U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Mark One
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended January 31, 2013
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to _____________
FREEDOM PETROLEUM, INC.
(Name of registrant in its charter)
Nevada 45-5440446
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
6025 South Quebec Street
Suite 100, Centennial, Co, 80111
1-800-493-0740
Indicate by checkmark whether the issuer: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No[ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-1 (232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files) Yes [X] No[ ]
Indicate by check mark whether the registrant is a large accelerated filed, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by checkmark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Applicable Only to Issuer Involved in Bankruptcy Proceedings During the
Preceding Five Years. N/A
Indicate by checkmark whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act
of 1934 after the distribution of securities under a plan confirmed by a court.
Yes [ ] No[ ]
Applicable Only to Corporate Registrants
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the most practicable date:
Class Outstanding as of February 28, 2013
----- -----------------------------------
Common Stock, $0.001 52,182,000
FREEDOM PETROLEUM INC.
FORM 10-Q
Part I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements 3
Balance Sheets 3
Statements of Operations 4
Statement of Stockholders' Equity 5
Statements of Cash Flows 6
Notes to unaudited Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Item 4. Controls and Procedures 15
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 1A. Risk Factors 16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Mine Safety Disclosures 16
Item 5. Other Information 16
Item 6. Exhibits 16
2
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
FREEDOM PETROLEUM, INC.
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
JANUARY 31, 2013 and JULY 31, 2012 (unaudited)
January 31, July 31,
2013 2012
-------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 36,775 $ 24,230
OTHER ASSETS
Oil and Gas Properties, unproved 15,000 15,000
-------- --------
TOTAL ASSETS $ 51,775 $ 39,230
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts Payable $ 3,000 $ 19,650
Due to Related Parties 824 824
-------- --------
TOTAL LIABILITIES 3,824 20,474
-------- --------
STOCKHOLDERS' EQUITY
Common stock, par $0.0001, 120,000,000 shares authorized,
52,182,000 and 27,000,000 shares issued outstanding, respectively 5,218 2,700
Paid in capital 59,715 24,460
Deficit accumulated during the development stage (16,982) (8,404)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 47,951 18,756
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 51,775 $ 39,230
======== ========
The accompanying notes are an integral part of the financial statements.
3
FREEDOM PETROLEUM INC
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS (unaudited)
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2013 AND
THE PERIOD FROM JUNE 13, 2012 (DATE OF INCEPTION) TO JANUARY 31, 2012
Period From
June 13, 2012
For the Three For the Six (Inception)
Months Ending Months Ended Through
January 31, January 31, January 31,
2013 2013 2013
------------ ------------ ------------
GROSS REVENUES $ 0 $ 0 $ 0
OPERATING EXPENSES 5,223 8,578 16,982
------------ ------------ ------------
LOSS FROM OPERATIONS (5,223) (8,578) (16,982)
OTHER EXPENSES 0 0 0
------------ ------------ ------------
NET LOSS BEFORE INCOME TAXES (5,223) (8,578) (16,982)
PROVISION FOR INCOME TAXES 0 0
------------ ------------ ------------
NET LOSS $ (5,223) $ (8,578) $ (16,982)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 40,188,000 33,594,000
------------ ------------
NET LOSS PER SHARE $ (0.00) $ (0.00)
============ ============
The accompanying notes are an integral part of the financial statements.
