As filed with the Securities and Exchange Commission on July 13, 2011
Registration No. 333-______
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PENOLA INC.
(Exact name of registrant as specified in its charter)
Nevada 1000 None
(State or Other Jurisdiction of (Primary Standard Industrial (IRS Employer
Incorporation or Organization) Classification Number) Identification Number)
492 Gilbert Road
West Preston, Victoria 3072
Australia
+61 (3) 9605 3907
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
State Agent & Transfer Syndicate, Inc.
112 North Curry Street
Carson City, Nevada 89703
(800) 253-1013
(Address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Thomas E. Puzzo, Esq.
Law Offices of Thomas E. Puzzo, PLLC
4216 NE 70th Street
Seattle, Washington 98115
Telephone No.: (206) 522-2256
Facsimile No.: (206) 260-0111
Approximate date of proposed sale to the public: As soon as practicable and from
time to time after the effective date of this Registration Statement.
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, 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 registration statement 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 registration statement 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. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
CALCULATION OF REGISTRATION FEE
======================================================================================================
Title of Each Proposed Maximum Proposed Maximum Amount of
Class of Securities Amount to be Offering Price Aggregate Offering Registration
to be Registered Registered (1) per Share Price Fee
------------------------------------------------------------------------------------------------------
Common Stock, par value
$0.001 per share 1,160,000 (2) $ .10 (3) $116,000 $13.47
------------------------------------------------------------------------------------------------------
TOTAL 1,160,000 $ -- $116,000 $13.47
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(1) In the event of a stock split, stock dividend or similar transaction
involving our common stock, the number of shares registered shall
automatically be increased to cover the additional shares of common stock
issuable pursuant to Rule 416 under the Securities Act of 1933, as amended.
(2) Represents the number of shares of common stock currently outstanding to be
sold by the selling security holders.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) and (o) of the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH 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 OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
================================================================================
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED JULY 13, 2011
PENOLA INC.
1,160,000 SHARES OF COMMON STOCK
This prospectus relates to the resale by certain selling security holders of
Penola Inc. of up to 1,160,000 shares of common stock held by selling security
holders of Penola Inc. We will not receive any of the proceeds from the sale of
the shares by the selling stockholders.
The selling security holders will be offering our shares of common stock at a
fixed price of $0.10 per share until our shares are quoted on the OTC Bulletin
Board and thereafter at prevailing market prices or privately negotiated prices.
Each of the selling stockholders may be deemed to be an "underwriter" as such
term is defined in the Securities Act of 1933, as amended (the "Securities
Act").
There has been no market for our securities and a public market may never
develop, or, if any market does develop, it may not be sustained. Our common
stock is not traded on any exchange or on the over-the-counter market. After the
effective date of the registration statement relating to this prospectus, we
hope to have a market maker file an application with the Financial Industry
Regulatory Authority for our common stock to be eligible for trading on the
Over-the-Counter Bulletin Board. We do not yet have a market maker who has
agreed to file such application. There can be no assurance that our common stock
will ever be quoted on a stock exchange or a quotation service or that any
market for our stock will develop.
OUR BUSINESS IS SUBJECT TO MANY RISKS AND AN INVESTMENT IN OUR SHARES OF COMMON
STOCK WILL ALSO INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE
FACTORS DESCRIBED UNDER THE HEADING "RISK FACTORS" BEGINNING ON PAGE 4 BEFORE
INVESTING IN OUR SHARES OF COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The information in this prospectus is not complete and may be changed. This
prospectus is included in the registration statement that was filed by us with
the Securities and Exchange Commission. The selling security holders may not
sell these securities until the registration statement becomes effective. This
prospectus is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
The date of this prospectus is July __, 2011.
The following table of contents has been designed to help you find information
contained in this prospectus. We encourage you to read the entire prospectus.
TABLE OF CONTENTS
Page
----
Prospectus Summary 3
Risk Factors 4
Risk Factors Relating to Our Company 4
Risk Factors Relating to Our Common Stock 8
Use of Proceeds 10
Determination of Offering Price 10
Selling Security Holders 10
Description of Securities 11
Plan of Distribution 13
Description of Business 16
Our Executive Offices 22
Legal Proceedings 22
Market for Common Equity and Related Stockholder Matters 22
Management's Discussion and Analysis of Financial Condition and
Results of Operations 23
Directors, Executive Officers, Promoters and Control Persons 28
Executive Compensation 29
Security Ownership of Certain Beneficial Owners and Management 30
Certain Relationships and Related Transactions 31
Disclosure of Commission Position on Indemnification for Securities
Act Liabilities 31
Where You Can Find More Information 31
Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure 31
Financial Statements F-1
Until ____________, 2011 (90 business days after the effective 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's obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
2
A CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements which relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may", "should", "expects",
"plans", "anticipates", "believes", "estimates", "predicts", "potential" or
"continue" or the negative of these terms or other comparable terminology. These
statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled
"Risk Factors," that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
these forward-looking statements.
While these forward-looking statements, and any assumptions upon which they are
based, are made in good faith and reflect our current judgment regarding the
direction of our business, actual results will almost always vary, sometimes
materially, from any estimates, predictions, projections, assumptions or other
future performance suggested herein. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
PROSPECTUS SUMMARY
As used in this prospectus, references to the "Company," "we," "our", "us" or
"Penola Inc." refer to Penola Inc. unless the context otherwise indicates.
The following summary highlights selected information contained in this
prospectus. Before making an investment decision, you should read the entire
prospectus carefully, including the "Risk Factors" section, the financial
statements, and the notes to the financial statements.
OUR COMPANY
Penola Inc. was incorporated on May 7, 2010, under the laws of the State of
Nevada, for the purpose of conducting mineral exploration activities.
We are an exploration stage company formed for the purposes of acquiring,
exploring, and if warranted and feasible, developing natural resource property.
We raised an aggregate of $31,000 through private placements of our securities.
Proceeds from these placements were used for working capital.
On July 6, 2010 we entered into a Mineral Property Option Agreement whereby we
have the right to acquire a 100% interest in Exploration License E 80/3757
located in Halls Creek Shire, in the Kimberly region of Western Australia and
known as the Halls Creek Property. The option agreement requires us to make an
initial cash payment of AUD$7,000 (US$7,703), which we paid on July 6, 2010. The
option agreement has an exercise price of approximately AUD$200,000 ($208,840)
cash to be paid, if exercised by the Company, and the option expires July 6,
2012. We retained a consulting geologist to prepare an evaluation report on the
Halls Creek Property. We intend to conduct exploratory activities on the claim
and if feasible, develop the Halls Creek Property.
The Company's principal offices are located at 492 Gilbert Road, West Preston,
Victoria 3072, Australia, and our telephone number is +61 (3) 9605 3907.
THE OFFERING
Securities offered: The selling stockholders are offering hereby up to
1,160,000 shares of common stock.
Offering price: The selling stockholders will offer and sell their
shares of common stock at a fixed price of $0.10
per share until our shares are quoted on the OTC
Bulletin Board, if our shares of common stock are
ever quoted on the OTC Bulletin Board, and
thereafter at prevailing market prices or
privately negotiated prices.
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Shares outstanding prior
to offering: 3,160,000
Shares outstanding
after offering: 3,160,000
Market for the common
shares: There is no public market for our shares. Our
common stock is not traded on any exchange or on
the over-the-counter market. After the effective
date of the registration statement relating to
this prospectus, we hope to have a market maker
file an application with the Financial Industry
Regulatory Authority ("FINRA") for our common
stock to eligible for trading on the Over The
Counter Bulletin Board. We do not yet have a
market maker who has agreed to file such
application.
There is no assurance that a trading market will
develop, or, if developed, that it will be
sustained. Consequently, a purchaser of our common
stock may find it difficult to resell the
securities offered herein should the purchaser
desire to do so when eligible for public resale.
Use of proceeds: We will not receive any proceeds from the sale of
shares by the selling security holders
SUMMARY FINANCIAL INFORMATION
The tables and information below are derived from our audited financial
statements for the period from May 7, 2010 (Inception) to February 28, 2011. Our
working capital as at July 11, 2011 was $20,564.
February 28, 2011 ($)
---------------------
FINANCIAL SUMMARY
Cash and Deposits 21,737
Total Assets 21,737
Total Liabilities 519
Total Stockholder's Equity 21,218
Accumulated From
May 7, 2010
(Inception) to
February 28, 2011 ($)
---------------------
STATEMENT OF OPERATIONS
Total Expenses 9,782
Net Loss for the Period 9,782
Net Loss per Share --
RISK FACTORS
An investment in our common stock involves a number of very significant risks.
You should carefully consider the following known material risks and
uncertainties in addition to other information in this prospectus in evaluating
our company and its business before purchasing shares of our company's common
stock. You could lose all or part of your investment due to any of these risks.
RISKS RELATING TO OUR COMPANY
OUR AUDITORS HAVE EXPRESSED SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A
GOING CONCERN.
4
Our financial statements for the year ended February 28, 2011 were prepared
assuming that we will continue our operations as a going concern. We were
incorporated on May 7, 2010 and do not have a history of earnings. As a result,
our independent accountants in their audit report have expressed substantial
doubt about our ability to continue as a going concern. Continued operations are
dependent on our ability to complete equity or debt financings or generate
profitable operations. Such financings may not be available or may not be
available on reasonable terms. Our financial statements do not include any
adjustments that may result from the outcome of this uncertainty.
WE MAY REQUIRE ADDITIONAL FUNDS WHICH WE PLAN TO RAISE THROUGH THE SALE OF OUR
COMMON STOCK, WHICH REQUIRES FAVORABLE MARKET CONDITIONS AND INTEREST IN OUR
ACTIVITIES BY INVESTORS. IF WE ARE NOT BE ABLE TO SELL OUR COMMON STOCK, FUNDING
WILL NOT BE AVAILABLE FOR CONTINUED OPERATIONS, AND OUR BUSINESS WILL FAIL.
We anticipate that our current cash of $21,737 will be sufficient to complete
the first phase of any initial exploration program of any mining claim.
Subsequent exploration activities will require additional funding. Our only
present means of funding is through the sale of our common stock. The sale of
common stock requires favorable market conditions for exploration companies like
ours, as well as specific interest in our stock, neither of which may exist if
and when additional funding is required by us. If we are unable to raise
additional funds in the future, our business will fail.
WE HAVE A VERY LIMITED HISTORY OF OPERATIONS AND ACCORDINGLY THERE IS NO TRACK
RECORD THAT WOULD PROVIDE A BASIS FOR ASSESSING OUR ABILITY TO CONDUCT
SUCCESSFUL MINERAL EXPLORATION ACTIVITIES. WE MAY NOT BE SUCCESSFUL IN CARRYING
OUT OUR BUSINESS OBJECTIVES.
We were incorporated on May 7, 2010 and to date, have been involved primarily in
organizational activities and obtaining financing. Accordingly we have no track
record of successful exploration activities, strategic decision making by
management, fund-raising ability, and other factors that would allow an investor
to assess the likelihood that we will be successful as a junior resource
exploration company. Junior exploration companies often fail to achieve or
maintain successful operations, even in favorable market conditions. There is a
substantial risk that we will not be successful in our exploration activities,
or if initially successful, in thereafter generating any operating revenues or
in achieving profitable operations.
IF WE ARE UNABLE TO PAY THE EXERCISE PRICE UNDER OUR MINERAL PROPERTY OPTION
AGREEMENT, OUR BUSINESS WILL FAIL.
We are a party to a Mineral Property Option Agreement whereby we have the right
to acquire a 100% interest in Exploration License E 80/3757 located in the
Murchison Mineral-field Halls Creek Shire, in the Kimberly region of Western
Australia and known as the Halls Creek Property. It is only under this option
agreement that we potentially have any right to explore for mineralized
material. This option agreement requires us to pay an exercise price of
AUD$200,000 (approximately $208,840) cash, in order for us to have the right to
explore for mineralized materials in the area covered by Exploration License E
80/3757. Our option expires July 6, 2012. If we fail to pay the exercise price,
we will not have the right to conduct exploration activities at all. Currently,
we do not have sufficient funds to pay the exercise price. If we fail to raise
sufficient funds to pay the exercise price, you will lose your entire
investment.
