FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FREEDOM PETROLEUM INC.
(Name of Small Business Issuer in its Charter)
Nevada 1311 45-5440446
(State or Other Jurisdiction (Primary Standard Industrial (IRS Employer
of Organization) Classification Code) Identification #)
Corp 95, LLC.
6025 South Quebec Street 2620 Regatta Drive, Suite 102
Suite 100, Centennial, CO, 80111 Las Vegas, NV, 89128
1-800-493-0740 1-800-859-6696
(Address and telephone of (Name, address and telephone number
registrant's executive office) of agent for service)
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Please send copies of all correspondence to:
Scott Olson, Esq.
274 Broadway
Costa Mesa, CA 92627
310.985.1034
Approximate date of proposed sale to the public: After this registration
statement becomes effective
If the securities being registered herein will be sold by the security shareholders on a delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933 please check the following box. [X]
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller Reporting Company [X]
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Price Aggregate Amount of
Registered Registered Per Share (1)(2) Offering Price Registration Fee
------------------------------------------------------------------------------------------------------------
Common Stock by Company
par value $0.0001 35,000,000 $0.0015 $52,500 $6.02
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(1) The offering price has been arbitrarily determined by the Company and bears
no relationship to assets, earnings, or any other valuation criteria. No
assurance can be given that the shares offered hereby will have a market
value or that they may be sold at this, or at any price.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457 of the Securities Act of 1933.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
FREEDOM PETROLEUM INC.
UP TO 35,000,000 SHARES OF COMMON STOCK
Subject to Completion,
________________________, 2012
Prior to this registration, there has been no public trading market for the common stock of FREEDOM PETROLEUM INC. ("Freedom", the "Company", "us", "we", "our") and it is not presently traded on any market or securities exchange. We are offering up to 35,000,000 shares of common stock for sale by us to the public.
The offering of up to 35,000,000 shares is a "best efforts" offering, which means that our directors and officers will use their best efforts to sell the common stock and there is no commitment by any person to purchase any shares. The shares will be offered at a fixed price of $0.0015 per share for the duration of the offering. There is no minimum number of shares required to be sold to close the offering. This offering will continue for the earlier of: (i) 90 days after this registration statement becomes effective with the Securities and Exchange Commission, or (ii) the date on which all 35,000,000 shares registered hereunder have been sold. We may at our discretion extend the offering for an additional 90 days. Proceeds from the sale of the shares will be used to fund the initial stages of our business development and will be immediately available to us as there have been no arrangements to place the funds in escrow. This offering will end no later than 180 days from the offering date. The offering date is the date by which this registration statement becomes effective. This is a direct participation offering since we, and not an underwriter, are offering the stock.
There can be no assurance that all or any shares being offered in this Prospectus are going to be sold and that we will be able to raise any funds from this offering.
Shares Offered Price to Selling Agent Proceeds to by Company Public Commissions the Company ---------- ------ ----------- ----------- Per Share $0.0015 Not applicable $0.0015 Minimum Purchase None Not applicable Not applicable Maximum (35,000,000 shares) $52,500 Not applicable $52,500 |
Neither the Securities and Exchange Commission nor any state regulatory authority has approved or disapproved of these securities, endorsed the merits of this offering, or determined that this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
We are an Emerging Growth Company as defined in the Jumpstart Our Business Startups Act.
AN INVESTMENT IN OUR SECURITIES IS SPECULATIVE. INVESTORS SHOULD BE ABLE TO AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY THESE SECURITIES AND WE SHALL NOT SELL ANY OF THESE SECURITIES IN ANY STATE WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER SUCH STATE'S SECURITIES LAWS.
You should rely only on the information contained in this Prospectus. We have not authorized anyone to provide you with information different from that contained in this Prospectus.
THE DATE OF THIS PROSPECTUS IS ______________, 2012
The following table of contents has been designed to help you find important information contained in this Prospectus. We encourage you to read the entire Prospectus.
TABLE OF CONTENTS
Page No.
--------
SUMMARY OF OUR OFFERING................................................. 3
BUSINESS SUMMARY........................................................ 3
SUMMARY OF OUR FINANCIAL INFORMATION.................................... 5
RISK FACTORS............................................................ 7
USE OF PROCEEDS......................................................... 15
DETERMINATION OF OFFERING PRICE......................................... 15
DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES........................... 16
PLAN OF DISTRIBUTION.................................................... 17
DESCRIPTION OF SECURITIES............................................... 18
INTEREST OF NAMED EXPERTS AND COUNSEL................................... 19
BUSINESS DESCRIPTION.................................................... 20
DESCRIPTION OF PROPERTY................................................. 24
LEGAL PROCEEDINGS....................................................... 27
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS................ 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.................................................. 28
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE................................................... 31
MANAGEMENT.............................................................. 32
CONFLICTS OF INTEREST................................................... 33
COMMITTEES OF THE BOARD OF DIRECTORS.................................... 33
EXECUTIVE COMPENSATION.................................................. 34
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS......................... 37
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.................... 37
DISCLOSURE OF COMMISSION'S POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES........................................................ 38
REPORTS TO SECURITY HOLDERS............................................. 38
WHERE YOU CAN FIND MORE INFORMATION..................................... 39
STOCK TRANSFER AGENT.................................................... 39
FINANCIAL STATEMENTS.................................................... F-1
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PROSPECTUS SUMMARY
This Prospectus, and any supplement to this Prospectus include "forward-looking statements". To the extent that the information presented in this Prospectus discusses financial projections, information or expectations about our business plans, results of operations, products or markets, or otherwise makes statements about future events, such statements are forward-looking. Such forward-looking statements can be identified by the use of words such as "intends", "anticipates", "believes", "estimates", "projects", "forecasts", "expects", "plans" and "proposes". Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These include, among others, the cautionary statements in the "Risk Factors" section beginning on Page 10 of this Prospectus and the "Management's Discussion and Analysis of Financial Position and Results of Operations" section elsewhere in this Prospectus.
This summary only highlights selected information contained in greater detail elsewhere in this Prospectus. This summary may not contain all of the information that you should consider before investing in our common stock. You should carefully read the entire Prospectus, including "Risk Factors" beginning on Page 9, and the financial statements, before making an investment decision
All dollar amounts refer to US dollars unless otherwise indicated.
Unless otherwise noted, All references to "us", "we", "our" relate to Freedom Petroleum Inc., a Nevada corporation.
BUSINESS
We are an exploration stage company, incorporated in the State of Nevada on June 13, 2012, as a for-profit company, and electing a fiscal year end of July 31. Our business office is located at 6025 South Quebec Street, Suite 100, Centennial, CO, 80111 and our registered office is located at 2620 Regatta Drive, Suite 102, Las Vegas, NV, 89128. Our telephone number is 1-800-493-0740. We have reserved a domain main and have a staging site that can be found at www.Freedompetroleum.com.
We plan on engaging in the exploration and development of oil and gas properties. We have acquired 100% of a 624 net acre Bakken shale lease in Lewis and Clark County, Montana, which we plan to explore for oil and gas, subject to overriding royalty of 3.3333%. This property is described in "Description of Property" further in this Prospectus. We have had limited operations and have been issued a "going concern" opinion by our auditor, based upon our reliance on the sale of our common stock as the sole source of funds for our future operations.
OUR OFFERING
We have 27,000,000 shares of common stock issued and outstanding. Through this offering we will register 35,000,000 shares of common stock for offering to the public. These shares represent additional common stock to be issued by us. We may endeavor to sell all 35,000,000 shares of common stock after this registration becomes effective. The price at which we offer these shares is fixed at $0.0015 per share for the duration of the offering. There is no arrangement to address the possible effect of the offering on the price of the stock. We will receive all proceeds from the sale of the common stock.
Securities being offered
by the Company Up to 35,000,000 shares of common stock,
par value $0.0015 offered by us in a
direct offering.
Offering price per share We are offering up to 35,000,000 shares of
our common stock at $0.0015.
Number of shares outstanding before
the offering of common shares 27,000,000 common shares are currently
issued and outstanding.
Number of shares outstanding after
the offering of common shares 62,000,000 common shares will be issued
and outstanding if we sell all of the
shares that we are offering.
The minimum number of shares to be
sold in this offering None.
Market for the common shares There is no public market for the common
shares.
The offering price for the shares will
remain at $0.0015 per share for the
duration of the offering.
Use of Proceeds We will receive all proceeds from the sale
of the common stock and intends to use the
proceeds from this offering, to begin
implementing the business and marketing
plan. The expenses of this offering,
including the preparation of this
prospectus and the filing of this
registration statement, estimated at
$13,000 are being paid for by us.
Termination of the Offering This offering will terminate upon the
earlier to occur of (i) 90 days after this
registration statement becomes effective
with the Securities and Exchange
Commission, or (ii) the date on which all
35,000,000 shares registered hereunder
have been sold. We may, at our discretion,
extend the offering for an additional 90
days. In any event, the offering will end
within 180 days of this Registration
Statement being declared effective.
Terms of the Offering Nina Bijedic, our officer, will sell the
common stock upon effectiveness of this
registration statement on a
self-underwritten basis.
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You should rely only upon the information contained in this prospectus. We have not authorized anyone to provide you with information different from that which is contained in this prospectus. We are offering to sell shares of common stock and seeking offers to buy shares of common stock only in jurisdictions where offers and sales are permitted.
SUMMARY OF OUR FINANCIAL INFORMATION
The following table sets forth selected financial information, which should be read in conjunction with the information set forth in the "Management's Discussion and Analysis of Financial Position and Results of Operations" section and the accompanying financial statements and related notes included elsewhere in this Prospectus.
STATEMENT OF EXPENSES DATA
Period from
June 13, 2012
(inception) to
July 31, 2012
-------------
Revenues $ 0
Total Expenses $ 8,404
Net Loss $ 8,404
Net Loss per share $ 0.00
BALANCE SHEET DATA
As at
July 31, 2012
-------------
Working Capital $ 3,756
Total Assets $ 39,230
Total Liabilities $ 20,474
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EMERGING GROWTH COMPANY
We are an Emerging Growth Company as defined in the Jumpstart Our Business Startups Act.
We shall continue to be deemed an emerging growth company until the earliest of:
a) the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more;
b) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective registration statement under this title;
c) the date on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or
d) the date on which such issuer is deemed to be a `large accelerated filer', as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto.
As an emerging growth company we are exempt from Section 404(b) of Sarbanes Oxley. Section 404(a) requires Issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures.
Section 404(b) requires that the registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting.
As an emerging growth company we are exempt from Section 14A and B of the Securities Exchange Act of 1934 which require the shareholder approval of executive compensation and golden parachutes.
We have irrevocably opted out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the Act.
RISK FACTORS
Please consider the following risk factors and other information in this prospectus relating to our business and prospects before deciding to invest in our common stock.
This offering and any investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and all of the information contained in this prospectus before deciding whether to purchase our common stock. If any of the following risks actually occur, our business, financial condition and results of operations could be harmed. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.
We consider the following to be the material risks for an investor regarding this offering. Our company should be viewed as a high-risk investment and speculative in nature. An investment in our common stock may result in a complete loss of the invested amount. Please consider the following risk factors before deciding to invest in our common stock.
RISKS ASSOCIATED WITH OUR BUSINESS
WE HAVE A LIMITED OPERATING HISTORY AND AS A RESULT THERE IS NO ASSURANCE WE CAN OPERATE ON A PROFITABLE BASIS.
We have a limited operating history. Our company's operations will be subject to all the uncertainties arising from the absence of a significant operating history. Potential investors should be aware of the difficulties normally encountered by resource exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates. The expenditures to be made by us in the exploration of our properties may not result in the discovery of reserves. Problems such as unusual or unexpected formations of rock or land and other conditions are involved in resource exploration and often result in unsuccessful exploration efforts. If the results of our exploration do not reveal viable commercial reserves, we may decide to abandon our claims and acquire new claims for new exploration or cease operations. The acquisition of additional claims will be dependent upon us possessing capital resources at the time in order to purchase such claims. If no funding is available, we may be forced to abandon our operations. There can be no assurance that we will be able to operate on a profitable basis.
IF WE DO NOT OBTAIN ADDITIONAL FINANCING, OUR BUSINESS WILL FAIL AND OUR INVESTORS COULD LOSE THEIR INVESTMENT.
We had cash in the amount of $24,230, and liabilities of $20,474 for a working capital of $3,756 as of July 31, 2012. We currently do not generate any revenues from our operations. We have estimated that we require $250,000 to conduct exploration activities on our property and cover legal, audit and G&A costs (banking fees, corporate fees, misc). Even if we are able to sell all of the securities offered by this Prospectus, we would still need to obtain additional financing to undertake our proposed exploration activity. Obtaining additional financing would be subject to a number of factors, including market prices for resources, investor acceptance of our properties and investor sentiment. These factors may negatively affect the timing, amount, terms or conditions of any
additional financing available to us. The most likely source of future funds presently available to us is through the sale of equity capital and loans. Any sale of share capital will result in dilution to existing shareholders.
THE OIL AND NATURAL GAS INDUSTRY IS HIGHLY COMPETITIVE AND THERE IS NO ASSURANCE THAT WE WILL BE SUCCESSFUL IN ACQUIRING LEASES.
The oil and natural gas industry is intensely competitive. Although we do not compete with other oil and gas companies for the sale of any oil and gas that we may produce, as there is sufficient demand in the world market for these products, we compete with numerous individuals and companies, including many major oil and natural gas companies which have substantially greater technical, financial and operational resources and staff. Accordingly, there is a high degree of competition for desirable oil and natural gas leases, suitable properties for drilling operations and necessary drilling equipment, as well as for access to funds. We cannot predict if the necessary funds can be raised or that any projected work will be completed.
THERE CAN BE NO ASSURANCE THAT WE WILL DISCOVER OIL OR NATURAL GAS IN ANY
COMMERCIAL QUANTITY ON OUR PROPERTIES.
Exploration for economic reserves of oil and natural gas is subject to a number of risks. There is competition for the acquisition of available oil and natural gas properties. Few properties that are explored are ultimately developed into producing oil and/or natural gas wells. If we cannot discover oil or natural gas in any commercial quantity thereon, our business will fail.
EVEN IF WE ARE ABLE TO ENGAGE IN EXPLORATION ON OUR PROPERTY AND ESTABLISH THAT IT CONTAINS OIL OR NATURAL GAS IN COMMERCIALLY EXPLOITABLE QUANTITIES, THE POTENTIAL PROFITABILITY OF OIL AND NATURAL GAS VENTURES DEPENDS UPON FACTORS BEYOND THE CONTROL OF OUR COMPANY.
The potential profitability of oil and natural gas properties is dependent upon many factors beyond our control. For instance, world prices and markets for oil and natural gas are unpredictable, highly volatile, potentially subject to governmental fixing, pegging, controls or any combination of these and other factors, and respond to changes in domestic, international, political, social and economic environments. Additionally, due to worldwide economic uncertainty, the availability and cost of funds for production and other expenses have become increasingly difficult, if not impossible, to project. In addition, adverse weather conditions can hinder drilling operations. These changes and events may materially affect our future financial performance. These factors cannot be accurately predicted and the combination of these factors may result in our company not receiving an adequate return on invested capital.
In addition, a productive well may become uneconomic in the event water or other deleterious substances are encountered which impair or prevent the production of oil and/or natural gas from the well. Production from any well may be unmarketable if it is impregnated with water or other deleterious substances. Also, the marketability of oil and natural gas which may be acquired or discovered will be affected by numerous related factors, including the proximity and capacity of oil and natural gas pipelines and processing equipment, market fluctuations of prices, taxes, royalties, land tenure, allowable production and environmental protection, all of which could result in greater expenses than revenue generated by the well.
THE MARKETABILITY OF NATURAL RESOURCES WILL BE AFFECTED BY NUMEROUS FACTORS BEYOND OUR CONTROL WHICH MAY RESULT IN US NOT RECEIVING AN ADEQUATE RETURN ON INVESTED CAPITAL TO BE PROFITABLE OR VIABLE.
The marketability of natural resources which may be acquired or discovered by us will be affected by numerous factors beyond our control. These factors include market fluctuations in oil and natural gas pricing and demand, the proximity and capacity of natural resource markets and processing equipment, governmental regulations, land tenure, land use, regulation concerning the importing and exporting of oil and natural gas and environmental protection regulations. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an adequate return on invested capital to be profitable or viable.
OIL AND NATURAL GAS OPERATIONS ARE SUBJECT TO COMPREHENSIVE REGULATION WHICH MAY CAUSE SUBSTANTIAL DELAYS OR REQUIRE CAPITAL OUTLAYS IN EXCESS OF THOSE ANTICIPATED CAUSING AN ADVERSE EFFECT ON OUR COMPANY.
Oil and natural gas operations are subject to federal, state, and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Oil and natural gas operations are also subject to federal, state, and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment. Various permits from government bodies are required for drilling operations to be conducted; no assurance can be given that standards imposed by federal, provincial, or local authorities may be changed and any such changes may have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages. To date, we have not been required to spend any material amount on compliance with environmental regulations. However, we may be required to do so in the future and this may affect our ability to expand or maintain our operations.
EXPLORATION AND PRODUCTION ACTIVITIES ARE SUBJECT TO CERTAIN ENVIRONMENTAL REGULATIONS WHICH MAY PREVENT OR DELAY THE COMMENCEMENT OR CONTINUATION OF OUR OPERATIONS.
In general, our exploration and production activities are subject to certain federal, state and local laws and regulations relating to environmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuation of a given operation. Specifically, we may be subject to legislation regarding emissions into the environment, water discharges and storage and disposition of hazardous wastes. In addition, legislation has been enacted which requires well and facility sites to be abandoned and reclaimed to the satisfaction of state authorities. However, such laws and regulations are frequently changed and we are unable to predict the ultimate cost of compliance. Generally, environmental requirements do not appear to affect us any differently or to any greater or lesser extent than other companies in the industry.
EXPLORATORY DRILLING INVOLVES MANY RISKS AND WE MAY BECOME LIABLE FOR POLLUTION OR OTHER LIABILITIES WHICH MAY HAVE AN ADVERSE EFFECT ON OUR FINANCIAL POSITION.
Drilling operations generally involve a high degree of risk. Hazards such as unusual or unexpected geological formations, power outages, labor disruptions, blow-outs, sour natural gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labor, and other risks are involved. We may become subject to liability for pollution or hazards against which it cannot
adequately insure or which it may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position and operations.
ANY CHANGE TO GOVERNMENT REGULATION/ADMINISTRATIVE PRACTICES MAY HAVE A NEGATIVE IMPACT ON OUR ABILITY TO OPERATE AND OUR PROFITABILITY.
The business of oil and natural gas exploration and development is subject to substantial regulation under various countries laws relating to the exploration for, and the development, upgrading, marketing, pricing, taxation, and transportation of oil and natural gas and related products and other matters. Amendments to current laws and regulations governing operations and activities of oil and natural gas exploration and development operations could have a material adverse impact on our business. In addition, there can be no assurance that income tax laws, royalty regulations and government incentive programs related to the properties subject to our farm-out agreements and the oil and natural gas industry generally will not be changed in a manner which may adversely affect our progress and cause delays, inability to explore and develop or abandonment of these interests.
Permits, leases, licenses, and approvals are required from a variety of regulatory authorities at various stages of exploration and development. There can be no assurance that the various government permits, leases, licenses and approvals sought will be granted in respect of our activities or, if granted, will not be cancelled or will be renewed upon expiry. There is no assurance that such permits, leases, licenses, and approvals will not contain terms and provisions which may adversely affect our exploration and development activities.
IF WE ARE UNABLE TO HIRE AND RETAIN KEY PERSONNEL, WE MAY NOT BE ABLE TO IMPLEMENT OUR BUSINESS PLAN.
Our success is largely dependent on our ability to hire highly qualified personnel. This is particularly true in highly technical businesses such as resource exploration. These individuals are in high demand and we may not be able to attract the personnel we need. In addition, we may not be able to afford the high salaries and fees demanded by qualified personnel, or may lose such employees after they are hired. Failure to hire key personnel when needed, or on acceptable terms, would have a significant negative effect on our business.
WE COULD NOT ACT AS THE "OPERATOR" ON OUR PROPERTY, AND SO WE ARE EXPOSED TO THE RISKS OF OUR THIRD-PARTY OPERATORS.
We will be relying on the expertise of contracted third-party oil and gas exploration and development operators and third-party consultants for their judgment, experience and advice. We can give no assurance that these third party operators or consultants will always act in our best interests, and we are exposed as a third party to their operations and actions and advice in those properties and activities in which we are contractually bound.
