With regard to short sales, the Selling Shareholders cannot cover their short
sales with securities from this offering. In addition, if a short sale is deemed
to be a stabilizing activity, then the Selling Shareholders will not be
permitted to engage in such an activity. All of these limitations may affect the
marketability of our common stock.
PENNY STOCK RULES
The SEC has adopted rules that regulate broker-dealer practices in connection
with transactions in penny stocks. Penny stocks are generally equity securities
with a price of less than $5.00 (other than securities registered on certain
national securities exchanges, provided that current price and volume
information with respect to transactions in such securities is provided by the
exchange or system).
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, to deliver a standardized risk
disclosure document prepared by the SEC which:
* contains a description of the nature and level of risk in the market
for penny stocks in both public offerings and secondary trading;
* contains a description of the broker's or dealer's duties to the
customer and of the rights and remedies available to the customer with
respect to violations of such duties or other requirements of federal
securities laws;
* contains a brief, clear, narrative description of a dealer market,
including "bid" and "ask" prices for penny stocks and the significance
of the spread between the bid and ask prices;
* contains the toll-free telephone number for inquiries on disciplinary
actions;
* defines significant terms in the disclosure document or in the conduct
of trading in penny stocks; and
* contains such other information, and is in such form (including
language, type size, and format) as the SEC shall require by rule or
regulation.
Prior to effecting any transaction in a penny stock, a broker-dealer must also
provide a customer with:
* the bid and ask prices for the penny stock;
* the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the
market for such stock;
* the amount and a description of any compensation that the
broker-dealer and its associated salesperson will receive in
connection with the transaction; and
* a monthly account statement indicating the market value of each penny
stock held in the customer's account.
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In addition, the penny stock rules require that prior to effecting any
transaction in a penny stock not otherwise exempt from those rules, a
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive (i) the purchaser's written
acknowledgment of the receipt of a risk disclosure statement, (ii) a written
agreement to transactions involving penny stocks, and (iii) a signed and dated
copy of a written suitability statement. These disclosure requirements may have
the effect of reducing the trading activity in the secondary market for our
securities, and therefore our stockholders may have difficulty selling their
shares.
BLUE SKY RESTRICTIONS ON RESALE
When a selling security holder wants to sell shares of our common stock under
this Prospectus in the United States, the selling security holder will need to
comply with state securities laws, also known as "blue sky laws," with regard to
secondary sales. All states offer a variety of exemptions from registration of
secondary sales. Many states, for example, have an exemption for secondary
trading of securities registered under section 12(g) of the Exchange Act or for
securities of issuers that publish continuous disclosure of financial and
non-financial information in a recognized securities manual, such as Standard &
Poor's. The broker for a selling security holder will be able to advise the
stockholder as to which states have an exemption for secondary sales of our
common stock.
Any person who purchases shares of our common stock from a selling security
holder pursuant to this Prospectus, and who subsequently wants to resell such
shares will also have to comply with blue sky laws regarding secondary sales.
When this Prospectus becomes effective, and a selling security holder indicates
in which state(s) he desires to sell his shares, we will be able to identify
whether he will need to register or may rely on an exemption from registration.
DESCRIPTION OF SECURITIES
As of June 29, 2010, there are 60,800,000 shares of the Company's common stock
issued and outstanding, held by 70 holders of record.
COMMON STOCK
On October 15, 2009, our board of directors approved a five (5) for one (1)
forward stock split of authorized, issued and outstanding shares of common
stock. We amended our Articles of Incorporation by the filing of a Certificate
of Change with the Nevada Secretary of State wherein it stated that we would
issue ten shares for every one share of common stock issued and outstanding
immediately prior to the effective date of the forward stock split. As a result,
the authorized capital increased from 100,000,000 to 500,000,000 shares of
common stock with a par value of $0.00001. The stock split is presented
retroactively in our financial statements.
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Our authorized capital stock currently consists of 500,000,000 shares of common
stock, par value $0.00001 per share. Our shareholders (i) have equal ratable
rights to dividends from funds legally available therefore, when, as and if
declared by the board of directors; (ii) are entitled to share ratably in all of
the assets for distribution to holders of common stock upon liquidation,
dissolution or winding up of our business affairs; (iii) do not have
pre-emptive, subscription or conversion rights, and there are no redemption or
sinking fund provisions or rights applicable thereto; and (iv) are entitled to
one non-cumulative vote per share on all matters on which stockholders may vote.
All shares of common stock now outstanding are fully paid and non-assessable.
There are no provisions in our articles of incorporation or bylaws that would
delay, defer or prevent a change in control of our company or a change in type
of business.
VOTING RIGHTS
Each holder of our common stock is entitled to one vote per share on all matters
on which such stockholders are entitled to vote. Since the shares of our common
stock do not have cumulative voting rights, the holders of more than 50% of the
shares voting for the election of directors can elect all the directors if they
choose to do so and, in such event, the holders of the remaining shares will not
be able to elect any person to our Board of Directors.
DIVIDEND POLICY
Holders of our common stock are entitled to dividends if declared by the Board
of Directors out of funds legally available for payment of dividends. From our
inception to the date of this Prospectus we did not declare any dividends.
We do not intend to issue any cash dividends in the future. We intend to retain
earnings, if any, to finance the development and expansion of our business.
However, it is possible that our management may decide to declare a stock
dividend in the future. Our future dividend policy will be subject to the
discretion of our Board of Directors and will be contingent upon future
earnings, if any, our financial condition, our capital requirements, general
business conditions and other factors.
PREFERRED STOCK
We are authorized to issue up to 100,000,000 shares of $0.00001 par value
preferred stock. We have no shares of preferred stock outstanding. Under our
Articles of Incorporation, the Board of Directors has the power, without further
action by the holders of the common stock, to determine the relative rights,
preferences, privileges and restrictions of the preferred stock, and to issue
the preferred stock in one or more series as determined by the Board of
Directors. The designation of rights, preferences, privileges and restrictions
could include preferences as to liquidation, redemption and conversion rights,
voting rights, dividends or other preferences, any of which may be dilutive of
the interest of the holders of the common stock.
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INTEREST OF NAMES EXPERTS AND COUNSEL
No expert or counsel named in this Prospectus as having prepared or certified
any part thereof or having given an opinion upon the validity of the securities
being registered or upon other legal matters in connection with the registration
or offering of our common stock was employed on a contingency basis or had or is
to receive, in connection with the offering, a substantial interest, directly or
indirectly, in us. Additionally, no such expert or counsel was connected with us
as a promoter, managing or principal underwriter, voting trustee, director,
officer or employee.
Macdonald Tuskey Corporate and Securities Lawyers, Suite 1210, 777 Hornby
Street, Vancouver, BC, V6Z 1S4, Canada, has passed upon certain legal matters in
connection with the validity of the issuance of the shares of common stock.
MaloneBailey, LLP has audited our Financial Statements for the year ended July
31, 2009 and to the extent set forth in its report, which are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.
There were no disagreements related to accounting principles or practices,
financial statement disclosure, internal controls or auditing scope or procedure
during the two fiscal years and interim period.
DESCRIPTION OF OUR BUSINESS
GENERAL
We are an exploration stage corporation. We are engaged in the acquisition and
exploration of mining and oil and gas properties. Our principal executive office
is located at One Lincoln Centre, 18 West 140 Butterfield Road -15th Floor,
Oakbrook Terrace, IL 60181. Our telephone number is 630-613-7487 and our
registered agent for service of process is the National Registered Agents Inc.
of NV, located at 1000 East William Street, Suite 204, Carson City, Nevada
89701. Our fiscal year end is July 31.
We are an exploration stage company and are primarily engaged in the exploration
and development of oil and gas properties. We originally acquired rights to
mineral properties in Nevada which we refer to as the Pepper Rock Mining Claims,
but have decided to abandon exploration on these claims and focus on our oil and
gas properties. We entered into an agreement to acquire a 49% interest in a
natural gas processing and compression facility, a natural gas pipeline,
additional infrastructure and certain lands associated with the infrastructure
in Southern Alberta, Canada, but on May 5, 2010 it was terminated. We have also
entered into a joint venture agreement with Oxalis Energy Group, Inc., to
develop a natural gas property within the Adams - Baggett Ranch near Ozona,
Texas. This property is described in detail in a section titled "Description of
Properties" further in this Prospectus.
OUR CURRENT BUSINESS - OIL AND GAS EXPLORATION
We are an exploration stage resource company, and are primarily engaged in the
business of exploration for oil and gas resources.
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On February 5, 2010 we entered into a joint venture agreement with Dominus
Energy, AG, to develop a natural gas property in the Manyberries region of
Alberta, Canada. Under the terms of this Agreement, we must pay $500,000 within
a 6 month period in order to acquire a 49% working interest in the property. We
will also have the option to increase our interest to 51%. The property in
question is located in Southern Alberta, in close proximity to the Montana
border. The property includes oil and gas production infrastructure comprised of
6 miles of 6-inch high-pressure pipeline tested to operate at 1200 pounds per
square inch. There are also 3.5 miles of 3-inch pipeline for waste water and a
2-inch pipeline for fuel gas. The natural gas pipelines connect to a major line
operated by EnCana Corporation which extends out towards three gas wells on the
Manyberries property. We have not yet closed the acquisition of our interest in
this property. On May 5, 2010, this agreement was terminated with no additional
obligations on us or Dominus.
On February 10, 2010 we entered into a joint venture agreement with Oxalis
Energy Group, Inc., for an exclusive right to participate in Oxalis' natural gas
project at the Adams - Baggett Ranch near Ozona, Texas. Under the terms of the
agreement we have committed to investing an aggregate of $5,300,000 into the
development of the property. An initial payment of $300,000 has already been
made and we anticipate making consequent payments of $500,000 every month in
order to fulfill our obligations under this agreement. We anticipate that we
will begin making the $500,000 for the development of new wells once we are able
to secure a service provider who can perform hydraulic fracturing work on our
existing properties in this region in a relatively short time frame and secure
the required financing. The hydraulic fracturing work has to be completed before
we can undertake the drilling of the wells for which the $500,000 has been
assigned for and Oxalis has expressed intent to arrange a mutually beneficial
time to begin the payments. The initial payment of $300,000 was used for the
re-activation of two natural gas wells on the property and the acquisition of a
50% working interest in these wells. With each additional payment of $500,000 we
will acquire a 50% operating interest in one of the remaining 10 yet to be
drilled natural gas wells on the property which are subject to our agreement
with Oxalis. None of these parcels, including the existing wells, are currently
producing natural gas and there can be no assurance that they will produce
natural gas even if we meet our financing requirements.
If we make all required payments under this agreement, we will have acquired a
50% working interest in 12 natural gas wells in a joint venture with Oxalis. If
we fail to make any future payments, we will abandon all rights to acquire any
further wells on the Adams - Baggett property from Oxalis. A detailed
description of the Adams - Baggett property is included further in this
Prospectus in the section titled "Description of Property".
MARKET AND INDUSTRY
As the U.S. economy expanded after World War II, the development of a vast
interstate transmission system facilitated the widespread consumption of natural
gas in homes and business establishments. The demand for natural gas rose
sharply in the 1980s, when consumers and businesses began to find more uses for
it. After years as a low-value commodity, natural gas ascended into the
spotlight as demand for the fuel to fire power plants, heat homes and serve as
chemical feedstock outstripped the petroleum industry's ability to tap new
28
reserves. In the 1990s, the popularity of natural gas as an economic and
environmentally benign fossil fuel made it the fuel of choice for power
generation.
By the year 2000, the U.S. economy was thriving, fueled by cheap energy. To meet
the growing need for electricity, U.S. utilities ordered 180,000 megawatts of
gas-fired power plants to be installed by 2005. This was, by far, the largest
amount of power generation capacity ever installed in such a short period. As a
result, the U.S. electricity supply margins and its economy became dependent on
natural gas availability and price. Today, most newly created electricity
capacity is generated by natural gas, rather than oil, coal, water or nuclear.
This has prompted the National Petroleum Council to predict that electricity
generation will be responsible for 47% of the increase in natural gas
consumption between 1998 and 2010.
The availability of a ready market and the prices obtained for produced oil and
gas depends on many factors, including the extent of domestic production and
imports of oil and gas, the proximity and capacity of natural gas pipelines and
other transportation facilities, fluctuating demand for oil and gas, the
marketing of competitive fuels, and the effects of governmental regulation of
oil and gas production and sales. A ready domestic market for oil and gas exists
because of the presence of pipelines to transport oil and gas. The existence of
an international market exists depends upon the presence of international
delivery systems and political and pricing factors.
If we are successful in producing oil and gas in the future, the target
customers for our oil and gas are expected to be refiners, remarketers and third
party intermediaries, who either have, or have access to, consumer delivery
systems. We intend to sell our oil and gas under both short-term (less than one
year) and long-term (one year or more) agreements at prices negotiated with
third parties. Typically either the entire contract (in the case of short-term
contracts) or the price provisions of the contract (in the case of long-term
contracts) are renegotiated at intervals ranging in frequency from daily to
annually.
We have not yet adopted any specific sales and marketing plans. However, as we
purchase future properties, the need to hire marketing personnel will be
addressed.
