Attached files
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EX-23.5 - Offshore Petroleum Corp. | v189713_ex23-5.htm |
EX-10.9 - Offshore Petroleum Corp. | v189713_ex10-9.htm |
AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
July ,
2010
REGISTRATION
NO. 333-164513
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
AMENDMENT
NO. 3
TO
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES
ACT OF 1933
OFFSHORE
PETROLEUM CORP.
(Name of
Registrant as specified in its charter)
DELAWARE
(State
or other jurisdiction
of
incorporation or
organization)
|
1311
(Primary
Standard Industrial
Classification
Code Number)
|
65-0947544
(I.R.S.
Employer
Identification
No.)
|
OFFSHORE
PETROLEUM CORP.
110 East
Broward Boulevard, Suite 1700
Ft.
Lauderdale, FL 33301
Telephone:
877-655-0501
FAX:
866-786-6415
(Name,
address, including zip code, and
telephone
number, including
area
code, of registrant’s principal executive offices)
Jonathan
H. Gardner
Kavinoky
Cook LLP
726
Exchange Street; Suite 800
Buffalo,
New York 14210
(Name,
address, including zip code, and
telephone
number, including
area
code, of agent for service)
Approximate
date of proposed sale to the public: As soon as practicable after the effective
date of this Registration Statement.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. ¨
If this
Form is filed to register additional securities pursuant to Rule 462(b) under
the Securities Act, please check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act Registration
Statement number of the earlier effective Registration Statement for the same
offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act Registration
Statement number of the earlier effective Registration Statement for the same
offering. ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer”, and
“smaller reporting company” in Ruler 12B-2 of the Exchange Act.
Large
accelerated filer
|
¨
|
Accelerated
filer ¨
|
|
Non-accelerated
filer
|
¨
|
(do
not check if a smaller
|
Smaller
reporting company x
|
reporting
company)
|
CALCULATION
OF REGISTRATION FEE:
Title Of Each Class Of
Securities To Be Registered
|
Amount to be
Registered
|
Proposed
Maximum
offering price per
Share
|
Proposed
Maximum
Aggregate
Offering Price
|
Amount of
Registration Fee
|
||||||||||||
Common
Stock, par value $0.0001 per Share (1)
|
20,502,500 | $ | 0.10 | $ | 2,050,250 | $ | 145.57 | |||||||||
Total
|
20,502,500 | $ | 0.10 | $ | 2,050,250 | $ | 145.57 |
(1) Represents
shares of common stock which may be sold by the selling shareholders listed in
this Registration Statement.
The
offering price with respect to Shares has been estimated solely for the purpose
of calculating the registration fee pursuant to Rule 457(C). This
price is not an indication of value nor has it been established by any
recognized methodology for deriving the value of the Shares.
The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
PROSPECTUS
PRELIMINARY
PROSPECTUS SUBJECT TO COMPLETION
The
information in this prospectus is not complete and may be
changed. This prospectus is not an offer to sell these securities and
it is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
OFFSHORE
PETROLEUM CORP.
SHARES OF
COMMON STOCK TO BE SOLD BY THE SELLING STOCKHOLDERS
The
selling shareholders named in this prospectus (the “Selling Shareholders”) are
offering up to 20,502,500 shares of the common stock of Offshore Petroleum
Corp., a Delaware corporation (“Offshore” or the “Company”), par value $0.0001
per share (“Shares”).
No public
market exists for the Shares or any other security issued by
Offshore. Offshore will undertake to include its Shares for trading
on the Over-The-Counter Bulletin Board, however, no assurance can be given that
such market will be established. The Selling Shareholders must sell
the Shares at $0.10 per Share until a market for the Shares develops, if at
all. Such offering price is not based upon our net worth, total asset
value or any other objective measure of value based on accounting
measurements. If a market for the Shares develops, the Selling
Shareholders may offer to sell their shares at prevailing market prices or at
negotiated prices. We will not receive any of the proceeds of the
sale of Shares by the Selling Shareholders. We will pay all of the
costs associated with this registration statement and prospectus, but we will
not pay any commissions or expenses of the actual sale of the
Shares. We have limited working capital and will require additional
capital to fund exploration activities. We will use our working
capital and any additional financing we obtain in the future for operating and
administrative expenses, maintenance of our exploration rights and exploration
for oil and gas in the areas subject to our Licenses, when granted.
