ONTRF Blackrock Oil Corporation (CE)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 20-F

 

 

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 2014
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO ___________

 

333-165163

(Commission File Number)

 

BLACKROCK OIL CORPORATION

(Exact name of registrant as specified in its charter)

 

		255 Duncan Mill Road, Suite 203
Province of Ontario, Canada		Toronto, Ontario, Canada M3B 3H9
(Jurisdiction of incorporation or organization)		(Address of principal executive offices)

 

Oliver Xing, President

255 Duncan Mill Road, Suite 203

Toronto, Ontario, Canada M3B 3H9

(416) 510-2991

 

(Name, telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

Securities registered pursuant to Section 12(g) of the Act:	Securities registered pursuant to section 15(d) of the Act:
NONE	COMMON STOCK

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report as of October 31, 2014           32,781,666         .

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   YES ☐   NO ☒

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. YES ☐   NO ☒

 

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days.   YES ☐   NO ☒

  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES o   NO x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

	Large Accelerated Filer	☐	Accelerated Filer	☐
	Non-accelerated Filer	☒

 

Indicate by check mark which basis of account the registrant has used to prepare the financial statements included in this filing:

 

	U.S. GAAP			☒
	International Reporting Standards as issued by the International Accounting Standards Board			☐
	Other			☐
	If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
	Item 17	☐	Item 18	☐

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.  YES ☐   NO ☒

 

 

 

TABLE OF CONTENTS

 

		Page
	PART I
Item 1.	Identity of Directors, Senior Management and Advisers.	3
Item 2.	Offer Statistics and Expected Timetable.	3
Item 3.	Key Information.	3
Item 4.	Information on the Company.	11
Item 4A.	Unresolved Staff Comments.	12
Item 5.	Operating and Financial Review and Prospects.	12
Item 6.	Directors, Senior Management and Employees.	14
Item 7.	Major Shareholders and Related Party Transactions.	16
Item 8.	Financial Information.	16
Item 9.	The Offer and Listing.	16
Item 10.	Additional Information.	17
Item 11.	Quantitative and Qualitative Disclosures About Market Risk.	22
Item 12.	Description of Securities Other than Equity Securities.	22
	PART II
Item 13.	Defaults, Dividend Arrearage and Delinquencies.	22
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds.	22
Item 15.	Controls and Procedures.	22
Item 16A.	Audit Committee Financial Expert.	23
Item 16B.	Code of Ethics.	23
Item 16C.	Principal Accountant Fees and Services.	23
Item 16D.	Exemptions from the Listing Standards for Audit Committee.	24
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers.	24
Item 16F.	Change in Registrant’s Certifying Accountant.	24
Item 16G.	Corporate Governance.	24
	PART III
Item 17.	Financial Statements.	25
Item 18.	Financial Statements.	25
Item 19.	Exhibits.
Signatures		26
Exhibit Index

 

 

FORWARD LOOKING STATEMENTS

 

Blackrock Oil Corporation, or the Company, desires to take advantage of the safe harbour provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbour legislation. This document and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. The words ‘‘believe’’, ‘‘expect’’, ‘‘anticipate’’, ‘‘intends’’, ‘‘estimate’’, ‘‘forecast’’, ‘‘project’’, ‘‘plan’’, ‘‘potential’’, ‘‘will’’, ‘‘may’’, ‘‘should’’, ‘‘expect’’ and similar expressions identify forward-looking statements.  Please note in this annual report, ‘‘we’’, ‘‘us’’, ‘‘our’’, ‘‘the Company’’, all refer to the Company.

 

The forward-looking statements in this document are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.

 

In addition to these important factors and matters discussed elsewhere herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies, fluctuations in currencies and interest rates, general market conditions, changes in the Company’s operating expenses, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions and other important factors described from time to time in the reports filed by the Company with the Securities and Exchange Commission.

 

PART I

 

ITEM 1.                      IDENTITY OF DIRECTORS, SENIOR MANAGEMNET AND ADVISERS

 

Not applicable.

 

ITEM 2.                      OFFER STATISTICS AND EXPECTED TIMETABLE

 

Not applicable.

 

ITEM 3.                      KEY INFORMATION

 

A.           Selected financial data.

 

The following selected financial data for the years ended June 30, 2014 and 2032 is derived from our audited financial statements.  The selected financial data, as well as the financial statements and accompanying notes, are prepared in accordance with accounting principles generally accepted in the United States.  The Registrant presents its financial statements in United States dollars.  All dollar amounts in this Form 20-F are in United States dollars, except where otherwise indicated. You should read the following selected financial data with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and accompanying notes and other financial information included elsewhere in this annual report.

 

 

		Year ended June 30, 2014				Year ended June 30, 2013
Revenue		$	-			$	-
Operating expenses			57,579				69,076
Net Income (loss)			(57,579	)			(69,076	)
Income (loss) per share – basic and diluted		$	(0.00	)		$	(0.01	)
Weighted average number of shares outstanding			11,541,666				11,541,666

 

		Year ended June 30, 2014				Year ended June 30, 2013
Balance Sheet Data
Cash and cash equivalent		$	6,336			$	17,168
Total current assets			152,472				166,443
Total assets			152,472				166,443
Total current liabilities			152,805				102,438
Total liabilities			152,805				102,438
Total accumulated deficits			(407,623	)			(350,044	)
Total shareholders’ equity			13,185				64,005

  

B.           Capitalization and indebtedness.

 

Not applicable.

 

C.           Reasons for the Offer and Use of Proceeds.

 

Not applicable.

 

D.           Risks Factors.

 

The risks described below are not the only ones we face.  Additional risks that generally apply to publicly traded companies, that are not yet identified or that are currently perceived as immaterial, may also impair our business operations.  Our business, operating results and financial condition could be adversely affected by any of the following risks.  You should refer to the other information set forth in this document, including our financial statements and the related notes.

 

This annual report also contains certain forward-looking statements that involve risks and uncertainties. These statements relate to our future plans, objectives, expectations and intentions.  These statements may be identified by the use of words such as “expects,” “anticipates,” “intends,” “plans” and similar expressions. Our actual results could differ materially from those discussed in these statements. Factors that could contribute to such differences include, but are not limited to, those discussed below and elsewhere in this annual report.

 

 

RISK FACTORS RELATED TO OUR BUSINESS

 

We have a limited operating history so it may be difficult for you to evaluate our business and its future prospects.

 

It may be difficult to evaluate our business and prospects because we have a limited operating history.  We were incorporated on September 3, 2009 under the laws of the Province of Ontario, Canada.  In our five years of operations, we focused our business developments and we only have limited revenue and there is no assurance of future revenue generation. Our operation is still in development stage and is susceptible to all risks associated with start-up company. Our ability to achieve and maintain profitability and positive cash flow is dependent upon:

 

*             our ability to source, analyze, finance and acquire oil and gas properties;

*             our ability to generate revenues through the sale of our oil production.

 

There can be no assurance that we will be able to successfully acquire an oil and gas assets at reasonable cost and generate revenue from

 

Our auditor has issued a going concern.

 

Our auditors have issued a going concern opinion. This means that there is substantial doubt that we will be an ongoing business for the next twelve months. Our cumulative loss since inception to June 30, 2014 is $407,623 and will require sufficient financing to continue our business.

 

Because our sole officer and director will only be devoting limited time to our operations, our operations may be sporadic which may result in periodic interruptions or suspensions of operations. This activity could prevent us from attracting purveyors and clients and result in a lack of revenues that may cause us to suspend or cease operations.

 

Our sole officer and director, Oliver Xing, will only be devoting limited time to our operations. Oliver Xing will be devoting approximately 15 hours per week of his time to our operations. Because our sole officer and director will only be devoting limited time to our operations, our operations may be sporadic and occur at times which are convenient to him. As a result, operations may be periodically interrupted or suspended which could result in a lack of revenues and a possible cessation of operations.

 

Because our management does not have technical training or experience in evaluating oil gas assets, we may have to hire qualified personnel. If we can’t locate qualified personnel, we may have to suspend or cease operations which will result in the loss of your investment.

 

Because our sole officer and director is inexperienced with providing technical evaluation of oil and gas properties, we may have to hire qualified persons to assist him in acquisitions.  Our sole officer and director has no direct formal training or experience in this area and as a result may not be fully aware of many of the specific requirements related to working within the industry. Management’s decisions and choices may not take into account standard engineering or managerial approaches companies commonly use. Consequently our operations, earnings and ultimate financial success could suffer irreparable harm due to management’s lack of experience in this industry.  As a result we may have to suspend or cease operations which will result in the loss of your investment.

 

If Oliver Xing, our sole officer and director, should resign or die, we will not have a chief executive officer which could result in our operations suspending. If that should occur, you could lose your investment.

 

Oliver Xing is our sole officer and director. We are extremely dependent upon him to conduct our operations. If he should resign or die we will not have a chief executive officer. If that should occur, until we find another person to act as our chief executive officer, our operations could be suspended. In that event it is possible you could lose your entire investment.

 

We may not be able to compete with others in the energy field and as a result may have to suspend or cease operations.

 

We are small and have not yet begun material operations.  As a result we may not be able to compete with other energy development business.  If we are unable to compete with other oil companies, we may have to suspend or cease operations - and in that event it is possible you could lose your entire investment.

 

 

There are risks inherent in foreign operations, such as adverse changes in currency values and foreign regulations relating to our business operations.

 

Our well and operations are located outside the US and are subject to certain risks related to the indirect ownership and development of foreign properties, including adverse changes in currency values, foreign taxes, US taxes on the repatriation of funds to the US, and other laws and regulations, any of which may have a material adverse effect on our properties, financial condition, results of operations, or cash flows.

 

We have limited management and staff and will be dependent upon contract arrangements.

 

We have no full time employee as of June 30, 2014. We expect that we will continue to require the services of independent consultants and contractors to perform various professional services, including reservoir engineering, land, legal, environmental, and tax services. We also plan to pursue alliances with partners in the areas of geological and geophysical services and prospect generation, evaluation, and prospect leasing. Our dependence on third party consultants and service providers creates a number of risks, including but not limited to:

●

the possibility that such third parties may not be available to us as and when needed; and

●

the risk that we may not be able to properly control the timing and quality of work conducted with respect to our projects.