COMPETITION
The oil and gas industry is highly competitive. We are a new exploration stage
company and have a weak competitive position in the industry. We compete with
junior and senior oil and gas companies, independent producers and institutional
and individual investors who are actively seeking to acquire oil and gas
properties throughout the world together with the equipment, labor and materials
required to operate on those properties. Competition for the acquisition of oil
and gas interests is intense with many oil and gas leases or concessions
available in a competitive bidding process in which we may lack the
technological information or expertise available to other bidders.
Many of the oil and gas companies with which we compete for financing and for
the acquisition of oil and gas properties have greater financial and technical
resources than those available to us. Accordingly, these competitors may be able
to spend greater amounts on acquiring oil and gas interests of merit or on
exploring or developing their oil and gas properties. This advantage could
29
enable our competitors to acquire oil and gas properties of greater quality and
interest to prospective investors who may choose to finance their additional
exploration and development. Such competition could adversely impact our ability
to attain the financing necessary for us to acquire further oil and gas
interests or explore and develop our current or future oil and gas properties.
We also compete with other junior oil and gas companies for financing from a
limited number of investors that are prepared to invest in such companies. The
presence of competing junior oil and gas companies may impact our ability to
raise additional capital in order to fund our acquisition or exploration
programs if investors perceive that investments in our competitors are more
attractive based on the merit of their oil and gas properties or the price of
the investment opportunity. In addition, we compete with both junior and senior
oil and gas companies for available resources, including, but not limited to,
professional geologists, land specialists, engineers, camp staff, helicopters,
float planes, oil and gas exploration supplies and drill rigs.
General competitive conditions may be substantially affected by various forms of
energy legislation and/or regulation introduced from time to time by the
governments of the United States and other countries, as well as factors beyond
our control, including international political conditions, overall levels of
supply and demand for oil and gas, and the markets for synthetic fuels and
alternative energy sources.
In the face of competition, we may not be successful in acquiring, exploring or
developing profitable oil and gas properties or interests, and we cannot give
any assurance that suitable oil and gas properties or interests will be
available for our acquisition, exploration or development. Despite this, we hope
to compete successfully in the oil and gas industry by:
* keeping our costs low;
* relying on the strength of our management's contacts; and
* using our size and experience to our advantage by adapting quickly to
changing market conditions or responding swiftly to potential
opportunities.
RESEARCH AND DEVELOPMENT
We have not spent any money on research and development activities since our
inception. We do not anticipate that we will not incur any research and
development expenses over the next 12 months, but this may change if we are
successful in acquiring new properties or interests. Our planned expenditures on
our operations and the exploration program are summarized under the section of
this Prospectus entitled "Description of Property".
INTELLECTUAL PROPERTY
Other than the rights we own in our website: http://www.pepperrockresourcescorp.
com. We have not filed for any protection of our trademark, and we do not have
any other intellectual property.
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GOVERNMENT REGULATIONS
Our current and future operations and exploration activities are or will be
subject to various laws and regulations in the United States, the countries in
which we conduct or plan to conduct our activities. These laws and regulations
govern the protection of the environment, conservation, prospecting,
development, energy production, taxes, labor standards, occupational health and
safety, toxic substances, chemical products and materials, waste management and
other matters relating to the oil and gas industry. Permits, registrations or
other authorizations may also be required to maintain our operations and to
carry out our future oil and gas exploration and production activities, and
these permits, registrations or authorizations will be subject to revocation,
modification and renewal.
Governmental authorities have the power to enforce compliance with lease
conditions, regulatory requirements and the provisions of required permits,
registrations or other authorizations, and violators may be subject to civil and
criminal penalties including fines, injunctions, or both. The failure to obtain
or maintain a required permit may also result in the imposition of civil and
criminal penalties, and third parties may have the right to sue to enforce
compliance.
We expect to be able to comply with all applicable laws and regulations and do
not believe that such compliance will have a material adverse effect on our
competitive position. We have obtained and intend to obtain all environmental
permits, licenses and approvals required by all applicable regulatory agencies
to maintain our current oil and gas operations and to carry out our future
exploration activities. We are not aware of any material violations of
environmental permits, licenses or approvals issued with respect to our
operations, and we believe that the operators of the properties in which we have
an interest comply with all applicable laws and regulations. We intend to
continue complying with all environmental laws and regulations, and at this time
we do not anticipate incurring any material capital expenditures to do so.
Compliance with environmental requirements, including financial assurance
requirements and the costs associated with the cleanup of any spill, could have
a material adverse effect on our capital expenditures, earnings or competitive
position. Our failure to comply with any laws and regulations may result in the
assessment of administrative, civil and criminal penalties, the imposition of
injunctive relief, or both. Legislation affecting the oil and gas industry is
subject to constant review, and the regulatory burden frequently increases.
Changes in any of the laws and regulations could have a material adverse effect
on our business, and in view of the many uncertainties surrounding current and
future laws and regulations, including their applicability to our operations, we
cannot predict their overall effect on our business.
U.S. REGULATIONS
Our operations are or will be subject to various types of regulation at the
federal, state and local levels in the United States. Such regulation covers
permits required for drilling wells; bonding requirements for drilling or
operating wells; the implementation of spill prevention plans; submissions and
permits relating to the presence, use and release of certain materials
incidental to oil and gas operations; the location of wells; the method of
drilling and casing wells; the use, transportation, storage and disposal of
fluids and materials used in connection with drilling and production activities;
surface usage and the restoration of properties upon which wells have been
drilled; the plugging and abandoning of wells; and the transportation of oil and
gas.
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Our operations are or will also be subject to various conservation matters,
including the regulation of the size of drilling and spacing units or proration
units, the number of wells which may be drilled in a unit, and the unitization
or pooling of oil and gas properties. In this regard, some states allow forced
pooling or the integration of tracts to facilitate exploration while other
states rely on the voluntary pooling of lands and leases, which may make it more
difficult to develop oil and gas properties. In addition, state conservation
laws establish maximum rates of production from oil and gas wells, generally
limit the venting or flaring of gas and impose certain requirements regarding
the ratable purchase of produced oil and gas. The effect of these regulations is
to limit the amounts of oil and gas we may be able to produce from our wells and
to limit the number of wells or the locations at which we may be able to drill.
Oil and natural gas exploration and production activities on federal lands are
subject to the NATIONAL ENVIRONMENTAL POLICY ACT (NEPA). The NEPA requires
federal agencies, including the Department of the Interior, to evaluate major
agency actions that have the potential to significantly impact the environment.
In the course of such evaluations, an agency will typically prepare an
environmental assessment on the potential direct, indirect and cumulative
impacts of a proposed project and, if necessary, will prepare a more detailed
environmental impact statement that may be made available for public review and
comment. This process has the potential to delay or limit the development of oil
and natural gas projects.
The RESOURCE CONSERVATION AND RECOVERY ACT (RCRA) and comparable state laws
regulate the generation, transportation, treatment, storage, disposal and
cleanup of "hazardous wastes" as well as the disposal of non-hazardous wastes.
Under the auspices of the U.S. Environmental Protection Agency, or EPA,
individual states administer some or all of the provisions of RCRA, sometimes in
conjunction with their own, more stringent requirements. While drilling fluids,
produced waters, and many other wastes associated with the exploration,
development, and production of crude oil, natural gas, or geothermal energy
constitute "solid wastes", which are regulated under the less stringent
non-hazardous waste provisions, there is no assurance that the EPA or individual
states will not in the future adopt more stringent and costly requirements for
the handling of non-hazardous wastes or categorize some non-hazardous wastes as
hazardous.
The COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT
(CERCLA), also known as "Superfund", and analogous state laws, impose joint and
several liability, without regard to fault or legality of conduct, on persons
who are considered to be responsible for the release of a "hazardous substance"
into the environment. These persons include the owner or operator of the site
where the release occurred and any company that disposed or arranged for the
disposal of the hazardous substance at the site. Under CERCLA, such persons may
be liable for the costs of cleaning up the hazardous substances that have been
released into the environment, for damages to natural resources and for the
costs of certain health studies. In addition, it is not uncommon for neighboring
landowners and other third parties to file claims for personal injury and
property damage allegedly caused by the release of hazardous substances into the
environment.
The WATER POLLUTION CONTROL ACT, also known as the Clean Water Act, and
analogous state laws, impose restrictions and strict controls on the discharge
of pollutants, including produced waters and other oil and natural gas wastes,
32
into waters of the United States. The discharge of pollutants into regulated
waters is prohibited, except in accordance with the terms of a permit issued by
the EPA or the relevant state. The Clean Water Act also prohibits the discharge
of dredge and fill material into regulated waters, including wetlands, unless
authorized by a permit issued by the U.S. Army Corps of Engineers. Federal and
state regulatory agencies can impose administrative, civil and criminal
penalties for non-compliance with discharge permits or other requirements of the
Clean Water Act and analogous state laws and regulations.
The CLEAN AIR ACT and associated state laws and regulations regulate emissions
of various air pollutants through the issuance of permits and the imposition of
other requirements. In addition, the EPA has developed, and continues to
develop, stringent regulations governing emissions of toxic air pollutants at
specified sources. In order to construct production facilities, we may be
required to obtain permits before work can begin. These regulations may increase
the costs of compliance for such facilities, and federal and state regulatory
agencies may impose administrative, civil and criminal penalties for
non-compliance.
We may be subject to the requirements of the OCCUPATIONAL SAFETY AND HEALTH ACT
(OSHA) and comparable state statutes. The OSHA hazard communication standard,
the EPA community right-to-know regulations under Title III of CERCLA, and
similar state statutes require that we organize and/or disclose information
about hazardous materials used or produced in our operations.
CANADIAN REGULATIONS
If we close our agreement on the Manyberries properties, we will have operations
and exploration activities in Canada, and we may have to comply with Canadian
laws and regulations related to the oil and gas industry. Canada has regulatory
provisions concerning permits for the drilling of wells, the spacing of wells,
the prevention of oil and natural gas waste, allowable rates of production and
other matters. The amount of oil and natural gas produced is subject to control
by regulatory agencies in each province that regulates allowable rates of
production.
In addition to the foregoing, our future Canadian operations may be affected
from time to time by political developments in Canada and by federal, provincial
and local laws and regulations, such as restrictions on production and export,
oil and natural gas allocation and rationing, price controls, tax increases, the
expropriation of property, the modification or cancellation of contract rights
and environmental protection controls.
The CANADA OIL AND GAS OPERATIONS ACT permits the creation of regulations
concerning the design, safety, construction, installation, inspection, testing,
monitoring, operation, maintenance and repair of installations used in the
exploration, development and production of oil and gas. The Act prohibits anyone
from carrying on any work or activity related to the exploration for or the
production of oil or gas unless they first obtain a license or authorization
issued by the National Energy Board. As part of the application process, a plan
must be submitted that shows that Canadians are being employed and that Canadian
goods and services are being used. The National Energy Board may require that
certain conditions be fulfilled, for example, that a company obtain appropriate
insurance and that environmental studies be carried out.
33
The OIL AND GAS SPILLS AND DEBRIS LIABILITY REGULATIONS govern the limits of
liability for spills, authorized discharges and debris emanating or originating
from work or activity related to the exploration or production of oil and gas.
The CANADA OIL AND GAS DRILLING REGULATIONS govern the exploration, drilling and
conservation of oil and gas and specify measures to ensure the safety of these
operations. These regulations stipulate that no person may drill a well without
the authorization and approval of the Chief Conservation Officer.
The REGISTRATION OF STORAGE TANK SYSTEMS FOR PETROLEUM PRODUCTS AND ALLIED
PETROLEUM PRODUCTS ON FEDERAL LANDS OR ABORIGINAL LANDS REGULATIONS require the
registration of specified storage tank systems located on federal lands or
aboriginal lands with the appropriate federal department responsible for
administering the land. The Department of Environment has access to the
consolidated storage tank system records in each appropriate federal department,
and any unregistered storage tank systems are prohibited from engaging in fuel
delivery.
OTHER LAWS AND REGULATIONS
The KYOTO PROTOCOL TO THE UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE
became effective in February 2005. Under the Protocol, participating nations are
required to implement programs to reduce emissions of certain gases, generally
referred to as greenhouse gases, which are suspected of contributing to global
warming. Methane, a primary component of natural gas, and carbon dioxide, a
byproduct of the burning of oil and natural gas, are examples of greenhouse
gases regulated by the Protocol. Although the United States is not participating
in the Protocol, the current session of Congress is considering climate change
legislation, with multiple bills having already been introduced that propose to
restrict greenhouse gas emissions. Also, several states have already adopted
regulatory initiatives or legislation to reduce emissions of greenhouse gases.
For example, California recently adopted the CALIFORNIA GLOBAL WARMING SOLUTIONS
ACT OF 2006, which requires the California Air Resources Board to achieve a 25%
reduction in emissions of greenhouse gases from sources in California by 2020.
Additionally, in the April 2, 2007 decision of the U.S. Supreme Court in
MASSACHUSETTS, ET AL. V. EPA, the Court held that the CLEAN AIR ACT provides the
EPA with the authority to regulate emissions of carbon dioxide and other
greenhouse gases from mobile sources. The Court determined that the EPA had
failed to provide an adequate statutory basis for its refusal to regulate
greenhouse gases from such sources, reversing the decision of the U.S. Circuit
Court of Appeals for the District of Columbia. The Court remanded the case to
the Circuit Court for further proceedings consistent with the ruling, which will
presumably require the EPA to determine whether greenhouse gases from mobile
sources endanger public health or welfare. The passage of climate control
legislation by Congress or a determination by the EPA that public health or
welfare is endangered by the emission of carbon dioxide from mobile sources may
result in the federal regulation of carbon dioxide emissions and other
greenhouse gases.