DUE TO THE SPECULATIVE NATURE OF MINERAL PROPERTY EXPLORATION, THERE IS
SUBSTANTIAL RISK THAT NO COMMERCIALLY VIABLE MINERAL DEPOSITS WILL BE FOUND ON
OUR HALLS CREEK PROPERTY OR OTHER MINERAL PROPERTIES THAT WE ACQUIRE.
In order for us to even commence mining operations we face a number of
challenges which include finding mining claims, qualified professionals to
conduct exploration programs, obtaining adequate financing to continue
exploration programs, locating viable mineral bodies, partnering with senior
mining companies, obtaining mining permits, and ultimately selling minerals in
order to generate revenue. Moreover, exploration for commercially viable mineral
deposits is highly speculative in nature and involves substantial risk that no
viable mineral deposits will be located on any future mineral properties. There
is a substantial risk that any exploration program that we conduct on future
claims may not result in the discovery of any significant mineralization, and
5
therefore no commercial viable mineral deposit. There are numerous geological
features that we may encounter that would limit our ability to locate
mineralization or that could interfere with our exploration programs as planned,
resulting in unsuccessful exploration efforts. In such a case, we may incur
significant costs associated with an exploration program, without any benefit.
This would likely result in a decrease in the value of our common stock.
DUE TO THE INHERENT DANGERS INVOLVED IN MINERAL EXPLORATION, THERE IS A RISK
THAT WE MAY INCUR LIABILITY OR DAMAGES AS WE CONDUCT OUR BUSINESS.
The search for minerals 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 may elect not to insure. We currently
have no such insurance nor do we expect to obtain such insurance for the
foreseeable future. If a hazard were to occur, the costs of rectifying the
hazard may exceed our asset value and cause us to liquidate all our assets and
cease operations, resulting in the loss of your entire investment.
AS WE UNDERTAKE EXPLORATION OF OUR MINERAL CLAIMS, WE WILL BE SUBJECT TO
COMPLIANCE WITH GOVERNMENT REGULATION THAT MAY INCREASE THE ANTICIPATED COST OF
OUR EXPLORATION PROGRAM.
There are several governmental regulations that materially restrict mineral
exploration. We will be subject to the laws of the Western Australia as
administered by the Department of Industry and Resources as we carry out our
exploration program. We may be required to obtain work permits, negotiate with
Aboriginal groups holding Native Title Rights for access to our leases, obtain
land access agreements from pastoral lease holders, post bonds and perform
remediation work for any physical disturbance to the land in order to comply
with these laws. If we enter the production phase, the cost of complying with
permit and regulatory environment laws will be greater because the impact on the
project area is greater. Permits and regulations will control all aspects of the
production program if the project continues to that stage. Examples of
regulatory requirements include:
* Water discharge will have to meet drinking water standards;
* Dust generation will have to be minimal or otherwise re-mediated;
* Dumping of material on the surface will have to be re-contoured and
re-vegetated with natural vegetation;
* An assessment of all material to be left on the surface will need to
be environmentally benign;
* Ground water will have to be monitored for any potential contaminants;
* The socio-economic impact of the project will have to be evaluated and
if deemed negative, will have to be remediated; and
* There will have to be an impact report of the work on the local fauna
and flora including a study of potentially endangered species.
There is a risk that new regulations could increase our costs of doing business
and prevent us from carrying out our exploration program. We will also have to
sustain the cost of reclamation and environmental remediation for all
exploration work undertaken. Both reclamation and environmental remediation
refer to putting disturbed ground back as close to its original state as
possible. Other potential pollution or damage must be cleaned-up and renewed
along standard guidelines outlined in the usual permits. Reclamation is the
process of bringing the land back to its natural state after completion of
exploration activities. Environmental remediation refers to the physical
activity of taking steps to remediate, or remedy, any environmental damage
caused. The amount of these costs is not known at this time as we do not know
the extent of the exploration program that will be undertaken beyond completion
of the recommended work program. If remediation costs exceed our cash reserves
we may be unable to complete our exploration program and have to abandon our
operations.
THE MARKET PRICE FOR PRECIOUS METALS IS BASED ON NUMEROUS FACTORS OUTSIDE OF OUR
CONTROL. THERE IS A RISK THAT THE MARKET PRICE FOR PRECIOUS METALS WILL
SIGNIFICANTLY DECREASE, WHICH WILL MAKE IT DIFFICULT FOR US TO FUND FURTHER
MINERAL EXPLORATION ACTIVITIES, AND WOULD DECREASE THE PROBABILITY THAT ANY
SIGNIFICANT MINERALIZATION THAT WE LOCATE CAN BE ECONOMICALLY EXTRACTED.
Numerous factors beyond our control may affect the marketability of minerals.
These factors include market fluctuations, the proximity and capacity of natural
resource markets and processing equipment, government regulations, including
6
regulations relating to prices, taxes, royalties, land tenure, land use,
importing and exporting of minerals and environmental protection. The exact
effect of these factors cannot be accurately predicted, but the combination of
these factors may result in our not receiving an adequate return on invested
capital and you may lose your entire investment in this offering by existing
investors.
OUR SOLE OFFICER AND DIRECTOR MAY HAVE A CONFLICT OF INTEREST WITH THE MINORITY
SHAREHOLDERS AT SOME TIME IN THE FUTURE. SINCE THE MAJORITY OF OUR SHARES OF
COMMON STOCK ARE OWNED BY OUR SOLE OFFICER AND DIRECTOR, OUR OTHER STOCKHOLDERS
MAY NOT BE ABLE TO INFLUENCE CONTROL OF THE COMPANY OR DECISION MAKING BY
MANAGEMENT OF THE COMPANY.
Our sole officer and director beneficially owns 63.2% of our outstanding common
stock. The interests of our sole officer and director may not be, at all times,
the same as that of our other shareholders. Our sole officer and director is not
simply a passive investor but is also executive officer of the Company, her
interest as executive may, at times be adverse to those of passive investors.
Where those conflicts exist, our shareholders will be dependent upon our
director exercising, in a manner fair to all of our shareholders, her fiduciary
duties as officer or as member of the Company's Board of Directors. Also, our
sole officer and director will have the ability to control the outcome of most
corporate actions requiring shareholder approval, including the sale of all or
substantially all of our assets and amendments to our articles of incorporation.
This concentration of ownership may also have the effect of delaying, deferring
or preventing a change of control of us, which may be disadvantageous to
minority shareholders.
SINCE OUR SOLE OFFICER AND DIRECTOR HAS THE ABILITY TO BE EMPLOYED BY OR CONSULT
FOR OTHER COMPANIES, HER OTHER ACTIVITIES COULD SLOW DOWN OUR OPERATIONS.
Our sole officer and director is not required to work exclusively for us and
does not devote all of her time to our operations. Therefore, it is possible
that a conflict of interest with regard to her time may arise based on her
employment by other companies. Her other activities may prevent him from
devoting full-time to our operations which could slow our operations and may
reduce our financial results because of the slowdown in operations. It is
expected that our officer and director will devote between 5 and 10 hours per
week to our operations on an ongoing basis, and when required will devote whole
days and even multiple days at a stretch when property visits are required or
when extensive analysis of information is needed. We do not have any written
procedures in place to address conflicts of interest that may arise between our
business and the business activities of our director.
IF THE SELLING SHAREHOLDERS SELL A LARGE NUMBER OF SHARES ALL AT ONCE OR IN
BLOCKS, THE MARKET PRICE OF OUR SHARES WOULD MOST LIKELY DECLINE.
The selling shareholders are offering up to 1,160,000 shares of our common stock
through this prospectus. Our common stock is presently not traded or quoted on
any market or securities exchange, but should a market develop, shares sold at a
price below the current market price at which the common stock is quoted will
cause that market price to decline. Moreover, the offer or sale of a large
number of shares at any price may cause the market price to fall. The
outstanding shares of common stock covered by this prospectus represent 31.6% of
the common shares outstanding as of the date of this prospectus.
WE OPERATE OUR BUSINESS AND MAINTAIN OUR BANK ACCOUNTS IN AUSTRALIA, A
NON-UNITED STATES JURISDICTION, WHICH MEANS THAT IT MAY BE DIFFICULT OR
IMPOSSIBLE FOR STOCKHOLDERS TO ENFORCE A JUDGMENT OBTAINED IN THE UNITED STATES
AGAINST THE COMPANY TO OBTAIN CASH FROM THE COMPANY'S BANK ACCOUNTS IN
AUSTRALIA.
Our operations are conducted in Australia, a foreign country where we maintain
our bank accounts and the legal system of which is based on the common law.
Nevertheless, a judgment obtained by a stockholder against the Company in the
United States will be difficult and costly, if not impossible, to enforce in
Australia. Additionally, there is no guarantee that Australia will not change
its laws or policies to reverse policy choices in the past with respect to the
enforceability of judgments obtained from courts in the United States in
Australia. Accordingly, an investor may lose his entire investment if he or she
cannot enforce a judgment from a court in the United States against the Company
in Australia.
7
RISKS RELATING TO OUR COMMON STOCK
THERE IS NO LIQUIDITY AND NO ESTABLISHED PUBLIC MARKET FOR OUR COMMON STOCK AND
WE MAY NOT BE SUCCESSFUL AT OBTAINING A QUOTATION ON A RECOGNIZED QUOTATION
SERVICE. IN SUCH EVENT IT MAY BE DIFFICULT TO SELL YOUR SHARES.
There is presently no public market in our shares. There can be no assurance
that we will be successful at developing a public market or in having our common
stock quoted on a quotation facility such as the OTC Bulletin Board. There are
risks associated with obtaining a quotation, including that broker dealers will
not be willing to make a market in our shares, or to request that our shares be
quoted on a quotation service. In addition, even if a quotation is obtained, the
OTC Bulletin Board and similar quotation services are often characterized by low
trading volumes, and price volatility, which may make it difficult for an
investor to sell our common stock on acceptable terms. If trades in our common
stock are not quoted on a quotation facility, it may be very difficult for an
investor to find a buyer for their shares in our Company.
OUR COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC AND THE
TRADING MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR
STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.
Under U.S. federal securities legislation, our common stock will constitute
"penny stock". Penny stock is any equity security that has a market price of
less than $5.00 per share, subject to certain exceptions. For any transaction
involving a penny stock, unless exempt, the rules require that a broker or
dealer approve a potential investor's account for transactions in penny stocks,
and the broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to be
purchased. In order to approve an investor's account for transactions in penny
stocks, the broker or dealer must obtain financial information and investment
experience objectives of the person, and make a reasonable determination that
the transactions in penny stocks are suitable for that person and the person has
sufficient knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks. The broker or dealer must
also deliver, prior to any transaction in a penny stock, a disclosure schedule
prepared by the Commission relating to the penny stock market, which, in
highlight form sets forth the basis on which the broker or dealer made the
suitability determination. Brokers may be less willing to execute transactions
in securities subject to the "penny stock" rules. This may make it more
difficult for investors to dispose of our common stock and cause a decline in
the market value of our stock. Disclosure also has to be made about the risks of
investing in penny stocks in both public offerings and in secondary trading and
about the commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and the rights and
remedies available to an investor in cases of fraud in penny stock transactions.
Finally, monthly statements have to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in
penny stocks.
WE MAY, IN THE FUTURE, ISSUE ADDITIONAL COMMON SHARES, WHICH WOULD REDUCE
INVESTORS' PERCENT OF OWNERSHIP AND MAY DILUTE OUR SHARE VALUE.
Our Articles of Incorporation authorize the issuance of 100,000,000 shares of
common stock and 25,000,000 shares of "blank check" preferred stock. As of July
11, 2011, the Company had 3,160,000 shares of common stock outstanding.
Accordingly, we may issue up to an additional 96,840,000 shares of common stock
and 25,000,000 shares of preferred stock with terms and preferences determined
by our board of directors. The future issuance of common stock and/or preferred
stock may result in substantial dilution in the percentage of our common stock
held by our then existing shareholders. We may value any common stock or
preferred stock issued in the future on an arbitrary basis. The issuance of
common stock or preferred stock for future services or acquisitions or other
corporate actions may have the effect of diluting the value of the shares held
by our investors, and might have an adverse effect on any trading market for our
common stock.