 

If we experience significant delays in obtaining the services of such third parties or poor performance by such parties, our results of operations may be materially adversely affected.

 

Oil and natural gas prices are volatile. A decline in prices could adversely affect our financial condition, results of operations, cash flows, access to capital, and ability to grow.

 

Our revenues, results of operations, future rate of growth, and the carrying value of our oil and gas properties depend heavily on the prices we receive for the crude oil and natural gas we sell. Prices also affect the amount of cash flow available for capital expenditures and our ability to borrow money or raise additional capital. The markets for crude oil and natural gas have historically been, and are likely to continue to be, volatile and subject to wide fluctuations in response to numerous factors, including the following:

 

	●	worldwide and domestic supplies of oil and gas, and the productive capacity of the oil and gas industry as a whole;
	●	changes in the supply and the level of consumer demand for such fuels;
	●	overall global and domestic economic conditions;
	●	political conditions in oil, natural gas, and other fuel-producing and fuel-consuming areas;
	●	the extent of US and Canadian domestic oil and gas production and the consumption and importation of such fuels and substitute fuels in US and Canada and other relevant markets;
	●	the availability and capacity of gathering, transportation, processing, and/or refining facilities in regional or localized areas that may affect the realized price for crude oil or natural gas;
	●	the price and level of foreign imports of crude oil, refined petroleum products, and liquefied natural gas;
	●	weather conditions, including effects of weather conditions on prices and supplies in worldwide energy markets;
	●	technological advances affecting energy consumption and conservation;
	●	the ability of the members of the Organization of Petroleum Exporting Countries and other exporting countries to agree to and maintain crude oil prices and production controls;
	●	the competitive position of each such fuel as a source of energy as compared to other energy sources;
	●	strengthening and weakening of the US dollar relative to other currencies; and
	●	the effect of governmental regulations and taxes on the production, transportation, and sale of oil, natural gas, and other fuels.

 

These factors and the volatility of the energy markets make it extremely difficult to predict future oil and gas price movements with any certainty, but in general we expect oil and gas prices to continue to fluctuate significantly.

Sustained declines in oil and gas prices would not only reduce our revenues but also could reduce the amount of oil and gas that we can produce economically and, as a result, could have a material adverse effect on our financial condition, results of operations, cash flows, and reserves. Further, oil and gas prices do not necessarily move in tandem. Prices for sales of our oil production are primarily affected by global oil prices, and the volatility of those prices will affect future oil revenues.

 

Competition in the oil and natural gas industry is intense, and many of our competitors have greater financial, technical, and other resources than we do.

 

We face intense competition from major oil and gas companies and independent oil and gas exploration and production companies who seek oil and gas investments throughout the world, as well as the equipment, expertise, labor, and materials required to explore, develop, and operate crude oil and natural gas properties. Many of our competitors have financial, technical, and other resources vastly exceeding those available to us, and many crude oil and natural gas properties are sold in a competitive bidding process in which our competitors may be able and willing to pay more for development prospects and productive properties, or in which our competitors have technological information or expertise that is not available to us to evaluate and successfully bid for the properties. In addition, shortages of equipment, labor, or materials as a result of intense competition may result in increased costs or the inability to obtain those resources as needed. We may not be successful in acquiring, exploring, and developing profitable properties in the face of this competition.

 

We also compete for human resources. The need for talented people across all disciplines in the industry has grown, while the number of talented people available has not grown at the same pace, and in many cases, is declining due to the demographics of the industry.

 

Our operations are subject to complex laws and regulations, including environmental regulations that result in substantial costs and other risks.

 

Legislation and regulations affecting the industry are under constant review for amendment or expansion, raising the possibility of changes that may become more stringent and, as a result, may affect, among other things, the pricing or marketing of crude oil and natural gas production. Noncompliance with statutes and regulations and more vigorous enforcement of such statutes and regulations by regulatory agencies may lead to substantial administrative, civil, and criminal penalties, including the assessment of natural resource damages, the imposition of significant investigatory and remedial obligations, and may also result in the suspension or termination of our operations. The overall regulatory burden on the industry increases the cost to place, design, drill, complete, install, operate, and abandon wells and related facilities and, in turn, decreases profitability.

 

Governmental authorities regulate various aspects of drilling for and the production of crude oil and natural gas, including the permit and bonding requirements of drilling wells, the spacing of wells, the unitization or pooling of interests in crude oil and natural gas properties, rights-of-way and easements, environmental matters, occupational health and safety, the sharing of markets, production limitations, plugging, abandonment, and restoration standards, and oil and gas operations. Public interest in environmental protection has increased in recent years, and environmental organizations have opposed, with some success, certain projects. Under certain circumstances, regulatory authorities may deny a proposed permit or right-of-way grant or impose conditions of approval to mitigate potential environmental impacts, which could, in either case, negatively affect our ability to explore or develop certain properties. Governmental authorities also may require any of our ongoing or planned operations on their leases or licenses to be delayed, suspended, or terminated. Any such delay, suspension, or termination could have a material adverse effect on our operations.

 

Our operations are also subject to complex and constantly changing environmental laws and regulations adopted by federal, state, tribal, and local governmental authorities in jurisdictions where we are engaged in exploration or production operations. New laws or regulations, or changes to current requirements, could result in material costs or claims with respect to properties we own or have owned. We will continue to be subject to uncertainty associated with new regulatory interpretations and inconsistent interpretations between various regulatory agencies. Under existing or future environmental laws and regulations, we could incur significant liability, including joint and several liability or strict liability under federal, state, and tribal environmental laws for noise emissions and for discharges of crude oil, natural gas, and associated liquids or other pollutants into the air, soil, surface water, or groundwater. We could be required to spend substantial amounts on investigations, litigation, and remediation for these discharges and other compliance issues. Any unpermitted release of petroleum or other pollutants from our operations could result not only in cleanup costs but also natural resources, real or personal property, and other compensatory damages and civil and criminal liability. Existing environmental laws or regulations, as currently interpreted or enforced, or as they may be interpreted, enforced, or altered in the future, may have a material adverse effect on us.

 

Legislative and regulatory initiatives related to global warming and climate change could have an adverse effect on our operations and the demand for crude oil and natural gas.

 

Due to concerns about the risks of global warming and climate change, a number of various national and regional legislative and regulatory initiatives to limit greenhouse gas emissions are currently in various stages of discussion or implementation. For example, the US Environmental Protection Agency has been adopting and implementing various rules regulating greenhouse gas emissions under the US Clean Air Act, the US Congress has from time to time considered other legislative initiatives to reduce emissions of greenhouse gases, and almost one-half of the states have already taken legal measures to reduce emissions of greenhouse gases, primarily through the planned development of greenhouse gas emission inventories and/or regional greenhouse gas cap and trade programs. Most of these cap and trade programs work by requiring major sources of emissions, such as electric power plants, or major producers of fuels, such as refineries and gas processing plants, to acquire and surrender emission allowances. The number of allowances available for purchase is reduced each year in an effort to achieve the overall greenhouse gas emission reduction goal.

 

Legislative and regulatory programs to reduce emissions of greenhouse gases could require us to incur substantially increased capital, operating, maintenance, and compliance costs, such as costs to purchase and operate emissions control systems, costs to acquire emissions allowances, and costs to comply with new regulatory or reporting requirements. Any such legislative or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, the oil and natural gas we produce. Consequently, legislative and regulatory programs to reduce emissions of greenhouse gases could have an adverse effect on our business, financial condition, results of operations, and cash flows.

 

In addition, there has been public discussion that climate change may be associated with more extreme weather conditions, such as increased frequency and severity of storms, droughts, and floods. Extreme weather conditions can interfere with our development and production activities, increase our costs of operations or reduce the efficiency of our operations, and potentially increase costs for insurance coverage in the aftermath of such conditions. Significant physical effects of climate change could also have an indirect effect on our financing and operations by disrupting the transportation or process related services provided by midstream companies, service companies, or suppliers with whom we have a business relationship. We may not be able to recover through insurance some or any of the damages, losses, or costs that may result from potential physical effects of climate change.

 

This report contains estimates of our proved and probable reserves and the estimated future net revenues from our proved reserves. These estimates are based upon various assumptions, including assumptions required by the SEC relating to oil and gas prices, drilling and operating expenses, capital expenditures, taxes, and availability of funds. The process of estimating oil and gas reserves is complex. The process involves significant decisions and assumptions in the evaluation of available geological, geophysical, engineering, and economic data for each reservoir. Actual future production, oil and gas prices, revenues, taxes, development expenditures, operating expenses, and quantities of recoverable oil and gas reserves will most likely vary from these estimates. Any significant variation of any nature could materially affect the estimated quantities and present value of our proved reserves, and the actual quantities and present value may be significantly less than we have previously estimated. In addition, we may adjust estimates of proved reserves to reflect production history, results of exploration and development drilling, prevailing oil and natural gas prices, costs to develop and operate properties, and other factors, many of which are beyond our control. Our properties may also be susceptible to hydrocarbon drainage from production by operators on adjacent properties. Probable reserves are less certain to be recovered than proved reserves.

The present value of future net cash flows from our proved reserves is not necessarily the same as the current market value of our estimated oil and natural gas reserves. We base the estimated discounted future net cash flows from our proved reserves on the average, first-day-of-the-month price during the 12-month period preceding the measurement date, in accordance with SEC rules. However, actual future net cash flows from our oil and natural gas properties also will be affected by factors such as:

 

●

actual prices we receive for oil and natural gas;

●

actual costs of development and production expenditures;

●

the amount and timing of actual production;

●

supply of and demand for oil and natural gas; and

●

changes in governmental regulations or taxation, including severance and excise taxes.

 

The timing of production from oil and natural gas properties and of related expenses affects the timing of actual future net cash flows from proved reserves, and thus their actual present value. In addition, the 10% discount factor required by the SEC to be used to calculate discounted future net cash flows for reporting purposes may not be the most appropriate discount factor in view of actual interest rates, costs of capital, and other risks to which our business or the oil and natural gas industry in general are subject.

 

 

 

 

 

 

 

SEC rules could limit our ability to book additional proved undeveloped reserves in the future.