We believe that we are currently in compliance with the statutory and regulatory
provisions governing our operations. We hold or will hold all necessary permits
and other authorizations to the extent required by our current or future
properties or interest and their associated operations. However, we may do
34
business and own properties in a number of different geographic areas and may
therefore be subject to the jurisdiction of a large number of different
authorities at different levels of government. We plan to comply with all
statutory and regulatory provisions governing our current and future operations;
however, such regulations may significantly increase our costs of compliance,
and regulatory authorities may also impose administrative, civil and criminal
penalties for non-compliance. At this time, it is not possible to accurately
estimate how laws or regulations may impact our future business. We also cannot
give any assurance that we will be able to comply with future changes in any
statutes or regulations.
We own or may own interests in properties that have been used for oil and gas
exploration in the past. Although industry-standard operating and waste disposal
practices may have been used, hazardous substances, wastes, or petroleum
hydrocarbons may have been released on or under the properties, or on or under
other locations, including off-site locations, where such substances have been
taken for disposal. In addition, some of these properties may have been or may
be operated by third parties or by previous owners or operators whose treatment
and disposal of hazardous substances, wastes, or hydrocarbons was not under our
control. These properties and the substances disposed or released thereon may be
subject to CERCLA, RCRA and analogous state laws. Under such laws, we could be
required to remove previously disposed substances and wastes, remediate
contaminated property or perform remedial plugging or pit closure operations to
prevent any future contamination.
EMPLOYEES AND CONSULTANTS
At present, we have no employees, other than our executive officers who do not
have an employment agreement with us. We presently do not have pension, health,
annuity, insurance, stock options, profit sharing or similar benefit plans;
however, we may adopt such plans in the future. There are presently no personal
benefits available to employees.
We intend to continue to use the services of subcontractors for manual labor
exploration work and an engineer or geologist to manage the exploration program.
Our only employees will be our senior officers and directors.
REPORTS TO SECURITY HOLDERS
Any member of the public may read and copy any materials filed by us with the
Securities and Exchange Commission at the Securities and Exchange Commission's
Public Reference Room at 100 F Street, N.E. Washington, D.C. 20549. Information
on the operation of the Public Reference Room may be obtained by calling the
Securities and Exchange Commission at 1-800-732-0330. The Securities and
Exchange Commission maintains an internet website (http://www.sec.gov) that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the Securities and Exchange
Commission.
35
DESCRIPTION OF PROPERTY AND FACILITIES
We maintain our statutory registered agent's office at National Registered
Agents, Inc. of NV, 1000 East William Street, Suite 204, Carson City, Nevada
89701 and our business office is located at One Lincoln Centre, 18 West 140
Butterfield Road - 15th Floor, Oakbrook Terrace, IL 60181. Our telephone number
is 630-613-7487. This is our mailing address as well.
On February 10, 2010 we entered into a joint venture agreement with Oxalis
Energy Group, Inc., for an exclusive right to participate in Oxalis' natural gas
project at the Adams - Baggett Ranch near Ozona, Texas. Under the terms of the
agreement we have committed to investing an aggregate of $5,300,000 into the
development of the property. The initial payment of $300,000 was used for the
re-activation of two natural gas wells on the property and the acquisition of a
50% working interest in these wells. With each additional payment of $500,000 we
will acquire a 50% operating interest in one of the remaining 10 yet to be
drilled natural gas wells on the property which are subject to our agreement
with Oxalis. None of these parcels, including the existing wells, are currently
producing natural gas and there can be no assurance that they will produce
natural gas. A description of this property follows.
ADAMS - BAGGETT PROPERTY
The Adams - Baggett Property is located approximately twenty five miles South of
the city of Ozona, Crockett County, Texas and approximately seventy miles North
of Del Rio, Texas. The entire area consists of approximately 21,000 acres
divided into 220 parcels which either contain currently natural gas wells which
will require re-activation or may be drilled to create natural gas wells, though
we cannot be certain if these wells contain commercially viable reserves. The
area to which we have acquired rights pursuant to the agreement with Oxalis
consists of 2 existing natural gas wells and 10 properties on which wells may be
drilled and installed for a total of approximately 80 acres.
The drilling activity in this part of Crockett County started in 1973 with the
completion of a pipeline to the area. The field was originally developed on a
180 acre per well basis, which was subsequently reduced over time to the current
10 acre per well spacing as it was found that the wells had a small radius of
drainage.
The prospective `Canyon Sandstone' formation in the Adams - Baggett Property
consist of several depositional cycles of sudden energy increases followed by
declines leaving a vertically stacked section of channel sands, bar sands and
braided stream deposits inter-bedded with mudstones and lime deposits. The
objective target of these prospective sandstones is to produce gas from
approximately 4,400 to 5,000 feet. These sandstones cover the entire 21,000 acre
area of the Adams - Baggett ranch and we plan on initiating a drilling program
on each of the 10 parcels which have under agreement with Oxalis upon the
delivery of funds which we are obligated to invest.
36
LEGAL PROCEEDINGS
We know of no material, active or pending legal proceedings against us, nor are
we involved as a plaintiff in any material proceedings or pending litigation.
There are no proceedings in which any of our directors, officers or affiliates,
or any registered beneficial shareholder are an adverse party or has a material
interest adverse to us.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Our common stock is not traded on any exchange. Our common stock is quoted on
OTC Bulletin Board under the trading symbol "PEPR.OB". We cannot assure you that
there will be a market in the future for our common stock.
OTC Bulletin Board securities are not listed and traded on the floor of an
organized national or regional stock exchange. Instead, OTC Bulletin Board
securities transactions are conducted through a telephone and computer network
connecting dealers. OTC Bulletin Board issuers are traditionally smaller
companies that do not meet the financial and other listing requirements of a
national or regional stock exchange.
The following table reflects the high and low bid information for our common
stock obtained from Stockwatch and reflects inter-dealer prices, without retail
mark-up, markdown or commission, and may not necessarily represent actual
transactions.
The high and low bid prices of our common stock for the periods indicated below
are as follows:
National Association of Securities Dealers
OTC Bulletin Board
Quarter Ended (1) High Low
----------------- ---- ---
April 30, 2010 $0.455 $0.07
January 31, 2010 $0.30 $0.22
October 31, 2009 $0.24 $0.23
July 31, 2009 $0.22 $0.22
- ----------
(1) The first trade in our stock did not occur until July 16, 2009.
HOLDERS OF OUR COMMON STOCK
As of June 29, 2010 our stock was held by 70 holders of record.
DIVIDENDS
We have not declared any dividends since incorporation and do not anticipate
that we will do so in the foreseeable future. Although there are no restrictions
that limit the ability to pay dividends on our common shares, our intention is
to retain future earnings for use in our operations and the expansion of our
business.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
We do not have any equity compensation plans in place.
37
FINANCIAL STATEMENTS
Our financial statements are stated in U.S. dollars and are prepared in
conformity with generally accepted accounting principles of the United States.
The following financial statements pertaining to our company are filed as part
of this registration statement: Audited financial statements for the period from
May 29, 2008 (inception) through July 31, 2009. Unaudited interim financial
statements for the nine month period ended April 30, 2010.
PEPPER ROCK RESOURCES CORP.
(An Exploration Stage Company)
Years Ended July 31, 2008 and 2009
Page
----
Report of Independent Registered Public Accounting Firm F-2
Balance Sheets F-3
Statements of Expenses F-4
Statements of Cash Flows F-5
Statements of Stockholders' Equity F-6
Notes to the Consolidated Financial Statements F-7
PEPPER ROCK RESOURCES CORP.
(An Exploration Stage Company)
Period ended April 30, 2010
Page
----
Balance Sheets F-12
Statements of Expenses F-13
Statements of Cash Flows F-14
Notes to the Consolidated Financial Statements F-15
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors
Pepper Rock Resources Corp
We have audited the accompanying balance sheets of Pepper Rock Resources Corp,
("Pepper Rock") as of July 31, 2009 and 2008 and the related statements of
expenses, changes in stockholders' equity (deficit) and cash flows for the years
then ended July 31, 2009 and from May 29, 2008 (inception) through July 31, 2009
and 2008. These financial statements are the responsibility of Pepper Rock's
management. Our responsibility is to express an opinion on these 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
consolidated financial statements are free of material misstatements. The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Pepper Rock as of
July 31, 2009 and 2008 and the results of its operations and its cash flows for
the years then ended July 31, 2009 and the period from inception through July
31, 2009 and 2008 in conformity with accounting principles generally accepted in
the United States of America.
The accompanying financial statements have been prepared assuming that Pepper
Rock will continue as a going concern. As discussed in Note 3 to the financial
statements, Pepper Rock has no revenues and suffered losses from operations,
which raises substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters are described in Note 3. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ MALONE & BAILEY, PC
- ----------------------------------
www.malone-bailey.com
Houston, Texas
October 29, 2009
F-2
Pepper Rock Resources Corp.
(An Exploration Stage Company)
Balance Sheets
July 31, July 31,
2009 2008
-------- --------
ASSETS
Current Assets
Cash $ 590 $ 32,793
Prepaid expenses 350 128
-------- --------
Total Assets $ 940 $ 32,921
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable and accrued liabilities $ 8,257 $ --
Due to related party 184 125
-------- --------
Total Liabilities 8,441 125
-------- --------
Contingencies and Commitments
Stockholders' Equity (Deficit)
Preferred Stock, 100,000,000 shares authorized, $0.00001 par value;
No shares issued and outstanding -- --
Common Stock, 100,000,000 shares authorized, $0.00001 par value;
11,560,000 shares issued and outstanding 116 116
Additional Paid-in Capital 62,584 57,784
Deficit Accumulated During the Exploration Stage (70,201) (25,104)
-------- --------
Total Stockholders' Equity (Deficit) (7,501) 32,796
-------- --------
Total Liabilities and Stockholders' Equity (Deficit) $ 940 $ 32,921
======== ========
(The Accompanying Notes are an Integral Part of These Financial Statements)
F-3
Pepper Rock Resources Corp.
(An Exploration Stage Company)
Statements of Expenses
From From
May 29, 2008 May 29, 2008
For the Year (Date of (Date of
Ended Inception) to Inception) to
July 31, July 31, July 31,
2009 2008 2009
------------ ------------ ------------
Expenses
General and administrative $ 5,892 $ 1,304 $ 7,196
Management services 4,800 800 5,600
Professional fees 34,110 15,000 49,110
Impairment of mineral properties -- 5,000 5,000
Exploration costs 295 3,000 3,295
------------ ------------ ------------
Total Expenses $ 45,097 $ 25,104 $ 70,201
------------ ------------ ------------
Net Loss for the Period $ (45,097) $ (25,104) $ (70,201)
============ ============ ============
Net Loss Per Share - Basic and Diluted $ (0.00 $ (0.00 n/a
============ ============
Weighted Average Common Shares Outstanding 11,560,000 11,560,000 n/a
============ ============
(The Accompanying Notes are an Integral Part of These Financial Statements)
F-4
Pepper Rock Resources Corp.
(An Exploration Stage Company)
Statements of Cash Flows
From From
May 29, 2008 May 29, 2008
For the Year (Date of (Date of
Ended Inception) to Inception) to
July 31, July 31, July 31,
2009 2008 2009
-------- -------- --------
Operating Activities
Net loss for the period $(45,097) $(25,104) $(70,201)
Adjustment to reconcile net loss to net
cash used in operating activities:
Donated services 4,800 800 5,600
Impairment of mineral properties -- 5,000 5,000
Changes in operating assets and liabilities:
Prepaid expenses (222) (128) (350)
Accounts payable and accrued liabilities 8,257 -- 8,257
-------- -------- --------
Net Cash Used in Operating Activities (32,262) (19,432) (51,694)
-------- -------- --------
Investing Activities
Mineral property costs -- (5,000) (5,000)
-------- -------- --------
Net Cash Used in Investing Activities -- (5,000) (5,000)
-------- -------- --------
Financing Activities
Due to related parties 59 125 184
Proceeds from issuance of common stock -- 57,100 57,100
-------- -------- --------
Net Cash Provided by Financing Activities 59 57,225 57,284
-------- -------- --------
Increase in Cash (32,203) 32,793 590
Cash - Beginning of Period 32,793 -- --
-------- -------- --------
Cash - End of Period $ 590 $ 32,793 $ 590
======== ======== ========
Supplemental Disclosures
Interest paid $ -- $ -- $ --
Income taxes paid $ -- $ -- $ --
======== ======== ========
(The Accompanying Notes are an Integral Part of These Financial Statements)
F-5
Pepper Rock Resources Corp.