4
FREEDOM PETROLEUM INC
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE PERIOD FROM JUNE 13, 2012 (DATE OF INCEPTION) TO JANUARY 31, 2013
Common Stock Additional
--------------------- Paid in Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
Inception, February 25, 2010 0 $ 0 $ 0 $ 0 $ 0
Common stock issued to founders
at $0.001 per share 27,000,000 2,700 24,460 -- 27,160
Net loss for the period ended
July 31, 2012 -- -- -- (8,404) (8,404)
---------- ------- -------- --------- --------
Balance July 31, 2012 27,000,000 2,700 24,460 (8,404) 18,756
Net loss for the period ended
January 31, 2013 -- -- -- (8,578) (8,578)
---------- ------- -------- --------- --------
Balance January 31, 2013 27,000,000 $ 5,218 $ 59,715 $ (16,982) $ 47,951
========== ======= ======== ========= ========
The accompanying notes are an integral part of these financial statements
5
FREEDOM PETROLEUM INC
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS (unaudited)
FOR THE SIX MONTHS ENDED JANUARY 31, 2013 AND THE PERIOD FROM JUNE 13, 2012
(DATE OF INCEPTION) TO JANUARY 31, 2013
Period From
Six Months June 13, 2012
Ended (Date of Inception) to
January 31, January 31,
2013 2013
-------- --------
Cash Flows from Operating Activities:
Net loss for the period $ (8,578) $(16,982)
Adjustments to Reconcile Net Loss to Net
Cash Used in Operating Activities:
Changes in Assets and Liabilities
Increase (decrease) in accounts payable (16,650) 3,000
Increase in due to related party 0 824
-------- --------
Net Cash Used in Operating Activities (25,228) (13,158)
-------- --------
Cash Flows from Investing Activities
Acquisition of unproved oil and gas properties -- (15,000)
-------- --------
Net Cash Used in Investing Activities -- (15,000)
-------- --------
Cash Flows from Financing Activities:
Proceeds from the sale of common stock 37,773 64,933
-------- --------
Net Cash Provided by Financing Activities 37,773 64,933
-------- --------
Net Increase in Cash and Cash Equivalents 12,545 36,775
Cash and Cash Equivalents - Beginning 24,230 0
-------- --------
Cash and Cash Equivalents - Ending $ 36,775 36,775
======== ========
Supplemental Cash Flow Information:
Cash paid for interest $ 0 $ 0
======== ========
Cash paid for income taxes $ 0 $ 0
======== ========
The accompanying notes are an integral part of the financial statements.
6
FREEDOM PETROLEUM, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2013
NOTE 1 - GENERAL ORGANIZATION AND BUSINESS
Freedom Petroleum, Inc. ("the Company") was incorporated under the laws of the
State of Nevada, U.S. on June 13, 2012. The Company is in the exploration stage
as defined under Accounting Standards Codification ("ASC 915") and it intends to
engage in the exploration and development of oil and gas properties.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
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 U.S. dollars. The Company's fiscal year end is July 31, 2012.
BASIS OF ACCOUNTING
The accompanying financial statements have been prepared using the accrual basis
of accounting in accordance with accounting principles generally accepted in the
United States of America and are presented in U.S. dollars. The Company is
currently an exploration stage enterprise. An exploration stage enterprise is
one in which planned principal operations have not commenced or if its
operations have commenced, there has been no significant revenues there from.
All losses accumulated since the inception of the business have been considered
as part of its exploration stage activities.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles of the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
The more significant areas requiring the use of estimates include asset
impairment, stock-based compensation, and future income tax amounts. Management
bases its estimates on historical experience and on other assumptions considered
to be reasonable under the circumstances. However, actual results may differ
from the estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in hand and cash in time deposits,
certificates of deposit and all highly liquid debt instruments with original
maturities of three months or less. The Company had $36,775 of cash at January
31, 2013.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts payable and
accrued expenses, and an amount due to a related party. The carrying amounts of
these financial instruments approximate fair value due either to length of
maturity or interest rates that approximate prevailing rates unless otherwise
disclosed in these financial statements.
REVENUE RECOGNITION
The Company has yet to realize revenues from operations and is still in the
exploration stage. The Company will recognize revenue when delivery of goods or
completion of services has occurred provided there is persuasive evidence of an
agreement, acceptance has been approved by its customers, the fee is fixed or
determinable based on the completion of stated terms and conditions, and
collection of any related receivable is reasonably assured.