THERE IS NO CURRENT TRADING MARKET FOR OUR SECURITIES AND IF A TRADING MARKET
DOES NOT DEVELOP, PURCHASERS OF OUR SECURITIES MAY HAVE DIFFICULTY SELLING THEIR
SHARES.
There is currently no established public trading market for our securities and
an active trading market in our securities may not develop or, if developed, may
not be sustained. We intend to have an application filed for admission to
8
quotation of our securities on the OTC Bulletin Board after this prospectus is
declared effective by the SEC. If for any reason our common stock is not quoted
on the OTC Bulletin Board or a public trading market does not otherwise develop,
purchasers of the shares may have difficulty selling their common stock should
they desire to do so. No market makers have committed to becoming market makers
for our common stock and none may do so.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF NEVADA STATE LAW HINDER A
POTENTIAL TAKEOVER OF PENOLA INC.
Though not now, in the future we may become subject to Nevada's control share
law. A corporation is subject to Nevada's control share law if it has more than
200 stockholders, at least 100 of whom are stockholders of record and residents
of Nevada, and it does business in Nevada or through an affiliated corporation.
The law focuses on the acquisition of a "controlling interest" which means the
ownership of outstanding voting shares sufficient, but for the control share
law, to enable the acquiring person to exercise the following proportions of the
voting power of the corporation in the election of directors:
(i) one-fifth or more but less than one-third, (ii) one-third or more but less
than a majority, or (iii) a majority or more. The ability to exercise such
voting power may be direct or indirect, as well as individual or in association
with others.
The effect of the control share law is that the acquiring person, and those
acting in association with it, obtains only such voting rights in the control
shares as are conferred by a resolution of the stockholders of the corporation,
approved at a special or annual meeting of stockholders. The control share law
contemplates that voting rights will be considered only once by the other
stockholders. T hus, there is no authority to strip voting rights from the
control shares of an acquiring person once those rights have been approved. If
the stockholders do not grant voting rights to the control shares acquired by an
acquiring person, those shares do not become permanent non-voting shares. The
acquiring person is free to sell its shares to others. If the buyers of those
shares themselves do not acquire a controlling interest, their shares do not
become governed by the control share law.
If control shares are accorded full voting rights and the acquiring person has
acquired control shares with a majority or more of the voting power, any
stockholder of record, other than an acquiring person, who has not voted in
favor of approval of voting rights is entitled to demand fair value for such
stockholder's shares.
Nevada's control share law may have the effect of discouraging takeovers of the
corporation.
In addition to the control share law, Nevada has a business combination law
which prohibits certain business combinations between Nevada corporations and
"interested stockholders" for three years after the "interested stockholder"
first becomes an "interested stockholder," unless the corporation's board of
directors approves the combination in advance. For purposes of Nevada law, an
"interested stockholder" is any person who is (i) the beneficial owner, directly
or indirectly, of ten percent or more of the voting power of the outstanding
voting shares of the corporation, or (ii) an affiliate or associate of the
corporation and at any time within the three previous years was the beneficial
owner, directly or indirectly, of ten percent or more of the voting power of the
then outstanding shares of the corporation. The definition of the term "business
combination" is sufficiently broad to cover virtually any kind of transaction
that would allow a potential acquiror to use the corporation's assets to finance
the acquisition or otherwise to benefit its own interests rather than the
interests of the corporation and its other stockholders.
The effect of Nevada's business combination law is to potentially discourage
parties interested in taking control of Penola Inc. from doing so if it cannot
obtain the approval of our board of directors.
BECAUSE WE DO NOT INTEND TO PAY ANY CASH DIVIDENDS ON OUR COMMON STOCK, OUR
STOCKHOLDERS WILL NOT BE ABLE TO RECEIVE A RETURN ON THEIR SHARES UNLESS THEY
SELL THEM.
We intend to retain any future earnings to finance the development and expansion
of our business. We do not anticipate paying any cash dividends on our common
stock in the foreseeable future. Unless we pay dividends, our stockholders will
not be able to receive a return on their shares unless they sell them. There is
no assurance that stockholders will be able to sell shares when desired.
9
USE OF PROCEEDS
This prospectus relates to shares of our common stock that may be offered and
sold from time to time by the selling stockholders. We will not receive any of
the proceeds from the sale of the common shares being offered for sale by the
selling security holders.
DETERMINATION OF THE OFFERING PRICE
The selling shareholders will sell our shares at $0.10 per share until our
shares are quoted on the OTCBB, and thereafter at prevailing market prices or
privately negotiated prices. This price was arbitrarily determined by us.
SELLING SECURITY HOLDERS
The following table sets forth the shares beneficially owned, as of July 11,
2011, by the selling security holders prior to the offering by existing
shareholders contemplated by this prospectus, the number of shares each selling
security holder is offering by this prospectus and the number of shares which
each would own beneficially if all such offered shares are sold.
Beneficial ownership is determined in accordance with Securities and Exchange
Commission rules. Under these rules, a person is deemed to be a beneficial owner
of a security if that person has or shares voting power, which includes the
power to vote or direct the voting of the security, or investment power, which
includes the power to vote or direct the voting of the security. The person is
also deemed to be a beneficial owner of any security of which that person has a
right to acquire beneficial ownership within 60 days. Under the Securities and
Exchange Commission rules, more than one person may be deemed to be a beneficial
owner of the same securities, and a person may be deemed to be a beneficial
owner of securities as to which he or she may not have any pecuniary beneficial
interest. Except as noted below, each person has sole voting and investment
power.
Each of the selling security holders acquired their shares of common stock being
resold hereunder directly from the Company for a purchase price of $0.025 per
share. The percentages below are calculated based on 3,160,000 shares of our
common stock issued and outstanding as of July 11, 2011. We do not have any
outstanding options, warrants or other securities exercisable for or convertible
into shares of our common stock.
Total
Number of Percentage of
Shares hares to be Total Shares Shares owned
Owned Offered for Owned After After the
Name of Before the Security the Offering Offering is
Selling Shareholder the Offering Holder's Account is Complete Complete
------------------- ------------ ---------------- ----------- --------
Christina Byamis 40,000 40,000 0 0
Evangelos Byamis 40,000 40,000 0 0
Melissa Briggs 40,000 40,000 0 0
Fabial Fulgione 40,000 40,000 0 0
Melissa De Stratis 40,000 40,000 0 0
Jeanette Gatto 40,000 40,000 0 0
Kathy Gatto 40,000 40,000 0 0
Nikola Kotevski 40,000 40,000 0 0
Jose Archer 40,000 40,000 0 0
Maree Carazzolo 40,000 40,000 0 0
Cindy Hodgson 40,000 40,000 0 0
Jake Smith 40,000 40,000 0 0
Kim Head 40,000 40,000 0 0
10
Rebecca Popple 40,000 40,000 0 0
Joanne Portelli 40,000 40,000 0 0
Danielle Soliman 40,000 40,000 0 0
Samir Lahibi 40,000 40,000 0 0
Robert Tapping 40,000 40,000 0 0
Alisha Thomas 40,000 40,000 0 0
Sofia Ward 40,000 40,000 0 0
Marian Daoud 40,000 40,000 0 0
James Pink 40,000 40,000 0 0
Hana Taouk 40,000 40,000 0 0
Crystal Portelli 40,000 40,000 0 0
Nina Naddaf 40,000 40,000 0 0
Hanan Taouk 40,000 40,000 0 0
Louise Keeran 40,000 40,000 0 0
S Kay 40,000 40,000 0 0
Giulia Gencarelli 40,000 40,000 0 0
Total 1,160,000 1,160,000 0 0
None of the selling shareholders has a relationship with us other than as a
shareholder, has ever been one of our officers or directors, or is a
broker-dealer registered under the Securities Exchange Act of 1934, as amended,
or an affiliate of such a broker-dealer.
We may require the selling stockholders to suspend the sales of the securities
offered by this prospectus upon the occurrence of any event that makes any
statement in this prospectus, or the related registration statement, untrue in
any material respect, or that requires the changing of the statements in these
documents in order to make statements in those documents not misleading. We will
file a post-effective amendment to the registration statement to reflect any
such material changes to this prospectus.
DESCRIPTION OF SECURITIES
GENERAL
There is no established public trading market for our common stock. Our
authorized capital stock consists of 100,000,000 shares of common stock, with
$0.001 par value per share, and 25,000,000 shares of "blank check" preferred
stock, with no par value. As of July 11, 2011, there were 3,160,000 shares of
our common stock issued and outstanding that were held by 30 stockholders of
record, and no shares of preferred stock issued and outstanding.
COMMON STOCK
The following is a summary of the material rights and restrictions associated
with our common stock. This description does not purport to be a complete
description of all of the rights of our stockholders and is subject to, and
qualified in its entirety by, the provisions of our most current Articles of
Incorporation and Bylaws, which are included as exhibits to this Registration
Statement.
The holders of our common stock currently have (i) equal ratable rights to
dividends from funds legally available therefore, when, as and if declared by
the Board of Directors of the Company; (ii) are entitled to share ratably in all
of the assets of the Company available for distribution to holders of common
stock upon liquidation, dissolution or winding up of the affairs of the Company
(iii) do not have preemptive, 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 stock
holders may vote.
11
Our Bylaws provide that at all meetings of the stockholders for the election of
directors, a plurality of the votes cast shall be sufficient to elect. On all
other matters, except as otherwise required by Nevada law or the Articles of
Incorporation, a majority of the votes cast at a meeting of the stockholders
shall be necessary to authorize any corporate action to be taken by vote of the
stockholders.
A "plurality" means the excess of the votes cast for one candidate over any
other. When there are more than two competitors for the same office, the person
who receives the greatest number of votes has a plurality.
Please refer to the Company's Articles of Incorporation, Bylaws and the
applicable statutes of the State of Nevada for a more complete description of
the rights and liabilities of holders of the Company's securities.
BLANK CHECK PREFERRED STOCK
The following is a summary of the material rights and restrictions associated
with our preferred stock. This description does not purport to be a complete
description of all of the rights of our stockholders and is subject to, and
qualified in its entirety by, the provisions of our most current Articles of
Incorporation and Bylaws, which are included as exhibits to this Registration
Statement.
Our Board of Directors is authorized to determine or alter any or all of the
rights, preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series of preferred stock and, within the limitations or
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series, to increase or
decrease (but not below the number of shares of any such series then
outstanding) the number of shares comprising any such series subsequent to the
issue of shares of that series, to set the designation of any series, and to
provide for rights and terms of redemption, conversion, dividends, voting
rights, and liquidation preferences of the shares of any such series.
NEVADA ANTI-TAKEOVER LAWS
The Nevada Business Corporation Law contains a provision governing "Acquisition
of Controlling Interest." This law provides generally that any person or entity
that acquires 20% or more of the outstanding voting shares of a publicly-held
Nevada corporation in the secondary public or private market may be denied
voting rights with respect to the acquired shares, unless a majority of the
disinterested stockholders of the corporation elects to restore such voting
rights in whole or in part. The control share acquisition act provides that a
person or entity acquires "control shares" whenever it acquires shares that, but
for the operation of the control share acquisition act, would bring its voting
power within any of the following three ranges: (1) 20 to 33 1/3%, (2) 33 1/3 to
50%, or (3) more than 50%. A "control share acquisition" is generally defined as
the direct or indirect acquisition of either ownership or voting power
associated with issued and outstanding control shares. The stockholders or board
of directors of a corporation may elect to exempt the stock of the corporation
from the provisions of the control share acquisition act through adoption of a
provision to that effect in the Articles of Incorporation or Bylaws of the
corporation. Our Articles of Incorporation and Bylaws do not exempt our common
stock from the control share acquisition act. The control share acquisition act
is applicable only to shares of "Issuing Corporations" as defined by the act. An
Issuing Corporation is a Nevada corporation, which; (1) has 200 or more
stockholders, with at least 100 of such stockholders being both stockholders of
record and residents of Nevada; and (2) does business in Nevada directly or
through an affiliated corporation.
At this time, we do not have 100 stockholders of record resident of Nevada.
Therefore, the provisions of the control share acquisition act do not apply to
acquisitions of our shares and will not until such time as these requirements
have been met. At such time as they may apply to us, the provisions of the
control share acquisition act may discourage companies or persons interested in
acquiring a significant interest in or control of the Company, regardless of
whether such acquisition may be in the interest of our stockholders.