OUR AUDITORS' REPORTS CONTAIN A STATEMENT THAT OUR NET LOSS AND LIMITED WORKING CAPITAL RAISE SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.
Our independent registered public accountants have stated in their report, included in this Prospectus under the heading "Financial Statements" that our significant operating losses and working capital deficiency raise substantial doubt about our ability to continue as a going concern. We had a net loss of $8,404 for the period ended July 31, 2012. We will be required to raise substantial capital to fund our capital expenditures, working capital and other cash requirements since our current cash assets are exhausted. We are currently
searching for sources of additional funding. The successful outcome of future financing activities cannot be determined at this time and there are no assurances that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operational results.
WE ARE INCURRING INCREASED COSTS AS A RESULT OF BEING A PUBLICLY-TRADED COMPANY.
As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the Securities and Exchange Commission, have required changes in corporate governance practices of public companies. These new rules and regulations have increased our legal and financial compliance costs and have made some activities more time-consuming and costly. They have also made it more difficult and more expensive for us to obtain director and officer liability insurance, which we currently cannot afford to do. As a result of the new rules, it may become more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. We cannot predict or estimate the amount of additional costs we may incur as a result of being a public company or the timing of such costs and/or whether we will be able to raise the funds necessary to meet the cash requirements for these costs.
BECAUSE WE MAY NEVER EARN REVENUES FROM OUR OPERATIONS, OUR BUSINESS MAY FAIL AND THEN INVESTORS MAY LOSE ALL OF THEIR INVESTMENT IN OUR COMPANY.
We have no history of revenues from operations. We have never had significant operations and have no significant assets. We have yet to generate positive earnings and there can be no assurance that we will ever operate profitably. We have a limited operating history and are in the exploration stage. The success of our company is significantly dependent on the uncertain events of the discovery and exploitation of oil and gas reserves on our properties or selling the rights to exploit those reserves. If our business plan is not successful and we are not able to operate profitably, then our stock may become worthless and investors may lose all of their investment in our company.
Prior to completion of the exploration stage, we anticipate that we will incur increased operating expenses without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from the exploration of our property in the future, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide no assurance that we will generate any revenues or ever achieve profitability. If we are unsuccessful in addressing these risks, our business will fail and investors may lose all of their investment in our company.
IF WE DO NOT FILE A REGISTRATION STATEMENT ON FORM 8-A TO BECOME A MANDATORY REPORTING COMPANY UNDER SECTION 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934, WE WILL CONTINUE AS A REPORTING COMPANY AND WILL NOT BE SUBJECT TO THE PROXY STATEMENT REQUIREMENTS, AND OUR OFFICERS, DIRECTORS AND 10% STOCKHOLDERS WILL NOT BE REQUIRED TO SUBMIT REPORTS TO THE SEC ON THEIR STOCK OWNERSHIP AND STOCK TRADING ACTIVITY, ALL OF WHICH COULD REDUCE THE VALUE OF YOUR INVESTMENT AND THE AMOUNT OF PUBLICLY AVAILABLE INFORMATION ABOUT US.
As a result of this offering as required under Section 15(d) of the Securities Exchange Act of 1934, we will file periodic reports with the Securities and Exchange Commission through July 31, 2013, including a Form 10-K for the year ended July 31, 2013, assuming this registration statement is declared effective before that date. At or prior to July 31, 2013 we intend voluntarily to file a registration statement on Form 8-A which will subject us to all of the reporting
requirements of the 1934 Act. This will require us to file quarterly and annual reports with the SEC and will also subject us to the proxy rules of the SEC. In addition, our officers, directors and 10% stockholders will be required to submit reports to the SEC on their stock ownership and stock trading activity. We are not required under Section 12(g) or otherwise to become a mandatory 1934 Act filer unless we have more than 2,000 (500 non-accredited) shareholders and total assets of more than $10 million on July 31, 2013. If we do not file a registration statement on Form 8-A at or prior to July 31, 2013, we plan to continue as a reporting company, but will not be subject to the proxy statement requirements of the 1934 Act, and our officers, directors and 10% stockholders will not be required to submit reports to the SEC on their stock ownership and stock trading activity.
RISKS ASSOCIATED WITH OUR COMMON STOCK AND THIS OFFERING
WE DO NOT INTEND TO PAY DIVIDENDS ON ANY INVESTMENT IN THE SHARES OF OUR STOCK.
We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock's price. This may never happen and investors may lose all of their investment in us.
BECAUSE WE CAN ISSUE ADDITIONAL SHARES OF COMMON STOCK, PURCHASERS OF OUR COMMON STOCK MAY INCUR IMMEDIATE DILUTION AND MAY EXPERIENCE FURTHER DILUTION.
We are authorized to issue up to 100,000,000 shares of common stock, of which 27,000,000 shares are issued and outstanding, and 20,000,000 shares of preferred stock, none of which is issued and outstanding. Our board of directors has the authority to cause us to issue additional shares of common stock, and to determine the rights, preferences and privileges of such shares, without consent of any of our stockholders. Consequently, the stockholders may experience more dilution in their ownership of our stock in the future.
OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SECURITIES AND EXCHANGE COMMISSION'S PENNY STOCK REGULATIONS WHICH MAY LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK.
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
FINRA SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK.
In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority (FINRA) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.
OUR SECURITY HOLDERS MAY FACE SIGNIFICANT RESTRICTIONS ON THE RESALE OF OUR SECURITIES DUE TO STATE "BLUE SKY" LAWS.
Each state has its own securities laws, often called "blue sky" laws, which (i) limit sales of securities to a state's residents unless the securities are registered in that state or qualify for an exemption from registration, and (ii) govern the reporting requirements for broker-dealers doing business directly or indirectly in the state. Before a security is sold in a state, there must be a registration in place to cover the transaction, or the transaction must be exempt from registration. The applicable broker must be registered in that state.
We do not know whether our securities will be registered or exempt from registration under the laws of any state. A determination regarding registration will be made by those broker-dealers, if any, who agree to serve as the market-makers for our common stock. There may be significant state blue sky law restrictions on the ability of investors to sell, and on purchasers to buy, our securities. You should therefore consider the resale market for our common stock to be limited, as you may be unable to resell your shares without the significant expense of state registration or qualification.
BECAUSE THERE IS NO PUBLIC TRADING MARKET FOR OUR COMMON STOCK, YOU MAY NOT BE ABLE TO RESELL YOUR STOCK.
There is currently no public trading market for our common stock. Therefore, there is no central place, such as stock exchange or electronic trading system, to resell your shares. If you do wish to resell your shares, you will have to locate a buyer and negotiate your own sale. As a result, you may be unable to sell your shares, or you may be forced to sell them at a loss.
We intend to apply to have our common stock quoted on the OTC Bulletin Board. This process takes at least 60 days and the application must be made on our behalf by a market maker. Our stock may be listed or traded only to the extent that there is interest by broker-dealers in acting as a market-maker. Despite our best efforts, it may not be able to convince any broker/dealer to act as market-makers and make quotations on the OTC Bulletin Board. We may consider pursuing a listing on the OTC Bulletin Board after this registration becomes effective and we have completed our offering. If our common stock becomes listed and a market for the stock develops, the actual price of our shares will be determined by prevailing market prices at the time of the sale.
We cannot assure you that there will be a market in the future for our common stock. The trading of securities on the OTC Bulletin Board is often sporadic and investors may have difficulty buying and selling our shares or obtaining market quotations for them, which may have a negative effect on the market price of our common stock. You may not be able to sell your shares at their purchase price or at any price at all.
INVESTING IN OUR COMPANY MAY RESULT IN AN IMMEDIATE LOSS BECAUSE BUYERS WILL PAY MORE FOR OUR COMMON STOCK THAN THE PRO RATA VALUE OF OUR ASSETS.
We have only been recently formed and has only a limited operating history and no earnings, therefore, the price of the offered shares is not based on any data. The offering price and other terms and conditions regarding our shares have been arbitrarily determined and do not bear any relationship to assets, earnings, book value or any other objective criteria of value. No investment banker, appraiser or other independent third party has been consulted concerning the offering price for the shares or the fairness of the offering price used for the shares.
The arbitrary offering price of $0.0015 per common share as determined herein is substantially higher than the net tangible book value per share of our common stock. Our assets do not substantiate a share price of $0.0015. This premium in share price applies to the terms of this offering. The offering price will not change for the duration of the offering even if we obtain a listing on any exchange or become quoted on the OTC Bulletin Board.
AS WE DO NOT HAVE AN ESCROW OR TRUST ACCOUNT WITH SUBSCRIPTIONS FOR INVESTORS, IF WE FILE FOR OR ARE FORCED INTO BANKRUPTCY PROTECTION, INVESTORS WILL LOSE THEIR ENTIRE INVESTMENT.
Invested funds for this offering will not be placed in an escrow or trust account and if we file for bankruptcy protection or a petition for involuntary bankruptcy is filed by creditors against us, your funds will become part of the bankruptcy estate and administered according to the bankruptcy laws. As such, you will lose your investment and your funds will be used to pay creditors.
WE DO NOT ANTICIPATE PAYING DIVIDENDS IN THE FORESEEABLE FUTURE, SO THERE IS WILL BE LESS WAYS IN WHICH YOU CAN MAKE A GAIN ON ANY INVESTMENT IN US.
We have never paid dividends and do not intend to pay any dividends for the foreseeable future. To the extent that we may require additional funding currently not provided for in our financing plan, our funding sources may prohibit the declaration of dividends. Because we do not intend to pay dividends, any gain on your investment will need to result from an appreciation in the price of our common stock. There will therefore be fewer ways in which you are able to make a gain on your investment.
USE OF PROCEEDS
Our offering is being made on a self-underwritten basis: no minimum number of shares must be sold in order for the offering to proceed. The offering price per share is $0.0015. The following table sets forth the uses of proceeds assuming the sale of 25%, 50%, 75% and 100%, respectively, of the securities offered for sale by us.
USE OF PROCEEDS TABLE
IF 25% OF IF 50% OF IF 75% OF IF 100% OF
SHARES SOLD SHARES SOLD SHARES SOLD SHARES SOLD
----------- ----------- ----------- -----------
GROSS PROCEEDS FROM THIS OFFERING $13,125 $26,250 $39,375 $52,500
======= ======= ======= =======
LESS: OFFERING EXPENSES
Accounting fees 4,000 4,000 4,000 4,000
Legal fees 5,000 5,000 5,000 5,000
G&A 4,125 17,250 375 13,500
TOTAL $13,125 $26,250 $ 9,375 $20,000
LESS: EXPLORATION ACTIVITIES $ 0 $ 0 $30,000 $30,000
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Even if we are able to sell all of the securities being offered in this Prospectus, we will still require approximately $52,500 to cover our anticipated expenses over the next 12 months. Please review our "Management's Discussion and Analysis of Financial Condition and Results of Operation" elsewhere in this Prospectus. Please note that there can be no assurance that we will be able to raise such funds.
If we are only able to sell less than 25% of the securities we are offering, substantially all of the funds raised by this offering will be spent on assuring that we meet our corporate and disclosure obligations so that we remain in good standing with the State of Nevada and maintain our status as a reporting issuer with the SEC.
DETERMINATION OF OFFERING PRICE
The offering price for the shares in this offering was arbitrarily determined. In determining the initial public offering price of the shares we considered several factors including the following:
* our start up status;
* our new business structure and operations as well as lack of client
base;
* prevailing market conditions, including the history and prospects for
our industry;
* our future prospects and the experience of our management;
* our capital structure;
Therefore, the public offering price of the shares does not necessarily bear any relationship to established valuation criteria and may not be indicative of prices that may prevail at any time or from time to time in the public market for the common stock. You cannot be sure that a public market for any of our securities will develop and continue or that the securities will ever trade at a price at or higher than the offering price in this offering.
DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES
The price of the current offering is fixed at $0.0015 per share. This price is greater than the price paid by our two officers and directors for common equity since our inception. Our officers and directors paid $0.001 per share. Our officers and directors paid $0.0005 per share less than the share price in this offering.
Dilution represents the difference between the offering price and the net tangible book value per share immediately after completion of this offering. Net tangible book value is the amount that results from subtracting total liabilities and intangible assets from total assets as of the date of our last audited financial statements. Dilution arises mainly as a result of our arbitrary determination of the offering price of the shares being offered. Dilution of the value of the shares you purchase is also a result of the lower book value of the shares held by our existing stockholders. The following tables compare the differences of your investment in our shares with the investment of our existing stockholders.
EXISTING STOCKHOLDERS IF ALL OF THE SHARES ARE SOLD
Price per share.................................................... $ 0.00150
Net tangible book value per share before offering.................. $ 0.00085
Potential gain to existing shareholder............................. $ 0.00065
Net tangible book value per share after offering
(if all shares sold)............................................... $ 0.00101
Increase to present stockholders in tangible book value
Per share after offering........................................... $ 0.00016
Net Capital contributions by new stockholders...................... $ 52,500
Capital contribution by officers & directors in July 2012.......... $ 27,000
Number of shares outstanding before the offering................... 27,000,000
Number of shares after offering held by existing stockholders...... 27,000,000
Percentage of ownership after offering (if all shares sold)........ 43.7%
DILUTION TO NEW SHAREHOLDERS
Percentage of Shares Sold
25% 50% 75% 100%
--------- --------- --------- ---------
Per share offering price $ 0.00150 $ 0.00150 $ 0.00150 $ 0.00150
Net tangible book value per
Share before offering $ 0.00085 $ 0.00085 $ 0.00085 $ 0.00085
Net tangible book value per
Share after offering $ 0.00064 $ 0.00081 $ 0.00092 $ 0.00101
Increase in book value
attributable to new
shareholders $(0.00021) $(0.00001) $ 0.00007 $ 0.00016
Dilution to new shareholders $(0.00086) $(0.00069) $(0.00058) $(0.00049)
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THE OFFERING
We are registering 35,000,000 shares of our common stock for offer and sale at $0.0015 per share.
There is currently no active trading market for our common stock, and such a market may not develop or be sustained. We currently plan to have our common stock listing on the OTC Bulletin Board, subject to the effectiveness of this Registration Statement. In addition, a market maker will be required to file a Form 211 with the Financial Industry Regulatory Authority (FINRA) before the market maker will be able to make a market in our shares of common stock. At the date hereof, we are not aware that any market maker has any such intention.
We may not sell the shares registered herein until the registration statement filed with the Securities and Exchange Commission is effective. Further, we will not offer the shares through a broker-dealer or anyone affiliated with a broker-dealer. Upon effectiveness, all of the shares being registered herein may become tradable. The stock may be traded or listed only to the extent that there is interest by broker-dealers in acting as a market maker in our stock. Despite our best efforts, it may not be able to convince any broker/dealers to act as market-makers and make quotations on the OTC Bulletin Board. We may consider pursuing a listing on the OTCBB after this registration becomes effective and we have completed our offering.
The price per share will remain at $0.0015 even if we obtain a listing on any exchange or are quoted on the Over-The-Counter (OTC) Bulletin Board, the offering price of $0.0015 will not change for the duration of the offering.
We will receive all of the proceeds from such sales of securities and are bearing all expenses in connection with the registration of our shares.
PLAN OF DISTRIBUTION
We are offering the shares on a "self-underwritten" basis directly through Nina Bijedic, our officer. Ms. Bijedic will not receive any commissions or other remuneration of any kind in connection with her participation in this offering based either directly or indirectly on transactions in securities.
This offering is a self-underwritten offering, which means that it does not involve the participation of an underwriter to market, distribute or sell the shares offered under this prospectus. This offering will terminate upon the earlier to occur of (i) 90 days after this registration statement becomes effective with the Securities and Exchange Commission, (ii) the date on which all 35,000,000 shares registered hereunder have been sold. We may, at our discretion, extend the offering for an additional 90 days.
Ms. Bijedic will not register as a broker-dealer pursuant to Section 15 of the Securities Exchange Act of 1934, in reliance upon Rule 3a4-1, which sets forth those conditions under which a person associated with an issuer may participate in the offering of the issuer's securities and not be deemed to be a broker-dealer.
1. Ms. Bijedic is not subject to a statutory disqualification, as that term is defined in Section 3(a)(39) of the Act, at the time of their participation;
2. Ms. Bijedic will not be compensated in connection with her participation by the payment of commissions or other remuneration based either directly or indirectly on transactions in securities;
3. Ms. Bijedic is not, nor will she be at the time of participation in the offering, an associated person of a broker-dealer; and
4. Ms. Bijedic meets the conditions of paragraph (a)(4)(ii) of Rule 3a4-1 of the Exchange Act, in that they (A) primarily perform, or are intended primarily to perform at the end of the offering, substantial duties for or on behalf of our company, other than in connection with transactions in securities; and (B) are not a broker or dealer, or been an associated person of a broker or dealer, within the preceding twelve months; and (C) have not participated in selling and offering securities for any issuer more than once every twelve months other than in reliance on Paragraphs (a)(4)(i) or (a)(4)(iii).
Neither Mr. Hynes, nor Ms. Bijedic, intend to purchase any shares in this offering.
If applicable, the shares may not be offered or sold in certain jurisdictions unless they are registered or otherwise comply with the applicable securities laws of such jurisdictions by exemption, qualification or otherwise. We intend to sell the shares only in the states in which this offering has been qualified or an exemption from the registration requirements is available, and purchases of shares may be made only in those states.
In addition and without limiting the foregoing, we will be subject to applicable provisions, rules and regulations under the Exchange Act with regard to security transactions during the period of time when this Registration Statement is effective.
We will not use public solicitation or general advertising in connection with the offering. This offering will continue for the longer of: (i) 90 days after this registration statement becomes effective with the Securities and Exchange Commission, or (ii) the date on which all 35,000,000 shares registered hereunder have been sold. We may at our discretion extend the offering for an additional 90 days.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 100,000,000 common shares, $0.0001 par value, of which 27,000,000 are currently issued and outstanding, as well as 20,000,000 shares of preferred stock, $0.0001 par value, of which none are currently issued and outstanding.
COMMON STOCK
As of September 18, 2012, we have 27,000,000 shares of our common stock outstanding. We do not have any outstanding warrants, options, or other convertible securities. Holders of the common stock have no preemptive rights to purchase additional shares of common stock or other subscription rights. The common stock carries no conversion rights and is not subject to redemption or to any sinking fund provisions. All shares of common stock are entitled to share equally in dividends from sources legally available, therefore, when, as and if declared by the Board of Directors, and upon our liquidation or dissolution, whether voluntary or involuntary, to share equally in our assets available for distribution to stockholders.
The Board of Directors is authorized to issue additional shares of common stock not to exceed the amount authorized by our Articles of Incorporation, on such terms and conditions and for such consideration as the Board may deem appropriate without further stockholder action.
VOTING RIGHTS
Each holder of common stock is entitled to one vote per share on all matters on which such stockholders are entitled to vote. Since the shares of common stock do not have cumulative voting rights, the holders of more than 50% of the shares voting for the election of directors can elect all the directors if they choose to do so and, in such event, the holders of the remaining shares will not be able to elect any person to the Board of Directors.
PREFERRED STOCK
We are authorized to issue up to 20,000,000 shares of $0.0001 par value preferred stock. We have no shares of preferred stock outstanding. Under our Articles of Incorporation, the Board of Directors has the power, without further action by the holders of the common stock, to determine the relative rights, preferences, privileges and restrictions of the preferred stock, and to issue the preferred stock in one or more series as determined by the Board of Directors. The designation of rights, preferences, privileges and restrictions could include preferences as to liquidation, redemption and conversion rights, voting rights, dividends or other preferences, any of which may be dilutive of the interest of the holders of the common stock.
DIVIDEND POLICY
Holders of our common stock are entitled to dividends if declared by the Board of Directors out of funds legally available for dividends. Since our inception to September 18, 2012 no dividends have been declared.
We do not intend to issue any cash dividends in the future. We intend to retain earnings, if any, to finance the development and expansion of our business. However, it is possible that management may decide to declare a stock dividend in the future. Our future dividend policy will be subject to the discretion of the Board of Directors and will be contingent upon future earnings, if any, our financial condition, our capital requirements, general business conditions and other factors.
INTEREST OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this Prospectus as having prepared or certified any part thereof or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of our common stock was employed on a contingency basis or had or is to receive, in connection with the offering, a substantial interest, directly or indirectly, in us. Additionally, no such expert or counsel was connected with us as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.
Scott Olson, Esq., of 65 Enterprise, Aliso Viejo, CA, 92656 has passed upon certain legal matters in connection with the validity of the issuance of the shares of our common stock.