7
FREEDOM PETROLEUM, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2013
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONTINUED)
OIL AND GAS PROPERTIES
The Company uses the full cost method of accounting for oil and natural gas
properties. Under this method, all acquisition, exploration and development
costs, including certain payroll, asset retirement costs, other internal costs,
and interest incurred for the purpose of finding oil and natural gas reserves,
are capitalized. Internal costs that are capitalized are directly attributable
to acquisition, exploration and development activities and do not include costs
related to production, general corporate overhead or similar activities. Costs
associated with production and general corporate activities are expensed in the
period incurred. Proceeds from the sale of oil and natural gas properties are
applied to reduce the capitalized costs of oil and natural gas properties unless
the sale would significantly alter the relationship between capitalized costs
and proved reserves, in which case a gain or loss is recognized.
Capitalized costs associated with impaired properties and capitalized costs
related to properties having proved reserves, plus the estimated future
development costs, and asset retirement costs under ASC 410 "Asset Retirement
and Environmental Obligations", are amortized using the unit-of-production
method based on proved reserves. Capitalized costs of oil and natural gas
properties, net of accumulated amortization and deferred income taxes, are
limited to the total of estimated future net cash flows from proved oil and
natural gas reserves, discounted at ten percent, plus the cost of unevaluated
properties.
There are many factors, including global events that may influence the
production, processing, marketing and price of oil and natural gas. A reduction
in the valuation of oil and natural gas properties resulting from declining
prices or production could adversely impact depletion rates and capitalized cost
limitations. Capitalized costs associated with properties that have not been
evaluated through drilling or seismic analysis are excluded from the
unit-of-production amortization. Exclusions are adjusted annually based on
drilling results and interpretative analysis.
Sales of oil and natural gas properties are accounted for as adjustments to the
net full cost pool with no gain or loss recognized, unless the adjustment would
significantly alter the relationship between capitalized costs and proved
reserves. If it is determined that the relationship is significantly altered,
the corresponding gain or loss will be recognized in the statements of
operations.
Costs of oil and gas properties are amortized using the units of production
method.
CEILING TEST: Under the full cost method of accounting, the net book value of
oil and gas properties, less related deferred income taxes, may not exceed a
calculated "ceiling". The ceiling limitation is the estimated after-tax future
net cash flows from proved oil and gas reserves, discounted at 10 percent per
annum and adjusted for cash flow hedges. Estimated future net cash flows exclude
future cash outflows associated with settling accrued asset retirement
obligations. The Company has adopted U.S. Securities and Exchange Commission
("SEC") Release 33-8995 and the amendments to ASC 932, "Extractive Industries -
Oil and Gas" (the Modernization Rules). Under the Modernization Rules, estimated
future net cash flows are calculated using end-of-period costs and an unweighted
arithmetic average of commodity prices in effect on the first day of each of the
previous 12 months, held flat for the life of production, except where prices
are defined by contractual arrangements.
Any excess of the net book value of proved oil and gas properties, less related
deferred income taxes, over the ceiling is charged to expense and reflected as
additional depletion, depreciation and amortization expense ("DD&A") in the
accompanying statement of operations. Such limitations are tested quarterly. As
of January 31, 2013, capitalized costs did not exceed the ceiling limitation,
and no write-down was indicated.
8
FREEDOM PETROLEUM, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2013
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONTINUED)
STOCK-BASED COMPENSATION
The Company accounts for employee stock-based compensation in accordance with
the guidance of FASB ASC Topic 718, COMPENSATION - STOCK COMPENSATION which
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the financial statements based on their fair
values. The fair value of the equity instrument is charged directly to
compensation expense and credited to additional paid-in capital over the period
during which services are rendered. There has been no stock-based compensation
issued to employees.
The Company follows ASC Topic 505-50, formerly EITF 96-18, "ACCOUNTING FOR
EQUITY INSTRUMENTS THAT ARE ISSUED TO OTHER THAN EMPLOYEES FOR ACQUIRING, OR IN
CONJUNCTION WITH SELLING GOODS AND SERVICES," for stock options and warrants
issued to consultants and other non-employees. In accordance with ASC Topic
505-50, these stock options and warrants issued as compensation for services
provided to the Company are accounted for based upon the fair value of the
services provided or the estimated fair market value of the option or warrant,
whichever can be more clearly determined. There has been no stock-based
compensation issued to non-employees.
INCOME TAXES
The Company provides for income taxes using an asset and liability approach.