 

SEC rules require that, subject to limited exceptions, proved undeveloped reserves may only be booked if they relate to wells scheduled to be drilled within five years after the date of booking. This requirement may limit our ability to book additional proved undeveloped reserves as we pursue drilling programs on our undeveloped properties in the future. In addition, we may be required to write down our proved undeveloped reserves if we do not drill the scheduled wells within the required five-year timeframe in the future.

 

Substantial capital is required for our business.

 

Our exploration, development, and acquisition activities require substantial capital expenditures. Our cash flows from operations are not sufficient to fund our planned capital expenditures, we may need to raise additional capital through debt, equity, or other financings. Debt or equity financing may not always be available to us in sufficient amounts or on acceptable terms.

 

If we are not able to replace reserves, we will not be able to sustain production.

 

Our future success depends largely upon our ability to find, develop, or acquire additional oil and gas reserves that are economically recoverable. Unless we replace the reserves we produce through successful exploration, development, or acquisition activities, our reserves will decline over time. Recovery of any additional reserves will require significant capital expenditures and successful drilling operations. We may not be able to successfully find and produce reserves economically in the future. In addition, we may not be able to acquire proved reserves at acceptable costs.

 

Future price declines may result in write-downs of our asset carrying values.

 

We follow the successful efforts method of accounting for our oil and gas operations. Under this method, all property acquisition costs and costs of exploratory and development wells are capitalized when incurred, pending determination of whether proved reserves have been discovered. If proved reserves are not discovered with an exploratory well, the costs of drilling the well are expensed.

 

The capitalized costs of our oil and natural gas properties, on a depletion pool basis, cannot exceed the estimated undiscounted future net cash flows of that depletion pool. If net capitalized costs exceed undiscounted future net revenues, we generally must write down the costs of each depletion pool to the estimated discounted future net cash flows of that depletion pool. A significant decline in oil or natural gas prices from current levels, or other factors, could cause a future impairment write-down of capitalized costs and a non-cash charge against future earnings. Once incurred, a write-down of oil and natural gas properties cannot be reversed at a later date, even if oil or natural gas prices increase.

 

Oil and gas drilling and producing operations are hazardous and expose us to environmental liabilities.

 

Oil and gas operations are subject to many risks, including well blowouts, cratering and explosions, pipe failure, fires, formations with abnormal pressures, uncontrollable flows of oil, natural gas, brine, or well fluids, and other environmental hazards and risks. Our drilling operations involve risks from high pressures and from mechanical difficulties such as stuck pipes, collapsed casings, and separated cables. If any of these risks occur, we could sustain substantial losses as a result of:

 

●

injury or loss of life;

●

severe damage to, or destruction of, property, natural resources, and equipment;

●

pollution or other environmental damage;

●

clean-up responsibilities;

●

regulatory investigations and penalties; and

●

suspension of operations.

 

Our liability for environmental hazards may include those created either by the previous owners of properties that we purchase or lease or by acquired companies prior to the date we acquire them. We will maintain insurance against some, but not all, of the risks described above. Our insurance may not be adequate to cover casualty losses or liabilities, and in the future we may not be able to obtain insurance at premium levels that justify its purchase.

 

Weakness in economic conditions or uncertainty in financial markets may have material adverse impacts on our business.

 

US, Canadian and global economies and financial systems have recently experienced turmoil and upheaval characterized by extreme volatility and declines in prices of securities, diminished liquidity and credit availability, inability to access capital markets, the bankruptcy, failure, collapse, or sale of financial institutions, increased levels of unemployment, and an unprecedented level of government intervention. Although some economies appear to have stabilized and begun to recover, the extent and timing of recovery, and whether it can be sustained, are uncertain. Continued weakness in the US, Canadian or other large economies could materially adversely affect our business, financial condition, results of operations, and cash flows.

 

 

Currency exchange rate fluctuations may negatively affect our operating results.

 

The exchange rates between the Canadian dollar and the US dollar have changed in recent periods and may fluctuate substantially in the future. We expect that a majority of our revenues will be denominated in Canadian dollars in the future. However, the US dollar has strengthened against the Canadian dollar, which has had, and may continue to have, a negative impact on our revenues generated in the Canadian dollar, as well as our operating income and net income. Any appreciation of the US dollar against the Canadian dollar is likely to have a negative impact on our revenue, operating income, and net income.

 

Since we are a Canadian company and all of our assets, officers, directors are located in Canada, you may not be able to enforce any United States judgment for claims you may bring against us.

 

We have been organized under the laws of the Province of Ontario, Canada.  All of our assets are located outside the United States. In addition, our sole officer and director are residents of Canada.  While a cross boarder treatise exists between the United States and Canada relating to the enforcement of foreign judgments, the process of such is cumbersome and in some cases has prevented the enforcement of judgments.  As a result, while actions may be brought in Canada, it may be impossible for you to affect service of process within the United States upon us or these persons or to enforce against us or these persons any judgments in civil and commercial matters, including judgments under United States federal securities laws. In addition, a Canadian court may not permit you to bring an original action in Canada or to enforce in Canada a judgment of a U.S. court based upon civil liability provisions of U.S. federal securities laws.

 

Our operating results may be impacted by foreign exchange rates.

 

Substantially all of our revenue is expected to be earned in Canadian dollars.  A significant portion of our expenses is incurred in Canadian dollars.  Changes in the value of the Canadian dollar relative to the U.S. dollar may result in currency translation gains and losses and could adversely affect our operating results.  To date, foreign currency exposure has been minimal.  However, in the future we may consider hedging all or a significant portion of our annual estimated Canadian dollar expenses to minimize our Canadian dollar exposure.

 

RISK FACTORS RELATED TO OWNING OUR STOCK

 

Control by existing shareholder, anti-takeover effects

 

As of June 30, 2014, Oliver Xing, our President and Chief Executive Officer and director, personally and indirectly through his spouse, beneficially owned approximately 9,250,000 shares or 80.14 % of our outstanding common shares.  As a result, Mr. Xing can exert substantial influence over us and influence most matters requiring shareholder approval, including the election of directors, and thereby exercise significant control over our affairs.  The voting power of Mr. Xing under certain circumstances could have the effect of delaying or preventing a change in our control, the effect of which may be to deprive you of a control premium that might otherwise be realized in connection with our acquisition.

 

No Established Public Trading Market

 

Our shares are qualified to begin trading on the Over the Counter Bulletin Board (OTCBB) on March 2011, however, at present our shares has only been very thinly traded, and there is no assurance that a significant trading market will develop, or if developed, that such market will be sustained.

 

Possible Volatility of Stock Price

 

Many factors could affect the market price of our common shares.  These factors include but are not limited to:

 

	●	Variations in our operating results;
	●	Variations in industry growth rate;
	●	Changes in government policies regarding solar energy legislations, administrative policies;
	●	Adjustments by governments or its agencies in Feed-in-tariff rate for solar energy in Ontario;
	●	General economic conditions in the markets;
	●	Change in market sentiments about renewable energy and etc.

 

 

Our common stock trades in the over-the-counter market on the OTCBB.  As a result, an investor may find it more difficult to dispose of, or to obtain accurate quotations as to the value of, our common stock. Because our common stock is subject to federal securities rules affecting penny stock, the market liquidity for our common stock may be adversely affected.

 

Our common stock could become subject to additional sales practice requirements for low priced securities. Our common stock could become subject to Rule 15g-9 under the Securities Exchange Act of 1934, which imposes additional sales practice requirements on broker-dealers that sell our shares of common stock to persons other than established customers and “accredited investors” or individuals with net worth in excess of $1,000,000 or annual incomes exceeding $200,000 or $300,000 together with their spouses.

 

Rule 15g-9 requires a broker-dealer to make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. Consequently, the rule may affect the ability of broker-dealers to sell our securities and may affect the ability of our shareholders to sell any of our securities in the secondary market; generally define a “penny stock” to be any non-Nasdaq equity security that has a market price less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions; requires broker dealers to deliver, prior to a transaction in a penny stock, a risk disclosure document relating to the penny stock market.

 

Disclosure is also required to be made about compensation payable to both the broker-dealer and the registered representative and current quotations for the securities. In addition, the rule requires that broker dealers deliver to customers monthly statements that disclose recent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

ITEM 4.                      INFORMATION ON THE COMPANY

 

A.           History and Development of the Company.

 

The Company was incorporated under the laws of the Province of Ontario, Canada on September 3, 2009. The Company intends to commence business operations by acquiring proved-developed-producing oil assets in Western Canada. The Company has not generated any revenue for the period of September 3, 2009 to June 30, 2014, and only generated $164,975 revenue for the year ended June 30, 2011, and generated no revenue in the years ended June 30, 2012, June 30, 2013 and June 30, 2014. The Company only generated $11,177 in interest income for the year ended June 30, 2014. Management believes the Company’s operations are subject to all risks inherent in the establishment of a new business enterprise because its revenue is still an immaterial amount and there is no assurance that future revenue will be generated.

 

B.           Business Overview.

 

We were incorporated in the Province of Ontario, Canada on September 3, 2009. We intend to explore, develop and operate oil assets in Western Canada. We maintain our statutory registered agent’s office and our business office is located at 255 Duncan Mill Road, Suite 203, Toronto, Ontario M3B 3H9.  Our telephone number is (416) 510-2991.

 

We have no plans to change our planned business activities or to combine with another business, and we are not aware of any events or circumstances that might cause these plans to change. We are a development stage company and our plan of operation is prospective and there is no assurance that we will begin profitable operations.

 

We intend to raise additional financing and acquire proved-developed-producing light oil assets in Western Canada by executing our growth strategy to build shareholder value.

 

Our Strategy

Our strategies to create shareholder value encompass three steps:

i)

Acquire Proved Developed and Producing light oil assets with optimization potentials. We will source, identify, analyze and acquire producing light oil assets with significant optimization opportunities. Once we have acquired a producing asset we will increase production by de-bottleneck the obsticles in production by investing optimization capital.

ii)

Drill and operate low risk production wells (off-set, re-entry and recompletion) to increase oil production with measured risks;

iii)

Acquire light oil land with identified resources to develop a large resources play.

 

We are committed to a measured-risk optimization capital and growth strategy and focused on determining the most efficient way to create greatest value and highest returns for our shareholders.