The Nevada "Combination with Interested Stockholders Statute" may also have an
effect of delaying or making it more difficult to effect a change in control of
the Company. This statute prevents an "interested stockholder" and a resident
domestic Nevada corporation from entering into a "combination," unless certain
conditions are met. The statute defines "combination" to include any merger or
consolidation with an "interested stockholder," or any sale, lease, exchange,
12
mortgage, pledge, transfer or other disposition, in one transaction or a series
of transactions with an "interested stockholder" having; (1) an aggregate market
value equal to 5 percent or more of the aggregate market value of the assets of
the corporation; (2) an aggregate market value equal to 5 percent or more of the
aggregate market value of all outstanding shares of the corporation; or (3)
representing 10 percent or more of the earning power or net income of the
corporation. An "interested stockholder" means the beneficial owner of 10
percent or more of the voting shares of a resident domestic corporation, or an
affiliate or associate thereof. A corporation affected by the statute may not
engage in a "combination" within three years after the interested stockholder
acquires its shares unless the combination or purchase is approved by the board
of directors before the interested stockholder acquired such shares. If approval
is not obtained, then after the expiration of the three-year period, the
business combination may be consummated with the approval of the board of
directors or a majority of the voting power held by disinterested stockholders,
or if the consideration to be paid by the interested stockholder is at least
equal to the highest of: (1) the highest price per share paid by the interested
stockholder within the three years immediately preceding the date of the
announcement of the combination or in the transaction in which he became an
interested stockholder, whichever is higher; (2) the market value per common
share on the date of announcement of the combination or the date the interested
stockholder acquired the shares, whichever is higher; or (3) if higher for the
holders of preferred stock, the highest liquidation value of the preferred
stock. The effect of Nevada's business combination law is to potentially
discourage parties interested in taking control of Omega Water Corp. from doing
so if it cannot obtain the approval of our board of directors.
RULE 144
All 3,160,000 shares of our issued and outstanding shares of our common stock
are "restricted securities" under Rule 144, promulgated pursuant to the
Securities Act of 1933, as amended, but none of those 3,160,000 shares can be
resold under Rule 144.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain future earnings, if any, to finance the expansion of
our business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.
PLAN OF DISTRIBUTION
As of the date of this prospectus, there is no market for our securities. After
the date of this prospectus, we expect to have an application filed with the
Financial Industry Regulatory Authority for our common stock to be eligible for
trading on the OTC Bulletin Board. Until our common stock becomes eligible for
trading on the OTC Bulletin Board, the selling security holders will be offering
our shares of common stock at a fixed price of $0.10 per common share. After our
common stock becomes eligible for trading on the OTC Bulletin Board, the selling
security holders may, from time to time, sell all or a portion of the shares of
common stock on OTC Bulletin Board, in privately negotiated transactions or
otherwise. After our common stock becomes eligible for trading on the OTC
Bulletin Board, such sales may be at fixed prices prevailing at the time of
sale, at prices related to the market prices or at negotiated prices.
After our common stock becomes eligible for trading on the OTC Bulletin Board,
the shares of common stock being offered for resale by this prospectus may be
sold by the selling security holders by one or more of the following methods,
without limitation:
* ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
* privately negotiated transactions;
* market sales (both long and short to the extent permitted under the
federal securities laws);
* at the market to or through market makers or into an existing market
for the shares;
* through transactions in options, swaps or other derivatives (whether
exchange listed or otherwise); and
* a combination of any of the aforementioned methods of sale.
13
In the event of the transfer by any of the selling security holders of its
shares of common stock 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 security holder who has
transferred his, her or its shares.
In effecting sales, brokers and dealers engaged by the selling security holders
may arrange for other brokers or dealers to participate. Brokers or dealers may
receive commissions or discounts from a selling security holder or, if any of
the broker-dealers act as an agent for the purchaser of such shares, from a
purchaser in amounts to be negotiated which are not expected to exceed those
customary in the types of transactions involved. Before our common stock becomes
eligible for trading on the OTC Bulletin Board, broker-dealers may agree with a
selling security holder to sell a specified number of the shares of common stock
at a price per share of $0.10. After our common stock becomes eligible for
trading on the OTC Bulletin Board, broker-dealers may agree with a selling
security holder 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 security holder if such
broker-dealer is unable to sell the shares on behalf of the selling security
holder. 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. After our
common stock becomes eligible for trading on the OTC Bulletin Board, 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 security holders and any broker-dealers or agents that participate
with the selling security holders 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, any of the selling security holders may pledge shares of
common stock pursuant to the margin provisions of customer agreements with
brokers. Upon a default by a selling security holder, their broker may offer and
sell the pledged shares of common stock from time to time. After our common
stock becomes eligible for trading on the OTC Bulletin Board, upon a sale of the
shares of common stock, the selling security holders 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 necessary documents in compliance with the Securities Act
that may be required in the event any of the selling security holders 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 shares of 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 security holders 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 a selling security holder is a
distribution participant and we, under certain circumstances, may be a
distribution participant, under Regulation M. All of the foregoing may affect
the marketability of the shares of 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
security holders, the purchasers participating in such transaction, or both.
Any shares of common stock covered by this prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act, as amended, may be sold under
Rule 144 rather than pursuant to this prospectus.
14
PENNY STOCK RULES
The Securities Exchange Commission has also adopted rules that regulate
broker-dealer practices in connection with transactions in "penny stocks" as
such term is defined by Rule 15g-9. 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 shares offered by this prospectus constitute penny stock under the
Securities and Exchange Act. The shares will remain penny stock for the
foreseeable future. The classification of penny stock makes it more difficult
for a broker-dealer to sell the stock into a secondary market, which makes it
more difficult for a purchaser to liquidate his or her investment. Any
broker-dealer engaged by the purchaser for the purpose of selling his or her
shares in our company will be subject to the penny stock rules.
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, deliver a standardized risk
disclosure document prepared by the Commission, which: (i) contains a
description of the nature and level of risk in the market for penny stocks in
both public offerings and secondary trading; (ii) 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 a violation to such duties or other
requirements of Securities' laws; (iii) contains a brief, clear, narrative
description of a dealer market, including bid and ask prices for penny stocks
and significance of the spread between the bid and ask price; (iv) contains a
toll-free telephone number for inquiries on disciplinary actions; (v) defines
significant terms in the disclosure document or in the conduct of trading in
penny stocks; and (vi) contains such other information and is in such form as
the Commission shall require by rule or regulation. The broker-dealer also must
provide to the customer, prior to effecting any transaction in a penny stock,
(i) bid and offer quotations for the penny stock; (ii) the compensation of the
broker-dealer and its salesperson in the transaction; (iii) 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; and (iv) monthly
account statements showing the market value of each penny stock held in the
customer's account.
In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those 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 acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements will have the effect of reducing the trading
activity in the secondary market for our stock because it will be subject to
these penny stock rules. Therefore, stockholders may have difficulty selling
those securities.
REGULATION M
During such time as we may be engaged in a distribution of any of the shares we
are registering by this registration statement, we are required to comply with
Regulation M. In general, Regulation M precludes any selling security holder,
any affiliated purchasers 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 which 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 under the Exchange Act 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
15
shareholders of the requirements for delivery of this prospectus in connection
with any sales of the common stock offered by this prospectus.
DESCRIPTION OF BUSINESS
ORGANIZATION WITHIN THE LAST FIVE YEARS
On May 7, 2010, the Company was incorporated under the laws of the State of
Nevada. We are engaged in the business of acquisition, exploration and
development of natural resource properties.
Filomena Gencarelli has served as our President and Chief Executive Officer,
Secretary and Treasurer, from May 7, 2010, until the current date. Our board of
directors is comprised of one person: Filomena Gencarelli.
We are authorized to issue 100,000,000 shares of common stock, par value $.001
per share, and 25,000,000 shares of blank check preferred stock. On September
30, 2010, we issued 2,000,000 shares of common stock to our sole officer and
director. The issuance was paid at a purchase price of the par value per share
or a total of $2,000. We hold our cash in bank accounts located in Australia.
On July 6, 2010 we entered into a Mineral Property Option Agreement whereby we
have the right to acquire a 100% interest in Exploration License E 80/3757,
located in Halls Creek Shire, in the Kimberly region of Western Australia and
known as the Halls Creek Property. The option agreement requires us to make an
initial cash payment of AUD$7,000 (US$7,703), which we paid on July 6, 2010. The
option agreement has an exercise price of approximately fifty thousand
AUD$200,000 (US$208,840) cash to be paid if exercised by the Company. We
retained a consulting geologist to prepare an evaluation report on the
prospects. We intend to conduct exploratory activities on the claim and if
feasible, develop the prospects.
IN GENERAL
We are an exploration stage company engaged in the acquisition and exploration
of mineral properties. We currently hold an option to acquire for AUS$50,000
(US$208,840) a 100% undivided interest Exploration License E 80/3757 located in
Halls Creek Shire, in the Kimberly region of Western Australia and known as the
Halls Creek Property. We are currently conducting mineral exploration activities
on the Halls Creek Property in order to assess whether it contains any
commercially exploitable mineral reserves. Currently there are no known mineral
reserves on the Halls Creek Property.
We have not earned any revenues to date. Our independent auditor has issued an
audit opinion which includes a statement expressing substantial doubt as to our
ability to continue as a going concern. The source of information contained in
this discussion is our geology report prepared by Gregory Curnow, B. SC
(Geology), M AusIMM, dated October 7, 2010.
There is the likelihood of our mineral claim containing little or no economic
mineralization or reserves of gold and other minerals. We are presently in the
exploration stage of our business and we can provide no assurance that any
commercially viable mineral deposits exist on our mineral claims, that we will
discover commercially exploitable levels of mineral resources on our property,
or, if such deposits are discovered, that we will enter into further substantial
exploration programs. Further exploration is required before a final
determination can be made as to whether our mineral claims possess commercially
exploitable mineral deposits. If our claim does not contain any reserves all
funds that we spend on exploration will be lost.
We have no current plans, proposals or arrangements, written or otherwise, to
seek a business combination with another entity in the near future.
POTENTIAL ACQUISITION OF THE HALLS CREEK PROPERTY
On July 6, 2010, we purchased an option to acquire a 100% undivided interest in
a mineral claim known as Exploration License E 80/3757 located in Halls Creek
Shire, in the Kimberly region of Western Australia and known as the Halls Creek
16
Property, for a price of AUD$7,000 (US$7,703). The mineral claim underlying the
option was granted by the Department of Mines and Petroleum, Western Australia,
on July 16, 2010.
We engaged Gregory Curnow, B. SC (Geology). M AusIMM, to prepare a geological
evaluation report on the Halls Creek Property. Mr. Curnow is a consulting
professional geologist and Member of the Australasian Institute of Mining &
Metallurgy. Mr. Curnow attended Monash University, Melbourne, Australia and
graduated in 1986 with a Bachelor of Science degree in geology.
The work completed by Mr. Curnow in preparing the geological report consisted of
a review of geological data from previous exploration within the region. The
acquisition of this data involved the research and investigation of historical
files to locate and retrieve data information acquired by previous exploration
companies in the area of the mineral claims.
We received the geological evaluation report on the Halls Creek Property
entitled "Evaluation Report, E 80/3757, Western Australia" prepared by Mr.
Curnow on October 7, 2010. The geological report summarizes the results of the
history of the exploration of the mineral claims, the regional and local geology
of the mineral claims and the mineralization and the geological formations
identified as a result of the prior exploration. The geological report also
gives conclusions regarding potential mineralization of the mineral claims and
recommends a further geological exploration program on the mineral claims. The
description of the Halls Creek Property provided below is based on Ms. Curnow's
report.
DESCRIPTION OF PROPERTY
The property on which the Company has an option is the Halls Creek Property
which is comprised of one located mineral claim, Exploration License E 80/3757.
The Halls Creek Property is in the Day Dawn district of the Murchison Mineral
Fields approximately 550 kilometers north north-east of Perth. The nearest towns
are the mining centers of Cue 25 kilometers to the north and Mt. Magnet 50
kilometers to the south.
PHYSIOGRAPHY, CLIMATE, VEGETATION & WATER
The nearest town is the mining and pastoral centre of Halls Creek 83 kilometers
to the north-east (see Fig 1). The Kimberley region is a semi-arid region with a
monsoonal climate with the wet season running from November to mid April.