(An Exploration Stage Company)
Statement of Stockholders' Equity (Deficit)
From May 29, 2008 (Date of Inception) to July 31, 2009
Deficit
Common Stock Accumulated
------------------- Additional During the
Par Paid-in Exploration
Shares Value Capital Stage Total
------ ----- ------- ----- -----
Issuance of common stock for cash
at $0.00001 per share 6,500,000 $ 65 $ 6,435 $ -- $ 6,500
Issuance of common stock for cash
at $0.00001 per share 5,060,000 51 50,549 -- 50,600
Donated services -- -- 800 -- 800
Net loss for the period -- -- -- (25,104) (25,104)
---------- ------- -------- --------- ---------
Balance - July 31, 2008 11,560,000 $ 116 $ 57,784 $ (25,104) $ 32,796
Donated services -- -- 4,800 -- 4,800
Net loss for the year -- -- -- (45,097) (45,097)
---------- ------- -------- --------- ---------
Balance - July 31, 2009 11,560,000 $ 116 $ 62,584 $ (70,201) $ (7,501)
========== ======= ======== ========= =========
(The Accompanying Notes are an Integral Part of These Financial Statements)
F-6
Pepper Rock Resources Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
July 31, 2009
1. Nature of Operations and Continuation of Business
Pepper Rock Resources Corp. (the "Company") was incorporated in the State of
Nevada on May 29, 2008. The Company is an Exploration Stage Company as defined
by Statement of Financial Accounting Standard ("SFAS") No. 7 " ACCOUNTING AND
REPORTING FOR DEVELOPMENT STAGE ENTERPRISES ". The Company's principal business
is the acquisition and exploration of mineral resources.
2. Summary of Significant Accounting Policies
a) Basis of Presentation
These financial statements and related notes are presented in accordance with
accounting principles generally accepted in the United States, and are expressed
in US dollars. The Company's fiscal year-end is July 31.
b) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The Company regularly evaluates estimates and assumptions
related to the recoverability of mineral property costs, donated expenses and
deferred income tax asset valuation allowances. The Company bases its estimates
and assumptions on current facts, historical experience and various other
factors that it believes to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets
and liabilities and the accrual of costs and expenses that are not readily
apparent from other sources. The actual results experienced by the Company may
differ materially and adversely from the Company's estimates. To the extent
there are material differences between the estimates and the actual results,
future results of operations will be affected.
c) Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three
months or less at the time of issuance to be cash equivalents.
d) Loss Per Share
The Company computes net earnings (loss) per share in accordance with SFAS No.
128, "EARNINGS PER SHARE". SFAS No. 128 requires presentation of both basic and
diluted earnings per share ("EPS") on the face of the income statement. Basic
EPS is computed by dividing net earnings (loss) available to common shareholders
(numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period using the treasury stock method and
convertible preferred stock using the if-converted method. In computing diluted
EPS, the average stock price for the period is used in determining the number of
shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential shares if their effect is anti
dilutive.
e) Asset Retirement Obligations
The Company follows the provisions of SFAS No. 143, "Accounting for Asset
Retirement Obligations," which establishes standards for the initial measurement
and subsequent accounting for obligations associated with the sale, abandonment
or other disposal of long-lived tangible assets arising from the acquisition,
construction or development and for normal operations of such assets.
F-7
Pepper Rock Resources Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
July 31, 2009
f) Long-lived Assets
In accordance with SFAS No. 144, "ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF
LONG-LIVED ASSETS", the Company tests long-lived assets or asset groups for
recoverability when events or changes in circumstances indicate that their
carrying amount may not be recoverable. Circumstances which could trigger a
review include, but are not limited to: significant decreases in the market
price of the asset; significant adverse changes in the business climate or legal
factors; accumulation of costs significantly in excess of the amount originally
expected for the acquisition or construction of the asset; current period cash
flow or operating losses combined with a history of losses or a forecast of
continuing losses associated with the use of the asset; and current expectation
that the asset will more likely than not be sold or disposed significantly
before the end of its estimated useful life.
Recoverability is assessed based on the carrying amount of the asset and its
fair value which is generally determined based on the sum of the undiscounted
cash flows expected to result from the use and the eventual disposal of the
asset, as well as specific appraisal in certain instances. An impairment loss is
recognized when the carrying amount is not recoverable and exceeds fair value.
g) Mineral Property Costs
The Company is primarily engaged in the acquisition, exploration and development
of mineral properties.
Mineral property acquisition costs are capitalized in accordance with EITF 04-2
"WHETHER MINERAL RIGHTS ARE TANGIBLE OR INTANGIBLE ASSETS " when management has
determined that probable future benefits consisting of a contribution to future
cash inflows have been identified and adequate financial resources are available
or are expected to be available as required to meet the terms of property
acquisition and budgeted exploration and development expenditures. Mineral
property acquisition costs are expensed as incurred if the criteria for
capitalization are not met. In the event that a mineral property is acquired
through the issuance of the Company's shares, the mineral property will be
recorded at the fair value of the respective property or the fair value of
common shares, whichever is more readily determinable.
Mineral property exploration costs are expensed as incurred.
When mineral properties are acquired under option agreements with future
acquisition payments to be made at the sole discretion of the Company, those
future payments, whether in cash or shares, are recorded only when the Company
has made or is obliged to make the payment or issue the shares. Because option
payments do not meet the definition of tangible property under EITF 04-2, all
option payments are expensed as incurred.
When it has been determined that a mineral property can be economically
developed as a result of establishing proven and probable reserves and pre
feasibility, the costs incurred to develop such property are capitalized.
Estimated future removal and site restoration costs, when determinable are
provided over the life of proven reserves on a units-of-production basis. Costs,
which include production equipment removal and environmental remediation, are
estimated each period by management based on current regulations, actual
expenses incurred, and technology and industry standards. Any charge is included
in exploration expense or the provision for depletion and depreciation during
the period and the actual restoration expenditures are charged to the
accumulated provision amounts as incurred.
As of the date of these financial statements, the Company has incurred only
acquisition and exploration costs which have been expensed.
F-8
Pepper Rock Resources Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
July 31, 2009
h) Foreign Currency Transactions
The Company's functional and reporting currency is the United States dollar.
Occasional transactions may occur in Canadian dollars and management has adopted
SFAS No. 52 " FOREIGN CURRENCY TRANSLATION ". Monetary assets and liabilities
denominated in foreign currencies are translated using the exchange rate
prevailing at the balance sheet date. Non-monetary assets and liabilities
denominated in foreign currencies are translated at rates of exchange in effect
at the date of the transaction. Average monthly rates are used to translate
revenues and expenses. Gains and losses arising on translation or settlement of
foreign currency denominated transactions or balances are included in the
determination of net income (loss). The Company has not, to the date of these
financial statements, entered into derivative instruments to offset the impact
of foreign currency fluctuations.
i) Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has adopted SFAS No. 109 "
ACCOUNTING FOR INCOME TAXES " as of its inception. Pursuant to SFAS No. 109 the
Company is required to compute tax asset benefits for net operating losses
carried forward. Potential benefit of net operating losses have not been
recognized in these financial statements because the Company cannot be assured
it is more likely than not it will utilize the net operating losses carried
forward in future years.
j) Recent Accounting Pronouncements
We do not expect the adoption of recently issued accounting pronouncements to
have a significant impact on our results of operations, financial position or
cash flow.
3. Going Concern
These financial statements have been prepared on a going concern basis, which
implies that the Company will continue to realize its assets and discharge its
liabilities in the normal course of business. The Company has not generated any
revenue since inception and has never paid any dividends and is unlikely to pay
dividends or generate earnings in the immediate or foreseeable future. The
continuation of the Company as a going concern is dependent upon the continued
financial support from its shareholders, the ability of the Company to obtain
necessary equity financing to continue operations, and the attainment of
profitable operations. As at July 31, 2009, the Company has accumulated losses
since inception. These factors raise substantial doubt regarding the Company's
ability to continue as a going concern. These financial statements do not
include any adjustments to the recoverability and classification of recorded
asset amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.
4. Related Party Transactions
a) For the fiscal period ended July 31, 2009 and 2008, the Company recognized
$4,800 and $800 respectively for donated services at $400 per month
provided by the President of the Company.
b) As at July 31, 2009 and 2008 the Company is indebted to the President of
the Company for $184 and 2008 $125 respectively for expenses paid on behalf
of the Company. This amount is non-interest bearing, unsecured and due on
demand.
F-9
Pepper Rock Resources Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
July 31, 2009
5. Mineral Property
On July 8, 2008, the Company paid $5,000 for a 100% interest in a mineral claim
located in Nevada, and $3,000 for a geological report conducted on the
respective mining claim. The cost of the mineral property was initially
capitalized. At July 31, 2009, the Company recognized an impairment loss of
$5,000, as it has not yet been determined whether there are proven or probable
reserves on the property.
6. Common Stock
a) On July 8, 2008, the Company issued 5,060,000 shares of common stock at
$0.01 per share for cash proceeds of $50,600.
b) On May 30, 2008, the Company issued 6,500,000 shares of common stock at
$0.001 per share to the President of the Company for cash proceeds of
$6,500.
7. Income Taxes
The Company accounts for income taxes under SFAS No. 109, "ACCOUNTING FOR INCOME
TAXES." Deferred income tax assets and liabilities are determined based upon
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. Income tax expense differs from
the amount that would result from applying the U.S federal and state income tax
rates to earnings before income taxes. The Company has a net operating loss
carryforward of $63,101 available to offset taxable income in future years which
begins to expire in fiscal 2028. Pursuant to SFAS 109, the potential benefit of
the net operating loss carryforward has not been recognized in the consolidated
financial statements since the Company cannot be assured that it is more likely
than not that such benefit will be utilized in future years.
The Company is subject to United States federal and state income taxes at an
approximate rate of 35%. The reconciliation of the provision for income taxes at
the United States federal statutory rate compared to the Company's income tax
expense as reported is as follows:
July 31, July 31,
2009 2008
-------- --------
Net loss before income taxes per financial statements $ 45,097 $ 25,104
Income tax rate 35% 35%
Income tax recovery (15,784) (8,786)
Permanent differences 1,680 280
Temporary differences (140) 665
Valuation allowance change 14,244 7,841
-------- --------
Provision for income taxes $ -- $ --
======== ========
F-10
Pepper Rock Resources Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
July 31, 2009
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Deferred income taxes
arise from temporary differences in the recognition of income and expenses for
financial reporting and tax purposes. The significant components of deferred
income tax assets and liabilities are as follows:
July 31, July 31,
2009 2008
-------- --------
Net operating loss carryforward $ 22,610 $ 8,506
Unamortized costs of incorporation (525) (665)
Valuation allowance (22,085) (7,841)
-------- --------
Net deferred income tax asset $ -- $ --
======== ========
The Company has recognized a valuation allowance for the deferred income tax
asset since the Company cannot be assured that it is more likely than not that
such benefit will be utilized in future years. The valuation allowance is
reviewed annually. When circumstances change and which cause a change in
management's judgment about the realizability of deferred income tax assets, the
impact of the change on the valuation allowance is generally reflected in
current income.
8. Commitments
Beginning on August 1, 2009, the Company was obligated to make monthly payments
of $175 for rent on a month to month basis.
9. Subsequent Events
In accordance with SFAS 165, we have evaluated subsequent events through October
29, 2009, the date of issuance of the audited financial statements. During this
period we did not have any material recognizable subsequent events.
F-11
Pepper Rock Resources Corp.
(An Exploration Stage Company)
Balance Sheets
(Unaudited)
April 30, July 31,
2010 2009
--------- ---------
ASSETS
Current Assets
Cash $ 7,519 $ 590
Prepaid expenses 350 350
--------- ---------
Total Current Assets 7,869 940
Oil and gas properties (successful efforts method of accounting) 300,000 --
--------- ---------
Total Assets $ 307,869 $ 940
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable and accrued liabilities $ 28,404 $ 7,257
Loan payable 24,340 1,000
Due to related party 16,974 184
--------- ---------
Total Liabilities 69,718 8,441
--------- ---------
Stockholders' Equity (Deficit)
Preferred Stock, 100,000,000 shares authorized,
$0.00001 par value; No shares issued and outstanding as of
April 30, 2010 & July 31, 2009 -- --
Common Stock, 500,000,000 shares authorized, $0.00001 par value;
57,800,000 shares issued and outstanding as of April 30, 2010 &
July 31, 2009 578 578
Additional Paid-in Capital 64,522 62,122
Common Stock Subscribed 300,000 --
Deficit Accumulated During the Exploration Stage (126,949) (70,201)
--------- ---------
Total Stockholders' Equity (Deficit) 238,151 (7,501)
--------- ---------
Total Liabilities and Stockholders' Equity (Deficit) $ 307,869 $ 940
========= =========
(The Accompanying Notes are an Integral Part of
These Unaudited Financial Statements)
F-12
Pepper Rock Resources Corp.
(An Exploration Stage Company)
Statements of Expenses
(Unaudited)
From
For the three months ended For the nine months ended May 29, 2008
April 30, April 30, (Date of Inception)
-------------------------- -------------------------- to April 30,
2010 2009 2010 2009 2010
----------- ----------- ----------- ----------- ----------
Expenses
Other general and administrative $ 4,265 $ 1,083 $ 6,418 $ 4,892 $ 13,614
Management services 12,000 1,200 14,400 3,600 20,000
Professional fees 17,284 3,358 35,790 28,373 84,900
Impairment of mineral properties -- -- -- -- 5,000
Exploration costs -- -- 140 295 3,435
----------- ----------- ----------- ----------- ----------
Total Expenses $ 33,549 $ 5,641 $ 56,748 $ 37,160 $ 126,949
----------- ----------- ----------- ----------- ----------
Net Loss for the Period $ (33,549) $ (5,641) $ (56,748) $ (37,160) $ (126,949)
=========== =========== =========== =========== ==========
Net Loss Per Common Share - Basic and
Diluted $ (0.00) $ (0.00) $ (0.00) $ (0.00)
=========== =========== =========== ===========
Weighted Average Common Shares Outstanding 57,800,000 57,800,000 57,800,000 57,800,000
=========== =========== =========== ===========
(The Accompanying Notes are an Integral Part of
These Unaudited Financial Statements)
F-13
Pepper Rock Resources Corp.