 

 

ITEM 4A.                      UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 5.                      OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

A.           Operating Results

 

The following discussion should be read in conjunction with our financial statements and the accompanying notes appearing elsewhere in this annual report.

 

Our financial statements are prepared in accordance with U.S. generally accepted accounting principles.  Our functional currency is the Canadian dollar.  Our financial statements are reported in United States dollars.

 

Sources of Revenue

 

For the year ended June 30, 2014, our revenue is $nil (June 30, 2013 - $nil). We had no revenue generated due to we concentrated our efforts substantially in evaluating our business strategies and selecting the best approach to build shareholder value. We expect the situation will change in the fiscal year 2015, and we are actively securing financing and evaluating acquisition targets. However, there can be no assurance that we will be successful in our business strategy.

 

Revenue Recognition

 

We recognize revenue when oil or gas is sold at a fixed or determinable price, persuasive evidence of an agreement exists, delivery has occurred and title has transferred, and collectability is reasonably assured.

 

Operating Results

 

The following is management’s discussion and analysis of our financial condition and results of its operations for the fiscal years ended June 30, 2014 and 2013.  Because we are an emerging company, the comparisons between our financial statements may not be meaningful and may not necessarily be indicative of our future results of operation.

 

Revenues

 

For the year ended June 30, 2014, we have generated no revenue other than $11,177 in interest income (June 30, 2013 - $10,042 in interest income). The reason that we did not generate any revenue is due to the facts that we concentrated our efforts in analyzing the situation and selecting a better alternative to build up shareholder value. The Company believes it is prudent to conserve cash and assess the impact in the long run than simply venture out to expend the cash and lose its investment.

 

Legal fee

 

Legal fees for the year ended June 30, 2014 were $nil (June 30, 2013 - $nil) due to the Company having completed its filings, and has had no material legal issues upon which to consult lawyer.

 

General and administrative expenses

 

General and administrative expenses include compensation expense, business travel, expenses of a general nature in up-keeping the Company. For the year ended June 30, 2014, the general and administrative expenses were $60,259 (June 30, 2012 - $61,887).

 

Financial Condition, Liquidity and Capital Resources

 

At June 30, 2014, the Company had total assets of $152,472 (June 30, 2013 - $166,433) consisting of cash and cash equivalents of $6,336 (June 30, 2013 - $17,168), accounts receivable of $5,530 (June 30, 2013 - $950) and tax receivable of $35 (June 30, 2012 - $995), and note receivable of $140,571 (June 30, 2013 - $147,330).

 

Operations used $67,918 cash for the fiscal year ended June 30, 2014 (June 30, 2013 - $63,703).  Funds used in operations primarily relate to general and administrative expenses.

 

Investing activities used $nil for the fiscal year ended June 30, 2014 and $177,330 for the year ended June 30, 2013. Funds used in investing activities primarily relate to the increase in notes receivable in 2013.

 

 

Financing activities provided $57,086 for the fiscal year ended June 30, 2014 (June 30, 2013 - $30,144), which is due to an increase in loan payable to related party.

 

B.           Liquidity and capital resources

 

We have financed our operations from our inception to June 30, 2014 from the issuance of equity securities and, to a lesser extent, from non-interest bearing loans from our founder, President and Chief Executive Officer Oliver Xing.

 

For the fiscal year ended June 30, 2014 and 2013, we did not sell any securities to raise funds. From September 3, 2009 to June 30, 2010, we sold approximately 1,541,66 shares of our common shares through private placements with investors and raised $314,049.  The offering was conducted pursuant to the exemption provided by Regulation S, under the Securities Act of 1933. 

 

As of June 30, 2014, we had approximately $6,336 of cash and cash equivalents (June 30, 2013 - $17,168).

 

To provide working capital for its operations and project development, the Company will need to raise new funds. The Company intends to raise additional capital through the issuance of common shares, through bank loans and through the issuance of related party debt.  In addition, from time to time in the past, Oliver Xing, the President of the Company, personally advanced non-interest-bearing loans to the Company for the day-to-day operations of the Company.  It is contemplated that it will continue to raise capital primarily in private placements through investors.  No assurance, however, can be given that the Company’s future capital requirements will be obtained. The Company’s access to capital is always dependent upon future financial market conditions, especially those pertaining to early-stage companies. There can be no guarantee that the Company will be successful in obtaining future financing, when necessary, on economically acceptable terms.

 

For the next year ending June 30, 2015, the Company anticipates that it will pay for its administrative and operational costs from existing working capital, from current revenue stream, if any, and from private placements through investors.  Due to the development nature of our business, the Company believes it is difficult to estimate its development cash needs, but the Company believes it can raise sufficient working capital to cover its operation requirements, however, no assurances can be given that the Company will be able to raise cash from additional financing efforts.  If the Company is unable to obtain sufficient funds from future financing, or from current revenues, the Company’s operation could be materially negatively affected, its operation could be forced into suspension.

 

C.           Research and development, patents and licenses

 

We are not involved in any research and development and have no registered patents or licenses.  In the fiscal year ended June 30, 2014 and 2013, and for the period of September 3, 2009 to June 30, 2014, the Company did not have any research, development or patent expenses.

 

D.           Trend information

 

For the next year, we intend to continue our tight cost control in order to potentially achieve profitability.  See Item 5A. “Operating and Financial Review and Prospects - Results of Operation” for additional trend information.

 

E.           Off-balance sheet arrangements

 

The Company does not have any off-balance sheet arrangements.

 

F.           Tabular disclosure of contractual obligations

 

The Company does not have any contractual obligations of the type required to be disclosed in this section.

 

 

G.           Safe Harbor

 

We are projecting increased expenses.

 

We are projecting increased expenses for the fiscal year ending June 30, 2015 as our development stage business grows.  It is expected that these expenses will be caused primarily by:

 

*	cost to start-up and operate new start-up business
*	marketing costs
*	increased personnel and office costs
*	Oil assets evaluating and acquisition costs
*	legal and accounting costs

 

We are in the emerging stage.

 

We have a limited operating history since our operations on September 3, 2009.  Consistent with other early-stage companies, expenditures are heavily weighted professional fees, general business development expenses and etc. We realize that these expenditures are necessary in order to maintain our various stringent filing obligations and to compete for customers more effectively and to develop a profitable company capable of surviving and prospering well into the future.

 

ITEM 6.                      DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

 

A.           Directors and Senior Management.

 

Set forth below are particulars respecting our directors and executive officers as of June 30, 2013, and each person’s business experience.

 

Name		Business Address		Position
Oliver Xing		255 Duncan Mill Road		Chief Executive Officer,
		Suite 203		President, Secretary
		Toronto, Ontario		Chief Financial Officer
		Canada M3B 3H9		Director

 

Since our inception on September 3, 2009, Oliver Xing has been our president, principal executive officer, secretary, treasurer, principal financial officer, principal accounting officer and sole member of the board of directors. Since May 17, 2010, Mr. Xing has been president, principal executive officer, secretary, treasurer, principal financial officer, principal accounting officer and sole director of CN Resources, Inc., an exploration stage company located in Toronto, Ontario, Canada.  From February, 2006 to May 2007, Mr. Xing was a Director, Chief Executive Officer and Chief Financial Officer of Arehada Mining Limited (formerly Dragon Capital Corporation), a Toronto Stock Exchange listed company.  Since March 18, 2005, Mr. Xing has been the managing partner of CRR Capital Markets, Inc. an exempt market dealer located in Ontario, Canada. Further, since 1996, Mr. Xing has been a business consultant to Toronto based corporations.  Since February 16, 1996, Mr. Xing has been a Chartered Accountant in Ontario, Canada.

 

Compensation

 

The Company has accrued total compensation of $60,000 to Oliver Xing for the fiscal year ended June 30, 2014 (June 30, 2013 was $60,000) for all services provided to the Company by Oliver Xing at the capacity as President, Chief Executive Officer and Chief Financial Officer, and Corporate Secretary.  There is no stock option or other compensation for Oliver Xing.

 

Summary Compensation Table

 

Non-

Non- qualified

Equity

Deferred

Name

Incentive

Compensa

All

and

Stock

Option

Plan

tion

Other

Principal

Salary

Bonus

Awards

Awards

Compensation

Earnings

Compensation

Total

Position

Year

(US$)

(US$)

(US$)

(US$)

(US$)

(US$)

(US$)

(US$)

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)

Oliver Xing

2014

0

0

0

0

0

0

60,000

60,000

President

2013

0

0

0

0

0

0

60,000

60,000

2012

0

0

0

0

0

0

60,000

60,000

 

We have no employment agreement with any of our officers. We do not contemplate entering into any employment agreements until such time as we begin profitable operations.

 

The compensation discussed herein addresses all compensation awarded to, earned by, or paid to our named executive officers.

 

 

There are no other stock option plans, retirement, pension, or profit sharing plans for the benefit of our officers and directors other than as described herein.

 

Compensation of Directors

 

The member of our board of directors is not compensated for his services as a director. The board has not implemented a plan to award options to any directors. There are no contractual arrangements with any member of the board of directors. We have no director’s service contracts.  In the future and when we are financially permitted, we do intend to reimburse independent directors, if any, for out-of-pocket expenses for attending board meetings.

 

Long-Term Incentive Plan Awards

 

We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.

 

Indemnification

 

Our articles of incorporation do not provide for indemnification. Our by-Law does provide indemnification for our Director and Officer of the Corporation.

 

B.           Board Practices.

 

While not required, each of the Company’s directors is a resident of Canada and holds office until the Company’s annual meeting or until his successor is duly elected or appointed.  Officers are appointed annually by the Board of Directors to serve at the Board’s will.  The Company has no contracts with any of its Directors that provide for payments upon termination.  

 

C.           Employees.

 

As of June 30, 2014, we have no full time or part-time employee nor have we entered any negotiation with anyone concerning any employment with the Company. We believe that we are a new start-up development stage company the current practice of using independent contractor(s) only on needed basis can better preserve company’s cash and reduce costs. However, we may hire full-time or part-time employee in the next twelve months if such need arises and we have determined that it is financially possible for the Company to do so.

 

D.           Share Ownership.

 

The following table sets forth, as of the date of this report, the total number of shares owned beneficially by each of our directors, officers and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares. The stockholders listed below have direct or indirect ownership of their shares and possesses sole voting and dispositive power with respect to the shares.