Temperatures in summer average 37(degree)C (99(degree)F) and the humidity is
commonly over 90%.
The the Halls Creek Property is located 30 kilometers south of the Great
Northern Highway, the major road of the Kimberley region, and is serviced by
unsealed minor roads. The terrain is open scrubland criss-crossed by a number of
perennial streams that only flow in the wet season and the main land use is
cattle farming.
Fieldwork in the Kimberley is usually scheduled for the dry season between April
and December.
The license was granted to George Lee on August 8, 2007 for a period of five
years and covers approximately 324 hectares. Mr. Lee is the third party with
whom we have entered into our Mineral Property Option Agreement.
[remainder of page intentionally left blank]
17
[MAP SHOWING THE LOCATION PLAN]
Figure 1: Location Plan
PROPERTY HISTORY
There is no prior mining exploration activity for the property to which our
Mineral Property Option Agreement relates.
REGIONAL GEOLOGY
The region falls within the Halls Creek Proterozoic Mobile Zone that is folded
about the edge of the Kimberly craton, which is also Proterozoic in age (see Fig
2). The Halls Creek Zone consists of moderately to highly deformed rocks of the
Halls Creek Group which is broken up into:
* Olympio Formation
* Biscay Formation
* Saunders Creek Formation
* Ding Dong Downs Volcanics
Deformation of the Hall Creek Zone has included tight sub-isoclinal to
isoclinals folding with associated regional faulting. Both the folding and
faulting is parallel to the Kimberley craton edge and generally trending to the
north north-east.
Only the Olympio and Biscay Formation occur in the area.
18
OLYMPIO FORMATION
The Olympio Formation consists mainly of a sequence of turbidite and deep water
sediments with a basal sequence of acid to intermediate volcanic interbedded
with tuffaceous and lithic sediments. Metamorphism is generally greenschist to
amphibolite facies.
BISCAY FORMATION
The Biscay Formation is a sequence of basic volcanics rocks generally basalts,
dolerites and gabbroic intrusives interbedded with turbiditic sediments.
Metamorphism is generally greenschist to amphibolite facies.
[MAP SHOWING THE REGIONAL GEOLOGY OF THE KIMBERLEY]
Figure 2: Regional Geology of the Kimberley (Tyler 02)
LOCAL GEOLOGY
Locally the area of the Mt. Dockrell goldfield is made up of a sequence of basic
volcanics, felsic volcanics and sediments which are part of the Halls Creek
Group. E 80/3757 consists of both the Olympio and Biscay Formations with the
contact between the two trending north north-east suggesting it is fault
related.
MINERALIZATION
Gold mineralization in the Mt. Dockrell area is generally associated with both
copper and lead, and there are 5 known types of mineralization, as follows:
1. Gold-galena in quartz filled axial plane shears and fractures.
2. Gold-arsenopyrite-chalcopyrite stratabound deposits.
19
3. Gold-tourmaline quartz veins.
4. Chalcopyrite-galena quartz veins.
5. Copper in quartz-calcite-epidote altered zones.
Both disseminated and vein hosted tin-tungsten mineralization is known in the
area and is associated with a quartzite unit in the Butchers Gully member (part
of the Biscay Formation) and is exposed by a large south plunging anticline. The
quartzite unit is lithologically mixed and consists of bands of magnetite,
epidote, tourmaline, and manganese rich quartzite with minor bands of
amphibolite and pelite.
The scheelite appears to be formed through preferential metasomatism of
psammitic horizons in the quartzite and is associated with secondary epidote and
less generally with fluorite, tourmaline, apatite and zircon.
[MAP SHOWING THE GEOLOGY PLAN OF THE MT. DOCKRELL GOLDFIELD]
Figure 3: Geology Plan of the Mt. Dockrell Goldfield
EXPLORATION POTENTIAL
Though there are no known occurrences of mineralization on E 80/3757, we believe
that the exploration potential of project area will contain occurrences of
mineralization, based on the substantial past exploration and the known,
widespread occurrence of gold and tin-tungsten mineralization in the area and
the local geology.
With a major fault splay passing through the license and a large portion of the
contact between the Biscay volcanics and the Olympio Formation also being
included in the license and the lack of modern exploration techniques,
especially geophysics, being carried out in the area the potential for discovery
in the area is high.
20
The tin-tungsten mineralization highlights the presence of a granitoid body that
does not outcrop in the area suggesting that it is located at a shallow depth
increasing the potential for more tin-tungsten mineralization to be found below
the surface.
CONDITIONS TO RETAIN TITLE TO THE CLAIM
State and local regulations will require a yearly maintenance fee to keep the
claim to Halls Creek Property in good standing. Yearly maintenance fees of
AUD$10,000 (US$10,605) payable to the Department of Mines and Petroleum Western
Australia, are on or payable prior to the anniversary of the claim to keep the
claim in good standing for an additional year.
COMPETITIVE CONDITIONS
The mineral exploration business is an extremely competitive industry. We are
competing with many other exploration companies looking for minerals. We are a
very early stage mineral exploration company and a very small participant in the
mineral exploration business. Being a junior mineral exploration company, we
compete with other companies like ours for financing and joint venture partners.
Additionally, we compete for resources such as professional geologists, camp
staff, helicopters and mineral exploration supplies.
GOVERNMENT APPROVALS AND RECOMMENDATIONS
We will be required to comply with all regulations, rules and directives of
governmental authorities and agencies applicable to the exploration of minerals
in Australia and the state of Western Australia.
COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
We currently have no costs to comply with environmental laws concerning our
exploration program. We will also have to sustain the cost of reclamation and
environmental remediation for all work undertaken which causes sufficient
surface disturbance to necessitate reclamation work. Both reclamation and
environmental remediation refer to putting disturbed ground back as close to its
original state as possible. Other potential pollution or damage must be
cleaned-up and renewed along standard guidelines outlined in the usual permits.
Reclamation is the process of bringing the land back to a natural state after
completion of exploration activities. Environmental remediation refers to the
physical activity of taking steps to remediate, or remedy, any environmental
damage caused, i.e. refilling trenches after sampling or cleaning up fuel
spills. Our initial programs do not require any reclamation or remediation other
than minor clean up and removal of supplies because of minimal disturbance to
the ground. The amount of these costs is not known at this time as we do not
know the extent of the exploration program we will undertake, beyond completion
of the recommended three phases described in the chart below. Because there is
presently no information on the size, tenor, or quality of any resource or
reserve at this time, it is impossible to assess the impact of any capital
expenditures on our earnings or competitive position in the event a potentially
economic deposit is discovered.
Proposed Work Amount Cost ($AUD)
------------- ------ -----------
PHASE 1
Data Collection $ 5,000.00
Re-Interpretation of Geophysical Data $ 10,000.00
Field Mapping 5 days @ $500 $ 2,500.00
Sampling 50 samples @ $30 $ 1,500.00
Travel & Accommodation 5 days @ $300 $ 1,500.00
Report 1.5 days @ $1,000 $ 1,500.00
Administration 15 % of costs $ 3,300.00
$ 25,300.00
21
PHASE 2
Soil Sampling 5 days @ $750 $ 3,750.00
Assaying 150 samples @ $20 $ 3,000.00
Ground Geophysics $ 65,000.00
Report 1.5 days @ $1,000 $ 1,500.00
Administration 15 % of costs $ 10,987.50
$ 84,237.50
PHASE 2
Drilling 1,000 meters @ $50 $ 50,000.00
Assaying 1,000 meters @ $30 $ 30,000.00
Supervision 7 days @ $600 $ 4,200.00
Travel & Accommodation 7 days @ $300 $ 2,100.00
Report 1.5 days @ $1,000 $ 1,500.00
Administration 15 % of costs $ 13,170.00
$100,970.00
TOTAL $210,507.50
EMPLOYEES
We currently have no employees other than our sole officer and director. We
intend to retain the services of geologists, prospectors and consultants on a
contract basis to conduct the exploration programs on our mineral claims and to
assist with regulatory compliance and preparation of financial statements.
OUR EXECUTIVE OFFICES
Our executive offices are located at 492 Gilbert Road, West Preston, Victoria
3072, Australia.
LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is a party or in
which any director, officer or affiliate of the Company, any owner of record or
beneficially of more than 5% of any class of voting securities of the Company,
or security holder is a party adverse to the Company or has a material interest
adverse to the Company. The Company's mineral claim is not the subject of any
pending legal proceedings.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
ADMISSION TO QUOTATION ON THE OTC BULLETIN BOARD
We intend to have our common stock be quoted on the OTC Bulletin Board. If our
securities are not quoted on the OTC Bulletin Board, a security holder may find
it more difficult to dispose of, or to obtain accurate quotations as to the
market value of our securities. The OTC Bulletin Board differs from national and
regional stock exchanges in that it:
(1) is not situated in a single location but operates through communication of
bids, offers and confirmations between broker-dealers, and (2) securities
admitted to quotation are offered by one or more Broker-dealers rather than the
"specialist" common to stock exchanges.
22
To qualify for quotation on the OTC Bulletin Board, an equity security must have
one registered broker-dealer, known as the market maker, willing to list bid or
sale quotations and to sponsor the company listing. We do not yet have an
agreement with a registered broker-dealer, as the market maker, willing to list
bid or sale quotations and to sponsor the Company listing. If the Company meets
the qualifications for trading securities on the OTC Bulletin Board our
securities will trade on the OTC Bulletin Board until a future time, if at all.
We may not now and it may never qualify for quotation on the OTC Bulletin Board.
TRANSFER AGENT
We have not retained a transfer agent to serve as transfer agent for shares of
our common stock. Until we engage such a transfer agent, we will be responsible
for all record-keeping and administrative functions in connection with the
shares of our common stock.
HOLDERS
As of July 11, 2011, the Company had 3,360,000 shares of our common stock issued
and outstanding held by 30 holders of record. The selling stockholders are
offering hereby up to 1,160,000 shares of common stock at fixed price of $0.10
per share.
DIVIDEND POLICY
We have not declared or paid dividends on our common stock since our formation,
and we do not anticipate paying dividends in the foreseeable future. Declaration
or payment of dividends, if any, in the future, will be at the discretion of our
Board of Directors and will depend on our then current financial condition,
results of operations, capital requirements and other factors deemed relevant by
the Board of Directors. There are no contractual restrictions on our ability to
declare or pay dividends. See the Risk Factor entitled " BECAUSE WE DO NOT
INTEND TO PAY ANY CASH DIVIDENDS ON OUR COMMON STOCK, OUR STOCKHOLDERS WILL NOT
BE ABLE TO RECEIVE A RETURN ON THEIR SHARES UNLESS THEY SELL THEM."
SECURITIES AUTHORIZED UNDER EQUITY COMPENSATION PLANS
We have no equity compensation or stock option plans. We may in the future adopt
a stock option plan as our mineral exploration activities progress.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Certain statements contained in this prospectus, including statements regarding
the anticipated development and expansion of our business, our intent, belief or
current expectations, primarily with respect to the future operating performance
of the Company and the products we expect to offer and other statements
contained herein regarding matters that are not historical facts, are
"forward-looking" statements. Future filings with the Securities and Exchange
Commission, future press releases and future oral or written statements made by
us or with our approval, which are not statements of historical fact, may
contain forward-looking statements, because such statements include risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements.
All forward-looking statements speak only as of the date on which they are made.
We undertake no obligation to update such statements to reflect events that
occur or circumstances that exist after the date on which they are made.
PLAN OF OPERATION
Our plan of operation for the twelve months following the date of this
prospectus is to complete the first and second of the three phases of the
exploration program on our prospects. In addition to the $210,508 we anticipate
spending for the first two phases of the exploration program as outlined below,
we anticipate spending an additional $12,508 on general and administration
23
expenses including fees payable in connection with the filing of our
registration statement and complying with reporting obligations, and general
administrative costs. Total expenditures over the next 12 months are therefore
expected to be approximately $223,016. We will experience a shortage of funds
prior to funding and we may utilize funds from our president, however they have
no formal commitment, arrangement or legal obligation to advance or loan funds
to the company.
Phase 1
* Collection, purchase and collation of all relevant geological,
geophysical and mining data available;
* Re-interpretation of available geophysics to determine location of
possible mineralized shears and faults; and
* Field mapping and rock chip sampling of the license.