Silberstein Ungar, PLLC of 30600 Telegraph Road, Suite 2175, Bingham Farms, MI 48025 have audited our Financial Statements for the period from June 13, 2012 (date of inception) through July 31, 2012 and to the extent set forth in its report, which are included herein in reliance upon the authority of said firm as experts in accounting and auditing. There were no disagreements related to accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure from date of appointment as our independent registered accountant through the period of audit (inception date June 13, 2012 through July 31, 2012)
BUSINESS DESCRIPTION
OVERVIEW
We are an exploration stage company, incorporated in the State of Nevada on June 13, 2012, as a for-profit company, and electing a fiscal year end of July 31. Our business office is located at 6025 South Quebec Street, Suite 100, Centennial, CO, 80111 and our registered office is located at 2620 Regatta Drive, Suite 102, Las Vegas, NV, 89128. Our telephone number is 1-800-493-0740. We have reserved a domain main and have a staging site that can be found at www.Freedompetroleum.com.
We plan on engaging in the exploration and development of oil and gas properties. We have acquired 100%, subject to an overriding royalty of 3.3333% of 8/8ths of all the oil, gas and other hydrocarbons produced, saved and marketed, of a 624 net acre Bakken shale lease in Lewis and Clark County, Montana, which we plan to explore for oil and gas. This property is described in "Description of Business" further in this Prospectus and is otherwise known as the Bear River Prospect. We have had limited operations and have been issued a "going concern" opinion by our auditor, based upon our reliance on the sale of our common stock as the sole source of funds for our future operations. We anticipate conducting exploration activity on this property to ascertain whether production of oil and gas will be financially feasible given the current market for these commodities. If our exploration activity results in a positive outlook for the commercialization of the property, we anticipate on exercising the option on the property and begin production. However, there can be no assurance that we will raise sufficient funds to complete the type of exploration activity which will be necessary and then begin production.
We have had limited operations and have been issued a "going concern" opinion by our auditor, based upon our reliance on the sale of our common stock as the sole source of funds for our future operations. We will need to raise $210,500 through the sale of our common stock, in addition to the proceeds of this offering, in order to implement our business plan for the upcoming 12 months. Our initial exploration plan calls for $30,000. If the initial exploration is successful, we plan to undertake a second phase of exploration. We anticipate that the second phase of exploration will cost approximately $150,000 and we will need to raise additional capital in order to carry out this activity. There can be no assurance that the initial stage of exploration activity will provide positive results or that we will be able to raise the capital required to undertake the planned second stage. Since our inception in June 2012, we have been involved primarily in organizational and acquisition activities. We have raised some initial capital, acquired an option on the Bear River Prospect property, developed a short-term and long term corporate strategy and retained experts in law and accounting. We anticipate undertaking exploration activity on the Bear River Prospect by spring of 2013.
Our short term business strategy is to conduct exploration activities on the Bear River Prospect, laid out in more detail in the "Description of Property" section of this Prospectus and raise sufficient capital to carry out these activities. If achieve positive results during our exploration activities, we believe we will be able to either develop the Bear River Prospect to the point of production or transfer our rights in the property at a profit.
Our long term strategy calls for the acquisition of additional property rights throughout North America and the undertaking of exploration activities on those properties. Both our short term and long term strategies are dependent on the ability to raise further capital and there can be no assurance that we will be able to raise such capital.
MARKETS
The availability of a ready market and the prices obtained for produced oil and gas depends on many factors, including the extent of domestic production and imports of oil and gas, the proximity and capacity of natural gas pipelines and other transportation facilities, fluctuating demand for oil and gas, the marketing of competitive fuels, and the effects of governmental regulation of oil and gas production and sales. A ready domestic market for oil and gas exists because of the presence of pipelines to transport oil and gas. The existence of an international market exists depends upon the presence of international delivery systems and political and pricing factors.
If we are successful in producing oil and gas in the future, the target customers for our oil and gas are expected to be refiners, remarketers and third party intermediaries, who either have, or have access to, consumer delivery systems. We intend to sell our oil and gas under both short-term (less than one year) and long-term (one year or more) agreements at prices negotiated with third parties. Typically either the entire contract (in the case of short-term contracts) or the price provisions of the contract (in the case of long-term contracts) are renegotiated at intervals ranging in frequency from daily to annually.
We have not yet adopted any specific sales and marketing plans. However, as we purchase future properties, the need to hire marketing personnel will be addressed.
COMPETITION
The oil and gas industry is highly competitive. We are a new exploration stage company and have a weak competitive position in the industry. We compete with junior and senior oil and gas companies, independent producers and institutional and individual investors who are actively seeking to acquire oil and gas properties throughout the world together with the equipment, labor and materials required to operate on those properties. Competition for the acquisition of oil and gas interests is intense with many oil and gas leases or concessions available in a competitive bidding process in which we may lack the technological information or expertise available to other bidders.
Many of the oil and gas companies with which we compete for financing and for the acquisition of oil and gas properties have greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater amounts on acquiring oil and gas interests of merit or on exploring or developing their oil and gas properties. This advantage could enable our competitors to acquire oil and gas properties of greater quality and interest to prospective investors who may choose to finance their additional exploration and development. Such competition could adversely impact our ability to attain the financing necessary for us to acquire further oil and gas interests or explore and develop our current or future oil and gas properties.
We also compete with other junior oil and gas companies for financing from a limited number of investors that are prepared to invest in such companies. The presence of competing junior oil and gas companies may impact our ability to raise additional capital in order to fund our acquisition or exploration programs if investors perceive that investments in our competitors are more attractive based on the merit of their oil and gas properties or the price of
the investment opportunity. In addition, we compete with both junior and senior oil and gas companies for available resources, including, but not limited to, professional geologists, land specialists, engineers, camp staff, helicopters, float planes, oil and gas exploration supplies and drill rigs.
General competitive conditions may be substantially affected by various forms of energy legislation and/or regulation introduced from time to time by the governments of the United States and other countries, as well as factors beyond our control, including international political conditions, overall levels of supply and demand for oil and gas, and the markets for synthetic fuels and alternative energy sources.
In the face of competition, we may not be successful in acquiring, exploring or developing profitable oil and gas properties or interests, and we cannot give any assurance that suitable oil and gas properties or interests will be available for our acquisition, exploration or development. Despite this, we hope to compete successfully in the oil and gas industry by:
* keeping our costs low;
* relying on the strength of our management's contacts; and
* using our size and experience to our advantage by adapting quickly to
changing market conditions or responding swiftly to potential
opportunities.
GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL COMPLIANCE
GENERAL. Our exploration activities are subject to federal, state and local laws and regulations governing exploration, environmental matters, occupational health and safety, taxes, labor standards and other matters. All material licenses, permits and other authorizations currently required for our operations have been obtained or timely applied for. Compliance is often burdensome, and failure to comply carries substantial penalties. The regulatory burden on the oil and gas industry increases the cost of doing business and affects profitability.
ENVIRONMENTAL MATTERS. Our operations are subject to numerous laws relating to environmental protection. These laws impose substantial penalties for any pollution resulting from our operations. We believe that our operations substantially comply with applicable environmental laws.
SOLID WASTE. Our operations require the disposal of both hazardous and nonhazardous solid wastes that are subject to the requirements of the Federal Resource Conservation and Recovery Act (RCRA) and comparable state statutes. In addition, the EPA and certain states in which we currently operate are presently in the process of developing stricter disposal standards for nonhazardous waste. Changes in these standards may result in our incurring additional expenditures or operating expenses.
HAZARDOUS SUBSTANCES. The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also known as the "Superfund" law, imposes liability, without regard to fault or the legality of the original conduct, on some classes of persons that are considered to have contributed to the release of a "hazardous substance" into the environment. These persons include but are not limited to the owner or operator of the site or sites where the release occurred or was threatened and companies that disposed or arranged for the disposal of the hazardous substances found at the site. Persons responsible for releases of hazardous substances under CERCLA may be subject to joint and several liability for the costs of cleaning up the hazardous substances and for damages to natural resources. Despite the RCRA exemption that encompasses wastes
directly associated with crude oil and gas production and the "petroleum exclusion" of CERCLA, we may generate or arrange for the disposal of "hazardous substances" within the meaning of CERCLA or comparable state statutes in the course of our ordinary operations. Thus, we may be responsible under CERCLA (or the state equivalents) for costs required to clean up sites where the release of a "hazardous substance" has occurred. Also, it is not uncommon for neighboring landowners and other third parties to file claims for cleanup costs as well as personal injury and property damage allegedly caused by the hazardous substances released into the environment. Thus, we may be subject to cost recovery and to some other claims as a result of our operations.
AIR. Our operations are also subject to regulation of air emissions under the Clean Air Act, comparable state and local requirements and the OCSLA. The scheduled implementation of these laws could lead to the imposition of new air pollution control requirements on our operations. Therefore, we may incur future capital expenditures to upgrade our air pollution control equipment. We do not believe that our operations would be materially affected by these requirements, nor do we expect the requirements to be any more burdensome to us than to other companies our size involved in exploration and production activities.
WATER. The Clean Water Act prohibits any discharge into waters of the United States except in strict conformance with permits issued by federal and state agencies. Failure to comply with the ongoing requirements of these laws or inadequate cooperation during a spill event may subject a responsible party to civil or criminal enforcement actions. Similarly, the Oil Pollution Act of 1990 imposes liability on "responsible parties" for the discharge or substantial threat of discharge of oil into navigable waters or adjoining shorelines. A "responsible party" includes the owner or operator of a facility or vessel, or the lessee or permittee of the area in which a facility is located. The Oil Pollution Act assigns liability to each responsible party for oil removal costs and a variety of public and private damages. While liability limits apply in some circumstances, a party cannot take advantage of liability limits if the spill was caused by gross negligence or willful misconduct, or resulted from violation of a federal safety, construction or operating regulation. If the party fails to report a spill or to cooperate fully in the cleanup, liability limits likewise do not apply. Even if applicable, the liability limits for offshore facilities require the responsible party to pay all removal costs, plus up to $75 million in other damages. Few defenses exist to the liability imposed by the Oil Pollution Act.
The Oil Pollution Act also requires a responsible party to submit proof of its financial responsibility to cover environmental cleanup and restoration costs that could be incurred in connection with an oil spill. The Oil Pollution Act requires parties responsible for offshore facilities to provide financial assurance in amounts that vary from $35 million to $150 million depending on a company's calculation of its "worst case" oil spill.
SAFETY AND HEALTH REGULATIONS. We are also subject to laws and regulations concerning occupational safety and health. We do not currently anticipate making substantial expenditures because of occupational safety and health laws and regulations. We cannot predict how or when these laws may be changed, or the ultimate cost of compliance with any future changes. However, we do not believe that any action taken will affect us in a way that materially differs from the way it would affect other companies in our industry.
INTELLECTUAL PROPERTY
We do not currently hold rights to any intellectual property and have not filed for copyright or trademark protection for our name or services. We own the rights to our website: www.freedompetroleum.com.
RESEARCH AND DEVELOPMENT
Since our inception to the date of this Prospectus, we have not spent any money on research and development activities.
REPORTS TO SECURITY HOLDERS
Any member of the public may read and copy any materials filed by us with the Securities and Exchange Commission at the Securities and Exchange Commission's Public Reference Room at 100 F Street, N.E. Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the Securities and Exchange Commission at 1-800-732-0330. The Securities and Exchange Commission maintains an internet website (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Securities and Exchange Commission.
DESCRIPTION OF PROPERTY
We have acquired 100%, subject to an overriding royalty of 3.3333% of 8/8ths of all the oil, gas and other hydrocarbons produced, saved and marketed, of a 624 net acre Bakken shale lease in Lewis and Clark County, Montana, known as the Bear River Prospect. The Bear River Prospect is specifically at Township 15 North, Range 4 West and is legally described as Section 32: Lots 1 through 8, E2.
We also have an office at 6025 South Quebec Street, Suite 100, Centennial, CO, 80111, which measures approximately 200 square feet and costs us $300 a month.
OWNERSHIP
On July 23, 2012 we entered into, and on August 2, 2012 we closed on a Lease Purchase Agreement with Summit West Oil, LLC pursuant to which we acquired the Bear River Prospect for $15,000. The lease is subject to a 3.3333% royalty owed to Summit West Oil, LLC, as well as a 16.67% royalty owed to the government of Montana over all oil and gas produced from the property. A copy of the Lease Purchase Agreement, with the original lease from the government of Montana attached as a Schedule, is filed herewith as Exhibit 10.1.
The lease is for a ten year term with a commencement date of June 5, 2012. The ability to renew the lease is to be renegotiated before or upon termination if Freedom Petroleum Inc. should choose to renew the leasing rights. The lease is extended automatically upon the ignition of oil or gas production from the property.
LOCATION
The Bear River opportunity is located in an area of the Alberta Bakken Fairway in Section 32 - Township 15 North - Range 4 West, Lewis & Clark County, Montana. It is where the western edge of the Bakken Fairway plunges into contact with the tectonically heated Thrust Zone and where our management believes, the resulting thermal maturity of the Bakken offers high potential for oil production.
[MAPS SHOWING CLAIM LOCATION]
GEOLOGY
The Bakken shale in the Bear River Prospect area is considered mature in geological terms. The vitreonix isopach demonstrates that the Bear River Prospect is well within the window of maturity, having an Ro between .75-1.0 regionally. The resistivity of the offsetting wells exceeds 400 ohms.
The Bakken development is considered simple and basic. A large blanket deposit covering hundreds of square miles is present and is currently being developed by approximately 200 drilling rigs in the Williston Basin. Our management believes that the western Bakken is very similar. Resistivity on logs and regional isopach maps of Bakken maturity guides the site selection for development. We believe that the Bear River Prospect is well within the maturity window.
EXPLORATION PROGRAM
In order to advance our property to a stage that would make the property of interest for a farm-in opportunity we will need to undertake the early stages of exploration ourselves. Our holdings do not currently have a resource. Our initial work plan for the first year will include a detailed review of all publicly available data and prepare for two drilling locations. In particular, the review will include a detailed assessment of publicly available drilling information to help us assess whether our properties may contain the type of formations that typically host crude oil in Montana. The review will also help to determine which other oil companies are exploring or drilling in our area in order to help us assess the possibility of approaching those companies for potential farm-in opportunities.
In addition to reviewing publicly available information we intend to conduct seismology studies to best make further determinations of geological potential. Seismology is a geophysical method of determining geologic structure by means of prospector-induced elastic waves. In exploration seismology, artificial sources are used that have periods of tenths of a second and tens of meters of resolution.
The seismic method as applied to exploration of oil and gas involves field acquisition, data processing, and geologic interpretation. Seismic field acquisition requires placement of acoustic receivers (geophones) on the surface. The end result of seismic data processing is the production of a subsurface profile similar to a geologic cross section. It is commonly plotted in a time scale, but it is also possible to plot it in depth. These time or depth profiles are used for geologic interpretation. Geologic interpretation of seismic data has two key components, structural and stratigraphic. Structural interpretation of seismic data involves mapping of the geologic relief of different subsurface strata by using seismic data as well as information from boreholes and outcrops. Stratigraphic interpretation looks at attributes within a common stratum and interprets changes to infer varying reservoir conditions such as lithology, porosity, and fluid content.
Based on the results of the planned work program the next step in the exploration process will likely be to approach oil companies in the area to discuss farm-in opportunities or to raise additional funds in order to drill a well.
We believe our initial exploration program will cost approximately $30,000 to complete. The breakdown for the program is as follows:
PHASE 1
Exploration Cost
----------- ---------
Drillings Permits & Location Surveys [2 x $3,500] $ 7,000
Geological Field Mapping - 2 Geologists @ $1,600/day X 5 days $ 8,000
Well Site Location & Environmental Study $ 7,500
Initial Engineering & Drilling Program, AFE's $ 3,000
Travel & Lodging $ 2,500
Administrative & Communications $ 2,000
--------
TOTAL $ 30,000
========
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If this initial phase provides us with positive results, we will undertake a second phase of exploration in an attempt to delineate an oil and gas reserve on our property. This second phase will cost approximately $150,000 and we will need additional capital in order to carry out this plan. The proposed second step of exploration on the Bear River Prospect is as follows:
PHASE 2
Exploration Cost
----------- ---------
3D Seismic Line Over Prospect Area $ 75,000
Reclamation Bond for Drilling Operations $ 25,000
Location idrt work, Contractor, Site Preparation $ 15,000
Drilling Contractor Deposit $ 20,000
Project Administration $ 10,000
Third Party Services, Deposits For Other Drilling Services $ 5,000
--------
TOTAL $150,000
========
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We have not recognized any revenue from our oil and gas project and do not expect to generate any revenue for at least 12 months. Our property does not contain any known reserves or resources of oil or gas.
LEGAL PROCEEDINGS
We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which our director, officer, or affiliate, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Our common stock is not traded on any exchange. We intend to apply to have our common stock quoted on the OTC Bulletin Board once this Prospectus has been declared effective by the SEC; however, there is no guarantee that we will obtain a listing.
There is currently no trading market for our common stock and there is no assurance that a regular trading market will ever develop. OTC Bulletin Board securities are not listed and traded on the floor of an organized national or regional stock exchange. Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers. OTC Bulletin Board issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.
To have our common stock listed on any of the public trading markets, including the OTC Bulletin Board, we will require a market maker to sponsor our securities. We have not yet engaged any market maker to sponsor our securities, and there is no guarantee that our securities will meet the requirements for quotation or that our securities will be accepted for listing on the OTC Bulletin Board. This could prevent us from developing a trading market for our common stock.
HOLDERS
As of the date of this Prospectus there were 2 holders of record of our common stock.
DIVIDENDS
To date, we have not paid dividends on shares of our common stock and we do not expect to declare or pay dividends on shares of our common stock in the foreseeable future. The payment of any dividends will depend upon our future earnings, if any, our financial condition, and other factors deemed relevant by our Board of Directors.
EQUITY COMPENSATION PLANS
As of the date of this Prospectus we did not have any equity compensation plans.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This section of the prospectus includes a number of forward-looking statements
that reflect our current views with respect to future events and financial
performance. Forward-looking statements are often identified by words like:
"believe", "expect", "estimate", "anticipate", "intend", "project" and similar
expressions, or words that, by their nature, refer to future events. You should
not place undue certainty on these forward-looking statements, which apply only
as of the date of this prospectus. These forward-looking statements are subject
to certain risks and uncertainties that could cause actual results to differ
materially from historical results or our predictions.
Our financial statements are stated in United States Dollars (USD or US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references to "common shares" refer to the common shares in our capital stock.
We anticipate that we will meet our ongoing cash requirements through equity or debt financing. We estimate that our expenses over the next 12 months will be approximately $253,500 as described in the table below. These estimates may change significantly depending on the nature of our future business activities and our ability to raise capital from shareholders or other sources.
Estimated Estimated
Description Completion Date Expenses
----------- --------------- --------
Legal and accounting fees 12 months $ 30,000
Exploration Expenses 12 months $180,000
General and administrative expenses 12 months $ 13,500
Acquisition of Additional Properties 12 months $ 30,000
--------
TOTAL $253,500
========
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We intend to meet our cash requirements for the next 12 months through a combination of debt financing and equity financing by way of private placements. We currently do not have any arrangements in place to complete any private placement financings and there is no assurance that we will be successful in completing any such financings on terms that will be acceptable to us.
If we are not able to raise the full $253,500 to implement our business plan as anticipated, we will scale our business development in line with available capital. Our primary priority will be to retain our reporting status with the SEC which means that we will first ensure that we have sufficient capital to cover our legal and accounting expenses. Once these costs are accounted for, in accordance with how much financing we are able to secure, we will focus on exploration activities on our property. We will likely not expend funds on the remainder of our planned activities unless we have the required capital.
We did not earn any revenues from our incorporation on June 13, 2012 to July 31, 2012. We incurred operating expenses in the amount of $8,404 for the period from our inception on June 13, 2012 through July 31, 2012. These operating expenses were comprised of incorporation costs, website, bank service charges and other development costs. On August 12, 2012 we spent $15,000 of the funds we had on hand for the acquisition of the Bear River Prospect.
As of July 31, 2012, our current assets were $24,230 and our liabilities were $20,474, which resulting in working capital of $3,756. As of July 31, 2012, current assets were comprised of $24,230 in cash and $15,000 in unproved oil and gas properties. Management believes additional capital will be required in order to complete our secondary offering which we intend to raise though debt. Capital required to complete our initial exploration plans however will require equity through private placements. We currently do not have any arrangements in place to complete any private placement financings and there is no assurance that we will be successful in completing any such financings on terms that will be acceptable to us.
We have not attained profitable operations and are dependent upon obtaining financing to continue with our business plan.