 

The percentage of beneficial ownership is as stated below and total issued and outstanding shares at the date of this report is 11,541,666 common shares.

 

		Number of						Percent
Name of owner		Shares				Position		of Class
Oliver Xing			6,000,000			President, President, Principal Executive			51.99	%
						Officer, Secretary, Treasurer, Principal
						Financial Officer, Principal Accounting
						Officer and sole director
Early Bird Capital Corporation			2,250,000			Oliver Xing, our sole officer and director			25.99	%
						owns 100% of the voting shares of Early
						Bird Capital Corporation
1547698 Ontario Limited			1,000,000			1547698 Ontario Limited is owned by			8.66	%
						He Zheng who is the wife of Oliver Xing,
						our president.  He Zheng currently holds
						100% of the voting shares of 1547698
						Ontario Limited.
All Officers and Directors as a Group (1 person)			10,000,000						86.64	%

 

 

There are no options outstanding to purchase our shares of common stock.

 

 

ITEM 7.                      MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

A.           Major Shareholders.

 

The Company is not aware of any beneficial owners of 5% or more of the Company’s common stock other than those disclosed in Item 6.D above.

 

B.           Related Party Transactions.

 

All transactions with related parties have occurred in the normal course of operations and are recorded at the amount as agreed and exchanged.

 

For the year ended June 30, 2014, the Company accrued a total of $24,000 management fee (including compensation for office, telephone and office supplies) and a total of $36,000 for consulting fee which is included in General and administrative fee category to compensate the president for all services rendered to the Company at the capacity as the President, Chief executive Officer, Chief Financial Officer and Secretary of the Company. The total compensation for the year ended June 30, 2014 is the same as for the year ended June 30, 2013 and June 30, 2012.

 

As of June 30, 2014, the President had loaned the Company $148,689 (June 30, 2013 - $91,768). The loan is non-interest bearing, due upon demand and unsecured.

 

ITEM 8.                      FINANCIAL INFORMATION

 

A.           Financial Statements and Other Financial Information.  

 

This annual report on Form 20-F contains the financial information set forth under Item 18.

 

B.           Significant Changes.

 

There are no significant changes in the Company’s business practice, strategy and operation in the year ended June 30, 2014 and for the period of inception on September 3, 2009 to June 30, 2014.

 

Legal Proceedings

 

The Company is not a party to any pending or ongoing legal proceeding nor is the company aware of any threatened or anticipated material legal proceeding against it.

 

Dividend Policy

 

The Company has not paid and does not plan to pay any cash dividends on its capital stock.  The Company currently intends to retain any future earnings, if any, to fund growth, and therefore does not expect to pay any cash dividends in the foreseeable future.

 

ITEM 9.                      THE OFFER AND LISTING

 

Price History of Shares

 

The Company’s common shares are qualified to be traded in the United States on the OTC Markets. However, as of June 30, 2014, active trading has not commenced, so there is no information or data available to report. Even though our stock is listed on the OTCQB, if traded, the trading price and trading volume can be sporadic. No active established market established within or outside the United States existed for our common stock.

 

 

Offering

 

There was no stock offering for the year ended June 30, 2014.

 

ITEM 10.                    ADDITIONAL INFORMATION

 

A.           Share Capital

 

Not Applicable.

 

B.           Memorandum and Articles of Incorporation and Bylaws

 

Incorporated by reference from the Company’s registration statement on F-1, as amended.

 

C.           Material Contracts

 

The Company has no material contracts with anyone.

 

D.           Exchange Controls

 

The Company is an Ontario corporation.  Canada has no system of exchange controls.  There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors.  There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, royalties and other payments to non-resident holders of the Canadian securities.

 

There are no limitations under the laws of Canada or in the controlling documents of the Company on the right of foreigners to hold or vote securities of the Company, except that the Investment Canada Act may require review and approval by the Minister of Industry (Canada) of certain acquisitions of “control” of the Company by a “non-Canadian.”  The threshold for acquisitions of control is generally defined as being one-third or more of the voting shares of the Company.  ”Non-Canadian” generally means an individual who is not a Canadian citizen, or a corporation, partnership, trust or joint venture that is ultimately controlled by non-Canadians.

 

E.           Taxation

 

Canadian Federal Income Tax Consequences

 

The following is a brief summary of some of the principal Canadian federal income tax consequences to a U.S. Holder (as defined below) of the Company’s common shares who deals at arm’s length with and is not affiliated with the Company, holds the shares as capital property and who, for the purposes of the Income Tax Act (Canada) and the Canada–United States Income Tax Convention, is at all relevant times resident or deemed to be resident in the United States and is not nor is deemed to be in Canada and does not carry on business in Canada.

 

This summary is of a general nature only and is not, and should not be interpreted as, legal or tax advice to any particular U.S. Holder and no representation is made with respect to the Canadian income tax consequences to any particular person.  Accordingly, U.S. Holders are advised to consult their own tax advisers with respect to their particular circumstances.

 

Under the Income Tax Act (Canada) and pursuant to the Canada-United States Income Tax Convention, a U.S. Holder of common shares will be subject to a 15 percent withholding tax on dividends paid or credited or deemed by the Income Tax Act (Canada) to have been paid or credited on such shares.  The withholding tax rate is 5 percent, where the U.S. Holder is a corporation that beneficially owns at least 10 percent of the voting shares of the Company.

 

In general, a U.S. Holder will not be subject to Canadian income tax on capital gains arising on the disposition of the Company common shares unless (i) at any time in the five-year period immediately preceding the disposition, 25 percent or more of the shares of any class or series of the capital stock of the Company were owned (or were under option or subject to an interest in) by the U.S. Holder, by persons with whom the U.S. Holder did not deal at arm’s length and (ii) the value of the common shares of the Company at the time of the disposition derives principally from real property (as defined in the Canada-United States Income Tax Convention) situated in Canada.

 

 

United States Federal Income Tax Consequences

 

The following is a general discussion of certain possible U.S. federal income tax consequences, under current law, generally applicable to a U.S. Holder of common shares of the Company.  This discussion is of a general nature only and does not take into account the particular facts and circumstances, with respect to U.S. federal income tax issues, of any particular U.S. Holder.  This discussion does not cover any state, local or foreign tax consequences. (See “Taxation – Canadian Federal Income Tax Consequences”, above).

 

The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time and which are subject to differing interpretations.  This discussion does not consider the potential effects, both adverse and beneficial, of any proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time.

 

This discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any U.S. Holder or prospective U.S. Holder of common shares of the Company, and no opinion or representation with respect to the U.S. federal income tax consequences to any such U.S. Holder or prospective U.S. Holder is made.  Accordingly, U.S. Holders and prospective U.S. Holders of common shares of the Company should consult their own financial advisor, legal counsel or accountant regarding the U.S. federal, state, local and foreign tax consequences of purchasing, owning and disposing of common shares of the Company.

 

U.S. Holders

 

As used herein, a “U.S. Holder” means a holder of common shares of the Company who is (i) a citizen or individual resident of the U.S., (ii) a corporation or partnership created or organized in or under the laws of the U.S. or of any political subdivision thereof, (iii) an estate whose income is taxable in the U.S. irrespective of source or (iv) a trust subject to the primary supervision of a court within the U.S. and control of a U.S. fiduciary as described Section 7701(a)(30) of the Code.

 

Persons Not Covered

 

This summary does not address the U.S. federal income tax  consequences to persons (including persons who are U.S. Holders) subject to special provisions of U.S. federal income tax law, including (i) tax-exempt organizations, (ii) qualified retirement plans, (iii) individual retirement accounts and other tax-deferred accounts, (iv) financial institutions, (v) insurance companies, (vi) real estate investment trusts, (vii) regulated investment companies, (viii) broker-dealers, (ix) persons or entities that have a “functional currency” other than the U.S. dollar, (x) persons subject to the alternative  minimum tax, (xi) persons who own their common shares of the Company as part of a straddle, hedging, conversion transaction, constructive sale or other arrangement involving more than one position, (xii) persons who acquired their common shares of the Company through the exercise of employee stock options or otherwise as compensation for services, (xiii) persons that own an interest in an entity that owns common shares of the Company, (xiv) persons who own, exercise or dispose of any options, warrants or other rights to acquire common shares of the Company, or (xv) persons  who own their common shares of the Company other than as a capital asset within the meaning of Section 1221 of the Code.

 

Distribution on Common Shares of the Company

 

U.S. Holders receiving distributions (including constructive distributions) with respect to common shares of the Company are required to include in gross income for U.S. federal income tax purposes the gross amount of such distributions, equal to the U.S. dollar value of such distributions on the date of receipt (based on the exchange rate on such date), to the extent that the Company has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions.  Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s U.S. federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder’s U.S. federal taxable income by those who itemize deductions. (See more detailed discussion at “Foreign Tax Credit” below).  To the extent that distributions from the Company exceed current or accumulated earnings and profits of the Company, such distributions will be treated first as a return of capital, to the extent of the U.S. Holder’s adjusted basis in the common shares, and thereafter as gain from the sale or exchange of the common shares of the Company. (See more detailed discussion at “Disposition of Common Shares of the Company” below)

 

In the case of foreign currency received as a distribution that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt.  Generally any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss.  However, an individual whose realized gain does not exceed $200 will not recognize that gain, to the extent that there are no expenses  associated with the transaction that meet the requirements for deductibility as a trade or business expense (other than travel expenses in connection with a business trip) or as an expense for the production of income.

 

 

Dividends paid on the common shares of the Company generally will not be eligible for the “dividends received deduction” allowed to corporate shareholders receiving dividends from certain U.S. corporations.  Under certain circumstances, a U.S. Holder that is a corporation and that owns shares representing at least 10% of the total voting power and the total value of the Company’s outstanding shares may be entitled to a 70% deduction of the “U.S. source” portion of dividends received from the Company (unless the Company qualifies as a “Foreign Personal Holding Company” or a “Passive Foreign Investment Company” as defined below).  The availability of the dividends received deduction is subject to several complex limitations which are beyond the scope of this discussion, and U.S. Holders of common shares of the Company should consult their own financial advisor, legal counsel or accountant regarding the dividends received deduction.