Phase 2
* Soil sampling of any significant areas highlighted in Phase 1; and
* Ground geophysics of targets generated by the re-interpretation of
available geophysical data.
Phase 3
* Drilling of any significant targets generated during Phase 2 work.
Proposed Work Amount Cost ($AUD)
------------- ------ -----------
PHASE 1
Data Collection $ 5,000.00
Re-Interpretation of Geophysical Data $ 10,000.00
Field Mapping 5 days @ $500 $ 2,500.00
Sampling 50 samples @ $30 $ 1,500.00
Travel & Accommodation 5 days @ $300 $ 1,500.00
Report 1.5 days @ $1,000 $ 1,500.00
Administration 15 % of costs $ 3,300.00
$ 25,300.00
PHASE 2
Soil Sampling 5 days @ $750 $ 3,750.00
Assaying 150 samples @ $20 $ 3,000.00
Ground Geophysics $ 65,000.00
Report 1.5 days @ $1,000 $ 1,500.00
Administration 15 % of costs $ 10,987.50
$ 84,237.50
PHASE 2
Drilling 1,000 meters @ $50 $ 50,000.00
Assaying 1,000 meters @ $30 $ 30,000.00
Supervision 7 days @ $600 $ 4,200.00
Travel & Accommodation 7 days @ $300 $ 2,100.00
Report 1.5 days @ $1,000 $ 1,500.00
Administration 15 % of costs $ 13,170.00
$100,970.00
TOTAL $210,507.50
We plan to commence Phase 1 of the exploration program on the prospects in the
fall of 2011. We expect this phase to take 7 days to complete and an additional
one to two months for the geologist to prepare his report.
24
The above program costs are management's estimates based upon the
recommendations of the consulting geologist's report and the actual project
costs may exceed our estimates. To date, we have not commenced exploration.
Following Phase 1 of the exploration program, if it proves successful in
identifying mineral deposits, we intend to proceed with Phase 2 of our
exploration program. Management will rely on the consulting geologist's
recommendations in making a decision to proceed with Phase 2. Subject to the
results of Phase 1, we anticipate commencing with Phase 2 in the winter of 2012.
We will require additional funding to commence with Phase 1 work on the
prospects; we have no current plans on how to raise the additional funding. We
cannot provide any assurance that we will be able to raise sufficient funds to
proceed with any work after the first phase of the exploration program.
We are a party to a Mineral Property Option Agreement whereby we have the right
to acquire a 100% interest in Exploration License E 80/3757 located in the
Murchison Mineral field Halls Creek Shire, in the Kimberly region of Western
Australia and known as the Halls Creek Property. It is only under this option
agreement that we potentially have any right to explore for mineralized
material. This option agreement requires us to pay an exercise price of
AUD$200,000 (approximately US$208,840) cash, in order for us to have the right
to explore for mineralized materials in the area covered by Exploration License
E 80/3757. Our option expires July 6, 2012.
If we fail to pay the exercise price, we will not have the right to conduct
exploration activities at all. Currently, we do not have sufficient funds to pay
the exercise price. We cannot provide investors with any assurance that we will
be able to raise sufficient funds pay the $208,840 exercise price, and we have
no current plans on how to raise the additional funding.
In terms of exploratory work we will be able to conduct before we exercise the
option, we anticipate completing Phases 1 and 2 of our Plan of Operation,
subject to our ability to raise sufficient funds to complete Phases 1 and 2, and
depending on the results of Phases 1 and 2, commencement of drilling of any
significant targets generated during Phase 2 work.
BUDGET
ACCOUNTING AND AUDIT PLAN
We intend to continue to have our Chief Financial Officer prepare our quarterly
and annual financial statements and have these financial statements reviewed or
audited by our independent auditor. Our independent auditor is expected to
charge us approximately $1,500 to review our quarterly financial statements and
approximately $3,000 to audit our annual financial statements. In the next
twelve months, we anticipate spending approximately $11,000 to pay for our
accounting and audit requirements.
SEC FILING PLAN
We intend to become a reporting company in 2011 after our registration statement
on Form S-1 is declared effective. This means that we will file documents with
the United States Securities and Exchange Commission on a quarterly basis.
We expect to incur filing costs of approximately $1,000 per quarter to support
our quarterly and annual filings. In the next twelve months, we anticipate
spending approximately $10,000 for legal costs in connection with our three
quarterly filings, annual filing, and costs associated with filing the
registration statement to register our common stock.
RESULTS OF OPERATIONS
We have had no operating revenues since our inception on May 7, 2010, through
February 28, 2011. Our activities have been financed from the proceeds of share
subscriptions. From our inception to February 28, 2011 we have raised a total of
25
$31,000 from private offerings of our common stock. All such private offerings
were made in reliance on the exemption from registration afforded by Rule
903(b)(3) of Regulation S, promulgated pursuant to the Securities Act of 1933,
as amended. The Company made all offers and sales offshore of the US, to non-US
persons, with no directed selling efforts in the US, and where offering
restrictions were implemented.
For the period from inception to February 28, 2011, we incurred total expenses
of $9,782, consisting of impairment of mining costs of $7,703, professional fees
of $1,687, general and administrative expenses of $363 and a foreign currency
gain of $29.
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 2011, we had a cash balance of $21,737. At July 11, we had a
cash balance of $20,564. Our expenditures over the next 12 months are expected
to be approximately $431,856, consisting of approximately $223,016 for the work
program under our plan of operation, and approximately $208,840 for the exercise
of our option to acquire a 100% interest in Exploration License E 80/3757 prior
to July 6, 2012.
We must raise approximately $411,292, to complete our plan of operation for the
next 12 months. Additional funding will likely come from equity financing from
the sale of our common stock, if we are able to sell such stock. If we are
successful in completing an equity financing, existing shareholders will
experience dilution of their interest in our Company. We do not have any
financing arranged and we cannot provide investors with any assurance that we
will be able to raise sufficient funding from the sale of our common stock to
fund our exploration activities. In the absence of such financing, our business
will fail.
There are no assurances that we will be able to achieve further sales of our
common stock or any other form of additional financing. If we are unable to
achieve the financing necessary to continue our plan of operations, then we will
not be able to continue our exploration of the Halls Creek Property and our
business will fail.
GOING CONCERN CONSIDERATION
We have not generated any revenues since inception. As of February 28, 2011, the
Company had accumulated losses of $9,782. Our independent auditors included an
explanatory paragraph in their report on the accompanying financial statements
regarding concerns about our ability to continue as a going concern. Our
financial statements contain additional note disclosures describing the
circumstances that lead to this disclosure by our independent auditors. Our
financial statements do not include any adjustments related to the
recoverability or classification of asset-carrying amounts or the amounts and
classifications of liabilities that may result should the Company be unable to
continue as a going concern.
OFF BALANCE SHEET ARRANGEMENTS.
We have no off-balance sheet arrangements including arrangements that would
affect our liquidity, capital resources, market risk support and credit risk
support or other benefits.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States of America and are
presented in US dollars. The Company's year end is February 28.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
26
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally accepted
accounting principles 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 period. Actual results
could differ from those estimates.
FOREIGN CURRENCY TRANSLATION
The financial statements are presented in United States dollars. In accordance
with ASC 830, "Foreign Currency Matters", foreign denominated monetary assets
and liabilities are translated into their United States dollar equivalents using
foreign exchange rates which prevailed at the balance sheet date. Revenue and
expenses are translated at average rates of exchange during the year. Gains or
losses resulting from foreign currency transactions are included in results of
operations.
EXPLORATION STAGE COMPANY
The Company complies with Financial Accounting Standards Codification ("ASC")
915 and Securities and Exchange Commission Act Guide 7 for its characterization
of the Company as an exploration stage enterprise.
MINERAL INTERESTS
The Company's management has considered the conditions outlined in ASC 360,
"Property, Plant and Equipment," and has concluded an impairment of $7,703
mining claim acquisition costs on the Property has taken place for the year
ended February 28, 2011. Mineral property acquisition costs are capitalized in
accordance with ASC 930. Mineral property exploration costs 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,
the costs incurred to develop such property are capitalized. To date the Company
has not established any reserves on its mineral properties
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets for indicators of impairment whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable. If the review indicates that the carrying amount of the asset may
not be recoverable, the potential impairment is measured based on a projected
discounted cash flow method using a discount rate that is considered to be
commensurate with the risk inherent in the Company's current business model. For
purposes of recognition and measurement of an impairment loss, a long-lived
asset is grouped with other assets at the lowest level for which identifiable
cash flows are largely independent of the cash flows of other assets.
FAIR VALUE OF FINANCIAL INSTRUMENT
The Company's financial instruments consisted of cash and accounts payable.
Unless otherwise noted, it is management's opinion the Company is not exposed to
significant interest, currency or credit risks arising from these financial
instruments. Because of the short maturity of such assets and liabilities the
fair value of these financial instruments approximate their carrying values,
unless otherwise noted.
INCOME TAXES
The Company follows the accrual method of accounting for income taxes. Under
this method, deferred income tax assets and liabilities are recognized for the
estimated tax consequences attributable to differences between the financial
statement carrying values and their respective income tax basis (temporary
differences). The effect on the deferred income tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. At February 28, 2011, a full deferred tax asset valuation
allowance has been provided and no deferred tax asset has been recorded.
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
The Company computes net income (loss) per share in accordance with ASC 260,
"Earnings per Share" which 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 income (loss) available to common shareholders
(numerator) by the weighted average number of common shares outstanding
(denominator) during the period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the period including stock options,
27
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 common shares if their effect is anti-dilutive.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2010, the FASB issued ASU No. 2010-09, which is included in the
Codification under ASC 855, SUBSEQUENT EVENTS ("ASC 855"). This update removes
the requirement for an SEC filer to disclose the date through which subsequent
events have been evaluated and become effective for interim and annual reporting
periods beginning January 1, 2010. The adoption of this guidance did not have a
material impact on the Company's financial statements.
In January 2010, the FASB issued ASU No. 2010-06, which is included in the
Codification under ASC 820, FAIR VALUE MEASUREMENTS AND DISCLOSURES ("ASC 820").
This update requires the disclosure of transfers between the observable input
categories and activity in the unobservable input category for fair value
measurements. The guidance also requires disclosures about the inputs and
valuation techniques used to measure fair value and become effective for interim
and annual reporting periods beginning January 1, 2010. The adoption of this
guidance did not have a material impact on the Company's financial statements.
The Company does not expect the adoption of recently issued accounting
pronouncements to have any significant impact on the Company's results of
operations, financial position or cash flow.
As new accounting pronouncements are issued, the Company will adopt those that
are applicable under the circumstances.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The Directors and Officers currently serving our Company is as follows:
Name Age Positions and Offices
---- --- ---------------------
Filomena Gencarelli (1) 49 President, Chief Executive Officer, Secretary,
Treasurer and Director
(1) c/o Penola Inc., 492 Gilbert Road, West Preston, Victoria 3072.
The director named above will serve until the next annual meeting of the
stockholders or until her respective resignation or removal from office.
Thereafter, directors are anticipated to be elected for one-year terms at the
annual stockholders' meeting. Officers will hold their positions at the pleasure
of the Board of Directors, absent any employment agreement, of which none
currently exists or is contemplated.
FILOMENA GENCARELLI, AGE 52
Ms. Gencarelli has served as our President, Chief Executive Officer, Secretary
and sole Director since our formation on May 7, 2010. Since 2001, Ms. Gencarelli
has owned and operated Illura Corporate Services Limited, a company which
provides corporate administrative and commercial services to various companies.
As Principal of Illura, Ms. Gencarelli has been instrumental in working with
local government and staff to restructure and multi-skill a number of private
companies as well as providing advisory services for the structuring of mining
resource companies. Ms. Gencarelli has had over 30 years experience in
implementing motivational inductions and training programs, administration
management and community development projects for companies. Ms. Gencarelli is a
graduate of St Josephs Convent, Bunbury, Western Australia, where she earned a
Leaving Certificate (tertiary entrance exam) 1965. In 1966, Ms. Gencarelli
graduated from Bunbury Technical College, Western Australia, where she earned a
Diploma in Administration and Business Practices in 1966.
Ms. Gencarelli's background providing advisory services for the structuring of
mining resource companies and what we believe to be her an excellent
understanding of commercial imperatives have led to our conclusion that she
should be serving as a member of our Board of Directors in light of our business
and structure.