OFF-BALANCE SHEET ARRANGEMENTS
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.
INFLATION
The effect of inflation on our revenues and operating results has not been significant.
CRITICAL ACCOUNTING POLICIES
Our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete listing of these policies is included in the notes to our financial statements for the period from June 13, 2012 to July 31, 2012. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by management.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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.
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 July 31, 2012.
OIL AND GAS PROPERTIES
We use 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, including exploration wells in progress at July 31, 2012, 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 the 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 July 31, 2012, capitalized costs did not exceed the ceiling limitation, and no write-down was indicated.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Silberstein Ungar PLLC, has audited our Financial Statements for the period June 13, 2012 (date of inception) to July 31, 2012 and to the extent set forth in its report, which are included herein in reliance upon the authority of said firm as experts in accounting and auditing. There were no disagreements related to accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure during the above period.
MANAGEMENT
OFFICERS AND DIRECTOR
Our sole Officer and Director will serve until her successor is elected and qualified. Our officer was elected by the board of directors and serves until her successor(s) is duly elected and qualified, or until she is removed from office. The board of directors has no nominating, auditing or compensation committees.
Thomas Hynes, is our officer and director, and Nina Bijedic is our officer. The name, age and position of our officers and director are set forth below:
Name Age Position(s)
---- --- -----------
Thomas Hynes 54 President, Treasurer, Chief Executive Officer,
Principal Financial Officer and Director
Nina Bijedic 41 Secretary
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The persons named above have held their offices/positions since the inception of our company and are expected to hold her offices/positions until the next annual meeting of our stockholders.
BUSINESS EXPERIENCE
THOMAS HYNES, PRESIDENT, TREASURER, CHIEF EXECUTIVE OFFICER, PRINCIPAL FINANCIAL OFFICER AND DIRECTOR
Mr. Hynes is our sole director and one of our two officers. Mr. Hynes has served as such since our inception. Mr. Hynes has over twenty five years of leadership experience within the energy, mineral and financial industries, with a background in domestic and international oilfield well site services and gold mining/dredging operations.
Since November of 2008, Mr. Hynes has been the owner of KTH Oil & Gas Consulting, where he provides geological services including prospect evaluation and creation, well site supervision, and project management; specializing in Rocky Mountain geological regions including Powder River Basin and Crow Indian Nation in Wyoming and Montana. Also since 2008, Mr. Hynes has been the Vice-President of Guffey Gold & Minerals Corporation where he was responsible for overseeing project development, fund raising, and expansion opportunities, supervising all field operations, property acquisition and evaluation, and maximizing production at existing operations. Currently involved in a joint venture operation in Guyana with an existing river dredging operator, the company is producing 450 ounces of gold per month.
From October 2006 to November 2009, Mr. Hynes was the Vice President of Field Operations for Golden Arrow Exploration & Bison Acid Service. At Golden Arrow, Mr. Hynes was responsible for supervising well site geological evaluation and oil and gas detection on multiple oil wells drilled on the Crow Indian Reservation, South of Billings, Montana. Wells were drilled to the Tensleep (Minnelusa) Formation for potential oil production, and other shallow gas formations were evaluated for natural gas production. From November 1990 to April 2009 Mr. Hynes was a Registered Representative at Northeast Securities in
Denver, Colorado. At Northeast Securities Mr. Hynes raised capital for oil companies, airline leasing companies, entertainment companies, and high-tech companies. Additionally, he supervised the retail accounts of 300 investors, and several dozen stockbrokers with emphasis on suitability, compliance and production.
Mr. Hynes is qualified to sit on our board of directors due to his experience with oil and gas operations as well as his past work in raising capital and managing investments.
Currently, Mr. Hynes spends approximately 25 hours a week on our affairs and Ms. Bijedic devotes approximately 15 hours per week on developing our business plan and developing marketing and capital raising materials.
OTHER DIRECTORSHIPS
Mr. Hynes does not and has not held over the past five years, any other directorships in any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.
CONFLICTS OF INTEREST
Neither Mr. Hynes nor Ms. Bijedic is obligated to commit their full time and attention to our business and accordingly, they may encounter a conflict of interest in allocating their time between our operations and those of other businesses. In that course of their other business activities they may become aware of investment and business opportunities which may be appropriate for presentation to us as well as other entities to which she owes a fiduciary duty. As a result they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. They may also in the future become affiliated with entities that are engaged in business activities similar to those we intend to conduct.
In general, officers and directors of a corporation are required to present business opportunities to the corporation if:
* the corporation could financially undertake the opportunity:
* the opportunity is within the corporation's line of business: and
* it would be unfair to the corporation and its stockholders not to
bring the opportunity to the attention of the corporation.
COMMITTEES OF THE BOARD OF DIRECTORS
Our director has not established any committees, including an Audit Committee, a Compensation Committee or a Nominating Committee, or any committee performing a similar function. The functions of those committees are being undertaken by our director. Because we do not have any independent directors, our board of directors believes that the establishment of committees of the Board would not provide any benefits to our company and could be considered more form than substance.
We do not have a policy regarding the consideration of any director candidates that may be recommended by our stockholders, including the minimum qualifications for director candidates, nor has our sole director established a process for identifying and evaluating director nominees. We have not adopted a
policy regarding the handling of any potential recommendation of director candidates by our stockholders, including the procedures to be followed. Our two directors and officers not considered or adopted any of these policies as we have never received a recommendation from any stockholder for any candidate to serve on our Board of Directors. Given our relative size and lack of directors and officers insurance coverage, we do not anticipate that any of our stockholders will make such a recommendation in the near future.
While there have been no nominations of additional directors proposed, in the event such a proposal is made, all current members of our Board will participate in the consideration of director nominees.
Mr. Hynes is not an "audit committee financial expert" within the meaning of Item 401(e) of Regulation S-K. In general, an "audit committee financial expert" is an individual member of the audit committee or Board of Directors who:
* understands generally accepted accounting principles and financial
statements,
* is able to assess the general application of such principles in
connection with accounting for estimates, accruals and reserves,
* has experience preparing, auditing, analyzing or evaluating financial
statements comparable to the breadth and complexity to our financial
statements,
* understands internal controls over financial reporting, and
* understands audit committee functions.
As with most small, early stage companies until such time our company further develops its business, achieves a stronger revenue base and has sufficient working capital to purchase directors and officers insurance, we do not have any immediate prospects to attract independent directors. When we are able to expand our Board of Directors to include one or more independent directors, we intend to establish an Audit Committee of our Board of Directors. It is our intention that one or more of these independent directors will also qualify as an audit committee financial expert. Our securities are not quoted on an exchange that has requirements that a majority of our Board members be independent and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include "independent" directors, nor are we required to establish or maintain an Audit Committee or other committee of our Board of Directors.
WE DO NOT HAVE ANY INDEPENDENT DIRECTORS AND WE HAVE NOT VOLUNTARILY IMPLEMENTED VARIOUS CORPORATE GOVERNANCE MEASURES, IN THE ABSENCE OF WHICH, STOCKHOLDERS MAY HAVE MORE LIMITED PROTECTIONS AGAINST INTERESTED DIRECTOR TRANSACTIONS, CONFLICTS OF INTEREST AND SIMILAR MATTERS.
EXECUTIVE COMPENSATION
We have made no provisions for paying cash or non-cash compensation to our sole Officer and Director. No salaries are being paid at the present time, no salaries or other compensation were paid in cash, or otherwise, for services performed prior to our date of inception, and we do not anticipate that any compensation will be paid unless and until our operations generate sufficient cash flows.
The table below summarizes all compensation awarded to, earned by, or paid to our named officers for all services rendered in all capacities to us for the period from inception (June 13, 2012) through July 31, 2012.
SUMMARY COMPENSATION TABLE
Non-Equity Nonqualified
Name and Incentive Deferred
Principal Stock Option Plan Compensation All Other
Position Year Salary($) Bonus($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Totals($)
-------- ---- --------- -------- --------- --------- --------------- ----------- --------------- ---------
Thomas Hynes, 2012 0 0 0 0 0 0 0 0
President,
CEO, CFO
Nina Bijedic, 2012 0 0 0 0 0 0 0 0
Secretary
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We have not paid any salaries to our officers or our director as of the date of this Prospectus. We do not anticipate beginning to pay salaries until we have adequate funds to do so. There are no other stock option plans, retirement, pension, or profit sharing plans for the benefit of our officer and directors other than as described herein.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of July 31, 2012.
Option Awards Stock Awards
----------------------------------------------------------------- -------------------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Plan Market or
Awards: Payout
Equity Number of Value of
Incentive Number Unearned Unearned
Plan Awards; of Market Shares, Shares,
Number of Number of Number of Shares Value of Units or Units or
Securities Securities Securities or Units Shares or Other Other
Underlying Underlying Underlying of Stock Units of Rights Rights
Unexercised Unexercised Unexercised Option Option That Stock That That That
Options Options Unearned Exercise Expiration Have Not Have Not Have Not Have Not
Name Exercisable(#) Unexercisable(#) Options(#) Price($) Date Vested(#) Vested($) Vested(#) Vested(#)
---- ------------------------------- ---------- -------- ---- --------- --------- --------- ---------
Thomas -- -- -- -- -- -- -- -- --
Hynes
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There were no grants of stock options since inception to the date of this Prospectus.
We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.
We have not adopted a stock option plan. We have no plans to adopt a stock option plan, but may choose to do so in the future. If such a plan is adopted, this may be administered by the board or a committee appointed by the board (the "Committee"). The committee would have the power to modify, extend or renew outstanding options and to authorize the grant of new options in substitution therefore, provided that any such action may not impair any rights under any option previously granted. We may develop an incentive based stock option plan for our officers and directors and may reserve up to 10% of our outstanding shares of common stock for that purpose.
OPTIONS GRANTS DURING THE LAST FISCAL YEAR / STOCK OPTION PLANS
We do not currently have a stock option plan in favor of any director, officer, consultant or employee of our company. No individual grants of stock options, whether or not in tandem with stock appreciation rights known as SARs or freestanding SARs have been made to our Sole Director and Officer since our inception; accordingly, no stock options have been granted or exercised by our Sole Director and Officer since we were founded.
AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR
No individual grants of stock options, whether or not in tandem with stock appreciation rights known as SARs or freestanding SARs have been made to our officer or directors since our inception; accordingly, no stock options have been granted or exercised by our officer or directors since we were founded.
LONG-TERM INCENTIVE PLANS AND AWARDS
We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance. No individual grants or agreements regarding future payouts under non-stock price-based plans have been made to our officer, directors or any employee or consultant since our inception; accordingly, no future payouts under non-stock price-based plans or agreements have been granted or entered into or exercised by our officer, directors or employees or consultants since we were founded.
COMPENSATION OF DIRECTORS
Our directors are not compensated by us for acting as such. They are reimbursed for reasonable out-of-pocket expenses incurred. There are no arrangements pursuant to which our directors are or will be compensated in the future for any services provided as a Director.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, CHANGE-IN-CONTROL ARRANGEMENTS
There are no employment contracts or other contracts or arrangements with Mr. Hynes and Ms. BIjedic. There are no compensation plans or arrangements, including payments to be made by us, with respect to Mr. Hynes and Ms. Bijedic that would result from their resignation, retirement or any other termination. There are no arrangements for Directors, Officers or Employees that would result from a change-in-control.
INDEBTEDNESS OF DIRECTORS, SENIOR OFFICERS, EXECUTIVE OFFICERS AND OTHER MANAGEMENT
Neither our officer, directors nor any associate or affiliate of our company during the last two fiscal years are or have been indebted to our company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of the date of this prospectus, the total number of shares owned beneficially by our sole officer and director, and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares. The table also reflects what her ownership will be assuming completion of the sale of all shares in this offering. The stockholder listed below has direct ownership of her shares and possesses sole voting and dispositive power with respect to the shares. Unless otherwise provided for, the address of each beneficial owner is c/o our company at 6025 South Quebec Street, Suite 100, Centennial, CO, 80111.
Name and Address Amount and Nature of Percent of
Title of Class of Beneficial Owner [1] Beneficial Ownership Class [2]
-------------- ----------------------- -------------------- ---------
Common Stock Thomas Hynes 17,000,000 63%
Common Stock Nina Bijedic 10,000,000 37%
All Officers and Directors
as a Group (2 persons) 27,000,000 100%
----------
|
[1] The person named above may be deemed to be a "parent" and "promoter" of our
company, within the meaning of such terms under the Securities Act of 1933,
as amended, by virtue of their direct and indirect stock holdings. Mr.
Hynes and Ms. Bijedic are the only "promoters" of our company. Mr. Hynes is
our sole director and one of our officers. Ms. Bijedic is one of our two
officers.
[2] Based on 27,000,000 shares issued and outstanding as of the date of this
Prospectus.
CHANGE IN CONTROL
We are not aware of any arrangement that might result in a change in control of our company in the future.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On July 30, 2012 we issued 17,000,000 shares of restricted common stock to Thomas Hynes, our sole director and one of our two officers for consideration of $17,000. Also on July 30, 2012 we Issued 10,000,000 shares of restricted common stock to Nina Bijedic, an officer, for total consideration of $10,000.
There have been no other transactions since our audit date, July 31, 2012, or any currently proposed transactions in which we are, or plan to be, a participant and in which any related person had or will have a direct or indirect material interest.
DIRECTOR INDEPENDENCE
We do not currently have any independent directors. Once we engage further directors and officers, we plan to develop a definition of independence and scrutinize our Board of Directors with regard to this definition.
LEGAL PROCEEDINGS
We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.
We intend to furnish annual reports to stockholders, which will include audited financial statements reported on by our Certified Public Accountants. In addition, we will issue unaudited quarterly or other interim reports to stockholders, as we deem appropriate or required by applicable securities regulations.
DISCLOSURE OF COMMISSION'S POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Our Bylaws provide that we will indemnify our directors and officers to the fullest extent not prohibited by Nevada law.
The general effect of the foregoing is to indemnify a control person, officer or director from liability, thereby making us responsible for any expenses or damages incurred by such control person, officer or director in any action brought against them based on their conduct in such capacity, provided they did not engage in fraud or criminal activity.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or control persons pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
REPORTS TO SECURITY HOLDERS
As a result of this offering as required under Section 15(d) of the Securities Exchange Act of 1934, we will file periodic reports with the Securities and Exchange Commission through July 31, 2013, including a Form 10-K for the year ended July 31, 2013, assuming this registration statement is declared effective before that date. At or prior to July 31, 2013 we intend voluntarily to file a registration statement on Form 8-A which will subject us to all of the reporting requirements of the 1934 Act. This will require us to file quarterly and annual reports with the SEC and will also subject us to the proxy rules of the SEC. In addition, our officers, directors and 10% stockholders will be required to submit reports to the SEC on their stock ownership and stock trading activity. We are not required under Section 12(g) or otherwise to become a mandatory 1934 Act filer unless we have more than 2,000 (maximum 500 non-accredited) shareholders and total assets of more than $10 million on July 31, 2013. If we do not file a registration statement on Form 8-A at or prior to July 31, 2013, we plan to continue as a reporting company, but will not be subject to the proxy statement requirements of the 1934 Act, and our officers, directors and 10% stockholders will not be required to submit reports to the SEC on their stock ownership and stock trading activity.
The public may read and copy any materials filed by us with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We are an electronic filer. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.
WHERE YOU CAN FIND MORE INFORMATION
In the Registration Statement, certain items of which are contained in exhibits and schedules as permitted by the rules and regulations of the Securities and Exchange Commission. You can obtain a copy of the Registration Statement from the Securities and Exchange Commission by mail from the Public Reference Room of the Securities and Exchange Commission at 100 F Street, NE, Washington, D.C. 20549, at prescribed rates. In addition, the Securities and Exchange Commission maintains a Web site at http://www.sec.gov containing reports, proxy and information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission. The Securities and Exchange Commission's telephone number is 1-800-SEC-0330 (1-800-732-0330). These SEC filings are also available to the public from commercial document retrieval services.
You should rely only on the information contained in this prospectus. No finder, dealer, sales person or other person has been authorized to give any information or to make any representation in connection with this offering other than those contained in this prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by our company. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby by anyone in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.
RECENT SALES OF UNREGISTERED SECURITIES
During the last three fiscal years we have had the following issuances of unregistered securities:
* On July 30, 2012 we issued 17,000,000 shares of restricted common
stock to Thomas Hynes, our sole director and one of our two officers
for consideration of $17,000. These shares were issued without a
prospectus in reliance on exemptions from registration found in
Section 4(2) of the Securities Act of 1933, as amended.
* Also on July 30, 2012 we issued 10,000,000 shares of restricted common
stock to Nina Bijedic, an officer, for total consideration of $10,000.
These shares were issued without a prospectus in reliance on
exemptions from registration found in Regulation S of the Securities
Act of 1933, as amended.
STOCK TRANSFER AGENT
We have not engaged the services of a transfer agent at this time. However, within the next twelve months we anticipate doing so. Until such a time a transfer agent is retained, we will act as our own transfer agent.
FINANCIAL STATEMENTS
FREEDOM PETROLEUM, INC.
(AN EXPLORATION STAGE COMPANY)
FINANCIAL STATEMENTS
JULY 31, 2012
Report of Independent Registered Public Accounting Firm F-2 Balance Sheet as of July 31, 2012 F-3 Statement of Operations for the period from June 13, 2012 (Date of Inception) through July 31, 2012 F-4 Statement of Stockholders' Equity as of July 31, 2012 F-5 Statement of Cash Flows for the period from June 13, 2012 (Date of Inception) through July 31, 2012 F-6 Notes to Financial Statements F-7 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Freedom Petroleum, Inc.
Las Vegas, NV
We have audited the accompanying balance sheet of Freedom Petroleum, Inc., as of July 31, 2012, and the related statements of operations, stockholders' equity, and cash flows for the period from June 13, 2012 (date of inception) to July 31, 2012. 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 the 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 has determined that it 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 Freedom Petroleum, Inc., as of July 31, 2012 and the results of their operations and cash flows for the period from June 13, 2012 (date of inception) to July 31, 2012, in conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that Freedom Petroleum, Inc. will continue as a going concern. As discussed in Note 9 to the financial statements, the Company has incurred losses from operations and is in need of additional capital to grow its operations so that it can become profitable. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans with regard to these matters are described in Note 9. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Silberstein Ungar, PLLC ------------------------------------ Silberstein Ungar, PLLC Bingham Farms, Michigan September 5, 2012 |
FREEDOM PETROLEUM, INC.
(An Exploration Stage Company)
BALANCE SHEET
AS OF JULY 31, 2012
ASSETS
Current Assets
Cash and cash equivalents $ 24,230
--------
Total Current Assets 24,230
Property and equipment
Unproved oil and natural gas properties 15,000
--------
Total Assets $ 39,230
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued expenses $ 19,650
Due to related party 824
--------
Total Current Liabilities 20,474
--------
Stockholders' Equity
Common stock, $0.0001 par value; 100,000,000 shares authorized,
27,000,000 shares issued and outstanding 2,700
Preferred stock, $0.0001 par value; 20,000,000 shares authorized,
0 shares issued and outstanding 0
Additional paid-in capital 24,460
Deficit accumulated during the exploration stage (8,404)
--------
Total Stockholders' Equity 18,756
--------
Total Liabilities and Stockholders' Equity $ 39,230
========
|
The accompanying notes are an integral part of the financial statements.
FREEDOM PETROLEUM, INC.
(An Exploration Stage Company)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JUNE 13, 2012 (DATE OF INCEPTION) THROUGH JULY 31, 2012
Period From
June 13, 2012
(Date of Inception)
through
July 31, 2012
-------------
GROSS REVENUES $ 0
OPERATING EXPENSES
General and administrative 3,354
Professional fees 4,250
Website design 800
------------
TOTAL OPERATING EXPENSES 8,404
------------
LOSS FROM OPERATIONS (8,404)
OTHER INCOME (EXPENSE) 0
------------
LOSS BEFORE PROVISION FOR INCOME TAXES (8,404)
PROVISION FOR INCOME TAXES 0
------------
NET LOSS $ (8,404)
============
NET LOSS PER SHARE: BASIC AND DILUTED $ (0.00)
============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
BASIC AND DILUTED 15,163,265
============
|
The accompanying notes are an integral part of these financial statements.
FREEDOM PETROLEUM, INC.
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JUNE 13, 2012 (DATE OF INCEPTION) THROUGH JULY 31, 2012
Deficit
Accumulated
Additional during the Total
Common Stock Paid in Exploration Stockholders'
Shares Amount Capital Stage Equity
------ ------ ------- ----- ------
Inception, June 13, 2012 -- $ -- $ -- $ -- $ --
Stock issued for cash 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
========== ======= ======== ======== ========
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The accompanying notes are an integral part of these financial statements.