Deferred tax assets and liabilities are recorded based on the differences
between the financial statement and tax bases of assets and liabilities and the
tax rates in effect currently. Deferred tax assets are reduced by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. No
provision for income taxes is included in the statement due to its immaterial
amount, net of the allowance account, based on the likelihood of the Company to
utilize the loss carry-forward.
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
Basic income (loss) per share is calculated by dividing the Company's net loss
applicable to common shareholders by the weighted average number of common
shares during the period. Diluted earnings per share is calculated by dividing
the Company's net income available to common shareholders by the diluted
weighted average number of shares outstanding during the year. The diluted
weighted average number of shares outstanding is the basic weighted number of
shares adjusted for any potentially dilutive debt or equity. There are no such
common stock equivalents outstanding as of January 31, 2013.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position or cash flow.
NOTE 3 - DUE TO RELATED PARTY
A related party loaned funds to the Company to pay certain expenses prior to the
opening of the Company's bank account. The loan is unsecured, non-interest
bearing, and has no specific terms of repayment. As of January 31, 2013 and July
31, 2012 the balance of this loan was $824.
9
FREEDOM PETROLEUM, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2013
NOTE 4 - OIL AND MINERAL LEASES
On July 23, 2012, the Company purchased a lease from an unrelated third party
consisting of approximately 624 net acres in Lewis and Clark County, Montana for
a total purchase price of $15,000. In addition, annual rental payments of $937
are due to the State of Montana starting June 5, 2013 through June 5, 2022.
Minimum annual rental payments total $8,434 for the nine-year term. The lease
can be extended after June 5, 2022 so long as oil and gas in paying quantities
are produced from the land. The Company has not incurred any exploration or
development costs in connection with this lease.
NOTE 5 - CAPITAL STOCK
The authorized capital of the Company is 100,000,000 common shares with a par
value of $0.0001 per share and 20,000,000 preferred shares with a par value of
$0.0001.
During the period ended July 31, 2012, the Company issued 27,000,000 shares of
common stock at a price of approximately $0.001 per share for total cash
proceeds of $27,160.
Between December 1, 2012 and January 31, 2013 the Company issued 25,182,000
shares of common stock at a price of $0.0015 per share for total cash proceeds
of $37,773.
There were 52,182,000 and 27,000,000 shares of common stock issued and
outstanding as of January 31, 2013 and July 31, 2012, respectively. There were
no shares of preferred stock issued and outstanding as of January 31, 2013 and
July 31, 2012.
NOTE 6 - INCOME TAXES
For the periods ended January 31, 2013, the Company has incurred a net loss and,
therefore, has no tax liability. The net deferred tax asset generated by the
loss carry-forward has been fully reserved. The cumulative net operating loss
carry-forward is approximately $16,982 at January 31, 2013 and will expire
beginning in the year 2032. The provision for Federal income tax consists of the
following for the periods ended January 31, 2013 and July 31, 2012:
Period Ended Year Ended
January 31, July 31,
2013 2012
-------- --------
Federal income tax benefit attributable to:
Current operations $ 1,897 $ 2,857
Less: valuation allowance (1,897) (2,857)
-------- --------
Net provision for Federal income taxes $ 0 $ 0
======== ========
January 31, July 31,
2013 2012
-------- --------
Deferred tax asset attributable to:
Net operating loss carryover $ 4,754 $ 2,857
Less: valuation allowance (4,754) (2,857)
-------- --------
Net deferred tax asset $ 0 $ 0
======== ========
Due to the change in ownership provisions of the Tax Reform Act of 1986, net
operating loss carry-forwards of $16,982 for Federal income tax reporting
purposes are subject to annual limitations. Should a change in ownership occur
net operating loss carry-forwards may be limited as to use in future years.
10
FREEDOM PETROLEUM, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2013
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company neither owns nor leases any real or personal property. An officer
has provided office services without charge. There is no obligation for the
officer to continue this arrangement. Such costs are immaterial to the financial
statements and accordingly are not reflected herein. The officers and directors
are involved in other business activities and most likely will become involved
in other business activities in the future.