28
DIRECTOR INDEPENDENCE
Our board of directors is currently composed of one member, whom does not
qualify as an independent director in accordance with the published listing
requirements of the NASDAQ Global Market (the Company has no plans to list on
the NASDAQ Global Market). The NASDAQ independence definition includes a series
of objective tests, such as that the director is not, and has not been for at
least three years, one of our employees and that neither the director, nor any
of her family members has engaged in various types of business dealings with us.
In addition, our board of directors has not made a subjective determination as
to our director that no relationships exist which, in the opinion of our board
of directors, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director, though such subjective
determination is required by the NASDAQ rules. Had our board of directors made
these determinations, our board of directors would have reviewed and discussed
information provided by our director and us with regard to our director's
business and personal activities and relationships as they may relate to us and
our management.
SIGNIFICANT EMPLOYEES AND CONSULTANTS
We currently have no employees, other than our sole officer and director,
Filomena Gencarelli.
CONFLICTS OF INTEREST
Since we do not have an audit or compensation committee comprised of independent
directors, the functions that would have been performed by such committees are
performed by our director. The Board of Directors has not established an audit
committee and does not have an audit committee financial expert, nor has the
Board established a nominating committee. The Board is of the opinion that such
committees are not necessary since the Company is an early exploration stage
company and has only one director, and to date, such director has been
performing the functions of such committees. Thus, there is a potential conflict
of interest in that our director and officer has the authority to determine
issues concerning management compensation, nominations, and audit issues that
may affect management decisions.
Other than as described above, we are not aware of any other conflicts of
interest of our executive officer and director.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
There are no legal proceedings that have occurred since our incorporation
concerning our director, or control persons which involved a criminal
conviction, a criminal proceeding, an administrative or civil proceeding
limiting one's participation in the securities or banking industries, or a
finding of securities or commodities law violations.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below summarizes all compensation awarded to, earned by, or paid to
our Officers for all services rendered in all capacities to us for the fiscal
periods indicated.
Name and Non-Equity Nonqualified
Principal Stock Option Incentive Plan Deferred All Other
Position Year Salary($) Bonus($) Awards($) Awards($) Compensation($) Compensation($) Compensation($) Total($)
-------- ---- --------- -------- --------- --------- --------------- --------------- --------------- --------
Filomena 2011 0 0 0 0 0 0 0 0
Gencarelli(1) 2010 0 0 0 0 0 0 0 0
----------
(1) President and Chief Executive Officer, Secretary, Treasurer and Director.
29
Our director has not received monetary compensation since our inception to the
date of this prospectus. We currently do not pay any compensation to our
director serving on our board of directors.
STOCK OPTION GRANTS
We have not granted any stock options to our executive officer since our
inception. Upon the further development of our business, we will likely grant
options to directors and officers consistent with industry standards for junior
mineral exploration companies.
EMPLOYMENT AGREEMENTS
The Company is not a party to any employment agreement and has no compensation
agreement with its sole officer and director, Filomena Gencarelli.
DIRECTOR COMPENSATION
The following table sets forth director compensation as of July 11, 2011:
Fees Nonqualified
Earned Non-Equity Deferred
Paid in Stock Option Incentive Plan Compensation All Other
Name Cash($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Total($)
---- ------- --------- --------- --------------- ----------- --------------- --------
Filomena 0 0 0 0 0 0 0
Gencarelli
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists, as of July 11, 2011, the number of shares of common
stock of our Company that are beneficially owned by (i) each person or entity
known to our Company to be the beneficial owner of more than 5% of the
outstanding common stock; (ii) each officer and director of our Company; and
(iii) all officers and directors as a group. Information relating to beneficial
ownership of common stock by our principal shareholders and management is based
upon information furnished by each person using "beneficial ownership" concepts
under the rules of the Securities and Exchange Commission. Under these rules, a
person is deemed to be a beneficial owner of a security if that person has or
shares voting power, which includes the power to vote or direct the voting of
the security, or investment power, which includes the power to vote or direct
the voting of the security. The person is also deemed to be a beneficial owner
of any security of which that person has a right to acquire beneficial ownership
within 60 days. Under the Securities and Exchange Commission rules, more than
one person may be deemed to be a beneficial owner of the same securities, and a
person may be deemed to be a beneficial owner of securities as to which he or
she may not have any pecuniary beneficial interest. Except as noted below, each
person has sole voting and investment power.
The percentages below are calculated based on 3,160,000 shares of our common
stock issued and outstanding as of July 11, 2011. We do not have any outstanding
warrant, options or other securities exercisable for or convertible into shares
of our common stock.
Name and Address of Number of Shares Percent of
Title of Class Beneficial Owner Owned Beneficially Class Owned
-------------- ---------------- ------------------ -----------
Common Stock: Mr. Filomena Gencarelli, 2,000,000 63.2%
President, Chief Executive
Officer, Secretary,
Treasurer and Director (1)
All executive officers and
directors as a group 2,000,000 63.2%
----------
(1) c/o Penola Inc., 492 Gilbert Road, West Preston, Victoria 3072.
30
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 30, 2010, we issued 2,000,000 shares of common stock to our
director, at a purchase price of $0.001 per share, for aggregate proceeds of
$2,000.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our Bylaws provide to the fullest extent permitted by law that our directors or
officers, former directors and officers, and persons who act at our request as a
director or officer of a body corporate of which we are a shareholder or
creditor shall be indemnified by us. We believe that the indemnification
provisions in our By-laws are necessary to attract and retain qualified persons
as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the Company
pursuant to provisions of the State of Nevada, the Company has been informed
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Commission a Registration Statement on Form S-1, under
the Securities Act of 1933, as amended, with respect to the securities offered
by this prospectus. This prospectus, which forms a part of the registration
statement, does not contain all the information set forth in the registration
statement, as permitted by the rules and regulations of the Commission. For
further information with respect to us and the securities offered by this
prospectus, reference is made to the registration statement. We do not file
reports with the Securities and Exchange Commission, and we will not otherwise
be subject to the proxy rules. The registration statement and other information
may be read and copied at the Commission's Public Reference Room at 100 F
Street, N.E., Washington, D.C. 20549. The public may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. The Commission maintains a web site at http://www.sec.gov that
contains reports and other information regarding issuers that file
electronically with the Commission.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
M&K CPAS, PLLC, is our registered independent auditor. There have not been any
changes in or disagreements with accountants on accounting and financial
disclosure or any other matter.
31
PENOLA INC.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm F-2
Financial Statements
Balance Sheet F-3
Statement of Operations F-4
Statement of Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Penola Inc. (An Exploration Stage Company)
We have audited the accompanying balance sheet of Penola Inc. (An Exploration
Stage Company) (the "Company") as of February 28, 2011 and the related statement
of operations, stockholders' equity and cash flows for the period from May 7,
2010 (inception) to February 28, 2011. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our 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
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Penola Inc. (An Exploration
Stage Company) as of February 28, 2011 and the results of its operations and
cash flows for the period described above in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has not established a
source of revenues sufficient to cover its operating costs, and as such, has
incurred an operating loss since its inception. These matters raise substantial
doubt about the Company's ability to continue as a going concern. These
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that may result should the Company be unable to
continue as a going concern. See note 1 to the financial statements for further
information regarding this uncertainty.
/s/ M&K CPAS, PLLC
-----------------------------
www.mkacpas.com
Houston, Texas
July 13, 2011
F-2
PENOLA INC.
(An Exploration Stage Company)
BALANCE SHEET
February 28,
2011
--------
ASSETS
CURRENT
Cash $ 21,737
--------
TOTAL ASSETS $ 21,737
========
LIABILITIES
CURRENT
Due to related party (Note 5) $ 519
--------
TOTAL LIABILITIES 519
STOCKHOLDERS' EQUITY
Common stock
Authorized:
125,000,000 common shares with a par value of $0.001
Issued and outstanding:
3,160,000 common shares 3,160
Additional paid in capital 27,840
Deficit accumulated during the exploration stage (9,782)
--------
TOTAL STOCKHOLDERS' EQUITY 21,218
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 21,737
========
Contingency (Note 1)
The accompanying notes are an integral part of these financial statements
F-3
PENOLA INC.
(An Exploration Stage Company)
STATEMENT OF OPERATIONS
May 7, 2010
(Inception) to
February 28,
2011
----------
EXPENSES
Office and general $ 363
Professional fees 1,687
Impairment of mining costs 7,703
----------
9,753
----------
OTHER EXPENSE
Foreign currency gain 29
----------
NET LOSS $ 9,782
==========
LOSS PER SHARE - BASIC AND DILUTED $ (0.00)
==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING -
BASIC AND DILUTED 2,467,609
==========
The accompanying notes are an integral part of these financial statements
F-4
PENOLA INC.
(An Exploration Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MAY 7, 2010
(INCEPTION) TO FEBRUARY 28, 2011
Deficit
Common Stock Accumulated
--------------------- Additional During
Number of Paid in Exploration
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
Balance, May 7, 2010 -- $ -- $ -- $ -- $ --
Common stock issued for cash at
$0.001 per share 2,000,000 2,000 -- -- 2,000
Common stock issued for cash at
$0.025 per share 1,160,000 1,160 27,840 -- 29,000
Net Loss -- -- -- (9,782) (9,782)
--------- ------- -------- -------- --------
Balance, February 28, 2011 3,160,000 $ 3,160 $ 27,840 $ (9,782) $ 21,218
========= ======= ======== ======== ========
The accompanying notes are an integral part of these financial statements
F-5
PENOLA INC.
(An Exploration Stage Company)
STATEMENT OF CASH FLOWS
May 7, 2010
(Inception) to
February 28,
2011
--------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (9,782)
Impairment of mining costs 7,703
Adjustment for items not affecting cash:
Change in non-cash working capital items:
Accounts payable and accrued liabilities --
Due to related party 519
--------
NET CASH USED IN OPERATIONS (1,560)
--------
CASH FLOWS FROM INVESTING ACTIVITIES
Mineral property option (7,703)
--------
NET CASH USED IN INVESTING ACTIVITIES (7,703)
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital stock issued 31,000
--------
NET CASH PROVIDED BY FINANCING ACTIVITIES 31,000
--------
INCREASE IN CASH 21,737
CASH, BEGINNING --
--------
CASH, ENDING $ 21,737
========
SUPPLEMENTARY CASH FLOW INFORMATION
Cash paid for:
Interest $ --
Income taxes $ --
========
The accompanying notes are an integral part of these financial statements
F-6
PENOLA INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
February 28, 2011
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Penola Inc. (the "Company") was incorporated in the State of Nevada on May 7,
2010, and its year-end is February 28. The Company is an exploration stage
company and is currently seeking new business opportunities.
GOING CONCERN
These financial statements have been prepared on a going concern basis. The
Company has incurred losses since inception resulting in an accumulated deficit
of $9,782 at February 28, 2011 and further losses are anticipated in the
development of its business raising substantial doubt about the Company's
ability to continue as a going concern. Its ability to continue as a going
concern is dependent upon the ability of the Company to generate profitable
operations in the future and/or to obtain the necessary financing to meet its
obligations and repay its liabilities arising from normal business operations
when they come due. Management has plans to seek additional capital through a
private placement of its common stock or further director loans as needed. These
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts of and
classification of liabilities that might be necessary in the event the Company
cannot continue.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States of America and are
presented in US dollars. The Company's year end is February 28.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally accepted
accounting principles 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 period. Actual results
could differ from those estimates.
FOREIGN CURRENCY TRANSLATION
The financial statements are presented in United States dollars. In accordance
with ASC 830, "Foreign Currency Matters", foreign denominated monetary assets
and liabilities are translated into their United States dollar equivalents using
foreign exchange rates which prevailed at the balance sheet date. Revenue and
expenses are translated at average rates of exchange during the year. Gains or
losses resulting from foreign currency transactions are included in results of
operations.
EXPLORATION STAGE COMPANY
The Company complies with Financial Accounting Standards Codification ("ASC")
915 and Securities and Exchange Commission Act Guide 7 for its characterization
of the Company as an exploration stage enterprise.