FREEDOM PETROLEUM, INC.
(An Exploration Stage Company)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JUNE 13, 2012 (DATE OF INCEPTION) THROUGH JULY 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (8,404)
Adjustments to Reconcile Net Loss to Net
Cash Provided by Operating Activities
Change in operating assets & liabilities
Increase in accounts payable and accrued expenses 19,650
Increase in due to related party 824
--------
Net Cash Provided by Operating Activities 12,070
--------
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 issuance of common stock 27,160
--------
Net Cash Provided by Financing Activities 27,160
--------
Net Increase in Cash and Cash Equivalents 24,230
Cash and cash equivalents, beginning of the period 0
--------
Cash and cash equivalents, end of the period $ 24,230
========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes $ 0
========
Cash paid for interest $ 0
========
|
The accompanying notes are an integral part of these financial statements.
FREEDOM PETROLEUM, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2012
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 $24,230 of cash at July 31,
2012.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instrument consists 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.
FREEDOM PETROLEUM, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2012
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 July 31, 2012, capitalized costs did not exceed the ceiling limitation, and no write-down was indicated.
FREEDOM PETROLEUM, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2012
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 July 31, 2012.
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 July 31, 2012 the balance of this loan is $824.
FREEDOM PETROLEUM, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2012
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. |
There were 27,000,000 shares of common stock issued and outstanding as of July 31, 2012. There were no shares of preferred stock issued and outstanding as of July 31, 2012.
NOTE 6 - INCOME TAXES
For the period ended July 31, 2012, 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 $8,404 at July 31, 2012, and will expire beginning in the year 2032.
The provision for Federal income tax consists of the following for the period ended July 31, 2012:
Current operations $ 2,857
Less: valuation allowance (2,857)
--------
Net provision for Federal income taxes $ 0
========
The cumulative tax effect at the expected rate of 34% of significant items
|
comprising our net deferred tax amount is as follows as of July 31, 2012:
Deferred tax asset attributable to:
Net operating loss carryover $ 2,857
Less: valuation allowance (2,857)
--------
Net deferred tax asset $ 0
========
Due to the change in ownership provisions of the Tax Reform Act of 1986, net
|
operating loss carry-forwards of $8,404 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.
FREEDOM PETROLEUM, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2012
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.
FREEDOM PETROLEUM, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2012
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 July 31, 2012.
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 $8,404 as of July 31, 2012 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
On September 4, 2012, the Company entered into an informal agreement with an unrelated third party to lease office space on a month to month basis at $300 per month.
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to July 31, 2012 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.
DEALER PROSPECTUS DELIVERY OBLIGATION
Until a date, which is 90 days after the date of this prospectus, all dealers that effect transactions in these securities whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
PART II. INFORMATION NOT REQUIRED IN THE PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The only statute, charter provision, bylaw, contract, or other arrangement under which any controlling person, director or officer of us is insured or indemnified in any manner against any liability which she may incur in her capacity as such, is as follows:
* Article VII of our Bylaws, filed as Exhibit 3.2 to this Registration Statement; and
* Chapter 78 of the Nevada Revised Statutes (the "NRS").
NEVADA REVISED STATUTES
Section 78.138 of the NRS provides for immunity of directors from monetary liability, except in certain enumerated circumstances, as follows:
"Except as otherwise provided in NRS 35.230, 90.660, 91.250, 452.200, 452.270, 668.045 and 694A.030, or unless the Articles of Incorporation or an amendment thereto, in each case filed on or after October 1, 2003, provide for greater individual liability, a director or officer is not individually liable to the corporation or its stockholders or creditors for any damages as a result of any act or failure to act in their capacity as a director or officer unless it is proven that:
(a) her act or failure to act constituted a breach of her fiduciary duties as a director or officer; and
(b) her breach of those duties involved intentional misconduct, fraud or a knowing violation of law."
Section 78.5702 of the NRS provides as follows:
1. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by her in connection with the action, suit or proceeding if she:
(a) is not liable pursuant to NRS 78.138; or
(b) acted in good faith and in a manner which she 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.
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2. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by her in connection with the defense or settlement of the action or suit if she:
(a) is not liable pursuant to NRS 78.138; or
(b) acted in good faith and in a manner which she reasonably believed to be in or not opposed to the best interests of the corporation.
To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2, or in defense of any claim, issue or matter therein, the corporation shall indemnify her against expenses, including attorneys' fees, actually and reasonably incurred by her in connection with the defense.
OUR BYLAWS
Our bylaws provide that we will indemnify our directors and officers to the fullest extent not prohibited by Nevada law.
The general effect of the foregoing is to indemnify a control person, officer or director from liability, thereby making us responsible for any expenses or damages incurred by such control person, officer or director in any action brought against them based on their conduct in such capacity, provided they did not engage in fraud or criminal activity.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The registrant will pay for all expenses incurred by this offering. Whether or not all of the offered shares are sold, these expenses are estimated as follows:
Securities and Exchange Commission registration fee................ $ 6
Printing Fees...................................................... $ 494
Accounting fees and expenses....................................... $ 5,000
Legal fees and expenses............................................ $ 7,500
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TOTAL.............................................................. $ 13,000
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EXHIBITS
The following exhibits are filed as part of this registration statement, pursuant to Item 601 of Regulation K. All exhibits have been previously filed unless otherwise noted.
Exhibit No. Document Description ----------- -------------------- 3.1 Articles of Incorporation of Freedom Petroleum Inc. 3.2 Bylaws of Freedom Petroleum Inc. 4.1 Form of Stock Certificate 5.1 Opinion of Counsel 10.1 Lease Purchase Agreement 23.1 Consent of Accountants 23.2 Consent of Counsel (included in Exhibit 5.1) |
UNDERTAKINGS
The registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and
(iii)To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
2. That for the purpose of determining liability under the Securities Act, each post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;
3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and
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4. That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the registrant undertakes that in a primary offering of securities of the registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the registrant or used or referred to by the registrant;
(iii)The portion of any other free writing prospectus relating to the offering containing material information about the registrant or its securities provided by or on behalf of the registrant; and
(iv) Any other communication that is an offer in the offering made by the registrant to the purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
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SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Centennial, Colorado on September 24, 2012.
FREEDOM PETROLEUM INC.
By: /s/ Thomas Hynes -------------------------------------- Thomas Hynes, President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Treasurer, Director |
In accordance with the requirements of the Securities Act, this Prospectus has been signed by the following persons in the capacities and on the dates stated.
Signatures Title Date
---------- ----- ----
/s/ Thomas Hynes President, Chief Executive Officer, September 24, 2012
--------------------------- Chief Financial Officer, Principal
Thomas Hynes Accounting Officer, Secretary,
Treasurer, Director
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Exhibit 3.1
ROSS MILLER
Secretary of State Document Number
206 North Carson Street 20120415347-49
Carson City, Nevada 89701-4298 Filing Date and Time
(775) 684-5708 06/13/2012 11:15 AM
Website: www.nvsos.gov Entity Number
E0319542012-6
Filed in the office of
ARTICLES OF INCORPORATION /s/ Ross Miller
(PURSUANT TO NRS CHAPTER 78) Ross Miller
Secretary of State
State of Nevada
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ABOVE SPACE IS FOR OFFICE USE ONLY
1. Name of
Corporation: FREEDOM PETROLEUM INC
2. Registered Agent [X] Commercial Registered Agent CORP 95, LLC
for Service of Name
Process [ ] Noncommercial Registered Agent OR [ ] Office or Position with Entity
(check only one box) (name and address below) (name and address below)
Nevada
Address City Zip Code
Nevada
Mailing Address City Zip Code
(if different from street address)
3. Shares:
(number of shares Number of shares Number of shares
corporation with par value: 120,000,000 Par value: $0.0001 without par value:
authorized
to issue)
4. Names & Addresses, 1. THOMAS HYNES
of Board of Name
Directors/Trustees: 8580 E. BELLWOOD PL DENVER CO 80237
(attach additional page Street Address City State Zip Code
if there is more than 3
directors/trustees 2.
Name
Street Address City State Zip Code
5. Purpose: (optional- The purpose of this Corporation shall be:
see instructions)
6. Names, Address DAVID DELOACH /s/ David Deloach
and Signature of Name Signature
Incorporator.
(attach additional page 2620 REGATTA DR SUITE 102 LAS VEGAS NV 89128
if there is more than 1 Address City State Zip Code
incorporator).
7. Certificate of I hereby accept appointment as Resident Agent for the above named corporation.
Acceptance of
Appointment of /s/ CORP 95, LLC 6/13/2012
Resident Agent: Authorized Signature of R. A. or On Behalf of R. A. Company Date
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This form must be accompanied by appropriate fees.
ARTICLE 3a
AUTHORIZED SHARES SUMMARY FOR
FREEDOM PETROLEUM INC.
100,000,000 Common Shares @ $.0001 par value
20,000,000 Preferred Shares @ $.0001 par value
Exhibit 3.2
BYLAWS
OF
FREEDOM PETROLEUM INC.
(the "Corporation")
ARTICLE I: MEETINGS OF SHAREHOLDERS
Section 1 - Annual Meetings
The annual meeting of the shareholders of the Corporation shall be held at the time fixed, from time to time, by the Board of Directors.
Section 2 - Special Meetings
Special meetings of the shareholders may be called by the Board of Directors or such person or persons authorized by the Board of Directors.
Section 3 - Place of Meetings
Meetings of shareholders shall be held at the registered office of the Corporation, or at such other places, within or without the State of Nevada as the Board of Directors may from time to time fix.
Section 4 - Notice of Meetings
A notice convening an annual or special meeting which specifies the place, day, and hour of the meeting, and the general nature of the business of the meeting, must be faxed, personally delivered or mailed postage prepaid to each shareholder of the Corporation entitled to vote at the meeting at the address of the shareholder as it appears on the stock transfer ledger of the Corporation, at least ten (10) days prior to the meeting. Accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by, a shareholder will not invalidate the proceedings at that meeting.
Section 5 - Action Without a Meeting
Unless otherwise provided by law, any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting, without prior notice and without a vote if written consents are signed by shareholders representing a majority of the shares entitled to vote at such a meeting, except however, if a different proportion of voting power is required by law, the Articles of Incorporation or these Bylaws, than that proportion of written consents is required. Such written consents must be filed with the minutes of the proceedings of the shareholders of the Corporation.
Section 6 - Quorum
a) No business, other than the election of the chairman or the adjournment of the meeting, will be transacted at an annual or special meeting unless a quorum of shareholders, entitled to attend and vote, is present at the commencement of the meeting, but the quorum need not be present throughout the meeting.
b) Except as otherwise provided in these Bylaws, a quorum is two persons present and being, or representing by proxy, shareholders of the Corporation.
c) If within half an hour from the time appointed for an annual or special meeting a quorum is not present, the meeting shall stand adjourned to a day, time and place as determined by the chairman of the meeting.
Section 7 - Voting
Subject to a special voting rights or restrictions attached to a class of shares, each shareholder shall be entitled to one vote for each share of stock in his or her own name on the books of the corporation, whether represented in person or by proxy.
Section 8 - Motions
No motion proposed at an annual or special meeting need be seconded.
Section 9 - Equality of Votes
In the case of an equality of votes, the chairman of the meeting at which the vote takes place is not entitled to have a casting vote in addition to the vote or votes to which he may be entitled as a shareholder of proxyholder.
Section 10 - Dispute as to Entitlement to Vote
In a dispute as to the admission or rejection of a vote at an annual or special meeting, the decision of the chairman made in good faith is conclusive.
Section 11 - Proxy
a) Each shareholder entitled to vote at an annual or special meeting may do so either in person or by proxy. A form of proxy must be in writing under the hand of the appointor or of his or her attorney duly authorized in writing, or, if the appointor is a corporation, either under the seal of the corporation or under the hand of a duly authorized officer or attorney. A proxyholder need not be a shareholder of the Corporation.
b) A form of proxy and the power of attorney or other authority, if any, under which it is signed or a facsimiled copy thereof must be deposited at the registered office of the Corporation or at such other place as is specified for that purpose in the notice convening the meeting. In addition to any other method of depositing proxies provided for in these Bylaws, the
Directors may from time to time by resolution make regulations relating to the depositing of proxies at a place or places and fixing the time or times for depositing the proxies not exceeding 48 hours (excluding Saturdays, Sundays and holidays) preceding the meeting or adjourned meeting specified in the notice calling a meeting of shareholders.
ARTICLE II: BOARD OF DIRECTORS
Section 1 - Number, Term, Election and Qualifications
a) The first Board of Directors of the Corporation, and all subsequent Boards of the Corporation, shall consist of not less than one (1) and not more than nine (9) directors. The number of Directors may be fixed and changed from time to time by ordinary resolution of the shareholders of the Corporation.
b) The first Board of Directors shall hold office until the first annual meeting of shareholders and until their successors have been duly elected and qualified or until there is a decrease in the number of directors. Thereinafter, Directors will be elected at the annual meeting of shareholders and shall hold office until the annual meeting of the shareholders next succeeding his or her election, or until his or her prior death, resignation or removal. Any Director may resign at any time upon written notice of such resignation to the Corporation.
c) A casual vacancy occurring in the Board may be filled by the remaining Directors.
d) Between successive annual meetings, the Directors have the power to appoint one or more additional Directors but not more than 1/2 of the number of Directors fixed at the last shareholder meeting at which Directors were elected. A Director so appointed holds office only until the next following annual meeting of the Corporation, but is eligible for election at that meeting. So long as he or she is an additional Director, the number of Directors will be increased accordingly.
e) A Director is not required to hold a share in the capital of the Corporation as qualification for his or her office.
Section 2 - Duties, Powers and Remuneration
a) The Board of Directors shall be responsible for the control and management of the business and affairs, property and interests of the Corporation, and may exercise all powers of the Corporation, except for those powers conferred upon or reserved for the shareholders or any other persons as required under Nevada state law, the Corporation's Articles of Incorporation or by these Bylaws.
b) The remuneration of the Directors may from time to time be determined by the Directors or, if the Directors decide, by the shareholders.
Section 3 - Meetings of Directors
a) The President of the Corporation shall preside as chairman at every meeting of the Directors, or if the President is not present or is willing to act as chairman, the Directors present shall choose one of their number to be chairman of the meeting.
b) The Directors may meet together for the dispatch of business, and adjourn and otherwise regulate their meetings as they think fit. Questions arising at a meeting must be decided by a majority of votes. In case of an equality of votes the chairman does not have a second or casting vote. Meetings of the Board held at regular intervals may be held at the place and time upon the notice (if any) as the Board may by resolution from time to time determine.
c) A Director may participate in a meeting of the Board or of a committee of the Directors using conference telephones or other communications facilities by which all Directors participating in the meeting can hear each other and provided that all such Directors agree to such participation. A Director participating in a meeting in accordance with this Bylaw is deemed to be present at the meeting and to have so agreed. Such Director will be counted in the quorum and entitled to speak and vote at the meeting.
d) A Director may, and the Secretary on request of a Director shall, call a meeting of the Board. Reasonable notice of the meeting specifying the place, day and hour of the meeting must be given by mail, postage prepaid, addressed to each of the Directors and alternate Directors at his or her address as it appears on the books of the Corporation or by leaving it at his or her usual business or residential address or by telephone, facsimile or other method of transmitting legibly recorded messages. It is not necessary to give notice of a meeting of Directors to a Director immediately following a shareholder meeting at which the Director has been elected, or is the meeting of Directors at which the Director is appointed.
e) A Director of the Corporation may file with the Secretary a document executed by him waiving notice of a past, present or future meeting or meetings of the Directors being, or required to have been, sent to him and may at any time withdraw the waiver with respect to meetings held thereafter. After filing such waiver with respect to future meetings and until the waiver is withdrawn no notice of a meeting of Directors need be given to the Director. All meetings of the Directors so held will be deemed not to be improperly called or constituted by reason of notice not having been given to the Director.
f) The quorum necessary for the transaction of the business of the Directors may be fixed by the Directors and if not so fixed is a majority of the Directors or, if the number of Directors is fixed at one, is one Director.
g) The continuing Directors may act notwithstanding a vacancy in their body but, if and so long as their number is reduced below the number fixed pursuant to these Bylaws as the necessary quorum of Directors, the continuing Directors may act for the purpose of increasing the number of Directors to that number, or of summoning a shareholder meeting of the Corporation, but for no other purpose.
h) All acts done by a meeting of the Directors, a committee of Directors, or a person acting as a Director, will, notwithstanding that it be afterwards discovered that there was some defect in the qualification, election or appointment of the Directors, shareholders of the committee or person acting as a Director, or that any of them were disqualified, be as valid as if the person had been duly elected or appointed and was qualified to be a Director.
i) A resolution consented to in writing, whether by facsimile or other method of transmitting legibly recorded messages, by all of the Directors is as valid as if it had been passed at a meeting of the Directors duly called and held. A resolution may be in two or more counterparts which together are deemed to constitute one resolution in writing. A resolution must be filed with the minutes of the proceedings of the directors and is effective on the date stated on it or on the latest date stated on a counterpart.
j) All Directors of the Corporation shall have equal voting power.
Section 4 - Removal
One or more or all the Directors of the Corporation may be removed with or without cause at any time by a vote of two-thirds of the shareholders entitled to vote thereon, at a special meeting of the shareholders called for that purpose.
Section 5 - Committees
a) The Directors may from time to time by resolution designate from among its members one or more committees, and alternate members thereof, as they deem desirable, each consisting of one or more members, with such powers and authority (to the extent permitted by law and these Bylaws) as may be provided in such resolution. Unless the Articles of Incorporation or Bylaws state otherwise, the Board of Directors may appoint natural persons who are not Directors to serve on such committees authorized herein. Each such committee shall serve at the pleasure of the Board of Directors and unless otherwise stated by law, the Certificate of Incorporation of the Corporation or these Bylaws, shall be governed by the rules and regulations stated herein regarding the Board of Directors.
b) Each Committee shall keep regular minutes of its transactions, shall cause them to be recorded in the books kept for that purpose, and shall report them to the Board at such times as the Board may from time to time require. The Board has the power at any time to revoke or override the authority given to or acts done by any Committee.
ARTICLE III: OFFICERS
Section 1 - Number, Qualification, Election and Term of Office
a) The Corporation's officers shall have such titles and duties as shall be stated in these Bylaws or in a resolution of the Board of Directors which is not inconsistent with these Bylaws. The officers of the Corporation shall consist of a president, secretary, treasurer, and also may have one
or more vice presidents, assistant secretaries and assistant treasurers and such other officers as the Board of Directors may from time to time deem advisable. Any officer may hold two or more offices in the Corporation, and may or may not also act as a Director.
b) The officers of the Corporation shall be elected by the Board of Directors at the regular annual meeting of the Board following the annual meeting of shareholders.
c) Each officer shall hold office until the annual meeting of the Board of Directors next succeeding his or her election, and until his or her successor shall have been duly elected and qualified, subject to earlier termination by his or her death, resignation or removal.
Section 2 - Resignation
Any officer may resign at any time by giving written notice of such resignation to the Corporation.
Section 3 - Removal
Any officer appointed by the Board of Directors may be removed by a majority vote of the Board, either with or without cause, and a successor appointed by the Board at any time, and any officer or assistant officer, if appointed by another officer, may likewise be removed by such officer.
Section 4 - Remuneration
The remuneration of the Officers of the Corporation may from time to time be determined by the Directors or, if the Directors decide, by the shareholders.
Section 5 - Conflict of Interest
Each officer of the Corporation who holds another office or possesses property whereby, whether directly or indirectly, duties or interests might be created in conflict with his or her duties or interests as an officer of the Corporation shall, in writing, disclose to the President the fact and the nature, character and extent of the conflict.