 

Certain information reporting and backup withholding rules may apply with respect to certain payments related to the Company’s common shares.  In particular, a payer or middleman within the U.S., or in certain cases outside the U.S., will be required to withhold 31% (which rate is scheduled for periodic adjustment) of any payments to a U.S. Holder of the Company’s common shares of dividends on, or proceeds from the sale of, such common shares within the U.S., if a U.S. Holder fails to furnish its correct taxpayer identification number or

otherwise fails to comply with, or establish an exemption from, the backup withholding tax requirements.  Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a refund or a credit against the U.S. Holder’s U.S. federal income tax liability, provided the required information is furnished to the IRS.   U.S.  Holders should consult their own financial advisor, legal counsel or accountant regarding the information reporting and backup withholding rules applicable to the Company’s common shares.

 

Foreign Tax Credit

 

A U.S. Holder who pays (or has withheld from distributions) Canadian or other foreign income tax with respect to the ownership of common shares of the Company may be entitled, at the option of the U.S. Holder, to either receive a deduction or a tax credit for U.S. federal income tax purposes with respect to such foreign tax paid or withheld.  Generally, it will be more advantageous to claim a credit because a credit reduces U.S. federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to U.S. federal income tax.  This election is made on a year-by-year basis and applies to all foreign taxes paid by (or withheld from distributions to) the U.S. Holder during that year.

 

There are significant and complex limitations that apply to the foreign tax credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s U.S. income tax liability that the U.S. Holder’s “foreign source” income bears to his or its worldwide taxable income.  In applying this limitation, the various items of income and deduction must be classified as either “foreign source” or “U.S. source.”  Complex rules govern this classification process.  In addition, this limitation is calculated separately with respect to specific classes of income such as “passive income,” “high withholding tax interest,” “financial services income,” “shipping income,” and certain other classifications of income.  Dividends distributed by the Company will generally constitute “foreign source” income, and will be classified as “passive income” or, in the case of certain U.S. Holders, “financial services income” for these purposes.

 

In addition, U.S. Holders that are corporations and that own 10% or more of the voting stock of the Company may be entitled to an “indirect” foreign tax credit under Section 902 of the Code with respect to the payment of dividends by the Company under certain circumstances and subject to complex rules and limitations.   The availability of the foreign tax credit and the application of the limitations with respect to the foreign tax credit are fact specific, and each U.S. Holder of common shares of the Company should consult their own financial advisor, legal counsel or accountant regarding the foreign tax credit rules.

 

Disposition of Common Shares of the Company

 

A U.S. Holder will recognize gain or loss upon the sale or other taxable disposition of common shares of the Company equal to the difference, if any, between (i) the amount of cash plus the fair market value of any property received, and (ii) the shareholder’s tax basis in the common shares of the Company.  This gain or loss will be capital gain or loss if the common shares are a capital asset in the hands of the U.S. Holder, which will be long-term capital gain or loss if the common shares of the Company are held for more than one year.

 

Preferential tax rates apply to long-term capital gains of U.S. Holders that are individuals, estates or trusts.  Deductions for net capital losses are subject to significant limitations.  For U.S. Holders that are not corporations, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted.  For U.S. Holders that are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.

 

 

Currency Exchange Gains or Losses

 

U.S. holders generally are required to calculate their taxable incomes in United States dollars.  Accordingly, a U.S. holder who purchases common shares of the Company with Canadian dollars will be required to determine the tax basis of such shares in United States dollars based on the exchange rate prevailing on the settlement date of the purchase (and may be required to recognize the unrealized gain or loss, if any, in the Canadian currency surrendered in the purchase transaction).  Similarly, a U.S. holder receiving dividends or sales proceeds from common shares of the Company in Canadian dollars will be required to compute the dividend income or the amount realized on the sale, as the case may be, in United States dollars based on the exchange rate prevailing at the time of receipt in the case of dividends and on the settlement date in the case of sales on an established securities exchange.  Gain or loss, if any, recognized on a disposition of Canadian currency in connection with the described transactions generally will be treated as ordinary gain or loss.

  

Other Considerations for U.S. Holders

 

In the following circumstances, the above sections of this discussion may not describe the U.S. federal income tax consequences to U.S. Holders resulting from the ownership and disposition of common shares of the Company:

 

Foreign Personal Holding Company

 

If at any time during a taxable year (i) more than 50% of the total voting power or the total value of the Company’s outstanding shares is owned, directly or indirectly, by five or fewer individuals who are citizens or residents of the U.S. and (ii) 60% (or 50% in certain cases) or more of the Company’s gross income for such year is “foreign personal holding company income” as defined in Section 553 of the Code (e.g., dividends, interest, royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions), the Company may be treated as a “Foreign Personal Holding Company” (“FPHC”) In that event, U.S. Holders of common shares of the Company would be required to include in gross income for such year their allocable portions of such “foreign personal holding company income” to the extent the Company does not actually distribute such income.

 

The Company does not believe that it currently qualifies as a FPHC.  However, there can be no assurance that the Company will not be considered a FPHC for the current or any future taxable year.

 

Foreign Investment Company

 

If (i) 50% or more of the total voting power or the total value of the Company’s outstanding shares is owned, directly or indirectly, by citizens or residents of the U.S., U.S. partnerships or corporations, or U.S. estates or trusts (as defined by the Code Section 7701(a)(30)),  and (ii) the Company is found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest therein, the Company may be treated as a “Foreign Investment Company” (“FIC”) as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging common  shares of the Company to be treated as ordinary income rather than capital gain.

 

The Company does not believe that it currently qualifies as a FIC.  However, there can be no assurance that the Company will not be considered a FIC for the current or any future taxable year.

 

Controlled Foreign Corporation

 

If more than 50% of the total voting power or the total value of the Company’s outstanding shares is owned, directly or indirectly, by citizens or residents of the U.S., U.S. partnerships or corporations, or U.S.  estates or trusts (as defined by the Code Section 7701(a)(30)), each of which own, directly or indirectly, 10% or more of the total voting power of the Company’s outstanding shares (each a “10% Shareholder”), the Company could be treated as a “Controlled Foreign Corporation” (“CFC”) under Section 957 of the Code.

 

The classification of the Company as a CFC would affect many complex results, including that 10% Shareholders of the Company would generally (i) be treated as having received a current distribution of the Company’s “Subpart F income” and (ii) would also be subject to current U.S. federal income tax on their pro rata shares of the Company’s earnings invested in “U.S. property.”  The foreign tax credit may reduce the U.S. federal income tax on these amounts for such 10% Shareholders (See more detailed discussion at “Foreign Tax Credit”

above).  In addition, under Section 1248 of the Code, gain from the sale or other taxable disposition of common shares of the Company by a U.S. Holder that is or was a 10% Shareholder at any time during the five-year period ending with the sale is treated as ordinary income to the extent of earnings and profits of the Company attributable to the common shares sold or exchanged.

 

If the Company is classified as both, a Passive Foreign Investment Company, as described below, and, a CFC, the Company generally will not be treated as a Passive Foreign Investment Company with respect to 10% Shareholders.  This rule generally will be effective for taxable years of 10% Shareholders beginning after 1997 and for taxable years of the Company ending with or within such taxable years of 10% Shareholders.

 

 

The Company does not believe that it currently qualifies as a CFC.  However, there can be no assurance that the Company will not be considered a CFC for the current or any future taxable year.   The CFC rules are very complicated, and U.S. Holders should consult their own financial advisor, legal counsel or accountant regarding the CFC rules and how these rules may impact their U.S. federal income tax situation.

 

Passive Foreign Investment Company

 

The Code contains rules governing “Passive Foreign Investment Companies” (“PFIC”) which can have significant tax effects on U.S. Holders of foreign corporations.  Section 1297 of the Code defines a PFIC as a corporation that is not formed in the U.S. and, for any taxable year, either (i) 75% or more of its gross income is “passive income” or (ii) the average percentage, by fair market value (or, if the corporation is not publicly traded and either is a controlled foreign corporation or makes an election, by adjusted tax basis), of its assets that produce or are held for the production of “passive income” is 50% or more.  ”Passive income” includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.  However, gains resulting from commodities transactions are generally excluded from the definition of passive income if “substantially all” of a merchant’s, producer’s or handler’s business is as an active merchant, producer or handler of such commodities.

 

For purposes of the PFIC income test and the assets test, if a foreign corporation owns (directly or indirectly) at least 25% by value of the stock of another corporation, such foreign corporation shall be treated as if it (a) held a proportionate share of the assets of such other corporation, and (b) received directly its proportionate share of the income of such other corporation.  Also, for purposes of such PFIC tests, passive income does not include any interest, dividends, rents or royalties that are received or accrued from a “related” person to the extent such amount is properly allocable to the income of such related person which is not passive income.  For these purposes, a person is related with respect to a foreign corporation if such person “controls” the foreign corporation or is controlled by the foreign corporation or by the same persons that control the foreign corporation.  For these purposes, “control” means ownership, directly or indirectly, of stock possessing more than 50% of the total voting power of all classes of stock entitled to vote or of the total value of stock of a corporation.

 

U.S. Holders owning common shares of a PFIC are subject to the highest rate of tax on ordinary income in effect for the applicable taxable year and to an interest charge based on the value of deferral of tax for the period during which the common shares of the PFIC are owned with respect to certain “excess distributions” on and dispositions of PFIC stock under Section 1291 of the Code.  However, if the U.S. Holder makes a timely election to treat a PFIC as a qualified electing fund (“QEF”) with respect to such shareholder’s interest therein, the above-described rules generally will not apply.  Instead, the electing U.S. Holder would include annually in his gross income his pro rata share of the PFIC’s ordinary earnings and net capital gain regardless of whether such income or gain was actually distributed.  A U.S. Holder of a QEF can, however, elect to defer the payment of U.S. federal income tax on such income inclusions.  In addition, subject to certain limitations, U.S. Holders owning, actually or constructively, marketable (as specifically defined) stock in a PFIC will be permitted to elect to mark that stock to market annually, rather than be subject to the tax regime of Section 1291 of Code as described above.  Amounts included in or deducted from income under this alternative (and actual gains and losses realized upon disposition, subject to certain limitations) will be treated as ordinary gains or losses.