(An Exploration Stage Company)
Statements of Cash Flows
(Unaudited)
For the For the From
Nine Months Nine Months May 29, 2008
Ended Ended (Date of Inception)
April 30, April 30, to April 30,
2010 2009 2010
--------- --------- ---------
OPERATING ACTIVITIES
Net loss for the period $ (56,748) $ (37,160) $(126,949)
Adjustment to reconcile net loss to net cash
used in operating activities:
Donated services 2,400 3,600 8,000
Impairment of mineral properties -- -- 5,000
Changes in operating assets and liabilities:
Prepaid expenses -- (222) (350)
Accounts payable and accrued liabilities 21,147 1,261 28,404
Due to related party, services 12,000 -- 12,000
--------- --------- ---------
Net Cash Used in Operating Activities (21,201) (32,521) (73,895)
--------- --------- ---------
INVESTING ACTIVITIES
Mineral property costs -- -- (5,000)
Oil and Gas property costs (300,000) -- (300,000)
--------- --------- ---------
Net Cash Used in Investing Activities (300,000) -- (305,000)
--------- --------- ---------
FINANCING ACTIVITIES
Bank overdraft -- 46 --
Loan payable 23,340 -- 24,340
Due to related parties, advances 4,790 59 4,974
Proceeds from issuance of common stock -- -- 57,100
Common stock subscribed 300,000 -- 300,000
--------- --------- ---------
Net Cash Provided by Financing Activities 328,130 105 386,414
--------- --------- ---------
Increase (Decrease) in Cash 6,929 (32,416) 7,519
Cash - Beginning of Period 590 32,793 --
--------- --------- ---------
Cash - End of Period $ 7,519 $ 377 $ 7,519
========= ========= =========
Supplemental Disclosures
Interest paid $ -- $ -- $ --
Income taxes paid $ -- $ -- $ --
========= ========= =========
(The Accompanying Notes are an Integral Part of
These Unaudited Financial Statements)
F-14
1. Significant Accounting Policies and Basis of Presentation
The accompanying unaudited interim financial statements of Pepper Rock Resources
Corp. (the "Company") have been prepared in accordance with accounting
principles generally accepted in the United States of America and the rules of
the Securities and Exchange Commission ("SEC"), and should be read in
conjunction with the audited financial statements and notes thereto contained in
the Company's July 31, 2009 report filed with the SEC on Form 10-K. In the
opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the
results of operations for the interim periods presented have been reflected
herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year. Notes to the
financial statements which would substantially duplicate the disclosure
contained in the audited financial statements for the most recent fiscal year
end July 31, 2009 as reported on Form 10-K, have been omitted.
REVENUE RECOGNITION
The Company recognizes sales revenues for gas, oil and condensate, and NGLs
based on the amount of each product sold to purchasers when delivery to the
purchaser has occurred and title has transferred. This occurs when product has
been delivered to a pipeline or purchaser. The Company follows the sales method
of accounting for natural-gas production imbalances. If the Company's sales
volumes for a well exceed the estimated remaining recoverable reserves of the
well, a liability is recognized. No receivables are recorded for those wells on
which the Company has taken less than its proportionate share of production.
SUCCESSFUL EFFORTS METHOD ACCOUNTING
The Company uses the successful efforts method of accounting for oil and gas
producing activities. Costs to acquire mineral interests in oil and gas
properties, to drill and equip exploratory wells that find proved reserves, to
drill and equip development wells and related asset retirement costs are
capitalized. Costs to drill exploratory wells that do not find proved reserves,
geological and geophysical costs, and costs of carrying and retaining unproved
properties are expensed.
IMPAIRMENT OF OIL AND NATURAL GAS PROPERTIES
Unproved oil and gas properties that are individually significant are
periodically assessed for impairment of value, and a loss is recognized at the
time of the impairment by providing an impairment allowance. An asset would be
impaired if the undiscounted cash flows were less than its carrying value.
Impairments are measured by the amount by which the carrying value exceeds its
fair value. Because the Company uses the successful efforts method, the Company
assesses its properties individually for impairment, instead of on an aggregate
pool of costs.
DEPRECIATION AND DEPLETION OF OIL AND NATURAL GAS PROPERTIES
Capitalized costs of producing oil and gas properties, after considering
estimated residual salvage values, are depreciated and depleted by the
unit-of-production method. This method is applied through the simple
multiplication of reserve units produced by the leasehold costs per unit on a
field by field basis. Leasehold cost per unit is calculated by dividing the
total cost of acquiring the leasehold by the estimated total proved oil and gas
reserves associated with that lease. Field cost is calculated by dividing the
total cost by the estimated total proved producing oil and gas reserves
associated with that field.
ASSET RETIREMENT OBLIGATIONS
The Company records a liability for legal obligations associated with the
retirement of tangible long-lived assets in the period in which they are
incurred. Under this method, when liabilities for dismantlement and abandonment
costs (ARO) are initially recorded, the carrying amount of the related oil and
natural gas properties are increased. Accretion of the liability is recognized
each period using the interest method of allocation, and the capitalized cost is
F-15
depleted over the useful life of the related asset. Revisions to such estimates
are recorded as adjustments to the ARO, capitalized asset retirement costs and
charges to operations during the periods in which they become known. At the time
the abandonment cost is incurred, the Company is required to recognize a gain or
loss if the actual costs do not equal the estimated costs included in ARO.
Reclassifications
Certain reclassifications have been made to the prior period's financial
statements to conform to the current period's presentation.
2. Going Concern
These financial statements have been prepared on a going concern basis, which
implies that the Company will continue to realize its assets and discharge its
liabilities in the normal course of business. The Company has not generated any
revenue since inception and has never paid any dividends and is unlikely to pay
dividends or generate earnings in the immediate or foreseeable future. The
continuation of the Company as a going concern is dependent upon the continued
financial support from its shareholders, the ability of the Company to obtain
necessary equity financing to continue operations, and the attainment of
profitable operations. At April 30, 2010, the Company has accumulated losses
since inception.
These factors raise substantial doubt regarding the Company's ability to
continue as a going concern. These financial statements do not include any
adjustments to the recoverability and classification of recorded asset amounts
and classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
3. Oil and Gas Properties
a) On February 10, 2010, the Company entered into an agreement with
Oxalis Energy Group ("Oxalis") of Katy, Texas to participate in ten
(10) oil and gas wells being drilled near Ozona, Texas. Pursuant to
the agreement, the Company is required to make development payments
totaling $5,300,000, payable in eleven (11) payment tranches. The
first payment of $300,000 was made in February 2010 and was for the
completion and reactivation of two (2) natural gas wells. The Company
will make ten (10) additional payments equal to $500,000, starting on
a date mutually determined by Oxalis and the Company. Each $500,000
tranche represents the Company's investment in a new well such that
after the full payment of $5,000,000, the Company will have invested
in ten (10) new wells. Upon full payment of each tranche, the Company
will receive a 50% working interest in the associated well. If the
Company fails to make a monthly payment, it forfeits all rights to any
unfunded wells and any rights to future wells assigned under the
agreement. The Company's cost per well is not to exceed $500,000. If
the Company makes all required payments under the agreement, it will
have a second ten well drilling program assigned to it.
b) On February 5, 2010, the Company entered into a Joint Venture
Agreement (the "Dominus Agreement") with Dominus Energy AG ("Dominus
Energy"). According to the Dominus Agreement, the Company has the
exclusive right to participate in the Manyberries Development located
in Alberta, Canada as long as the Company meets its funding
obligations. The Company agreed to fund $500,000 as working capital in
the Manyberries Development and also agreed to pay all capital needs
to develop the property no later than six (6) months from the date of
the signed agreement. The Dominus Agreement was subsequently cancelled
with no further obligations to either party. Refer to note 8(a).
4. Related Party Transactions
a) For the fiscal period ended April 30, 2010, the Company recognized
$2,400 for donated services at $400 per month provided by the
President of the Company. The Company did not record donated services
for the three months period ended April 30, 2010, as management
services provided by the President of the Company of $4,000 were
accrued pursuant to the management agreement described in Note 7. As
F-16
at April 30, 2010, the Company is indebted to the President of the
Company for $12,000 of accrued management fees and $4,790 for expenses
paid on behalf of the Company which are non-interest bearing,
unsecured and due on demand.
This amount is non-interest bearing, unsecured and due on demand.
b) As at April 30, 2010, the Company is indebted to the former President
of the Company for $184 for expenses paid on behalf of the Company.
This amount is non-interest bearing, unsecured and due on demand.
5. Loan Payable
During the nine months period ended April 30, 2010, the Company received $23,340
(July 31, 2009 - $1,000) in loans from unrelated third parties. This amount was
used for corporate expenses and is unsecured, non-interest bearing and has no
terms of repayment.
6. Common Stock
a) During the period ended April 30, 2010, the Company received common
stock subscriptions of $300,000 pursuant to a private placement for
the issuance 3,000,000 shares at $0.10 per share. At April 30, 2010,
the shares had not been issued.
b) On October 15, 2009, the Company effected a 5:1 forward stock split of
the authorized, issued and outstanding common stock. As a result, the
authorized share capital increased from 100,000,000 shares of common
stock to 600,000,000 shares of common stock with no change in par
value. All share amounts have been retroactively adjusted for all
periods presented.
7. Commitment
a) On February 8, 2010, the Company signed an agreement with the
President of the Company for management services at $4,000 per month
for a period of twelve months. Either party can cancel the agreement
with ten days notice.
b) Pursuant to the agreement with Oxalis, the Company is committed to pay
$500,000 per month for ten (10) months in order to fulfil its
development obligations. If the Company fails to make a payment, it
forfeits all rights to any unfunded wells and any rights to future
wells assigned under the agreement.
8. Subsequent Events
a) Effective May 5th, 2010, the Company terminated the Joint Venture
Agreement with Dominus Energy. Both Dominus Energy and the Company
agreed it was no longer both entities desire to further the joint
venture. There are no additional obligations to either party. Refer to
Note 3(b).
b) On May 20, 2010, the Company filed a Registration Statement on Form
S-1/A with the United States Securities and Exchange Commission
("SEC") to register 40,000,000 shares of common stock. 22,500,000
shares are being registered for resale by existing stockholders of the
Company at prevailing market prices, and 17,500,000 are being
registered for sale by the Company. The Company will not receive any
proceeds from the resale of shares of common stock by the
stockholders.
F-17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with our consolidated
audited financial statements and the related notes that appear elsewhere in this
registration statement. The following discussion contains forward-looking
statements that reflect our plans, estimates and beliefs. Our actual results
could differ materially from those discussed in the forward looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to those discussed below and elsewhere in this registration statement,
particularly in the section entitled "Risk Factors" beginning on page 10 of this
registration statement.
GENERAL INFORMATION
Our financial statements are stated in United States Dollars (USD or US$) and
are prepared in accordance with United States Generally Accepted Accounting
Principles. All references to "common shares" refer to the common shares in our
capital stock.
We are an exploration stage company. There is no assurance that commercially
viable mineral deposits exist on the mineral property that we have under option.
Further exploration will be required before a final evaluation as to the
economic and legal feasibility of the claim is determined.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE PERIOD ENDED APRIL 30, 2010.
RESULTS OF OPERATIONS
We are a start-up, exploration stage corporation, and have not yet generated or
realized any revenues from our business activities. We have not generated any
revenue and have incurred losses since inception. In addition, we had a working
capital deficit at April 30, 2010. These factors raise substantial doubt
regarding the Company's ability to continue as a going concern for the next
twelve months unless we obtain additional capital to pay our bills. This is
because we have not generated any revenues and no revenues are anticipated until
we begin removing and selling minerals.
Accordingly, we must raise cash from sources other than the sale of minerals
found on the property. Our only other sources for cash at this time are loans
from related parties and additional sales of common stock. Our success or
failure will be determined by what additional financing we obtain and what we
find under the ground.
Funds raised from our private placement were used to pay administrative and
other expenses, however we have spent all of it. We have to raise additional
money to complete exploring our property. If we find mineralized material and it
is economically feasible to remove the mineralized material, we will attempt to
raise even more money through a subsequent private placement, public offering or
through loans. If we do not have enough money to complete our exploration of the
property, we will have to find alternative sources, like a public offering, an
additional private placement of securities, or loans from our officer or others.
38
Our sole officer and director is unwilling to make any commitment at this time
to loan us money. At the present time, we have not made any arrangements to
raise additional cash. If we need additional cash and can't raise it, we will
either have to suspend activities until we do raise the cash, seek additional
opportunities, or cease activities entirely. Other than as described in this
paragraph, we have no other financing plans.
We plan on conducting initial preparatory work on the Adams - Baggett Property,
and if we can raise the necessary capital and secure services required to
develop potential wells on the property.