MINERAL INTERESTS
The Company's management has considered the conditions outlined in ASC 360,
"Property, Plant and Equipment," and has concluded an impairment of $7,703
mining claim acquisition costs on the Property has taken place for the year
ended February 28, 2011. Mineral property acquisition costs are capitalized in
accordance with ASC 930. Mineral property exploration costs are expensed as
F-7
PENOLA INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
February 28, 2011
incurred. When it has been determined that a mineral property can be
economically developed as a result of establishing proven and probable reserves,
the costs incurred to develop such property are capitalized. To date the Company
has not established any reserves on its mineral properties
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets for indicators of impairment whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable. If the review indicates that the carrying amount of the asset may
not be recoverable, the potential impairment is measured based on a projected
discounted cash flow method using a discount rate that is considered to be
commensurate with the risk inherent in the Company's current business model. For
purposes of recognition and measurement of an impairment loss, a long-lived
asset is grouped with other assets at the lowest level for which identifiable
cash flows are largely independent of the cash flows of other assets.
FAIR VALUE OF FINANCIAL INSTRUMENT
The Company's financial instruments consisted of cash and accounts payable.
Unless otherwise noted, it is management's opinion the Company is not exposed to
significant interest, currency or credit risks arising from these financial
instruments. Because of the short maturity of such assets and liabilities the
fair value of these financial instruments approximate their carrying values,
unless otherwise noted.
INCOME TAXES
The Company follows the accrual method of accounting for income taxes. Under
this method, deferred income tax assets and liabilities are recognized for the
estimated tax consequences attributable to differences between the financial
statement carrying values and their respective income tax basis (temporary
differences). The effect on the deferred income tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. At February 28, 2011, a full deferred tax asset valuation
allowance has been provided and no deferred tax asset has been recorded.
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
The Company computes net income (loss) per share in accordance with ASC 260,
"Earnings per Share" which 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 income (loss) available to common shareholders
(numerator) by the weighted average number of common shares outstanding
(denominator) during the period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the period including stock options,
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 common shares if their effect is anti-dilutive.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2010, the FASB issued ASU No. 2010-09, which is included in the
Codification under ASC 855, SUBSEQUENT EVENTS ("ASC 855"). This update removes
the requirement for an SEC filer to disclose the date through which subsequent
events have been evaluated and become effective for interim and annual reporting
periods beginning January 1, 2010. The adoption of this guidance did not have a
material impact on the Company's financial statements.
F-8
PENOLA INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
February 28, 2011
In January 2010, the FASB issued ASU No. 2010-06, which is included in the
Codification under ASC 820, FAIR VALUE MEASUREMENTS AND DISCLOSURES ("ASC 820").
This update requires the disclosure of transfers between the observable input
categories and activity in the unobservable input category for fair value
measurements. The guidance also requires disclosures about the inputs and
valuation techniques used to measure fair value and become effective for interim
and annual reporting periods beginning January 1, 2010. The adoption of this
guidance did not have a material impact on the Company's financial statements.
The Company does not expect the adoption of recently issued accounting
pronouncements to have any significant impact on the Company's results of
operations, financial position or cash flow.
As new accounting pronouncements are issued, the Company will adopt those that
are applicable under the circumstances.
NOTE 3 - MINERAL PROPERTY
On July 6, 2010 the Company entered into an Option Agreement to acquire a 100%
undivided legal, beneficial and register-able interest in an Exploration License
E 80/3757 located in Halls Creek Shire in Western Australia. The option period
is for two years from the effective date of the Agreement. Initial cash
consideration is AU$7,000 (paid) upon signing the agreement. The exercise price
of the option is AU$200,000 cash at the time the notice of exercise of option is
sent to the Owner.
At February 28, 2011, the accumulated costs totalled $7,703. Management has
concluded these costs to be an impairment due to uncertainty in the ability of
the Company to exercise the option underlying the Option Agreement.
NOTE 4 - RELATED PARTY TRANSACTIONS
During the period, the Company issued 2,000,000 common shares at $0.001 per
share to the Company's President for cash proceeds of $2,000. At February 28,
2011 there was a balance due to the related party of $519. The balance due is
payable on demand, has no term and carries no interest.
NOTE 5 - INCOME TAXES
As of February 28, 2011, the Company has estimated tax loss carry forwards for
tax purpose of approximately $2,079, which expire by 2030. These amounts may be
applied against future taxable income. Future tax benefits which may arise as a
result of theses losses have not been recognized in these financial statements,
as their realization has not been determined to be more likely than not to
occur.
The actual income tax provisions differ from the expected amounts calculated by
applying the statutory income tax rate to the Company's loss before income
taxes. The components of these differences are as follows:
Loss before income tax $ 2,079
Statutory tax rate 34%
Expected recovery of income taxes at standard rates 707
Change in valuation allowance (707)
-------
Income tax provision $ --
=======
F-9
PENOLA INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
February 28, 2011
Components of deferred tax asset:
Non-capital tax loss carry forwards $ 707
Less: valuation allowance (707)
-------
Net deferred tax asset $ --
=======
The Company has not filed income tax returns since inception in the United
States. Both taxing authorities prescribe penalties for failing to file certain
tax returns and supplemental disclosure. Upon filing there could be penalties an
interest assessed. Such penalties vary by jurisdiction and by assessing
practices and authorities. As the Company has incurred losses since inception
there would be no known or anticipated exposure to penalties for income tax
liability. However, certain jurisdictions may assess penalties for failing to
file returns and other disclosures and for failing to file other supplemental
information associated with foreign ownership, debt and equity position.
Inherent uncertainties arise over tax positions taken with respect to transfer
pricing, related party transactions, tax credits, tax based incentives and stock
based transactions. Management has considered the likelihood and significance of
possible penalties associated with its current and intended filing positions and
has determined, based on their assessment, that such penalties, if any, would
not be expected to be material.
NOTE 6 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events as of July 13, 2011 for potential
recognition and disclosure in the financial statements and has determined there
are none to be disclosed. This date represents the date the financial statements
are issued.
F-10
[OUTSIDE BACK COVER PAGE]
PROSPECTUS
PENOLA INC.
1,160,000 SHARES OF
COMMON STOCK
TO BE SOLD BY CURRENT SHAREHOLDERS
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or a
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein nor the affairs of the Issuer
have not changed since the date hereof.
Until __________, 2011 (90 days after the date of this prospectus), all dealers
that effect transactions in these shares of common stock may be required to
deliver a prospectus. This is in addition to the dealer's obligation to deliver
a prospectus when acting as an underwriter and with respect to their unsold
allotments or subscriptions.
THE DATE OF THIS PROSPECTUS IS ___________, 2011
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with the
issuance and distribution of the securities being registered hereby. All such
expenses will be borne by the Company; none shall be borne by any selling
security holders.
Amount
Item (US$)
---- ----------
SEC Registration Fee $ 13.47
Transfer Agent Fees 1,000.00
Legal Fees 5,000.00
Accounting Fees 5,000.00
Printing Costs 500.00
Miscellaneous 1,000.00
----------
TOTAL $12,513.47
==========
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws and Articles of Incorporation provide that we shall, to the
full extent permitted by the Nevada General Business Corporation Law, as amended
from time to time (the "Nevada Corporate Law"), indemnify all of our directors
and officers. Section 78.7502 of the Nevada Corporate Law provides in part that
a corporation shall have the power to 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 (other than an action by or in the right of the
corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of another corporation or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner 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 her conduct was unlawful.
Similar indemnity is authorized for such persons against expenses (including
attorneys' fees) actually and reasonably incurred in defense or settlement of
any threatened, pending or completed action or suit by or in the right of the
corporation, if such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and
provided further that (unless a court of competent jurisdiction otherwise
provides) such person shall not have been adjudged liable to the corporation.
Any such indemnification may be made only as authorized in each specific case
upon a determination by the stockholders or disinterested directors that
indemnification is proper because the indemnitee has met the applicable standard
of conduct. Under our Bylaws and Articles of Incorporation, the indemnitee is
presumed to be entitled to indemnification and we have the burden of proof to
overcome that presumption. Where an officer or a director is successful on the
merits or otherwise in the defense of any action referred to above, we must
indemnify him against the expenses which such officer or director actually or
reasonably incurred. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 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 Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
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 Act and will
be governed by the final adjudication of such issue.
II-1
RECENT SALES OF UNREGISTERED SECURITIES
Within the past two years we have issued and sold the following securities
without registration.
On September 30, 2010, we issued 2,000,000 shares of common stock to our sole
officer and director, at a purchase price of $0.001 per share, for aggregate
proceeds of $2,000. The offering was made to a non-U.S. person, offshore of the
U.S., with no directed selling efforts in the U.S., where offering restrictions
were implemented in a transaction pursuant to the exclusion from registration
provided by Rule 903(b)(3) of Regulation S of the Securities Act.
Between October 2010 and January 2011, we accepted subscriptions for 1,160,000
shares of our common stock from 29 investors. The shares of common stock were
sold at a purchase price of $0.025 per share, amounting in the aggregate to
$29,000. The offering was made to non-U.S. persons, offshore of the U.S., with
no directed selling efforts in the U.S., where offering restrictions were
implemented in transactions pursuant to the exclusion from registration provided
by Rule 903(b)(3) of Regulation S of the Securities Act.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed as part of this registration statement:
Exhibit Description
------- -----------
3.1 Articles of Incorporation of Registrant
3.2 Bylaws of the Registrant
5.1 Opinion of Law Offices of Thomas E. Puzzo, PLLC, regarding the
legality of the securities being registered
10.1 Mineral Property Option Agreement, dated July 6, 2010, by and
between Registrant and George Lee
23.1 Consent of Law Offices of Thomas E. Puzzo, PLLC (included in
Exhibit 5.1)
23.2 Consent of M&K CPAS, PLLC
23.3 Consent of Gregory Curnow *
----------
* To be provided by amendment.
UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales of securities
are being made, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(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 Commission pursuant to Rule 424(b)
(ss.230.424(b) of this chapter) if, in the aggregate, the changes in
volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(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;
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(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such 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.
(4) That, for the purpose of determining liability under the Securities Act
of 1933 to any purchaser:
(i) If the registrant is subject to Rule 430C, 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.
(5) That, for the purpose of determining liability of the registrant under
the Securities Act of 1933 to any purchaser in the initial distribution of the
securities: The undersigned registrant undertakes that in a primary offering of
securities of the undersigned 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 undersigned 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 undersigned 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 undersigned registrant or used or referred to by the
undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the
offering containing material information about the undersigned
registrant or our securities provided by or on behalf of the
undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the
undersigned registrant to the purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to our directors, officers and controlling
persons pursuant to the provisions above, or otherwise, we have 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 us of expenses incurred or paid by one of our directors,
officers, or controlling persons in the successful defense of any action, suit
or proceeding, is asserted by one of our directors, officers, or controlling
persons in connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification is against public policy as expressed in the Securities Act, and
we will be governed by the final adjudication of such issue.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-1 and has authorized this registration
statement to be signed on its behalf by the undersigned, in the West Preston,
Victoria, Australia, on the 13th day of July, 2011.
PENOLA INC.
(Registrant)
By: /s/ Filomena Gencarelli
----------------------------------------------
Name: Filomena Gencarelli
Title: President and Chief Executive Officer
(Principal Executive Officer and Principal
Financial and Accounting Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Filomena Gencarelli, as her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in her name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments) to this Registration
Statement on Form S-1 of Penola Inc., and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, grant unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the foregoing, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or her substitutes, may lawfully do or cause to be
done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Signature Title Date
--------- ----- ----
/s/ Filomena Gencarelli President and Chief Executive Officer, July 13, 2011
---------------------------------- Secretary, Treasurer and Director
Filomena Gencarelli (Principal Executive Officer and Principal
Financial and Accounting Officer)
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EXHIBIT INDEX
Exhibit Description
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3.1 Articles of Incorporation of Registrant
3.2 Bylaws of the Registrant
5.1 Opinion of Law Offices of Thomas E. Puzzo, PLLC, regarding the
legality of the securities being registered
10.1 Mineral Property Option Agreement, dated July 6, 2010, by and
between Registrant and George Lee
23.1 Consent of Law Offices of Thomas E. Puzzo, PLLC (included in
Exhibit 5.1)
23.2 Consent of M&K CPAS, PLLC
23.3 Consent of Gregory Curnow *
----------
* To be provided by amendment.