ARTICLE V: SHARES OF STOCK
Section 1 - Certificate of Stock
a) The shares of the Corporation shall be represented by certificates or shall be uncertificated shares.
b) Certificated shares of the Corporation shall be signed, either manually or by facsimile, by officers or agents designated by the Corporation for such purposes, and shall certify the number of shares owned by the shareholder in the Corporation. Whenever any certificate is countersigned or otherwise authenticated by a transfer agent or transfer clerk, and by a registrar, then a facsimile of the signatures of the officers or agents, the transfer agent or transfer clerk or the registrar of the Corporation may be printed or lithographed upon the certificate in lieu of the actual signatures. If
the Corporation uses facsimile signatures of its officers and agents on its stock certificates, it cannot act as registrar of its own stock, but its transfer agent and registrar may be identical if the institution acting in those dual capacities countersigns or otherwise authenticates any stock certificates in both capacities. If any officer who has signed or whose facsimile signature has been placed upon such certificate, shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of its issue.
c) If the Corporation issued uncertificated shares as provided for in these Bylaws, within a reasonable time after the issuance or transfer of such uncertificated shares, and at least annually thereafter, the Corporation shall send the shareholder a written statement certifying the number of shares owned by such shareholder in the Corporation.
d) Except as otherwise provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing shares of the same class and series shall be identical.
e) If a share certificate:
(i) is worn out or defaced, the Directors shall, upon production to them of the certificate and upon such other terms, if any, as they may think fit, order the certificate to be cancelled and issue a new certificate;
(ii) is lost, stolen or destroyed, then upon proof being given to the satisfaction of the Directors and upon and indemnity, if any being given, as the Directors think adequate, the Directors shall issue a new certificate; or
(iii)represents more than one share and the registered owner surrenders it to the Corporation with a written request that the Corporation issue in his or her name two or more certificates, each representing a specified number of shares and in the aggregate representing the same number of shares as the certificate so surrendered, the Corporation shall cancel the certificate so surrendered and issue new certificates in accordance with such request.
Section 2 - Transfers of Shares
a) Transfers or registration of transfers of shares of the Corporation shall be made on the stock transfer books of the Corporation by the registered holder thereof, or by his or her attorney duly authorized by a written power of attorney; and in the case of shares represented by certificates, only after the surrender to the Corporation of the certificates representing such shares with such shares properly endorsed, with such evidence of the authenticity of such endorsement, transfer, authorization and other matters as the Corporation may reasonably require, and the payment of all stock transfer taxes due thereon.
b) The Corporation shall be entitled to treat the holder of record of any share or shares as the absolute owner thereof for all purposes and, accordingly, shall not be bound to recognize any legal, equitable or other claim to, or interest in, such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law.
Section 3 - Record Date
a) The Directors may fix in advance a date, which must not be more than 60 days permitted by the preceding the date of a meeting of shareholders or a class of shareholders, or of the payment of a dividend or of the proposed taking of any other proper action requiring the determination of shareholders as the record date for the determination of the shareholders entitled to notice of, or to attend and vote at, a meeting and an adjournment of the meeting, or entitled to receive payment of a dividend or for any other proper purpose and, in such case, notwithstanding anything in these Bylaws, only shareholders of records on the date so fixed will be deemed to be the shareholders for the purposes of this Bylaw.
b) Where no record date is so fixed for the determination of shareholders as provided in the preceding Bylaw, the date on which the notice is mailed or on which the resolution declaring the dividend is adopted, as the case may be, is the record date for such determination.
Section 4 - Fractional Shares
Notwithstanding anything else in these Bylaws, the Corporation, if the Directors so resolve, will not be required to issue fractional shares in connection with an amalgamation, consolidation, exchange or conversion. At the discretion of the Directors, fractional interests in shares may be rounded to the nearest whole number, with fractions of 1/2 being rounded to the next highest whole number, or may be purchased for cancellation by the Corporation for such consideration as the Directors determine. The Directors may determine the manner in which fractional interests in shares are to be transferred and delivered to the Corporation in exchange for consideration and a determination so made is binding upon all shareholders of the Corporation. In case shareholders having fractional interests in shares fail to deliver them to the Corporation in accordance with a determination made by the Directors, the Corporation may deposit with the Corporation's Registrar and Transfer Agent a sum sufficient to pay the consideration payable by the Corporation for the fractional interests in shares, such deposit to be set aside in trust for such shareholders. Such setting aside is deemed to be payment to such shareholders for the fractional interests in shares not so delivered which will thereupon not be considered as outstanding and such shareholders will not be considered to be shareholders of the Corporation with respect thereto and will have no right except to receive payment of the money so set aside and deposited upon delivery of the certificates for the shares held prior to the amalgamation, consolidation, exchange or conversion which result in fractional interests in shares.
ARTICLE VI: DIVIDENDS
a) Dividends may be declared and paid out of any funds available therefor, as often, in such amounts, and at such time or times as the Board of Directors may determine and shares may be issued pro rata and without consideration to the Corporation's shareholders or to the shareholders of one or more classes or series.
b) Shares of one class or series may not be issued as a share dividend to shareholders of another class or series unless such issuance is in accordance with the Articles of Incorporation and:
(i) a majority of the current shareholders of the class or series to be issued approve the issue; or
(ii) there are no outstanding shares of the class or series of shares that are authorized to be issued as a dividend.
ARTICLE VII: BORROWING POWERS
a) The Directors may from time to time on behalf of the Corporation:
(i) borrow money in such manner and amount, on such security, from such sources and upon such terms and conditions as they think fit,
(ii) issue bonds, debentures and other debt obligations either outright or as security for liability or obligation of the Corporation or another person, and
(iii)mortgage, charge, whether by way of specific or floating charge, and give other security on the undertaking, or on the whole or a part of the property and assets of the Corporation (both present and future).
b) A bond, debenture or other debt obligation of the Corporation may be issued at a discount, premium or otherwise, and with a special privilege as to redemption, surrender, drawing, allotment of or conversion into or exchange for shares or other securities, attending and voting at shareholder meetings of the Corporation, appointment of Directors or otherwise, and may by its terms be assignable free from equities between the Corporation and the person to whom it was issued or a subsequent holder thereof, all as the Directors may determine.
ARTICLE VIII: FISCAL YEAR
The fiscal year end of the Corporation shall be fixed, and shall be subject to change, by the Board of Directors from time to time, subject to applicable law.
ARTICLE IX: CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be prescribed and altered, from time to time, by the Board of Directors. The use of a seal or stamp by the Corporation on corporate documents is not necessary and the lack thereof shall not in any way affect the legality of a corporate document.
ARTICLE X: AMENDMENTS
Section 1 - By Shareholders
All Bylaws of the Corporation shall be subject to alteration or repeal, and new Bylaws may be made by a majority vote of the shareholders at any annual meeting or special meeting called for that purpose.
Section 2 - By Directors
The Board of Directors shall have the power to make, adopt, alter, amend and repeal, from time to time, Bylaws of the Corporation.
ARTICLE XI: DISCLOSURE OF INTEREST OF DIRECTORS
a) A Director who is, in any way, directly or indirectly interested in an existing or proposed contract or transaction with the Corporation or who holds an office or possesses property whereby, directly or indirectly, a duty or interest might be created to conflict with his or her duty or interest as a Director, shall declare the nature and extent of his or her interest in such contract or transaction or of the conflict with his or her duty and interest as a Director, as the case may be.
b) A Director shall not vote in respect of a contract or transaction with the Corporation in which he is interested and if he does so his or her vote will not be counted, but he will be counted in the quorum present at the meeting at which the vote is taken. The foregoing prohibitions do not apply to:
(i) a contract or transaction relating to a loan to the Corporation, which a Director or a specified corporation or a specified firm in which he has an interest has guaranteed or joined in guaranteeing the repayment of the loan or part of the loan;
(ii) a contract or transaction made or to be made with or for the benefit of a holding corporation or a subsidiary corporation of which a Director is a director or officer;
(iii)a contract by a Director to subscribe for or underwrite shares or debentures to be issued by the Corporation or a subsidiary of the Corporation, or a contract, arrangement or transaction in which a Director is directly or indirectly interested if all the other Directors are also directly or indirectly interested in the contract, arrangement or transaction;
(iv) determining the remuneration of the Directors;
(v) purchasing and maintaining insurance to cover Directors against liability incurred by them as Directors; or
(vi) the indemnification of a Director by the Corporation.
c) A Director may hold an office or place of profit with the Corporation (other than the office of Auditor of the Corporation) in conjunction with his or her office of Director for the period and on the terms (as to remuneration or otherwise) as the Directors may determine. No Director or intended Director will be disqualified by his or her office from contracting with the Corporation either with regard to the tenure of any such other office or place of profit, or as vendor, purchaser or otherwise, and, no contract or transaction entered into by or on behalf of the Corporation in which a Director is interested is liable to be voided by reason thereof.
d) A Director or his or her firm may act in a professional capacity for the Corporation (except as Auditor of the Corporation), and he or his or her firm is entitled to remuneration for professional services as if he were not a Director.
e) A Director may be or become a director or other officer or employee of, or otherwise interested in, a corporation or firm in which the Corporation may be interested as a shareholder or otherwise, and the Director is not accountable to the Corporation for remuneration or other benefits received by him as director, officer or employee of, or from his or her interest in, the other corporation or firm, unless the shareholders otherwise direct.
ARTICLE XII: ANNUAL LIST OF OFFICERS, DIRECTORS AND REGISTERED AGENT
The Corporation shall, within sixty days after the filing of its Articles of Incorporation with the Secretary of State, and annually thereafter on or before the last day of the month in which the anniversary date of incorporation occurs each year, file with the Secretary of State a list of its president, secretary and treasurer and all of its Directors, along with the post office box or street address, either residence or business, and a designation of its resident agent in the state of Nevada. Such list shall be certified by an officer of the Corporation.
ARTICLE XIII: INDEMNITY OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
a) The Directors shall cause the Corporation to indemnify a Director or former Director of the Corporation and the Directors may cause the Corporation to indemnify a director or former director of a corporation of which the Corporation is or was a shareholder and the heirs and personal representatives of any such person against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him or them including an amount paid to settle an action or satisfy a judgment inactive criminal or administrative action or proceeding to which he is or they are made a party by reason of his or her being or having been a Director of the Corporation or a director of such corporation, including an action brought by the Corporation or corporation. Each Director of the Corporation on being elected or appointed is deemed to have contracted with the Corporation on the terms of the foregoing indemnity.
b) The Directors may cause the Corporation to indemnify an officer, employee or agent of the Corporation or of a corporation of which the Corporation is or was a shareholder (notwithstanding that he is also a Director), and his or her heirs and personal representatives against all costs, charges and expenses incurred by him or them and resulting from his or her acting as an
officer, employee or agent of the Corporation or corporation. In addition the Corporation shall indemnify the Secretary or an Assistance Secretary of the Corporation (if he is not a full time employee of the Corporation and notwithstanding that he is also a Director), and his or her respective heirs and legal representatives against all costs, charges and expenses incurred by him or them and arising out of the functions assigned to the Secretary by the Corporation Act or these Articles and each such Secretary and Assistant Secretary, on being appointed is deemed to have contracted with the Corporation on the terms of the foregoing indemnity.
c) The Directors may cause the Corporation to purchase and maintain insurance for the benefit of a person who is or was serving as a Director, officer, employee or agent of the Corporation or as a director, officer, employee or agent of a corporation of which the Corporation is or was a shareholder and his or her heirs or personal representatives against a liability incurred by him as a Director, officer, employee or agent.
CERTIFIED TO BE THE BYLAWS OF:
FREEDOM PETROLEUM INC.
per:
/s/ Thomas Hynes ------------------------------ Thomas Hynes, President |
Exhibit 4.1
[FRONT]
Form of Share Certificate
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
[LOGO]
CUSIP NO. [sample]
Freedom Petroleumf Inc.
AUTHORIZED COMMON STOCK: 100,000,000 SHARES
PAR VALUE: $0.0001 PER SHARE
THIS CERTIFIES THAT
[SAMPLE]
IS THE RECORD HOLDER OF __________________
Shares of Freedom Petroleum, Inc. Common Stock transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
----------------------------------- -------------------------------------
Secretary President
[FREEDOM PETROLEUM INC. CORPORATE SEAL NEVADA]
|
[BACK]
Signature must be guaranteed by a firm which is a member of a registered
|
national stock exchange, or by bank (other than a savings bank), or a trust company. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations.
Additional abbreviations may also be used though not on the above list.
For Value Received, _______ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
of the capital stock represented by the within certificate, and do hereby irrevocably constitute and appoint
to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.
NOTICE: The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular without alteration or enlargement or any change whatever
Exhibit 5.1
SCOTT D. OLSON ESQ. 274 broadway ATTORNEY AT LAW costa mesa, ca 92627 tel 310.985.1034 fax 310.564.1912 email sdoesq@gmail.com skype scottdavidolson
September 24, 2012
Freedom Petroleum Inc.
6025 South Quebec Street, Suite 100,
Centennial, CO, 80111
Re: Freedom Petroleum Inc. Registration Statement on Form S-1
Ladies and Gentlemen:
I have acted as special counsel to Freedom Petroleum Inc., a Nevada corporation ("Company") for the limited purpose of rendering this opinion in connection with the proposed issuance and sale of up to 35,000,000 shares of the Company's common stock, par value $0.0001 per share ("Shares") pursuant to the Company's Registration Statement on Form S-1 and the prospectus included therein (collectively the "Registration Statement") filed with the Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as amended (the "Act").
In connection with this opinion, I have examined and relied upon the Registration Statement, the Company's Articles of Incorporation, its Bylaws, and the originals or copies certified to my satisfaction of such records, documents, certificates, memoranda and other instruments as in my judgment are necessary or appropriate to enable me to render the opinion expressed below. I have assumed the genuineness and authenticity of all documents submitted to me as originals, the conformity to originals of all documents submitted to me as copies thereof and the due execution and delivery of all documents where due execution and delivery are a prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, I am of the opinion that the Shares are validly issued, fully paid and nonassessable.
This opinion letter is opining upon and is limited to the current federal laws of the United States and the Nevada Revised Statutes, including the statutory provisions, all applicable provisions of the Nevada constitution, and reported judicial decisions interpreting those laws, as such laws presently exist and to the facts as they presently exist. I express no opinion with respect to the effect or applicability of the laws of any other jurisdiction. I assume no obligation to revise or supplement this opinion letter should the laws of such jurisdiction be changed after the date hereof by legislative action, judicial decision or otherwise.
I hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Act and to the use of my name therein and in the related prospectus under the caption "Legal Matters." In giving such consent, I do not hereby admit that I am in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the SEC.
Very truly yours,
/s/ Scott D. Olson Esq. --------------------------------- Scott D. Olson Esq. |
Exhibit 10.1
LEASE PURCHASE AGREEMENT
THIS AGREEMENT (together with the exhibits and schedules attached hereto, this "AGREEMENT") dated as of the 23rd day of July, 2012.
BETWEEN:
SUMMIT WEST OIL, LLC., a company formed under the laws of Washington State, having an address of 1115 W 10th Ave, Spokane WA 99204.
(Herein called the "ASSIGNOR") AND:
FREEDOM PETROLEUM INC., a company incorporated under the laws of the State of Nevada, having a registered address of 2620 Regatta Drive, Suite 102, Las Vegas, NV, 89128
(Herein called the "ASSIGNEE")
WHEREAS, the Assignee desires to purchase and acquire from the Assignor and the Assignor desires to sell and assign to the Assignee 100% of the Assignor's rights, title and interest in and to the Leases attached hereto as Exhibit A (the "LEASES").
NOW, THEREFORE, in consideration of the mutual promises of the parties hereto, and of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is mutually agreed by and between the parties hereto as follows:
ARTICLE 1
ASSIGNMENT OF LEASES
1.1 Assignment of Leases. Subject to the terms and conditions of this Agreement and in reliance upon the representations, warranties, covenants and agreements contained herein, at the closing of the transactions contemplated hereby, the Assignor will sell, convey, assign and transfer 100% of Assignor's interest in and to the following Leases, and the Assignee will purchase and acquire the Leases from the Assignor, reserving however, unto Assignor herein an overriding royalty of 3.3333% of 8/8ths of all the oil, gas and other hydrocarbons produced, saved and marketed from the assigned lands and leases. This overriding royalty and all other terms and conditions of this assignment shall apply to any and all extension, renewal and substitute leases obtained by Assignee, its successors or assigns on the land described herein.
(a) 100% of Assignor's rights, title and interests in and to the oil, gas and other minerals in and under and that may be produced from the lands described in Exhibit A including, without limitation, interests in oil, gas and/or mineral leases covering any part of the lands, fee mineral interests, and other interests in oil, gas and other minerals in any part of the lands;
(b) 100% of the right, title and interests of Assignor in all presently existing and valid oil, gas and/or mineral unitization, pooling and/or communitization agreements, declarations, and/or orders and the properties covered or included in the units (including, without limitation, units formed under orders, rules, regulations or other official acts of any federal, state or other authority having jurisdiction, voluntary unitization agreements, designations, and/or declarations, and any working interest units created under operating agreements or otherwise), which relate to the properties subject to the Leases;
(c) 100% of the right, title and interests of Assignor in all presently existing and valid production sales and sales related contracts, operating agreements and other agreements and contracts which relate to the properties
subject to the Leases or which relate to the exploration, development, operation or maintenance of the properties subject to the Leases or the treatment, storage, transaction or marketing of production from or allocated to the properties subject to the Leases; and
(d) 100% of the right, title and interests of Assignor in and to all materials, supplies, machinery, equipment, improvements, and other personal Leases and fixtures relating to the properties subject to the Leases, and all wells, wellhead equipment, pumping units, flow lines, tanks, buildings, injection facilities, salt water disposal facilities, compression facilities, gathering systems and other equipment, all easements, rights-of-way, surface leases and other surface rights, all permits and licenses and all other appurtenances, used or held for use in connection with or related to the exploration, development, operation or maintenance of any of the properties subject to the Leases.
1.2 Consideration. In consideration of the sale, transfer and assignment to the Assignee of 100% of Assignor's right, title and interest in and to the Leases, the Assignee shall pay an aggregate purchase price of $15,000 (the "PURCHASE PRICE") of the Assignee.
1.3 The Closing. The transfer and delivery of the documents transferring
100% of the right, title and interest of the Assignor to the Leases to the
Assignee and the Purchase Price to the Assignor (the "CLOSING") will take place
no later than August 15, 2012 or such earlier date as may be mutually acceptable
to the Assignor and the Assignee, subject to the satisfaction or waiver (by the
party receiving the benefit thereof) of the conditions precedent set forth in
Section 6 and 7 of this Agreement (the "CLOSING DATE").
1.4 Deliveries. At the Closing on the Closing Date:
(a) The Assignor shall deliver to the Assignee executed and duly acknowledged assignments conveying 100% of the right, title and interest of the Assignor to the Leases to the Assignee;
(b) The Assignee shall deliver to the Assignor and/or its designee the Purchase Price;
(c) The Assignor and the Assignee shall each execute and deliver such other instruments and take such other action as may be necessary to carry out its obligations under this Agreement; including, without limitation, working together to cause the title to any assets to be transferred into the name of the Assignee in the applicable governmental records.
1.5 Expenses of Assignor. Any liability or obligation of the Assignor arising or incurred in connection with the negotiation, preparation and execution of this Agreement and the transactions contemplated hereby and any fees and expenses of counsel, accountants and other experts employed by Assignor shall be paid by the Assignee.
ARTICLE 2
TITLE DUE DILIGENCE
2.1 Access to Leases. The Assignor shall grant the Assignee such access to the properties subject to the Leases, including all records relating to same, as is necessary to permit the Assignee to conduct a thorough due diligence investigation of the title to the properties subject to the Leases. The Assignee shall have a maximum of seven (7) days from the date of this Agreement to conduct its due diligence (this 7-day period, as it may be extended in accordance with this Agreement or by other agreement of the parties, will be referred to herein as the "DUE DILIGENCE PERIOD").
2.2 The Assignee shall notify the Assignor in writing (the "DEFECT NOTICE") by the end of the Due Diligence Period of any failures or defects in title ("TITLE DEFECTS") that the Assignee may have identified as pertaining to the properties subject to the Leases. The Defect Notice shall identify the alleged defect and the nature of the defect. If no defects are identified in said written notice, the Assignee will be deemed to have accepted title for said properties subject to the Leases. Upon receipt of Defect Notice, the Assignor
shall have until the Closing to cure any such Title Defects or, if not curable prior to the Closing, advise the Assignee how such Title Defects will be cured following the Closing and provide a satisfactory commitment to the Assignee with respect to curing of such Title Defects. If the Assignor is unable to cure any material Title Defects to the Assignee's reasonable satisfaction or provide a plan and commitment to cure such Title Defects prior to the Closing, then the Assignee may (i) terminate this Agreement; or (ii) proceed with the Closing with no reduction in the Purchase Price. Title Defect, as used in this Agreement, shall mean any lien, encumbrance, encroachment or other defect in the Assignor's title to the properties subject to the Leases that would cause the Assignor not to have defensible title to such properties subject to the Leases.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE ASSIGNOR
To induce the Assignee to execute, deliver and perform this Agreement, and in acknowledgement of the Assignee's reliance on the following representations and warranties, the Assignor jointly and severally represent and warrant to the Assignee as follows as of the date hereof and as of the Closing Date:
3.1 Organization. The Assignor has the power and authority to conduct its business as it is now being conducted and to own their assets.