We will be conducting research in the form of exploration of the property. Our
exploration program is explained in as much detail as possible in the business
section of our Form S-1 registration statement. We are not going to buy or sell
any plant or significant equipment during the next twelve months. We will not
buy any equipment until we have located a reserve and we have determined it is
economical to extract the minerals from the land.
We do not intend to involve other companies in the property if we find oil and
gas reserves. We intend to try to develop the reserves ourselves. If we can't or
don't raise more money, we will either cease activities or look for other
opportunities. If we cease activities, we don't know what we will do and we
don't have any plans to do anything.
We do not intend to hire additional employees at this time. All of the work on
the property will be conducted by unaffiliated independent contractors that we
will hire. The independent contractors will be responsible for surveying,
geology, engineering, exploration, and excavation. The geologists will evaluate
the information derived from the exploration and excavation and the engineers
will advise us on the economic feasibility of removing the oil and gas reserves.
LIMITED OPERATING HISTORY; NEED FOR ADDITIONAL CAPITAL
There is no historical financial information about us upon which to base an
evaluation of our performance. We are an exploration stage corporation and have
not generated any revenues from activities. We cannot guarantee we will be
successful in our business activities. Our business is subject to risks inherent
in the establishment of a new business enterprise, including limited capital
resources, possible delays in the exploration of our properties, and possible
cost overruns due to price and cost increases in services.
To become profitable and competitive, we conduct research and exploration of our
properties before we start production of any oil or gas we may find. We will be
seeking equity financing to provide for the capital required to implement our
research and exploration phases.
We have no assurance that future financing will be available to us on acceptable
terms. If financing is not available on satisfactory terms, we may be unable to
continue, develop or expand our operations. Equity financing could result in
additional dilution to existing shareholders.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have issued 60,800,000 shares of our common stock and
received $357,100.
39
Since our inception, we have conducted limited operations and therefore have not
generated any revenues.
In May 29, 2008, we issued 32,500,000 shares of common stock to our former
officer and director, Curtis C. Daye. The purchase price of the shares was
$6,500. This was accounted for as an acquisition of shares. Curtis C. Daye
covered some of our initial expenses by paying $184 for incorporation documents,
administrative costs, and courier costs. The amount owed to Mr. Daye is
non-interest bearing, unsecured and due on demand. Further, the agreement with
Mr. Daye is oral and there is no written document evidencing the agreement.
On July 8, 2008, we issued 25,300,000 shares of common stock to 46 individuals
for consideration of $50,600.
As of April, 2010, our total assets were $307,869 and our total liabilities were
$69,718.
On February 5, 2010 we entered into a joint venture agreement with Dominus
Energy, AG, to develop a natural gas property in the Manyberries region of
Alberta, Canada. Under the terms of this Agreement, we must pay $500,000 within
a 6 month period in order to acquire a 49% working interest in the property. We
will also have the option to increase our interest to 51%. The property in
question is located in Southern Alberta, in close proximity to the Montana
border. The property includes oil and gas production infrastructure comprised of
6 miles of 6-inch high-pressure pipeline tested to operate at 1200 pounds per
square inch. There are also 3.5 miles of 3-inch pipeline for waste water and a
2-inch pipeline for fuel gas. The natural gas pipelines connect to a major line
operated by EnCana Corporation which extends out towards three gas wells on the
Manyberries property. We have not yet closed the acquisition of our interest in
this property. On May 5, 2010, this agreement was terminated with no additional
obligations on us or Dominus.
On February 10, 2010 we entered into a joint venture agreement with Oxalis
Energy Group, Inc., for an exclusive right to participate in Oxalis' natural gas
project at the Adams - Baggett Ranch near Ozona, Texas. Under the terms of the
agreement we have committed to investing an aggregate of $5,300,000 into the
development of the property. An initial payment of $300,000 has already been
made and we anticipate making consequent payments of $500,000 every month in
order to fulfill our obligations under this agreement. The initial payment of
$300,000 was used for the re-activation of two natural gas wells on the property
and the acquisition of a 50% working interest in these wells. With each
additional payment of $500,000 we will acquire a 50% operating interest in one
of the remaining 10 yet to be drilled natural gas wells on the property which
are subject to our agreement with Oxalis. We anticipate that we will begin
making the $500,000 for the development of new wells once we are able to secure
a service provider who can perform hydraulic fracturing work on our existing
properties in this region in a relatively short time frame and raise the
required funds. The hydraulic fracturing work has to be completed before we can
undertake the drilling of the wells for which the $500,000 has been assigned
for. None of these parcels, including the existing wells, are currently
producing natural gas and there can be no assurance that they will produce
natural gas even if we meet our financing requirements.
If we make all required payments under this agreement, we will have acquired a
50% working interest in 12 natural gas wells in a joint venture with Oxalis. If
we fail to make any future payments, we will abandon all rights to acquire any
further wells on the Adams - Baggett property from Oxalis.
40
On June 15, 2010 we issued 3,000,000 shares of our common stock at $0.10 per
share to one non-US investor. Though we had received the subscription funds
before April 30, 2010, due to an administrative error, the shares were not duly
issued until June 15, 2010.
We estimate that our expenses over the next 12 months (beginning July, 2010)
will be approximately $6,225,000 as described in the table below. These
estimates may change significantly depending on the nature of our future
business activities and our ability to raise capital from shareholders or other
sources.
Estimated Estimated
Description Completion Date Expenses ($)
----------- --------------- ------------
Legal and accounting fees 12 months 100,000
Marketing and advertising 12 months 25,000
Management and operating costs 12 months 650,000
Salaries and consulting fees 12 months 200,000
Development of Adams - Baggett Property 12 months 5,000,000
General and administrative expenses 12 months 250,000
---------
Total 6,225,000
=========
We intend to meet our cash requirements for the next 12 months through a
combination of debt financing and equity financing by way of private placements
and this registered offering. We currently do not have any arrangements in place
to complete any private placement financings and there is no assurance that we
will be successful in completing any private placement financings or that any
securities being offered pursuant to this Prospectus will be purchased. If we
are not able to successfully raise the sufficient capital to complete our
intended work on the Adams - Baggett Property we will have to abandon our plans
for this property and we will not be able to carry out our business plan.
OFF-BALANCE SHEET ARRANGEMENTS
We have no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to stockholders.
INFLATION
The amounts presented in the financial statements do not provide for the effect
of inflation on our operations or financial position. The net operating losses
shown would be greater than reported if the effects of inflation were reflected
either by charging operations with amounts that represent replacement costs or
by using other inflation adjustments.
41
AUDIT COMMITTEE
The functions of the audit committee are currently carried out by our Board of
Directors, who has determined that we do not have an audit committee financial
expert on our Board of Directors to carry out the duties of the audit committee.
The Board of Directors has determined that the cost of hiring a financial expert
to act as a director and to be a member of the audit committee or otherwise
perform audit committee functions outweighs the benefits of having a financial
expert on the audit committee.
OFF-BALANCE SHEET ARRANGEMENTS
We have not entered into any transactions with unconsolidated entities whereby
we have financial guarantees or other contingent arrangements that expose us to
material continuing risks, contingent liabilities or any other obligations that
provide financing, liquidity, market risk or credit risk support to us.
CRITICAL ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. We regularly evaluate estimates and assumptions related to the
recoverability of mineral property costs, donated expenses and deferred income
tax asset valuation allowances. We base our estimates and assumptions on current
facts, historical experience and various other factors that we believe to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities and the
accrual of costs and expenses that are not readily apparent from other sources.
The actual results experienced by us may differ materially and adversely from
our estimates. To the extent there are material differences between the
estimates and the actual results, future results of operations will be affected.
LOSS PER SHARE
We compute net earnings (loss) per share in accordance with SFAS No. 128,
"EARNINGS PER SHARE". SFAS No. 128 requires presentation of both basic and
diluted earnings per share ("EPS") on the face of the income statement. Basic
EPS is computed by dividing net earnings (loss) available to common shareholders
(numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period using the treasury stock method and
convertible preferred stock using the if-converted method. In computing diluted
EPS, the average stock price for the period is used in determining the number of
shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential shares if their effect is anti
dilutive.
42
FOREIGN CURRENCY TRANSACTIONS
Our functional and reporting currency is the United States dollar. Occasional
transactions may occur in Canadian dollars and management has adopted SFAS No.
52 "FOREIGN CURRENCY TRANSLATION". Monetary assets and liabilities denominated
in foreign currencies are translated using the exchange rate prevailing at the
balance sheet date. Non-monetary assets and liabilities denominated in foreign
currencies are translated at rates of exchange in effect at the date of the
transaction. Average monthly rates are used to translate revenues and expenses.
Gains and losses arising on translation or settlement of foreign currency
denominated transactions or balances are included in the determination of net
income (loss). We have not, to the date of these financial statements, entered
into derivative instruments to offset the impact of foreign currency
fluctuations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE YEARS ENDED JULY 31, 2008 AND 2009.
You should read the following discussion of our financial condition and results
of operations together with the consolidated audited financial statements and
the notes to consolidated audited financial statements included elsewhere in
this filing prepared in accordance with accounting principles generally accepted
in the United States. This discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those anticipated in these forward-looking statements. This
discussion is historical and pertains to our financial condition and plan of
operations as of July 31, 2009.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have issued 11,560,000 shares of our common stock and
received $57,100.
Since our inception, we have conducted limited operations and therefore have not
generated any revenues.
In May 29, 2008, we issued 6,500,000 shares of common stock to our sole officer
and director, Curtis C. Daye, pursuant to the exemption from registration
contained in Regulation S of the Securities Act of 1933. The purchase price of
the shares was $6,500. This was accounted for as an acquisition of shares.
Curtis C. Daye covered some of our initial expenses by paying $184 for
incorporation documents, administrative costs, and courier costs. The amount
owed to Mr. Daye is non-interest bearing, unsecured and due on demand. Further,
the agreement with Mr. Daye is oral and there is no written document evidencing
the agreement.
On July 8, 2008, we issued 5,060,000 shares of common stock to 46 individuals in
consideration of $50,600.
As of July 31, 2009, our total assets were $940 and our total liabilities were
$8,441.
43
OFF-BALANCE SHEET ARRANGEMENTS
We have no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to stockholders.
INFLATION
The amounts presented in the financial statements do not provide for the effect
of inflation on our operations or financial position. The net operating losses
shown would be greater than reported if the effects of inflation were reflected
either by charging operations with amounts that represent replacement costs or
by using other inflation adjustments.
AUDIT COMMITTEE
The functions of the audit committee are currently carried out by our Board of
Directors, who has determined that we do not have an audit committee financial
expert on our Board of Directors to carry out the duties of the audit committee.
The Board of Directors has determined that the cost of hiring a financial expert
to act as a director and to be a member of the audit committee or otherwise
perform audit committee functions outweighs the benefits of having a financial
expert on the audit committee.
GOING CONCERN
Due to our being a development stage company and not having generated revenues,
in the consolidated financial statements for the year ended August 31, 2009, we
included an explanatory paragraph regarding concerns about our ability to
continue as a going concern. Our consolidated financial statements contain
additional note disclosures describing the circumstances that lead to this
disclosure.
The continuation of our business is dependent upon us raising additional
financial support. The issuance of additional equity securities by us could
result in a significant dilution in the equity interests of our current
stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.
CRITICAL ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. We regularly evaluate estimates and assumptions related to the
recoverability of mineral property costs, donated expenses and deferred income
tax asset valuation allowances. We base our estimates and assumptions on current
facts, historical experience and various other factors that we believe to be
reasonable under the circumstances, the results of which form the basis for
44
making judgments about the carrying values of assets and liabilities and the
accrual of costs and expenses that are not readily apparent from other sources.
The actual results experienced by us may differ materially and adversely from
our estimates. To the extent there are material differences between the
estimates and the actual results, future results of operations will be affected.
LOSS PER SHARE
We compute net earnings (loss) per share in accordance with SFAS No. 128,
"EARNINGS PER SHARE". SFAS No. 128 requires presentation of both basic and
diluted earnings per share ("EPS") on the face of the income statement. Basic
EPS is computed by dividing net earnings (loss) available to common shareholders
(numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period using the treasury stock method and
convertible preferred stock using the if-converted method. In computing diluted
EPS, the average stock price for the period is used in determining the number of
shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential shares if their effect is anti
dilutive.
FOREIGN CURRENCY TRANSACTIONS
Our functional and reporting currency is the United States dollar. Occasional
transactions may occur in Canadian dollars and management has adopted SFAS No.
52 "FOREIGN CURRENCY TRANSLATION". Monetary assets and liabilities denominated
in foreign currencies are translated using the exchange rate prevailing at the
balance sheet date. Non-monetary assets and liabilities denominated in foreign
currencies are translated at rates of exchange in effect at the date of the
transaction. Average monthly rates are used to translate revenues and expenses.
Gains and losses arising on translation or settlement of foreign currency
denominated transactions or balances are included in the determination of net
income (loss). We have not, to the date of these financial statements, entered
into derivative instruments to offset the impact of foreign currency
fluctuations.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
MaloneBailey, LLP has audited our Financial Statements for the year ended July
31, 2009 and to the extent set forth in its report, which are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.