 

The Company believes that it was not a PFIC for its fiscal year ended December 31, 2014 and does not believe that it will be a PFIC for the fiscal year ending December 31, 2014.   There can be no assurance that the Company’s determination concerning its PFIC status will not be challenged by the IRS, or that it will be able to satisfy record keeping requirements that will be imposed on QEFs in the event that it qualifies as a PFIC.

 

The PFIC rules are very complicated, and U.S. Holders should consult their own financial advisor, legal counsel or accountant regarding the PFIC rules and how these rules may impact their U.S. federal income tax situation.

 

F.           Dividends and Paying Agents

 

Not Applicable.

 

G.           Statement by Experts

 

Not Applicable.

 

H.           Documents on Display

 

Documents filed as exhibits to this annual report are described in Item 18(b).

 

 

I.            Subsidiary Information

 

The Company has no subsidiaries.

 

ITEM 11.                    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not Applicable.

 

ITEM 12.                    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

 

Not Applicable.

 

PART II

 

ITEM 13.                    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

 

Not Applicable.

 

ITEM 14.                    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

 

Not Applicable.

 

ITEM 15.                    CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

The Chief Financial Officer has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Financial Officer has concluded that, as of June 30, 2014, these disclosure controls and procedures were not effective to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rule and forms; and (ii) accumulated and communicated to our management, as appropriate to allow timely decisions regarding required disclosure, primarily due to the Company’s minimal financial staff which prevents us from segregating duties, which management believes is a material weakness in our internal controls and procedures. We intend to address such weakness and work with our outside advisors to improve our controls and procedures as and when the circumstances of the Company permit this.

 

Management’s Annual Report on Internal Control Over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed by the Chief Executive Officer, who is also the Chief Financial Officer, and effected by our Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Forward looking statements regarding the effectiveness of internal controls during future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

 

Management completed an assessment of the effectiveness of the Company’s internal control over financial reporting (“ICFR”) as of June 30, 2014, using the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) framework as contemplated by Rule 13a-15(c). Based on this assessment, the Company concluded that it did not have effective internal controls over financial reporting as of June 30, 2014.  The Company’s assessment of the effectiveness of the ICFR at June 30, 2013 identified certain material weaknesses as of that date.

 

 

1.	Weakness: It is not possible to adequately segregate incompatible duties among the officers of the Company, because the Company only has one executive management position--Chief Executive Officer and Chief Financial Officer--which are both fulfilled by one person.
	Remediation: Appoint a separate Chief Financial Officer, in addition to the current Chief Executive Officer, to formally segregate the duties of maintaining accounting records and preparing financial statements, from the executive duties of the current officer, when financially possible for the Company to do so.
2.	Weakness: The Company is small, with only one officer (who is also a director), thereby creating a risk of override of existing controls by management.
	Remediation: Appoint a separate Chief Financial Officer for expenditures and other dispositions of assets.
3.	Weakness:   The Company maintains limited audit evidence in documentary form which is used to test the operating effectiveness of control activities.
	Remediation:   Increase the documentation of expenditures and receipts, under the joint supervision of the newly appointed Chief Financial Officer, and the Chief Executive Officer, to insure all receipts and third-party services conform to contract terms, and maintain adequate documents to the extent feasible and reasonable.

 

The Company intends to add additional levels of executive management and personnel to remediate the weaknesses, in the specific manners described in paragraphs 1 through 3 above, as and when the Company has sufficient financial resources to effect the remediation.

 

Changes in Internal Control over Financial Reporting

 

As disclosed above, in fiscal 2014, the Company completed its assessment of its ICFR in place for the year ended June 30, 2014, using the COSO framework. Although the assessment was completed, there were no changes in the ICFR during the 2014 fiscal year that have materially affected, or are reasonably likely to materially affect, the Company’s ICFR.

 

ITEM 16A.                 AUDIT COMMITTEE FINANCIAL EXPERT

 

The Audit Committee is responsible for reviewing the Company’s financial reporting procedures, internal controls, and the performance of the Company’s external auditors. The functions of the Audit Committee also include selecting, appointing, retaining, compensating and overseeing our independent auditors, deciding upon and approving in advance the scope of audit and non-audit assignments and related fees, reviewing accounting principles we use in financial reporting, and reviewing the adequacy of our internal control procedures, including the internal audit function. The committee is also responsible for reviewing the annual financial statements prior to their approval by the Board of Directors. 

 

The Board has only one Director, Oliver Xing, and has not established a formal Audit Committee and does not presently have a financial expert as defined in relevant SEC rules. However, the Company will try to remedy the situation by seeking a qualified financial expert who can also be regarded as an independent director as soon as financial possible or an opportunity arises for recruiting such a financial expert.

 

ITEM 16B.                 CODE OF ETHICS

 

The Company has not yet formally adopted a code of ethics applicable to all employees and directors. However, the Company recognizes the importance of formally establishing the Code of Ethics and will endeavor to adopt such Code of Ethics in the future.

 

ITEM 16C.                 PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

The Company accrued $4,000 audit fees to MaloneBailey, LLP, Certified Public Accountants during the fiscal year ended at June 30, 2014 (2013 – $4,000) due to change in Auditors of the Company in the year. Audit fees consist of audit work performed in the preparation of financial statements and services that are normally provided in connection with statutory and regulatory filings.

 

There is no tax preparation fee or related services fee paid or payable for the year ended June 30, 2014  (June 30, 2013 – $nil).

 

 

There is no other services paid or payable to our Auditors for the year ended June 30, 2014 (June 30, 2013 – $nil).

 

Policy on pre-approval of Audit and non-audit services of independent Auditors

 

The Audit Committee’s policy is to approve all audit and audit-related services. Permissible non-audit services are pre-approved according to fee amount threshold. Permissible non-audit services may include tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to an initial estimated budget. The Audit Committee may also pre-approve particular services on a case-by-case basis.

 

ITEM 16D.                 EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE

 

Not Applicable.

 

ITEM 16E.                 PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

 

Not Applicable.

 

ITEM 16F.                 CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

 

Our Auditors are Malone Bailey, LLP. There is no change in our independent Auditors in fiscal year 2014.

 

ITEM 16G.                 CORPORATE GOVERNANCE

 

Not Applicable.

 

 

PART III

 

ITEM 17.                      FINANCIAL STATEMENTS

 

Financial Statements

 

The financial statements set forth under Item 18 are included as part of this annual report.

 

ITEM 18.                      FINANCIAL STATEMENTS

 

INDEX TO FINANCIAL STATEMENTS

 

	Index
Report of Independent Registered Public Accounting Firm	F-1
Balance Sheet	F-2
Statements of Operations	F-3
Statements of Cash Flows	F-4
Statements of Stockholders’ Equity	F-5
Notes to the Financial Statements	F-6

 

 

REPORT OF INDEPENDEN REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors

Blackrock Oil Corporation

 

 

We have audited the accompanying balance sheets of Blackrock Corporation (the “Company”) as of June 30, 2014 and 2013, and the related statements of operations, stockholders’ deficit, and cash flows for the years then ended. 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 audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits 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 audits provide 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 the Blackrock Corporation as of June 30, 2014 and 2013 and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that Blackrock Corporation will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred cumulative losses since inception and has negative working capital, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

  

/s/ MaloneBailey, LLP

www.malonebailey.com

Houston, Texas

October 16, 2014

 

 

 

BLACKROCK OIL CORPORATION

(f/k/a: ONTARIO SOLAR ENERGY CORPORATION)

Balance Sheets

 

		June 30				June 30
		2014				2013
Assets
Current assets
Cash and cash equivalents		$	6,336			$	17,168
Accounts receivable			5,530				950
Tax receivable			35				995
Note receivable			140,571				147,330
Total current assets			152,472				166,443
Total assets		$	152,472			$	166,443
Liabilities and Stockholders' Equity
Liabilities
Current liabilities
Accounts payable and accrued liabilities		$	4,116			$	10,670
Loans payable - related party			148,689				91,768
Total current liabilities			152,805				102,438
Stockholders' equity
Common stock, unlimited number of shares authorized without par value, 11,541,666 issued and outstanding			414,049				414,049
Accumulated other comprehensive income			6,759				-
Accumulated deficit during the development period			(407,623	)			(350,044	)
			13,185				64,005
Total liabilities and stockholders' equity		$	165,990			$	166,443

 

See accompanying notes to financial statements

 

 

BLACK OIL CORPORATION

(f/k/a: ONTARIO SOLAR ENERGY CORPORATION)

Statements of Operations

For the years ended June 30, 2014 and 2013

 

 

 

			Year ended				Year ended
			June 30				June 30
			2014				2013
Revenue		$	—			$	—
Operating expenses
Legal fees and professional			3,497				—
Audit and accounting fees			5,000				11,684
Interest income			(11,177	)			(10,042	)
FX Exchange (gain) loss			—				5,547
General and administrative expenses			60,259				61,887
Total operating expenses			57,579				69,076
Net income (loss) for the periods		$	(57,579	)		$	(69,076	)
Effect of foreign currency transaltion		$	(6,759	)			—
Comprehensive net loss		$	(64,338	)		$	(69,076	)
Income (loss) per common stock - basic and diluted		$	(0.01	)		$	(0.01	)
Weighted average common share outstanding - Basic and diluted			11,541,666				11,541,666

 

 

See accompanying notes to financial statements

 

 

BLACKROCK OIL CORPORATION

(f/k/a: ONTARIO SOLAR ENERGY CORPORATION)

Statements of Cash Flows

For the years ended June 30, 2014 and 2013 

 

		Year ended				Year ended
		June 30				June 30
		2014				2013
Cash Flows From Operating Activities
Net (loss) for the period			(57,579	)		$	(69,076	)
Adjustments to reconcile net (loss) to net cash
Changes in operating assets and liabilities
decrease in accounts receivable			(4,580	)			(950	)
decrease in accounts payable and accrued liabilities			(6,719	)			5,454
decrease in tax receivable			960				869
Net cash used in operating activities			(67,918	)			(63,703	)
Cash Flows From Investing Activities
Issuance of Note Receivable			-				(147,330	)
Net cash used in investing activities			-				(147,330	)
Cash Flows From Financing Activities
Increase in payable to related party			57,086				30,114
Net cash provided by financing activities			57,086				30,114
Net increase (decrease) in cash and cash equivalents			(10,832	)			(180,919	)
Cash and cash equivalents, beginning of the period			17,168				198,087
Cash and cash equivalents, end of the period			6,336			$	17,168
Foreign currency translation			6,759				-