NOTE 8 - ENVIRONMENTAL AND OTHER CONTINGENCIES
The Company's operations and earnings may be affected by various forms of
governmental action in the United States. Examples of such governmental action
include, but are by no means limited to: tax increases and retroactive tax
claims; royalty and revenue sharing increases; import and export controls; price
controls; currency controls; allocation of supplies of crude oil and petroleum
products and other goods; expropriation of property; restrictions and
preferences affecting the issuance of oil and gas or mineral leases;
restrictions on drilling and/or production; laws and regulations intended for
the promotion of safety and the protection and/or remediation of the
environment; governmental support for other forms of energy; and laws and
regulations affecting the Company's relationships with employees, suppliers,
customers, stockholders and others. Because governmental actions are often
motivated by political considerations and may be taken without full
consideration of their consequences, and may be taken in response to actions of
other governments, it is not practical to attempt to predict the likelihood of
such actions, the form the actions may take or the effect such actions may have
on the Company.
Companies in the oil and gas industry are subject to numerous federal, state,
and local regulations dealing with the environment. Violation of federal or
state environmental laws, regulations and permits can result in the imposition
of significant civil and criminal penalties, injunctions and construction bans
or delays. A discharge of hazardous substances into the environment could, to
the extent such event is not insured, subject the Company to substantial
expense, including both the cost to comply with applicable regulations and
claims by neighboring landowners and other third parties for any personal injury
and property damage that might result.
The Company currently leases a property at which hazardous substances could have
been or are being handled. In addition, many of these properties have been
operated by third parties whose treatment and disposal or release of
hydrocarbons or other wastes were not under the Company's control. Under
existing laws, the Company could be required to remove or remediate previously
disposed wastes (including wastes disposed of or released by prior owners or
operators), to clean up contaminated property (including contaminated
groundwater) or to perform remedial plugging operations to prevent future
contamination. The Company is investigating the extent of any such liability and
the availability of applicable defenses and believes the costs related to these
sites will not have a material adverse effect on the Company's net income,
financial condition or liquidity in a future period.
The Company's liability for remedial obligations includes certain amounts that
are based on anticipated regulatory approval for proposed remediation of former
refinery waste sites. Although regulatory authorities may require more costly
alternatives than the proposed processes, the cost of such potential alternative
processes is not expected to be a material amount. Certain environmental
expenditures are likely to be recovered by the Company from other sources,
primarily environmental funds maintained by certain states. Since no assurance
can be given that future recoveries from other sources will occur, the Company
has not recorded a benefit for likely recoveries.
11
FREEDOM PETROLEUM, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2013
NOTE 8 - ENVIRONMENTAL AND OTHER CONTINGENCIES (CONTINUED)
There is the possibility that environmental expenditures could be required at
currently unidentified sites, and new or revised regulations could require
additional expenditures at known sites. However, based on information currently
available to the Company, the amount of future remediation costs incurred at
known or currently unidentified sites is not expected to have a material adverse
effect on the Company's future net income, cash flows or liquidity. The Company
has recorded $0 for its estimated asset retirement obligations as of January 31,
2013.
NOTE 9 - GOING CONCERN
The financial statements have been prepared on a going concern basis which
assumes the Company will be able to realize its assets and discharge its
liabilities in the normal course of business for the foreseeable future. The
Company has incurred losses since inception resulting in an accumulated deficit
of $16,982 as of January 31, 2013 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. The ability to continue as a going
concern is dependent upon the Company generating 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 intends to finance operating costs over the next twelve months
with existing cash on hand and loans from directors and/or private placement of
common stock.
NOTE 10 - SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations
subsequent to January 31, 2013 to the date these financial statements were
issued, and has determined that it does not have any material subsequent events
to disclose in these financial statements other than the events described above.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Our financial statements have been prepared assuming that we will continue as a
going concern and, accordingly, do not include adjustments relating to the
recoverability and realization of assets and classification of liabilities that
might be necessary should we be unable to continue in operation. We expect we
will require additional capital to meet our long term operating requirements. We
expect to raise additional capital through, among other things, the sale of
equity or debt securities.