There were no disagreements related to accounting principles or practices,
financial statement disclosure, internal controls or auditing scope or procedure
during the two fiscal years and interim period.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following individuals serve as the directors and executive officers of our
company as of the date of this annual report. All directors of our company hold
office until the next annual meeting of our shareholders or until their
successors have been elected and qualified. The executive officers of our
company are appointed by our board of directors and hold office until their
death, resignation or removal from office. Our directors and executive officers,
their ages, positions held, and duration as such, are as follows:
45
Date First Elected
Name Position Held with our Company Age or Appointed
---- ------------------------------ --- ------------
Philip Kueber Chief Executive Officer, President, Secretary, 48 February 5, 2010
Treasurer, Chief Financial Officer, Principal
Accounting Officer and Director
Mr. Kueber does not have professional or technical accreditation in the
exploration, development or operations of oil and gas projects. For the coming
year, it is anticipated that he will commit approximately 50% of his time to our
operations.
BUSINESS EXPERIENCE
The following is a brief account of the education and business experience during
at least the past five years of each director, executive officer and key
employee of our company, indicating the person's principal occupation during
that period, and the name and principal business of the organization in which
such occupation and employment were carried out.
Philip Kueber
Mr. Kueber, age 48, is a 1983 graduate of the University of British Columbia and
has over 20 years experience in the entertainment, resource, and venture capital
industry. Beginning as a writer for Global Television Network, Mr. Kueber then
wrote feature films which were produced and exhibited worldwide. From 1986 to
1990 Mr. Kueber was President of Seguro Resources Ltd., an oil and gas producing
company based in Calgary, Alberta, Canada.
From 1990 to present, Mr. Kueber has financed and produced live entertainment,
feature films, and televised series. In addition, many non-entertainment
ventures have been funded and managed by Mr. Kueber in the resource,
bio-medical, and high-tech areas.
From 2000 to present, Mr. Kueber has also consulted to various commercially,
successful Internet based companies to assist in their corporate development,
creative development, and raising of capital.
From 2008 to present, Mr Kueber has been President and CEO of Riverdale Capital
Ltd., a corporation that acquires Internet based companies.
We have entered into a consulting agreement with Mr. Kueber pursuant to which we
pay him $4,000 for management services.
COMMITTEES OF THE BOARD
We do not have a separate audit committee at this time. Our entire board of
directors acts as our audit committee.
46
FAMILY RELATIONSHIPS
There are no family relationships among our directors or officers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past ten years, neither Mr. Kueber, nor any of our promoters or
control persons have had any of the following events occur:
1. A petition under the Federal bankruptcy laws or any state insolvency
law was filed by or against, or a receiver, fiscal agent or similar
officer was appointed by a court for the business or property of such
person, or any partnership in which he was a general partner at or
within two years before the time of such filing, or any corporation or
business association of which he was an executive officer at or within
two years before the time of such filing;
2. Such person was convicted in a criminal proceeding or is a named
subject of a pending criminal proceeding (excluding traffic violations
and other minor offenses);
3. Such person was the subject of any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from, or
otherwise limiting, the following activities:
i. Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
Commodity Futures Trading Commission, or an associated person of
any of the foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and
loan association or insurance company, or engaging in or
continuing any conduct or practice in connection with such
activity;
ii. Engaging in any type of business practice; or
iii. Engaging in any activity in connection with the purchase or sale
of any security or commodity or in connection with any violation
of Federal or State securities laws or Federal commodities laws;
4. Such person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any Federal or State
authority barring, suspending or otherwise limiting for more than 60
days the right of such person to engage in any activity described in
paragraph (f)(3)(i) of this section, or to be associated with persons
engaged in any such activity;
5. Such person was found by a court of competent jurisdiction in a civil
action or by the Commission to have violated any Federal or State
securities law, and the judgment in such civil action or finding by
the Commission has not been subsequently reversed, suspended, or
vacated;
47
6. Such person was found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have violated
any Federal commodities law, and the judgment in such civil action or
finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended or vacated;
7. Such person was the subject of, or a party to, any Federal or State
judicial or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of:
i. Any Federal or State securities or commodities law or regulation;
or
ii. Any law or regulation respecting financial institutions or
insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil
money penalty or temporary or permanent cease-and-desist order,
or removal or prohibition order; or
iii. Any law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or
8. Such person was the subject of, or a party to, any sanction or order,
not subsequently reversed, suspended or vacated, of any
self-regulatory organization (as defined in Section 3(a)(26) of the
Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as
defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C.
1(a)(29))), or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or
persons associated with a member.
48
OTHER DIRECTORSHIPS
Other than the above, none of our directors hold any other directorships in any
company with a class of securities registered pursuant to section 12 of the
Exchange Act or subject to the requirements of section 15(d) of such Act or any
company registered as an investment company under the Investment Company Act of
1940.
BOARD OF DIRECTORS AND DIRECTOR NOMINEES
Since our Board of Directors does not include a majority of independent
directors, the decisions of the Board regarding director nominees are made by
persons who have an interest in the outcome of the determination. The Board will
consider candidates for directors proposed by security holders, although no
formal procedures for submitting candidates have been adopted. Unless otherwise
determined, at any time not less than 90 days prior to the next annual Board
meeting at which a slate of director nominees is adopted, the Board will accept
written submissions from proposed nominees that include the name, address and
telephone number of the proposed nominee; a brief statement of the nominee's
qualifications to serve as a director; and a statement as to why the security
holder submitting the proposed nominee believes that the nomination would be in
the best interests of our security holders. If the proposed nominee is not the
same person as the security holder submitting the name of the nominee, a letter
from the nominee agreeing to the submission of his or her name for consideration
should be provided at the time of submission. The letter should be accompanied
by a resume supporting the nominee's qualifications to serve on the Board, as
well as a list of references.
The Board identifies director nominees through a combination of referrals from
different people, including management, existing Board members and security
holders. Once a candidate has been identified, the Board reviews the
individual's experience and background and may discuss the proposed nominee with
the source of the recommendation. If the Board believes it to be appropriate,
Board members may meet with the proposed nominee before making a final
determination whether to include the proposed nominee as a member of the slate
of director nominees submitted to security holders for election to the Board.
Some of the factors which the Board considers when evaluating proposed nominees
include their knowledge of and experience in business matters, finance, capital
markets and mergers and acquisitions. The Board may request additional
information from each candidate prior to reaching a determination, and it is
under no obligation to formally respond to all recommendations, although as a
matter of practice, it will endeavor to do so.
CONFLICTS OF INTEREST
Our directors are not obligated to commit their full time and attention to our
business and, accordingly, they may encounter a conflict of interest in
49
allocating their time between our operations and those of other businesses. In
the course of their other business activities, they may become aware of
investment and business opportunities which may be appropriate for presentation
to us as well as other entities to which they owe a fiduciary duty. As a result,
they may have conflicts of interest in determining to which entity a particular
business opportunity should be presented. They may also in the future become
affiliated with entities that are engaged in business activities similar to
those we intend to conduct.
In general, officers and directors of a corporation are required to present
business opportunities to the corporation if:
* the corporation could financially undertake the opportunity;
* the opportunity is within the corporation's line of business; and
* it would be unfair to the corporation and its stockholders not to
bring the opportunity to the attention ourfprincipal executive
officer;
We the plan corporation. to adopt a code of ethics that obligat our directoe
officer s and r employess, to disclose potenti s conflice of a interestl and s
prohibit those personst from s engagin in such g transac without our t consent
ions
EXECUTIVE COMPENSATION
GENERAL
The particulars of the compensation paid to the following persons:
(a) our principal executive officer;
(b) each of our two most highly compensated executive officers who were
serving as executive officers at the end of the years ended July 31,
2009, and 2008 and
(c) up to two additional individuals for whom disclosure would have been
provided under (b) but for the fact that the individual was not
serving as our executive officer at the end of the years ended July
31, 2009, and 2008,
whom we will collectively refer to as the named executive officers of our
company, are set out in the following summary compensation table, except that no
disclosure is provided for any named executive officer, other than our principal
executive officers, whose total compensation did not exceed $100,000 for the
respective fiscal year.
SUMMARY COMPENSATION TABLE (1)
Name and Principal Position Year Salary($) Total($)
- --------------------------- ---- --------- --------
(a) (b) (c) (j)
Curtis Daye (2) 2009 Nil Nil
former President, CEO, CFO and Director 2008 Nil Nil
- ----------
(1) We have omitted certain columns in the summary compensation table pursuant
to Item 402(a)(5) of Regulation S-K as no compensation was awarded to,
50
earned by, or paid to any of the executive officers or directors required
to be reported in that table or column in any fiscal year covered by that
table.
(2) Mr. Daye was our sole director and officer from our inception on May 29,
2008 to February 5, 2010.
OPTIONS GRANTS DURING THE LAST FISCAL YEAR / STOCK OPTION PLANS
We do not currently have a stock option plan in favor of any director, officer,
consultant or employee of our company. No individual grants of stock options,
whether or not in tandem with stock appreciation rights known as SARs or
freestanding SARs have been made to any executive officer or director since our
inception; accordingly, no stock options have been granted or exercised by any
of the officers or directors since we were founded.
AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR
No individual grants of stock options, whether or not in tandem with stock
appreciation rights known as SARs or freestanding SARs have been made to any
executive officer or any director since our inception; accordingly, no stock
options have been granted or exercised by any of the officers or directors since
we were founded.
LONG-TEM INCENTIVE PLANS AND AWARDS
We do not have any long-term incentive plans that provide compensation intended
to serve as incentive for performance. No individual grants or agreements
regarding future payouts under non-stock price-based plans have been made to any
executive officer or any director or any employee or consultant since our
inception; accordingly, no future payouts under non-stock price-based plans or
agreements have been granted or entered into or exercised by any of the officers
or directors or employees or consultants since we were founded.
COMPENSATION OF DIRECTORS
The members of the Board of Directors are not compensated by us for acting as
such. Directors are reimbursed for reasonable out-of-pocket expenses incurred.
There are no arrangements pursuant to which directors are or will be compensated
in the future for any services provided as a director.
We do not have any agreements for compensating our directors for their services
in their capacity as directors, although such directors are expected in the
future to receive stock options to purchase shares of our common stock as
awarded by our board of directors.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, CHANGE-IN-CONTROL ARRANGEMENTS
There are no employment contracts or other contracts or arrangements with our
officers or directors other than those disclosed in this report. There are no
compensation plans or arrangements, including payments to be made by us, with
respect to our officers, directors, employees or consultants that would result
from the resignation, retirement or any other termination of such directors,
officers, employees or consultants. There are no arrangements for directors,
officers or employees that would result from a change-in-control.
51
INDEBTEDNESS OF DIRECTORS, SENIOR OFFICERS, EXECUTIVE OFFICERS AND OTHER
MANAGEMENT
None of our directors or executive officers or any associate or affiliate of our
company during the last two fiscal years is or has been indebted to our company
by way of guarantee, support agreement, letter of credit or other similar
agreement or understanding currently outstanding.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of the date of this report, the total number
of shares owned beneficially by each of our directors, officers and key
employees, individually and as a group, and the present owners of 5% or more of
our total outstanding shares. Unless otherwise notes, the shareholders listed
below have direct ownership of his shares and possess sole voting and
dispositive power with respect to the shares.
Title of Name and Address Amount and Nature of Percentage
Class of Beneficial Owner Beneficial Ownership (2) of Class (3)
----- ------------------- ------------------------ ------------
Common Philip Kueber (1) 5,000,000 Direct 8.2%
One Lincoln Center, 18 West 140
Butterfield Road, 15th Floor,
Oakbrook Terrace, IL, 60181
Common Roberto Rodriguez Bernal 3,750,000 Indirect (4) 6.2%
Lintheschergasse 19
P.O. Box 3426
CH-8021 Zurich
Common Naomi Johnson 3,750,000 Indirect (5) 6.2%
#12 The Belvedere,
Chelsea Harbour, London,
UK, SW10-0XA
Common Jonathan Marshall 3,750,000 Indirect (6) 6.2%
Suite #25, 405 Kings Road,
London, UK, SW10-0BB
Common Kent Ltd. 7,500,000 Indirect (7) 12.3%
Marque Place #300, 430 West Bay
Road, PO Box 30691 SMB, Grand
Cayman, KY1-1203, Cayman Islands
Common Cameron Frater 3,750,000 Indirect (8) 6.2%
3540 West Sahara Road
Las Vegas, NV, 89122
Common Total Directors and Officers 5,000,000 Direct 8.2%
52
- ----------
(1) The person named above may be deemed to be our "parent" and "promoter"
within the meaning of such terms under the Securities Act by virtue of his
direct and indirect stock holdings. Mr. Kueber is our only "promoter". Mr.
Kueber is also our President, Chief Executive Officer, Chief Financial
Officer, Principal Accounting Officer Secretary, Treasurer and director.
(2) Beneficial owner of a security includes any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship,
or otherwise has or shares: (i) voting power, which includes the power to
vote, or to direct the voting of shares; and (ii) investment power, which
includes the power to dispose or direct the disposition of shares. Certain
shares may be deemed to be beneficially owned by more than one person (if,
for example, persons share the power to vote or the power to dispose of the
shares). In addition, shares are deemed to be beneficially owned by a
person if the person has the right to acquire the shares (for example, upon
exercise of an option) within 60 days of the date as of which the
information is provided. In computing the percentage ownership of any
person, the amount of shares outstanding is deemed to include the amount of
shares beneficially owned by such person (and only such person) by reason
of these acquisition rights. As a result, the percentage of outstanding
shares of any person as shown in this table does not necessarily reflect
the person's actual ownership or voting power with respect to the number of
shares of common stock actually outstanding on the date of this report as
of which there were 60,800,000 shares of our common stock issued and
outstanding.