 

See accompanying notes to financial statements

 

 

BLACKROCK OIL CORPORATION

(f/k/a: ONTARIO SOLAR ENERGY CORPORATION)

Statements of Stockholders' Equity 

 

														Accumulated
		Common Stock								Accumulated				Other Comprehensive				Total Stockholders'
		Shares				Amount				Deficit				Income				Equity
Balance, June 30, 2012			11,541,666			$	414,049			$	(280,968	)		$	-			$	133,081
Net loss			-				-				(69,076	)			-				(69,076	)
Balance, June 30, 2013			11,541,666				414,049				(350,044	)			-				64,005
Foreign currency translation			-				-				-				6,759				6,759
Net loss			-				-				(57,579	)			-				(57,579	)
Balance, June 30, 2014			11,541,666			$	414,049			$	(407,623	)		$	6,759			$	13,185

 

See accompanying notes to financial statements

 

 

BLACKROCK OIL CORPORATION

(f/k/a: Ontario Solar Energy Corporation)

Notes to the Financial Statements

June 30, 2014 and 2013

 

1.    ORGANIZATION AND BUSINESS OPERATIONS

 

Blackrock Oil Corporation (“the Company”) was incorporated under the laws of the Province of Ontario, Canada on September 3, 2009. The Company intends to commence business operations by engaging in exploration, development and acquisition of light oil in Western Canada. The Company has not generated any revenue in 2014 and only generated $164,975 in revenue since inception. Consequently its operations are subject to all risks inherent in the establishment of a new business enterprise.

 

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(a)  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 (“US GAAP”) and are presented in US dollars. The financial statements reflect all adjustments that, in the opinion of management, are necessary in order to make the financial statements not misleading.

 

(b)  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 incurred a loss of $57,579 for the year ended June 30, 2014 and incurred net loss for the year ended June 30, 2013 of $69,076. The Company has resulted an accumulated deficit of $407,623 from inception on September 3, 2009 to June 30, 2014, 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 with loans from a director and/or private placements of common stock. However, there is no certainty that financing will be successful or will be on terms favourable to the Company.

 

(c)  Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with US GAAP 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. Financial statement items subject to significant management judgment include revenue recognition; the completeness of accounts payable and accrued liabilities, and allowance for doubtful accounts. While management believes that the estimates and assumptions are reasonable and appropriate in the circumstances, actual results may differ.

 

 

BLACKROCK OIL CORPORATION

(f/k/a: Ontario Solar Energy Corporation)

Notes to the Financial Statements

June 30, 2014 and 2013

 

(d)   Revenue Recognition

 

The Company recognizes revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (“SAB 101”) as modified by Securities and Exchange Commission Staff Accounting Bulletin No. 104 (codified within ASC Topic 605). Under SAB 101, revenue is recognized at the point of passage to the customer of title and risk of loss, there is persuasive evidence of an arrangement, the sales price is fixed or determinable, and collection of the resulting receivable is reasonably assured. For consulting services, revenue is recognized as services are provided.

 

(e)   Stock-Based Compensation

 

The Company accounts for its stock-based compensation in accordance with ASC Topic 718, “Share-Based Payment” (“ASC 718”). Under ASC 718, the Company recognizes compensation costs related to share-based payment transactions in the financial statements based on the fair value of the equity (or liability) instruments issued over the period that an employee is expected to provide service in exchange for the award, based on the vesting terms of the specific stock compensation awards. Stock issued to non-employees is valued based on the fair value of the services received or the fair value of the stock given up.

 

Since the Company’s inception to June 30, 2014, the Company has not established a stock based compensation arrangement. However, the Company may, in the future, decide to establish a stock-based compensation to encourage talented individuals to join in and be retained by the Company.

 

(f)   Income Taxes

 

The Company accounts for its income taxes under the liability method specified by ASC Topic 740, “Accounting for Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the effective tax rates which will be in effect when these differences reverse. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard imposed by ASC 740 to allow recognition of such an asset.

 

(g)   Fair Value of Financial Instruments

 

Fair value is defined under ASC Topic 820, “Fair Value Measurement and Disclosures”, as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for an asset or liability in an orderly transaction between participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on the levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value. The levels are as follows:

 

	●	Level 1	-	Quoted prices in active markets for identical assets or liabilities;
	●	Level 2	-	Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or corroborated by observable market data or substantially the full term of the assets or liabilities; and
	●	Level 3	-	Unobservable inputs that are supported by little or no market activity and that are significant to the value of the assets or liabilities.

 

 

 

BLACKROCK OIL CORPORATION

(f/k/a: Ontario Solar Energy Corporation)

Notes to the Financial Statements

June 30, 2014 and 2013

 

The Company’s financial instruments consist of cash and cash equivalents. Cash and cash equivalents was determined to be a Level 1 fair value measurement. The carrying amounts of cash and cash equivalents, accounts receivables, accounts payable and accrued liabilities and loans payable due to related party approximate their respective fair values because of the short maturities of these instruments.

 

(h)  Foreign Currency Transactions

 

The Company's functional is the Canadian dollars and reporting currency is the United States dollar. Foreign currency transactions are remeasured into the Company’s reporting currency with amounts resulting from changes in exchange rates being reported in income.

 

(i)   Comprehensive Income (Loss)

 

The Company has adopted ASC Topic 830, “Reporting Comprehensive Income (Loss)” (“ASC  830”), which establishes standards for reporting and presentation of comprehensive income (loss), its components and accumulated balances. Comprehensive income (loss) is defined to include all changes in equity (shareholders’ deficiency) except those resulting from investments by or distributions to owners. Among other disclosures, ASC 830 requires that all items that are required to be recognized under the current accounting standards as a component of comprehensive income (loss) be reported in a financial statement that is displayed with the same prominence as other financial statements. ASC 830 requires that items be included in other comprehensive income (loss) according to their nature, such as: foreign currency items, change in the fair value of derivative financial instruments and unrealized gains and losses on certain debt and equity securities. Comprehensive income (loss) is displayed in the statements of stockholders’ equity and in the balance sheets as a component of stockholders’ equity.

 

(j)   Basic and Diluted Net Loss per Share

 

The Company computes net loss per share in accordance with ASC Topic 260, “Earnings per Share” (“ASC 260”). ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the statement of operations. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all potentially dilutive common shares outstanding during the period. Diluted EPS excludes all potentially dilutive shares if their effect is anti-dilutive.

 

(k)  Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

 

 

BLACKROCK OIL CORPORATION

(f/k/a: Ontario Solar Energy Corporation)

Notes to the Financial Statements

June 30, 2014 and 2013

 

(l)    Accounts Receivable

 

Trade and other accounts receivable are carried at face value less any provisions for uncollectible accounts considered necessary. Bad debt expense is recognized based on management’s estimate of likely losses per year, and an estimate of current year uncollectible amounts. 

 

3.     RECENT ACCOUNTING PRONOUNCEMENTS

 

The company has limited operations and is considered in the development stage. In the year ended June 30, 2014, the Company has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the company to remove the inception to date information and all references to development stage.

 

4.    INCOME TAXES

 

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740, “Accounting for Income Taxes” (“ASC 740”) as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in the future years.

 

As of June 30, 2014, the Company had net operating loss carry forwards of approximately $304,000 that may be available to reduce future years' taxable income through 2034. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.

 

5.    RELATED PARTY TRANSACTIONS

 

During the period from inception to June 30, 2014, the President has taken initiative to organize, source, secure funding for the Company, provide consulting and management services to the Company and provide necessary office space for the Company. The Company has booked related party transactions of consulting fees of $36,000 (June 30, 2013 – $36,000) and management fees of $24,000 (June 30, 2013 - $24,000).

 

As of June 30, 2014, the President had loaned the Company $148,689 (June 30, 2013 - $91,911). The loan is non-interest bearing, due on demand and unsecured.

 

6.    NOTE RECEIVABLE

 

During the current fiscal year, the Company loaned a third party $150,000 in Canadian funds. The note was valued at US $140,571 upon issuance. The note bears 8% interest and is due on demand. As of June 30, 2014, the Company has an interest receivable of $5,530 and is included in accounts receivable in the balance sheet.

 

 

BLACKROCK OIL CORPORATION

(f/k/a: Ontario Solar Energy Corporation)

Notes to the Financial Statements

June 30, 2014 and 2013

 

7.    SUBSEQUENT EVENTS

 

Subsequent to the year ended June 30, 2014, on August 28, 2014, the Company issued 15,000,000 restricted common stocks from treasury to settle outstanding related party debt in the amount of $150,000. On September 4, 2014, the Company issued 5,200,000 common shares for gross proceeds of $1,050,000, on September 5, 2014, the Company issued 1,000,000 common stocks for gross proceeds of $200,000 and on September 12, 2014 the Company issued 40,000 common shares for gross proceeds of $10,000. No fees or commissions were paid to anyone in raising the equity capital. As of the date of October 31, the Company has total issued, non-assessable and fully paid common stocks of 32,781,666.

 

 

SIGNATURES

 

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf on October 31, 2014.

 

	BLACKROCK OIL CORPORATION
	(the “Registrant”)
	BY:	OLIVER XING
		Oliver Xing
		President, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, Treasurer and sole member of the Board of Directors

 

 

26

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Exhibit 31.1

 

SARBANES-OXLEY SECTION 302(a) CERTIFICATION

 

I, Oliver Xing, certify that:

 

1.	I have reviewed this Form 20-F for the period ended June 30, 2014 of Blackrock Oil Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and,
	d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

  

Date: October 31, 2014	OLIVER XING
	Oliver Xing
	Principal Executive Officer and Principal Financial Officer

 

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. Section 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Annual Report of Blackrock Oil Corporation (the “Company”) on Form 20-F for the period ended June 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “report”), I, Oliver Xing, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated October 31, 2014

	OLIVER XING
	Oliver Xing
	Chief Executive Officer and Chief Financial Officer