3.2 Power and Authority. The Assignor has the power and authority to execute, deliver, and perform this Agreement and the other agreements and instruments to be executed and delivered by it in connection with the transactions contemplated hereby, and the Assignor will have taken all necessary action to authorize the execution and delivery of this Agreement and such other agreements and instruments and the consummation of the transactions contemplated hereby, including but not limited to the receipt of all necessary regulatory approvals. This Agreement is, and the other agreements and instruments to be executed and delivered by the Assignor in connection with the transactions contemplated hereby, when such other agreements and instruments are executed and delivered, shall be, the valid and legally binding obligations of the Assignor enforceable against the Assignor in accordance with their respective terms.
3.3 Non-Contravention. To the Assignor's knowledge, neither the execution, delivery and/or performance of this Agreement, nor the consummation of the transactions contemplated hereby, will:
(a) conflict with, result in a violation of, cause a default under (with or without notice, lapse of time or both) or give rise to a right of termination, amendment, cancellation or acceleration of any obligation contained in or the loss of any material benefit under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the material properties or assets of Assignor under any term, condition or provision of any loan or credit agreement, note, debenture, bond, mortgage, indenture, lease or other agreement, instrument, permit, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Assignor, or any of its material properties or assets;
3.4 Actions and Proceedings. To the knowledge of Assignor, (i) there is no basis for and there is no action, suit, judgment, claim, demand or proceeding outstanding or pending, or threatened against or affecting Assignor or which involves any of the business, or the properties or assets of Assignor that, if adversely resolved or determined, would have a material adverse effect on the Leases (a "ASSIGNOR MATERIAL ADVERSE Effect"), and (ii) there is no reasonable basis for any claim or action that, based upon the likelihood of its being asserted and its success if asserted, would have such a Assignor Material Adverse Effect.
3.5 Compliance.
(a) To the knowledge of Assignor, Assignor is in compliance with, is not in default or violation in any material respect under, and has not been charged with or received any notice at any time of any material violation of any
statute, law, ordinance, regulation, rule, decree or other regulation that would constitute a Assignor Material Adverse Effect;
(b) To the knowledge of Assignor, Assignor is not subject to any judgment, order or decree entered in any lawsuit or proceeding applicable to its business and operations that would result in a Assignor Material Adverse Effect; and
(c) To the knowledge of Assignor, Assignor has duly filed all reports and has obtained all governmental permits and other governmental consents, except as may be required after the execution of this Agreement. To the knowledge of Assignor, all of such permits and consents are in full force and effect, and no proceedings for the suspension or cancellation of any of them, and no investigation relating to any of them, is pending or to the knowledge of Assignor, threatened, and none of them will be adversely affected by the consummation of this Agreement.
3.6 Filings, Consents and Approvals. To the knowledge of Assignor, no filing or registration with, no notice to and no permit, authorization, consent, or approval of any public or governmental body or authority or other person or entity is necessary for the consummation by Assignor of the transactions contemplated by this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ASSIGNEE
To induce the Assignor to execute, deliver and perform this Agreement, and in acknowledgement of Assignor's reliance on the following representations and warranties, the Assignee hereby represents and warrants to the Assignor as follows as of the date hereof and as of the Closing Date:
4.1 Organization. The Assignee is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Washington, with the power and authority to conduct its business as it is now being conducted and to own and lease its properties and assets.
4.2 Power and Authority. The Assignee has the power and authority to execute, deliver, and perform this Agreement and the other agreements and instruments to be executed and delivered by it in connection with the transactions contemplated hereby, and the execution, delivery and performance of the Agreement by the Assignee has been duly authorized. This Agreement is, and, when such other agreements and instruments are executed and delivered, the other agreements and instruments to be executed and delivered by the Assignee in connection with the transactions contemplated hereby shall be, the valid and legally binding obligations of the Assignee, enforceable in accordance with their respective terms.
4.3 Broker's or Finder's Fees. The Assignee has not authorized any person to act as broker, finder, or in any other similar capacity in connection with the transactions contemplated by this Agreement.
4.4 No Conflict. Neither the execution and delivery by the Assignee of this
Agreement and of the other agreements and instruments to be executed and
delivered by the Assignee in connection with the transactions contemplated
hereby or thereby, nor the consummation by the Assignee of the transactions
contemplated hereby, will or do violate or conflict with: (a) any foreign or
local law, regulation, ordinance, governmental restriction, order, judgment or
decree applicable to the Assignee; (b) any provision of any charter, bylaw, or
(c) under any material agreement to which the Assignee is a party.
4.5 Required Consents. No permit or approval, authorization, consent, permission, or waiver to or from any person, or notice, filing, or recording to or with, any person is necessary for the execution and delivery of this Agreement and the other agreements and instruments to be executed and delivered by the Assignee in connection with the transactions contemplated hereby, or the consummation by the Assignee of the transactions contemplated hereby.
4.6 Litigation. There are no proceedings pending or, to the knowledge of the Assignee, threatened against the Assignee which (i) seek to restrain or enjoin the consummation of the Agreement or the transactions contemplated hereby or (ii) could reasonably be expected to have a material adverse effect on the Assignee or its abilities to perform its obligations under the Agreement and the other agreements and instruments to be executed and delivered by the Assignee in connection with the transactions contemplated hereby.
4.7 Risks Related to Hazardous Materials. The Assignee shall assume all risks that the Leases may contain waste materials or other adverse physical conditions, including, but not limited to, the presence of unknown abandoned oil and gas wells, water wells, sumps, pits, pipelines or other waste or spill sites. At Closing, all responsibility and liability related to all such conditions, whether known or unknown, fixed or contingent, will be transferred from the Assignor to the Assignee.
ARTICLE 5
COVENANTS OF THE ASSIGNOR PRIOR TO CLOSING
5.1 Required Approvals. As promptly as practicable after the date of this Agreement, the Assignor shall make all filings required by foreign or local law to be made by them in order to consummate the transactions contemplated hereby. The Assignor shall cooperate with the Assignee with respect to all filings that the Assignee elects to make or is required by law to make in connection with the transactions contemplated hereby.
5.2 Prohibited Actions. Except as provided herein below, in no event, without the prior written consent of the Assignee, shall the Assignor:
(a) permit any of the Leases to be subjected to any claim or encumbrance, except claims or encumbrances that the Assignor believes, in its sole judgment, are necessary to continue development of the Leases in the ordinary course of business and consistent with past practice;
(b) waive any claims or rights respecting the Leases, or sell, transfer, or otherwise dispose of any of the Leases; or
(c) dispose of any interest in any of the Leases, or permit any rights in any of the Leases to lapse into default or in non-compliance with all and any regulatory or governmental requirement.
5.3 Access. From the date of this Agreement to the Closing Date, the Assignor shall provide the Assignee with such information and access as the Assignee may from time to time reasonably request regarding the properties subject to the Leases.
ARTICLE 6
CONDITIONS TO THE ASSIGNOR'S OBLIGATIONS
Each of the obligations of the Assignor to be performed hereunder shall be subject to the satisfaction (or waiver by the Assignor) at or prior to the Closing Date of each of the following conditions:
6.1 Representations and Warranties; Performance. The Assignee shall have performed and complied in all respects with the covenants and agreements contained in this Agreement required to be performed and complied with by it at or prior to the Closing Date, the representations and warranties of the Assignee set forth in this Agreement shall be true and correct in all respects as of the date hereof and as of the Closing Date as though made at and as of the Closing Date (except as otherwise expressly contemplated by this Agreement), and the execution and delivery of this Agreement by the Assignee and the consummation of the transactions contemplated hereby shall have been duly and validly authorized by the Assignee's Board of Directors.
6.2 Consents. All required approvals, consents and authorizations shall have been obtained.
6.3 Litigation. No Litigation shall be threatened or pending against the Assignee or the Assignor that, in the reasonable opinion of counsel for the Assignor, could result in the restraint or prohibition of any such party, or the obtaining of damages or other relief from such party, in connection with this Agreement or the consummation of the transactions contemplated hereby.
6.4 Documents Satisfactory in Form and Substance. All agreements, certificates, and other documents delivered by the Assignee to the Assignor hereunder shall be in form and substance satisfactory to counsel for the Assignor, in the exercise of such counsel's reasonable judgment.
6.5 Due Diligence. The Assignor shall have completed its due diligence review of the Assignee and shall have been satisfied with the findings thereof.
ARTICLE 7
CONDITIONS TO THE ASSIGNEE'S OBLIGATIONS
Each of the obligations of the Assignee to be performed hereunder shall be subject to the satisfaction (or the waiver by the Assignee) at or prior to the Closing Date of each of the following conditions:
7.1 Representations and Warranties; Performance. The Assignor shall have performed and complied in all respects with the covenants and agreements contained in this Agreement required to be performed and complied with by it at or prior to the Closing Date, the representations and warranties of the Assignor set forth in this Agreement shall be true and correct in all respects as of the date hereof and as of the Closing Date as though made at and as of the Closing Date (except as otherwise expressly contemplated by this Agreement), and the execution and delivery of this Agreement by the Assignor and the consummation of the transactions contemplated hereby shall have been duly and validly authorized by the Assignor.
7.2 Consents. All required approvals, consents and authorizations shall have been obtained.
7.3 No Litigation. No Litigation shall be threatened or pending against the Assignee or the Assignor that, in the reasonable opinion of counsel for the Assignee, could result in the restraint or prohibition of any such party, or the obtaining of damages or other relief from such party, in connection with this Agreement or the consummation of the transactions contemplated hereby.
7.4 Due Diligence. The Assignee shall have completed its due diligence review of the Leases and shall have been satisfied with the findings thereof.
7.5 Proof of Ownership of the Assets. The Assignor shall have delivered to the Assignee copies of instruments evidencing its ownership of the Leases.
ARTICLE 8
COVENANTS OF THE ASSIGNOR AND THE ASSIGNEE FOLLOWING CLOSING
8.1 Transfer, Documentary Taxes.
(a) All sales, transfer, and similar taxes and fees (including all recording fees, if any) incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the Assignor and the Assignor shall file all necessary documentation with respect to such taxes.
8.2 Further Assurances. Subject to the terms and conditions of this Agreement, each party agrees to use all of its reasonable efforts to take, or cause to be taken, all actions and to do or cause to be done, all things
necessary and proper or advisable to consummate and make effective the transactions contemplated by this Agreement (including the execution and delivery of such further instruments and documents) as the other party may reasonably request.
8.3 Nondisclosure of Proprietary Data. The Parties shall hold in a fiduciary capacity for the benefit of each other all secret or confidential information, knowledge or data relating to each other or any of their affiliated companies, and their respective businesses, which shall not be or become public knowledge. Neither Party, without the prior written consent of the other, or as may otherwise be required by law or legal process, shall communicate or divulge either before or after the Closing Date any such information, knowledge or data to anyone other than the other Party and those designated by the other Party in writing, or except as required by applicable law.
ARTICLE 9
SURVIVAL AND INDEMNITY
9.1 Survival of Representations, Warranties, etc. Each of the representations, warranties, agreements, covenants and obligations herein is material and shall be deemed to have been relied upon by the other party or parties and shall survive for a period of twelve (12) months after the Closing and shall not merge in the performance of any obligation by any party hereto. All rights to indemnification contained in this Agreement shall survive the Closing indefinitely.
9.2 Indemnification by the Assignor and Assignee. The parties shall indemnify, defend, and hold harmless each other, and the each others representatives, stockholders, controlling persons and affiliates, at, and at any time after, the Closing, from and against any and all demands, claim, actions, or causes of action, assessments, losses, damages (including incidental and consequential damages), liabilities, costs, and expenses, including reasonable fees and expenses of counsel, other expenses of investigation, handling, and litigation , and settlement amounts, together with interest and penalties (collectively, a "LOSS" or "LOSSES"), asserted against, resulting to, imposed upon, or incurred by the either party, directly or indirectly, by reason of, resulting from, or arising in connection with: (i) any breach of any representation, warranty, or agreement of either party contained in or made pursuant to this Agreement, including the agreements and other instruments contemplated hereby; (ii) any breach of any representation, warranty, or agreement of either party contained in or made pursuant to this Agreement, including the agreements and other instruments contemplated hereby, as if such representation or warranty were made on and as of the Closing Date; (iii) any claim by any person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by any such person with either party in connection this Agreement or any of the transactions contemplated hereby; and (iv) to the extent not covered by the foregoing, any and all demands, claims, actions or causes of action, assessments, losses, damages, liabilities, costs, and expenses, including reasonable fees and expenses of counsel, other expenses of investigation, handling, and litigation and settlement amounts, together with interest and penalties, incident to the foregoing.
The remedies provided in this Section 9.2 will not be exclusive of or limit any other remedies that may be available to the either party to this Agreement.
ARTICLE 10
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior to the Closing Date:
(a) by mutual written consent of the Assignor and the Assignee;
(b) by either the Assignor or the Assignee if (i) there shall have been a material breach of any representation, warranty, covenant or agreement set forth in this Agreement, on the part of the Assignee, in the case of a termination by the Assignor, or on the part of the Assignor, in the case of a termination by
the Assignee, which breach shall not have been cured, in the case of a representation or warranty, prior to Closing or, in the case of a covenant or agreement, within ten (10) business days following receipt by the breaching party of notice of such breach, or (ii) any permanent injunction or other order of a court or other competent authority preventing the consummation of the transactions contemplated hereby shall have become final and non-appealable;
(c) by either the Assignor or the Assignee if the transactions contemplated hereby shall not have been consummated on or before the Closing Date; provided, however, that the right to terminate this Agreement pursuant to this Section 10.1(c) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the consummation of the transactions contemplated hereby to have occurred on or before the aforesaid date; or
(d) By the Assignee in the event of an uncured Title Defect as provided in
Section 2.2 of this Agreement.
10.2 Effect of Termination. Each party's right of termination under Section 10.1 is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies. If this Agreement is terminated pursuant to Section 10.1, unless otherwise specified in this Agreement, all further obligations of the parties under this Agreement will terminate; provided, however, that if this Agreement is terminated by a party because of the breach of this Agreement by the other party or because one or more of the conditions to the terminating party's obligations under this Agreement is not satisfied as a result of the other party's failure to comply with its obligations under this Agreement, the terminating party's rights to pursue all legal remedies will survive such termination unimpaired.
ARTICLE 11
MISCELLANEOUS
11.1 Entire Agreement. This Agreement, and the other certificates, agreements, and other instruments to be executed and delivered by the parties in connection with the transactions contemplated hereby, constitute the sole understanding of the parties with respect to the subject matter hereof and supersede all prior oral or written agreements with respect to the subject matter hereof.
11.2 Parties Bound by Agreement; Successors and Assigns. The terms, conditions, and obligations of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns.
11.3 Amendments and Waivers. No modification, termination, extension, renewal or waiver of any provision of this Agreement shall be binding upon a party unless made in writing and signed by such party. A waiver on one occasion shall not be construed as a waiver of any right on any future occasion. No delay or omission by a party in exercising any of its rights hereunder shall operate as a waiver of such rights.
11.4 Severability. If for any reason any term or provision of this Agreement is held to be invalid or unenforceable, all other valid terms and provisions hereof shall remain in full force and effect, and all of the terms and provisions of this Agreement shall be deemed to be severable in nature. If for any reason any term or provision containing a restriction set forth herein is held to cover an area or to be for a length of time which is unreasonable, or in any other way is construed to be too broad or to any extent invalid, such term or provision shall not be determined to be null, void and of no effect, but to the extent the same is or would be valid or enforceable under applicable law, any court of competent jurisdiction shall construe and interpret or reform this Agreement to provide for a restriction having the maximum enforceable area, time period and other provisions (not greater than those contained herein) as shall be valid and enforceable under applicable law.
11.5 Attorneys' Fees. Should any party hereto retain counsel for the purpose of enforcing, or preventing the breach of, any provision hereof including, but not limited to, the institution of any action or proceeding, whether by arbitration, judicial or quasi-judicial action or otherwise, to enforce any provision hereof or for damages for any alleged breach of any provision hereof, or for a declaration of such party's rights or obligations hereunder, then, whether such matter is settled by negotiation, or by arbitration or judicial determination, the prevailing party shall be entitled to be reimbursed by the losing party for all costs and expenses incurred thereby, including, but not limited to, reasonable attorneys' fees for the services rendered to such prevailing party.
11.6 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original and all of which shall constitute the same instrument.
11.7 Headings. The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.
11.8 Notices. All notices, requests, demands, claims, and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given five business days after such notice, request, demand, claim or other communication is sent, if sent by registered or certified mail, return receipt requested, postage prepaid; and, in any case, all such communications must be addressed to the intended recipient at the address set forth on the first page of this Agreement. Any party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means, but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth.
11.9 Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Montana without giving effect to the principles of choice of law thereof.
11.10 Arbitration. Any dispute arising under or in connection with any matter related to this Agreement or any related agreement shall be resolved exclusively by arbitration in the State of Montana. The arbitration shall be in conformity with and subject to the applicable rules and procedures of the American Arbitration Association. All parties agree to be (1) subject to the jurisdiction and venue of the arbitration in the State of Montana, (2) bound by the decision of the arbitrator as the final decision with respect to the dispute, and (3) subject to the jurisdiction of the Superior Court of the State of Montana for the purpose of confirmation and enforcement of any award made by the arbitrator or for any actions seeking injunctive relief.
11.11 References, etc.
(a) Whenever reference is made in this Agreement to any Article, Section,
or paragraph, such reference shall be deemed to apply to the specified Article,
Section or paragraph of this Agreement.
(b) Wherever reference is made in this Agreement to a Schedule, such reference shall be deemed to apply to the specified Schedule attached hereto, which are incorporated into this Agreement and form a part hereof. All terms defined in this Agreement shall have the same meaning in the Schedules attached hereto.
(c) Any form of the word "include" when used herein is not intended to be exclusive (e.g., "including" means "including, without limitation").
11.12 No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any person.
11.13 No Third Party Beneficiary Rights. No provision in this Agreement is intended or shall create any rights with respect to the subject matter of this Agreement in any third party.
11.14 Such Other Acts. The parties hereto shall do all things, take such acts and execute such documents as are necessary to give effect to the intention herein contemplated.
11.15 Electronic Means. Delivery of an executed copy of this Agreement by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy will be deemed to be execution and delivery of this Agreement as of the date first indicated above.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed on its behalf as of the date first indicated above.
SUMMIT WEST OIL, LLC.
/s/ Fred Taylor ------------------------------- Fred Taylor - President |
FREEDOM PETROLEUM INC.
/s/ Thomas Hynes ------------------------------- Thomas Hynes |
EXHIBIT A
STATE OF MONTANA OIL AND GAS LEASE
DS-423
AMENDED 12/6/05
No. OG-427Q9-12
THIS INDENTURE OF LEASE, entered into between the State of Montana, through its Board of Land Commissioners, hereinafter referred to as lessor, and the person, company, or corporation herein named, hereinafter referred to as lessee, pursuant to the provisions of Title 77, Chapter 3, Part 4, M.C.A., and all acts amendatory thereof and supplementary thereto, WITNESSETH:
1. GRANTING CLAUSE--The lessor, in consideration of the annual rentals herein stated, the receipt of which for the first year of this lease is hereby acknowledged, the royalties to be paid, and the covenants to be kept and performed by the lessee, hereinafter set forth, hereby grants, demises, leases and lets to the lessee, for the purpose of mining and operating for oil and gas, and of laying pipelines, building tanks, power stations, and other structures thereon necessary in order to produce, save, care for, dispose of and remove the oil and gas, all the lands herein described, as follows:
Date this lease takes effect: June 05, 2012
Name of Lessee: SUMMIT WEST OIL, LLC Address: 1115 W10TH AVE
SPOKANE, WA 99204
Land Located in: Township 15 North, Range 4 West County: Lewis and Clark
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Description of land: Section 32: Lots 1 thru 8, E2
Total number of acres, more or less, 624.72, belonging to Common Schools Grant.
Annual rental, payable each year in advance: $2,342.70 first year; $937.08 each year thereafter.
2.TERM AND HORIZONTAL SEGREGATION--This lease is granted for a primary term often years and so long thereafter as oil and gas in paying quantities shall be produced from the land, subject to all of the terms and conditions herein set forth; provided, however, that:
(a) The extended term of this lease shall apply only to those formations discovered, developed or drilled during the primary term of ten years, and the interest of the lessee in the premises herein described shall thereafter be limited to such formations.