(3) Based on 60,800,000 number of shares of common stock issued and outstanding
as of June 29, 2010.
(4) Mr. Bernal has voting and dispositive control over shares of our common
stock owned by Alabaster Limited.
(5) Ms. Johnson has voting and dispositive control over shares of our common
stock owned by Nuria Investment Ltd.
(6) Mr. Marshall has voting and dispositive control over shares of our common
stock owned by Hayward Management, Inc.
(7) Kent Ltd. has voting and dispositive control over shares of our common
stock owned by Med Ventures Ltd., and Gravhaven Limited.
(8) Mr. Frater has voting and dispositive control over shares of our common
stock owned by Armada International, Inc.
All directors and officers hold office until our next annual general meeting of
shareholders or until a successor is appointed.
CHANGE IN CONTROL
We are not aware of any arrangement that might result in a change in control of
our company in the future.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
For the fiscal period ended April 30, 2010, we recognized $2,400 for donated
services at $400 per month provided by our President. We did not record donated
services for the three months period ended April 30, 2010, as management
services provided by our President of $4,000 were accrued pursuant to the
management agreement described in Note 7. As at April 30, 2010, we are indebted
to our President for $12,000 of accrued management fees and $4,790 for expenses
paid on our behalf which are non-interest bearing, unsecured and due on demand.
53
As at April 30, 2010, we are indebted to our former President for $184 for
expenses paid on our behalf. This amount is non-interest bearing, unsecured and
due on demand.
There have been no other transactions since the beginning of our last fiscal
year or any currently proposed transactions in which we are, or plan to be, a
participant and the amount involved exceeds $120,000 or one percent of the
average of our total assets at year end for the last two completed fiscal years,
and in which any related person had or will have a direct or indirect material
interest.
During the last two years and except as disclosed below, none of the following
persons has had any direct or indirect material interest in any transaction to
which our company was or is a party, or in any proposed transaction to which our
company proposes to be a party:
(a) any director or officer of our company;
(b) any proposed director of officer of our company;
(c) any person who beneficially owns, directly or indirectly, shares
carrying more than 5% of the voting rights attached to our common
stock; or
(d) any member of the immediate family of any of the foregoing persons
(including a spouse, parents, children, siblings, and in-laws).
DIRECTOR INDEPENDENCE
Our securities are quoted on the OTC Bulletin Board which does not have any
director independence requirements. Once we engage further directors and
officers, we plan to develop a definition of independence and scrutinize our
Board of Directors with regard to this definition.
LEGAL PROCEEDINGS
We know of no material, active or pending legal proceedings against us, nor are
we involved as a plaintiff in any material proceedings or pending litigation.
There are no proceedings in which any of our directors, officers or affiliates,
or any registered beneficial shareholder are an adverse party or has a material
interest adverse to us.
We intend to furnish annual reports to stockholders, which will include audited
financial statements reported on by our Certified Public Accountants. In
addition, we will issue unaudited quarterly or other interim reports to
stockholders, as we deem appropriate or required by applicable securities
regulations.
DISCLOSURE OF COMMISSION'S POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our Bylaws provide that we will indemnify our directors and officers to the
fullest extent not prohibited by Nevada law.
The general effect of the foregoing is to indemnify a control person, officer or
director from liability, thereby making us responsible for any expenses or
damages incurred by such control person, officer or director in any action
brought against them based on their conduct in such capacity, provided they did
not engage in fraud or criminal activity.
54
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers or control persons pursuant to the
foregoing provisions, we have been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
REPORTS TO SECURITY HOLDERS
We are not required to deliver an annual report to our stockholders but will
voluntarily send an annual report, together with our annual audited financial
statements. Any Securities and Exchange Commission filings that we do file will
be available to the public over the internet at the SEC's website at
http://www.sec.gov.
The public may read and copy any materials filed by us with the SEC at the SEC's
Public Reference Room at 100 F Street, NE, Washington DC 20549. The public may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. We are an electronic filer. The SEC maintains an internet
site that
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, 100 F Street NE,
Washington, D.C. 20549, under the Securities Act of 1933 a registration
statement on Form S-1 of which this prospectus is a part, with respect to the
common shares offered hereby. We have not included in this prospectus all the
information contained in the registration statement, and you should refer to the
registration statement and our exhibits for further information.
Any statement in this prospectus about any of our contracts or other documents
is not necessarily complete. If the contract or document is filed as an exhibit
to the registration statement, the contract or document is deemed to modify the
description contained in this prospectus. You must review the exhibits
themselves for a complete description of the contract or document.
In the Registration Statement, certain items of which are contained in exhibits
and schedules as permitted by the rules and regulations of the Securities and
Exchange Commission. You can obtain a copy of the Registration Statement from
the Securities and Exchange Commission by mail from the Public Reference Room of
the Securities and Exchange Commission at 100 F Street, NE, Washington, D.C.
20549, at prescribed rates. In addition, the Securities and Exchange Commission
maintains a Web site at http://www.sec.gov containing reports, proxy and
information statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission. The Securities and
Exchange Commission's telephone number is 1-800-SEC-0330 (1-800-732-0330). These
SEC filings are also available to the public from commercial document retrieval
services.
You should rely only on the information contained in this prospectus. No finder,
dealer, sales person or other person has been authorized to give any information
or to make any representation in connection with this offering other than those
contained in this prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by us. This
55
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby by anyone in any jurisdiction in which
such offer or solicitation is not authorized or in which the person making such
offer or solicitation is not qualified to do so or to any person to whom it is
unlawful to make such offer or solicitation. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of our common shares.
DEALER PROSPECTUS DELIVERY OBLIGATION
Until a date, which is 90 days after 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 dealer' obligation to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
56
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The only statute, charter provision, bylaw, contract, or other arrangement under
which any controlling person, director or officer of us is insured or
indemnified in any manner against any liability which he may incur in his
capacity as such, is as follows:
* Article IX of our Bylaws, filed as Exhibit 3.2 to our Registration
Statement on Form S-1 filed on October 23, 2010; and
* Chapter 78 of the Nevada Revised Statutes (the "NRS").
NEVADA REVISED STATUTES
Section 78.138 of the Nevada Revised Statute ("NRS") provides for immunity of
directors from monetary liability, except in certain enumerated circumstances,
as follows:
"Except as otherwise provided in NRS 35.230, 90.660, 91.250, 452.200, 452.270,
668.045 and 694A.030, or unless the Articles of Incorporation or an amendment
thereto, in each case filed on or after October 1, 2003, provide for greater
individual liability, a director or officer is not individually liable to the
corporation or its stockholders or creditors for any damages as a result of any
act or failure to act in his capacity as a director or officer unless it is
proven that:
(a) his act or failure to act constituted a breach of his fiduciary duties
as a director or officer; and
(b) his breach of those duties involved intentional misconduct, fraud or a
knowing violation of law."
Section 78.5702 of the NRS provides as follows:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation, by
reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action, suit
or proceeding if he:
(a) is not liable pursuant to NRS 78.138; or
(b) acted in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful.
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2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys' fees actually
and reasonably incurred by him in connection with the defense or settlement
of the action or suit if he:
(a) is not liable pursuant to NRS 78.138; or
(b) acted in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the corporation.
To the extent that a director, officer, employee or agent of a corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections 1 and 2, or in defense of any claim, issue
or matter therein, the corporation shall indemnify him against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
with the defense.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to directors or officers pursuant to the
foregoing provisions, we are informed that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy, as expressed
in said Act and is, therefore, unenforceable.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of the expenses incurred in connection
with this registration statement and the issuance and distribution of the shares
of common stock being registered under this registration statement. All such
expenses will be paid by us.
Securities and Exchange Commission registration fee .................. $ 285
Legal fees and expenses .............................................. 25,000
Accounting, Auditing fees and expenses ............................... 12,000
Transfer agent fees and expenses ..................................... 2,000
Printing, electronic filing and engraving expenses ................... 715
-------
TOTAL ................................................................ $40,000
=======
All of the above items are estimates.
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RECENT SALES OF UNREGISTERED SECURITIES
During the last three fiscal years we have had the following issuances of
unregistered securities:
* On May 30, 2008, we issued 6,500,000 shares of common stock to our
former sole officer and director in consideration of $0.001 per share
or a total of $6,500. We issued the foregoing restricted shares of
common stock pursuant to the exemption from registration contained in
Section 4(2) of the Securities Act of 1933. He is a sophisticated
investor, is our sole officer and director, and is in possession of
all material information relating to us. Further, no commissions were
paid to anyone in connection with the sale of the shares and general
solicitation was not made to anyone.
* On July 8, 2008, we issued 5,060,000 shares of common stock to 46
individuals in consideration of $0.01 per share or a total of $50,600.
The 5,060,000 shares so issued are being registered in this offering.
The foregoing 5,060,000 shares of common stock were issued as
restricted securities pursuant to Reg. S of the Securities Act of 1933
in that all of the sales took place outside the United States of
America with non-US persons.
* On June 15, 2010, we issued 3,000,000 shares of common stock to one
investor in consideration of $0.10 per share or a total of $300,000.
The foregoing 3,000,000 shares of common stock were issued as
restricted securities pursuant to Reg. S of the Securities Act of 1933
in that all of the sales took place outside the United States of
America with non-US persons.
We relied upon Regulation S, Section 4(2) and Rule 504 of Regulation D of the
Securities Act of 1933, as amended for the issuances of the above listed
securities. Each prospective investor was given a private placement memorandum
designed to disclose all material aspects of an investment in us, including the
business, management, offering details, risk factors, financial statements and
use of funds. The investors were business acquaintances, family members, or
friends of, or personally known to, our officers and directors. It is the belief
of management that each of the individuals who invested have such knowledge and
experience in financial and business matters that they are capable of evaluating
the merits and risks of the investment and therefore did not need the
protections offered by registering their shares under Securities and Act of
1933, as amended. Each investor completed a subscription confirmation letter and
private placement subscription agreement whereby the investors certified that
they were purchasing the shares for their own accounts, with investment intent.
This offering was not accompanied by general advertisement or general
solicitation and the shares were issued with a Rule 144 restrictive legend.
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EXHIBITS
Exhibit Exhibit
Number Description
- ------ -----------
3.1 Articles of Incorporation of Pepper Rock Resources Corp.(1)
3.2 Certificate of Amendment filed with the Nevada Secretary of State on
October 16, 2009 (3)
3.3 Bylaws of Pepper Rock Resources Corp. (1)
4.1 Instrument Defining the Right of Holders - Form of Share Certificate (1)
5.1 Legal Opinion of Macdonald Tuskey (3)
10.1 Joint Venture Agreement with Oxalis Energy Group, Inc. dated February
10, 2010 (2)
10.2 Management Agreement with Phil Kueber dated February 8, 2010 (4)
10.3 Joint Venture Agreement with Dominus Energy, AG dated February 5,
2010. (4)
23.1 Consent of Malone Bailey, LLP
23.3 Consent of Macdonald Tuskey
- ----------
(1) Included as an exhibit to our Registration Statement on Form S-1 filed on
October 23, 2008.
(2) Included as an exhibit to our Current Report on Form 8-K filed on February
16, 2010.
(3) Included as an exhibit to our Registration Statement on Form S-1 filed on
April 8, 2010.
(4) Included as an exhibit to our Registration Statement on Form S-1/A filed on
May 20, 2010
UNDERTAKINGS
The registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
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) and 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 SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
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(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
2. That for the purpose of determining liability under the Securities Act,
each post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof;
3. To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering; and
4. That, for the purpose of determining liability of the registrant under the
Securities Act to any purchaser in the initial distribution of the
securities, the registrant undertakes that in a primary offering of
securities of the registrant 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 registrant 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 registrant relating to
the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on
behalf of the registrant or used or referred to by the registrant;
(iii) The portion of any other free writing prospectus relating to the
offering containing material information about the registrant or its
securities provided by or on behalf of the registrant; and
(iv) Any other communication that is an offer in the offering made by the
registrant to the purchaser. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to
directors, officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant 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 registrant 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
Securities Act and will be governed by the final adjudication of such issue.
Each prospectus filed pursuant to Rule 424(b) 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, 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.
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SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Oakbrook Terrace,
Illinois, on June 30, 2010.
PEPPER ROCK RESOURCES CORP.
By: /s/ Philip Kueber
---------------------------------------------------
Philip Kueber
President, Chief Executive Officer, Chief Financial
Officer, Principal Accounting Officer, Secretary,
Treasurer, Director
In accordance with the requirements of the Securities Act, this Prospectus has
been signed by the following persons in the capacities and on the dates stated.
Signatures Title Date
---------- ----- ----
/s/ Philip Kueber President, Chief Executive Officer, Chief June 30, 2010
- ---------------------------------- Financial Officer, Principal Accounting
Philip Kueber Officer, Secretary, Treasurer, Director
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