THREE MONTH PERIOD ENDED JANUARY 31, 2013 COMPARED TO THE PERIOD FROM INCEPTION
(JUNE 13, 2012) TO JANUARY 31, 2013.
Our net loss for the three-months ended January 31, 2013 was approximately
($5,223) compared to a net loss during the period from inception (June 13, 2012)
to January 31, 2013 of ($16,982).
During the three-months ended January 31, 2013, we incurred general and
administrative, consulting, and professional expenses of approximately $5,223.
General and administrative expenses incurred during the three-month period ended
January 31, 2013 were generally related to corporate overhead, financial and
administrative contracted services, such as legal and accounting and
developmental costs. During the period from inception (June 13, 2012) to January
31, 2013, we incurred general and administrative, consulting, and professional
expenses of approximately $16,982.
Our net loss during the three-months ended January 31, 2013 was ($5,223) or
($0.00) per share. The weighted average number of shares outstanding was
40,188,000 for the three-month period ended January 31, 2013.
SIX MONTH PERIOD ENDED JANUARY 31, 2013 COMPARED TO THE PERIOD FROM INCEPTION
(JUNE 13, 2012) TO JANUARY 31, 2013.
Our net loss for the six-months ended January 31, 2013 was approximately
($8,578) compared to a net loss during the period from inception (June 13, 2012)
to January 31, 2013 of ($16,982).
During the six-months ended January 31, 2013, we incurred general and
administrative, consulting, and professional expenses of approximately $8,578.
General and administrative expenses incurred during the six-month period ended
January 31, 2013 were generally related to corporate overhead, financial and
administrative contracted services, such as legal and accounting and
developmental costs. During the period from inception (June 13, 2012) to January
31, 2013, we incurred general and administrative, consulting, and professional
expenses of approximately $16,982.
Our net loss during the six-months ended January 31, 2013 was ($8,578) or
($0.00) per share. The weighted average number of shares outstanding was
33,594,000 for the six-month period ended January 31, 2013.
LIQUIDITY AND CAPITAL RESOURCES
SIX-MONTH PERIOD ENDED JANUARY 31, 2013
As at the six-months ended January 31, 2013, our current assets were $36,775 and
our total current liabilities were $3,824, which resulted in a working capital
of $32,951. As at the six-months ended January 31, 2013, current assets were
comprised of $36,775 in cash compared to $24,230 in current assets at July 31,
2012. At the six-months ended January 31, 2013, current liabilities were
13
comprised of $824 in advances from director and $3,000 owed to our auditor for
professional fees. Stockholders' equity increased from $18,756 as of July 31,
2012 to $47,951 as of January 31, 2013.
CASH FLOWS FROM OPERATING ACTIVITIES
We have not generated positive cash flows from operating activities. For the
six-month period ended January 31, 2013, net cash flows used by operating
activities was ($25,228) consisting of a net loss of $8,578 and decrease in
accounts payable of 16,650. Net cash flowsused by operating activities was
($13,158) for the period from inception (June 13, 2012) to January 31, 2013
consisting of a net loss of $16,982 which was offset by an increase in related
party debt of $824 and accounts payable of $3,000.
CASH FLOWS FROM FINANCING ACTIVITIES
We have financed our operations primarily from either advances from directors
(operating expenses paid on behalf of the Company by directors) or the issuance
of equity and debt instruments. For the six-months ended January 31, 2013 we
generated $37,773 from financing activities. For the period from inception on
June 13, 2012 through January 31, 2013, net cash provided by financing
activities was $64,993 due to the issuance of 52,182,000 common shares.
PLAN OF OPERATION AND FUNDING
We expect that working capital requirements will continue to be funded through a
combination of our existing funds and further issuances of securities. Our
working capital requirements are expected to increase in line with the growth of
our business.