(b) If oil and gas in paying quantities is discovered in an offset well on a contiguous section during the extended term of this lease in any formation in the zone between the deepest formation to which the lessee drilled during the primary term of this lease and the deepest formation in which oil or gas has been discovered on the leased premises, this lease shall terminate as to said zone unless, within 60 days after the completion of such offset well, the lessee shall commence operations to test such a formation.
IT IS MUTUALLY UNDERSTOOD, AGREED AND COVENANTED BY AND BETWEEN THE PARTIES TO THIS LEASE AS FOLLOWS:
3.LEASE EXTENSION--The Board of Land Commissioners may grant reasonable extensions of the primary term of this lease upon a showing that lessee, despite due care and diligence, is or has been directly or indirectly prevented from exploring, developing, or operating this lease or is threatened with substantial economic loss due to litigation regarding this lease or another lease in the immediate area held by the lessee, state compliance with the Montana Environmental Policy Act, or adverse conditions caused by natural occurrences.
4.LAND DISPOSITIONS--The lessor expressly reserves the right to sell, lease, or otherwise dispose of any interest or estate in the lands hereby leased, except the interest conveyed by this lease. However, lessor agrees that sales, leases, or other dispositions of any interest of estate in the lands hereby leased shall be subject to the terms of this lease, and shall not interfere with the lessee's possession or rights hereunder.
5.RENTAL--The lessee shall pay to the lessor an annual money rental in the amount hereinabove stated being not less than one dollar and fifty cents ($1.50) for each acre of land held under this lease from year to year, provided, however, that the amount of such money rental so payable shall in no case be less than one hundred dollars ($ 100.00) per annum. The first year's rental must
be paid before the issuance of the lease. The rentals for each subsequent year of the lease shall be due and payable before the beginning of such subsequent lease year. Upon failure to make the rental payment, the lease terminates unless there is a well currently being drilled, a producing well, or a shut-in well approved by the Department of Natural Resources and Conservation, Trust Land Management Division (Department) on the lease. Rental paid for any year must be credited against any royalty that accrues during that year.
6. ROYALTY ON OIL--The lessee shall pay in money or in kind to the lessor at its option as hereinafter provided during the full term of this lease a royalty of 16.67%, free of all costs and deductions, on the average production of the oil from producing wells under this lease for each calendar month.
7.ROYALTY ON GAS--The lessee shall also pay in money or in kind to the lessor at its option as hereinafter provided during the full term of this lease, free of costs and deductions, a royalty on the gas produced from the wells under this lease whether the wells produce oil and gas or gas alone, of 16.67%.
8.SHUT IN GAS ROYALTY--The royalty on gas, including casinghead gas and all gaseous substances not sold or used off the premises, must be at the rate of $400 per lease each year or the amount of the annual rental provided in the lease, whichever is the greater, payable on or before the annual anniversary date of the lease. As long as the leased lands contain a well capable of production in paying quantities and the requisite payment is made, the lease must be considered as a producing lease under the terms herein.
9. ROYALTIES BASED ON PRODUCTION-AO royalties shall be calculated upon the total amount produced and saved under this lease exclusive of oil and/or gas used for light, fuel or operating purposes in connection with the work on the lands under the lease.
10. FULL PRODUCTION REQUIRED-All wells under this lease shall be so drilled, maintained and operated as to produce the maximum amount of oil and/or gas which can be secured without injury to wells and the aforesaid royalties shall be based and calculated on such full production of oil and/or gas.
11. ROYALTY PAYMENT-The lessee shall pay to the lessor in cash for such royalty oil and gas at the rate of the posted field price therefor existing on the day such oil or gas was run into any pipeline or storage tank to the credit of the lessee plus any bonus or other increase in price actually paid or agreed to be paid to the lessee.
12. IN-KIND OIL OR GAS--At the option of the lessor exercised not more
frequently than once every thirty days by notice in writing the lessee shall
deliver the State's royalty oil or gas free of cost or deductions into the
pipeline to which the wells of the lessee may be connected or into any storage
designated by the State and connected with such wells. The lessee shall not be
required to furnish storage for the State's royalty oil for more than thirty
(30) days following the date of production thereof when a market therefor is
available.
13. FAIR MARKET VALUE--In all cases where there is no posted field price for oil or gas produced under this lease, the payments in cash for the royalties payable hereunder shall never be less than the fair market value thereof, for oil, at the wells where produced on the day it is run into the pipeline or storage tanks, and for gas, at the well where produced on the day produced. It is agreed that helium gas, carbon dioxide gas, and all other natural gases are included under the term "gas" as used in this lease.
14. LIENS ON PRODUCTION--The lessor shall have a first lien upon all oil or gas produced from the lands leased hereunder, to secure the payment of all unpaid royalty and other sums of money that may become due under the terms herein.
15. POOLING AND UNITIZATION-Upon receiving the written consent of the lessor, the lessee shall have the right to commit the lands hereby leased to a pooling, unit, cooperative or other plan of development or operation with other State lands, Federal lands, privately-owned lands or Indian lands. Such agreements shall not change the percentage of royalties to be paid to the state from the percentages as fixed herein. Oil or gas produced from any lands included in such an agreement which encompasses the lands hereby leased are considered to be produced from the lands hereby leased.
16. FARM LOAN ACQUISITIONS-If the land under this lease is "mortgaged land" acquired by the State in connection with a mortgage given to the State as security for a loan and such mortgage land has been sold by the State subsequent to July 1,1927, and prior to February 26,1929, the lessee shall pay directly to the holder of such land under certificate of purchase or other contract, or deed from the State, a royalty of one percentum (1%) of the oil and gas produced from such land to be calculated on the same basis and in the same manner as the royalty to be paid to the State, but the said royalty of one percentum shall be deducted from the royalty to be paid to the State so that such one percentum royalty does not increase the total royalty to be paid under this lease, and if such mortgage land was sold by the State between March 15, 1935, and July 1, 1961, the lessee shall pay directly to the holder of such land under certificate of purchase or other contract or deed from the State, a royalty of six and one-fourth percentum (614%) of the oil and gas produced from such land to be calculated as hereinbefore specified.
17.DELAY DRILLING PENALTY-Unless this lease is surrendered, is terminated by lessee's failure to pay rentals when due, or is terminated by the Board of Land Commissioners because of the failure of the lessee to comply with the express and implied covenants of this lease, the Board of Land Commissioners may, in its discretion and as provided by law, cancel and terminate this lease upon the failure of the lessee (1) to commence within five (5) years of the effective date of this lease, drilling of at least one well upon the leased premises of such diameter and to such depth as may be necessary to make a reasonable test for oil and gas; or (2) pay in advance a delay drilling penalty of one dollar and twenty-five cents ($ 1.25) per acre for the sixth year of the lease in addition to the annual rental; or (3) pay in advance a delay drilling penalty of two dollars and fifty cents ($2.50) per acre per annum for the seventh through the tenth year of the lease in addition to the annual rental. The lessee shall notify the Department of the commencement of drilling of any well within five (5) days after the well is spudded in. The Board shall refund delay drilling penalties paid on a lease for any year in which the lessee commences drilling on that lease.
18. DRY HOLE CLAUSE-Following the termination of the fourth year of this
lease, if the lessee drills a dry hole on the lease premises prior to discovery
of oil or gas or if after discovery of oil or gas, production thereof in paying
quantities ceases, the lease may be terminated by the Board unless the lessee
(1) commences drilling of another well for oil and/or gas before the 7th year of
this lease or second anniversary of the lease following completion of the well,
whichever comes later, or (2) unless the lessee, on or before such anniversary
date resumes payment of any delay drilling penalties imposed by the Board. For
purposes of this lease "dry hole" is defined as a completed well which is not capable of producing oil and/or gas in paying quantities when completed.
19. DRILLING EXTENSION--If at the expiration of the primary term hereof oil or gas is not being produced from the lease premises in paying quantities, but the owner of the lease is then engaged in drilling on the premises for oil and gas, then the lease continues in effect so long as such drilling operations are being diligently prosecuted. If oil or gas is recovered from any such well drilled or being drilled at or after the expiration of the primary term hereof, the lease continues in effect so long as oil or gas in paying quantities is being produced from the leased premises.
20. DUE DILIGENCE--Upon completion of a commercially productive oil or gas well upon the leased premises, the lessee shall proceed with reasonable diligence to drill such additional wells to the depth of the formation found commercially productive, or to such depth as may be necessary to economically test, develop and operate the deposits discovered.
21. OFFSET PROTECTION--The lessee shall commence promptly and diligently drill to completion all wells necessary on the lands under this lease in order to fairly offset commercially producing oil or gas wells on contiguous lands or pay a compensatory royalty.
22. WASTE PROHIBITED--In conducting all explorations, mining or drilling operations under this lease, the lessee shall exercise all reasonable care and precautions in order to prevent waste of oil and gas. The lessee shall also at all times use all reasonable care and precautions to prevent the entrance of water to the oil or gas bearing strata to the destruction or injury thereof.
23. LOGS REQUIRED-The lessee agrees to keep a correct log of each well drilled under this lease, showing the formations passed through, the depth at which such formation was reached, the thickness of each formation, the water-bearing formations and the character of water therein, the elevations to which the water rises, the number of feet of casing set in such well and where placed, its size and the total depth to which such well was drilled; and upon request, to file the log with the Department.
24. PROGRESS REPORTS REQUIRED--When called upon to do so, the lessee shall also file progress reports with the Department before the completion or abandonment of any well.
25. PRODUCTION REPORTS AND PAYMENT OF ROYALTY-The lessee further agrees on or before the last day of each month to make a report to the Department for operations covering the preceding calendar month, which report shall be in such form as the Department may prescribe and shall show the amount of oil or gas produced and saved during the preceding calendar month, the price obtained therefor, the total amount of all sales, whether any bonus or other increase in price was actually paid or agreed to be paid and such additional information as may be required. Such report shall be signed by the lessee or by some responsible person having knowledge of the facts contained therein. The report shall be accompanied by payment of the amount due the State as royalty for the month covered by the report where payment is required in money in place of oil or gas.
26. COMPLETION REPORTS REQUIRED-When the lessee is required by the rules of the Board of Oil and Gas Conservation to file a well completion report with that board, lessee shall file one copy of that report with the Department.
27. LESSOR'S RIGHT TO INSPECT-Representatives of the lessor shall at all times have the right to enter upon the granted premises and all parts thereof for the purpose of inspecting and examining the same, as well as supervising tests thai they may deem necessary to ascertain the condition of the wells being drilled or about to be abandoned and gauging the production of producing wells. Representatives of the lessor shall also, at all reasonable hours, have free access to all books, accounts, records and papers of the lessee insofar as they contain information relating to the production obtained under this lease, the price obtained therefor, and the fair market value of the production. Lessor shall also have free access to agreements relating to production hereunder.
28. SURFACE OWNER'S OR LESSEE'S RIGHTS-The lessee hereunder agrees to
provide the surface owner and surface lessee with a plan for location of all
facilities and consult with the surface owner and surface lessee regarding a
reasonable location of access roads. In all operations on the land hereby
leased, lessee agrees to interfere as little as possible with the use of the
premises for any other purpose to which the same may be devoted by other persons
to whom the land may have been leased or sold by the State. The lessee shall not
drill any well upon the lands hereby leased, within two hundred feet (200') of
any residence or barn now or hereafter erected thereon without the consent of
the owner of such building. The lessee hereby agrees to make satisfactory
adjustment with the owner or lessee of the surface, including the State of
Montana, for damages sustained by such surface owner, the lessee, or the State
of Montana by reason of the lessee's entry upon, use and occupancy of, the
surface of the land. If amicable determination of damages cannot be made between
such surface owner, lessee, or the State of Montana and the lessee hereunder,
then, upon the agreement of the surface owner or lessee to enter into
arbitration, the damages to be paid to the surface owner or lessee shall be
fixed by a board of arbitrators of three persons, to be appointed as follows:
one by the State of Montana or the owner or lessee of the surface who is
claiming damages, one by the lessee hereunder, and the third by the two
arbitrators so appointed. The lessee hereby agrees to make prompt payment of the
damages awarded by such board of arbitrators.
In any case where the owner of the surface claims title under a "C" patent issued by the State of Montana, and demands that the Board fix, allow and pay the owner the reasonable value of any right of way established by the lessee hereunder, the Department shall charge the cost of fixing the amount of damages to the lessee hereunder. The lessee hereunder shall pay the reasonable sum so fixed as damages to the Board, which will pay the surface owner.
29.ASSIGNMENTS--The lessee may assign this lease either in whole or as to any regular subdivision thereof, embracing not less than forty (40) acres, to any qualified assignee, providing that such assignment shall not be binding upon the State until it has been filed with the Department accompanied by the required fees. No assignment to two or more assignees will be approved until one of the assignees is designated to act as agent for the assignees. Each lessee executing this lease, or accepting an assignment of an interest in this lease, is jointly and severally liable for all obligations attributable to the entire working interest under this lease.
30. RELINQUISHMENTS--The lessee shall have the right at the termination of any rental year, by giving at least thirty (30) days previous notice in writing to the Department, to surrender and relinquish any legal subdivisions of the land hereby leased and thereupon be discharged from any obligation not theretofore accrued as to the lands so surrendered and relinquished. When this lease terminates as to any portion less than the whole of the lands covered
hereby, because of the lessee's failure to pay rental when due, lessee agrees to submit to the lessor, within thirty (30) days after such termination, a written surrender and relinquishment of those lands.
31. CANCELLATION--It is understood and agreed that the lessor hereby reserves the right to declare this lease forfeited and to cancel the same through the Board of Land Commissioners upon failure of the lessee to fully discharge all the obligations provided herein, after written notice from the Board and reasonable time fixed and allowed by it to the lessee for the performance of any undertaking or obligation specified in such notice concerning which the lessee is in default. The lessee, upon written application therefor, shall be granted a hearing on any notice or demand of the Board before the lease shall be declared forfeited or canceled. The provisions of this clause shall not in any way affect an automatic termination of this lease caused by lessee's failure to pay rental when due.
32. SURRENDER POSSESSION-Upon the termination of this lease for any cause the lessee shall surrender possession of the leased premises to the lessor subject to lessee's right to re-enter, hereby granted, at any time within six months after the date of such termination, for the purpose of removing all machinery, fixtures, improvements, buildings and equipment belonging to the lessee remaining upon the premises except casing in wells and other equipment or apparatus necessary for the preservation of any oil or gas well or wells. It is hereby agreed that any succeeding lessee, or in the event there be no succeeding lessee, the lessor, wishing to have such property left permanently upon the premises, shall pay the reasonable value thereof, in cash, to the lessee, but if the succeeding lessee or the lessor, acting through its Board of Land Commissioners, shall be unable to agree with the lessee upon the reasonable cash value of such casing, equipment and apparatus, then the succeeding lessee or the lessor herein, as the case may be, shall pay in cash to the lessee hereunder, such sum as may be fixed as a reasonable price by a board of three appraisers, one of whom shall be chosen by the succeeding lessee or the State of Montana as the case may be, one by the lessee hereunder, and the third by the two chosen, and whose appraisal shall be reported to the respective parties, in writing, and is final and conclusive. If the lessee or succeeding lessee refuses to appoint an appraiser within fifteen (15) days of a request to do so by the Department, the Department may appoint an appraiser for the lessee or succeeding lessee. Unless the Department gives written authorization, the lessee may not remain in possession or manage the land and property formerly covered by the lease. During the time the lessee remains in authorized possession, the lessee shall be entitled to retain the same share of the products of the lands as inured to the lessee during the term of this lease. Should the lessor herein or any succeeding lessee not desire any of the lessee's property permanently left upon the premises, as provided in this paragraph, the lessee shall properly plug all non-producing wells and remove all of his property from the lands with reasonable diligence. If any of the property of the lessee is not removed from the leased premises within six months of the termination date of the lease as herein provided the same shall be deemed forfeited to the State of Montana and shall become its property.
33. COMPLIANCE WITH LAWS, RULES AND REGULATIONS--This lease is subject to ftirther permitting under the provisions of Title 75 or 82, Montana Code Annotated. The lessee agrees to comply with all applicable laws, rules and regulations in effect at the date of this lease, particularly the Rules Governing the Issuance of Oil and Gas Leases on State Lands of the State of Montana. The lessee agrees to comply with all applicable laws, rules and regulations which may, from time to time, be adopted and which do not impair the obligations of this contract and which do not deprive the iessee of an existing property right recognized by law.
34. WARRANTY OF TITLE--It is understood and agreed that this lease is issued only under such title as the State of Montana may now have or hereafter acquire, and that the lessor shall not be liable for any damages sustained by the lessee, nor shall the lessee be entitled to or claim any refund of rentals or royalties theretofore paid to the lessor in the event the lessor does not have the title to the oil and gas in the leased lands. If the lessor owns a lesser interest in the leased lands than the entire and undivided fee simple estate in underlying oil and gas for which rental and royalty is payable, then the rentals and royalties herein provided shall be paid the lessor only in the proportion which its interest bears to the whole and undivided fee simple estate in the oil and gas for which royalty is payable.
35. LEGAL FEES--In the event lessor shall institute and prevail in any action or suit for the enforcement of any provisions of this lease, lessee will pay to lessor a reasonable sum for costs incurred on account thereof.
36. SPECIAL PROVISIONS:
SEE EXHIBIT "A"
37. EXECUTING PARTIES BOUND--A11 covenants and agreements herein set forth between the parties hereto shall extend to and bind their successors, heirs, executors and assigns.
IN WITNESS WHEREOF, the State of Montana and the lessee have caused this lease to be executed in duplicate and the Director of the Montana Department of Natural Resources and Conservation, pursuant to the authority granted him by the Board of Land Commissioners of the State of Montana, has hereunto set his hand and affixed the seal of the Board of Land Commissioners this 18th day of June 2012.
/s/ Fred Taylor ------------------------------------- Lessee |
/s/ Mary Sexton by Monte G. Mason ---------------------------------------------------------------- Director of the Department of Natural Resources and Conservation |
EXHIBIT A - SPECIAL PROVISIONS OG-42709-12
Surface Ownership: STATE-OWNED SURFACE
1 Lessee shall notify and obtain approval from the Department's Trust Land Management Division (TLMD) prior to constructing well pads, roads, power lines, and related facilities that may require surface disturbance on the tract. Lessee shall comply with any mitigation measures stipulated in TLMD's approval.
2 Prior to the drilling of any well, lessee shall send one copy of the well prognosis, including Form 22 "Application for Permit" to the Department's Trust Land Management Division (TLMD). After a well is drilled and completed, lessee shall send one copy of all logs run, Form 4A "Completion Report", and geologic report to TLMD. A copy of Form 2 "Sundry Notice and Report of Wells" or other appropriate Board of Oil and Gas Conservation form shall be sent to TLMD whenever any subsequent change in well status or operator is intended or has occurred. Lessee shall also notify and obtain approval from the TLMD prior to plugging a well on the lease premises.
Issuance of this lease in no way commits the Land Board to approval of coal bed methane production on this lease. Any coal bed methane extraction wells would require subsequent review and approval by the board.
3 The TLMD will complete an initial review for cultural resources and, where applicable, paleontological resources of the area intended for disturbance and may require a resources inventory. Based on the results of the inventory, the TLMD may restrict surface activity for the purpose of protecting significant resources located on the lease premises.
4 The lessee shall be responsible for controlling any noxious weeds introduced by lessee's activity on State- owned land and shall prevent or eradicate the spread of those noxious weeds onto land adjoining the lease premises.
5 The definitions of "oil" and "gas" provided in 82-1-111, MCA, do not apply to this lease for royalty calculation purposes.
6 If the State does not own the surface, the lessee must contact the owner of the surface in writing at least 30 days prior to any surface activity. A copy of the correspondence shall be sent to TLMD.
7 Due to unstable soil conditions on this tract and/or topography that is rough and/or steep, surface use may be restricted or denied. Seismic activity may be restricted to poltershots.
/s/ Fred Taylor ------------------------------------- Lessee |
Exhibit 23.1
September 24, 2012
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Freedom Petroleum Inc.
Centennial, Colorado
To Whom It May Concern:
Silberstein Ungar, PLLC hereby consents to the use in the Form S-1, Registration Statement under the Securities Act of 1933, filed by Freedom Petroleum Inc. of our report dated September 5, 2012, relating to the financial statements of Freedom Petroleum Inc. as of and for the period ending July 31, 2012, and the reference to us under the caption "Interest of Named Experts and Counsel".
Sincerely,
/s/ Silberstein Ungar, PLLC -------------------------------------- Silberstein Ungar, PLLC Bingham Farms, Michigan |