Existing working capital, further advances, equity and debt instruments, and
anticipated cash flow are expected to be adequate to fund our operations over
the next three months. We have no lines of credit or other bank financing
arrangements. Generally, we have financed operations to date through the
proceeds of the private placement of equity and debt instruments. In connection
with our business plan, management anticipates additional increases in operating
expenses and capital expenditures relating to: (i) acquisition of inventory;
(ii) developmental expenses associated with a start-up business; and (iii)
marketing expenses. We intend to finance these expenses with further issuances
of securities and debt issuances. Thereafter, we expect we will need to raise
additional capital and generate revenues to meet long-term operating
requirements. Additional issuances of equity or convertible debt securities will
result in dilution to our current shareholders. Further, such securities might
have rights, preferences or privileges senior to our common stock. Additional
financing may not be available upon acceptable terms, or at all. If adequate
funds are not available or are not available on acceptable terms, we may not be
able to take advantage of prospective new business endeavors or opportunities,
which could significantly and materially restrict our business operations.
MATERIAL COMMITMENTS
As of the date of this Quarterly Report, we have a material commitment. During
the period from inception (June 13, 2012) to January 31, 2013, Thomas Hynes, our
Chief Executive Officer and a director, advanced us $824. The advances are
non-interest bearing and payable upon demand.
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PURCHASE OF SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment during the next twelve
months.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Quarterly Report, we do not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to investors.
GOING CONCERN
The independent auditors' report accompanying our January 31, 2013 financial
statements contained an explanatory paragraph expressing substantial doubt about
our ability to continue as a going concern. The financial statements have been
prepared "assuming that we will continue as a going concern," which contemplates
that we will realize our assets and satisfy our liabilities and commitments in
the ordinary course of business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our financial position,
results of operations or cash flows due to adverse change in foreign currency
and interest rates.
EXCHANGE RATE
Our reporting currency is United States Dollars ("USD").
INTEREST RATE
Any future loans will relate mainly to trade payables and will be mainly
short-term. However our debt may be likely to rise in connection with expansion
and if interest rates were to rise at the same time, this could become a
significant impact on our operating and financing activities. We have not
entered into derivative contracts either to hedge existing risks of for
speculative purposes.
ITEM 4. CONTROLS AND PROCEDURES
Our management is responsible for establishing and maintaining a system of
disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)
under the Exchange Act) that is designed to ensure that information required to
be disclosed by us in the reports that we file or submit under the Exchange Act
is recorded, processed, summarized and reported, within the time periods
specified in the Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the issuer's management, including its principal executive officer or
officers and principal financial officer or officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required
disclosure.
An evaluation was conducted under the supervision and with the participation of
our management of the effectiveness of the design and operation of our
disclosure controls and procedures as of January 31, 2013. Based on that
evaluation, our management concluded that our disclosure controls and procedures
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were not effective as of such date to ensure that information required to be
disclosed in the reports that we file or submit under the Exchange Act, is
recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms. Such officer also confirmed that there was no change in
our internal control over financial reporting during the three-months ended
January 31, 2013 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Management is not aware of any legal proceedings contemplated by any
governmental authority or any other party involving us or our properties. As of
the date of this Quarterly Report, no director, officer or affiliate is (i) a
party adverse to us in any legal proceeding, or (ii) has an adverse interest to
us in any legal proceedings. Management is not aware of any other legal
proceedings pending or that have been threatened against us or our properties.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On July 12 2012, our registration statement on Form S-1 became effective.
35,000,000 common shares were registered.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No report required.
ITEM 4. MINE SAFETY DISCLOSURES
No report required.
ITEM 5. OTHER INFORMATION
No report required.
ITEM 6. EXHIBITS
31.1 Certification of Chief Executive Officer pursuant to Securities Exchange
Act of 1934 Rule 13a-14(a) or 15d-14(a).
31.2 Certification of Chief Financial Officer pursuant to Securities Exchange
Act of 1934 Rule 13a-14(a) or 15d-14(a).
32.1 Certifications pursuant to Securities Exchange Act of 1934 Rule 13a-14(b)
or 15d- 14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes- Oxley Act of 2002.
101 Interactive Data Files pursuant to Rule 405 of Regulation S-T.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FREEDOM PETROLEUM INC.
Dated: March 18, 2013
By: /s/ Thomas Hynes
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Thomas Hynes
President, Chief Financial Officer, Director
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