WE
ARE IN AN EXPLORATION STAGE ONLY AND HAVE NO RESERVES. READERS ARE
STRONGLY URGED TO READ THE “RISK FACTORS” SECTION OF THIS
PROSPECTUS.
BEFORE
BUYING THE SHARES OF COMMON STOCK, CAREFULLY READ THIS
PROSPECTUS. THE PURCHASE OF OUR SECURITIES INVOLVES A HIGH DEGREE OF
RISK.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The
information in this prospectus is not complete and may be
changed. The Selling Shareholders may not sell the Shares until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell the Shares and it
is not soliciting an offer to buy the Shares in any state where the offer or
sale is not permitted.
The date
of this prospectus is _________________, 2010.
- 2 -
TABLE OF CONTENTS
|
Page
|
Prospectus
Summary
|
4
|
Summary
Financial Data
|
6
|
Risk
Factors
|
7
|
Determination
of Offering Price
|
10
|
Dilution
|
11
|
Description
of Business
|
11
|
Properties
|
12
|
Fiscal
Year
|
19
|
Transfer
Agent
|
20
|
Employees
|
20
|
Stock
Option Plan
|
20
|
Competition
|
20
|
History
|
20
|
Management's
Discussion and Analysis or Plan of Operation
|
22
|
Disclosure
Controls and Procedures
|
33
|
Market
for Common Equity and Related Stockholder Matters
|
33
|
Directors,
Executive Officers, Promoters, Control Persons
|
35
|
Executive
Compensation
|
38
|
Security
Ownership of Certain Beneficial Owners and Management
|
39
|
Certain
Relationships and Related Transactions
|
39
|
Organization
Within the Last Five Years
|
41
|
Description
of Securities
|
41
|
Use
of Proceeds
|
42
|
Determination
of Offering Price
|
42
|
Selling
Shareholders and Plan of Distribution
|
42
|
Legal
Proceedings
|
45
|
Legal
Matters
|
45
|
Experts
|
45
|
Disclosure
of Commission Position on Indemnification for Securities Act
Liabilities
|
46
|
How
To Get More Information
|
46
|
Glossary
|
46
|
Index to Financial
Statements
|
|
Interim
Consolidated Financial Statements for the three months ended March 31,
2010 and March 31, 2009 (unaudited)
|
F-2
|
Financial
Statements for the years ended December 31, 2009 and
2008 (audited)
|
F-13
|
Until
______________, 2010, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealer’s obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
- 3 -
PROSPECTUS
SUMMARY
History and
Business. Our name is Offshore Petroleum Corp.
and we sometimes refer to ourselves in this prospectus as “Offshore Petroleum”
or “Offshore”, the “Company” or as “we,” “our,” or “us.” We are an
oil and gas exploration company. Our objective is to explore and, if
warranted, develop the area covered by eight licenses to be granted by the
Government of the Commonwealth of the Bahamas (the “Licenses”). The
area is located in the offshore waters controlled by the Commonwealth of the
Bahamas; as more fully described herein.
We
have two wholly-owned subsidiaries: Atlantic Petroleum Ltd. (“Atlantic”), a
Cayman Islands company, and Bahamas Exploration Limited (“Bahamas”), also a
Cayman Islands company. Atlantic and Bahamas together are sometimes
referred to herein as our “Subsidiaries.” The Subsidiaries each
applied to the Government of the Commonwealth of the Bahamas for certain rights
to explore for oil and gas in territorial waters controlled by the Commonwealth
of the Bahamas. We refer to such exploration rights as the
“Licenses.” The Subsidiaries hold eight Licenses that are more fully
described herein in the section herein entitled, “PROPERTIES – Licenses for
Exploration.” The geographic location and area covered by the
Licenses (the “Licensed Areas”) and a description of the work that has been
performed on the Licensed Areas is described herein in the section entitled,
“PROPERTIES – Description of Licensed Areas”. There is no assurance
that the Licenses will be granted. We will not list our shares on any
exchange, or further pursue the effectiveness of the registration statement of
which this prospectus forms a part, until the Licenses are
received.
If the
Licenses are granted, Offshore will endeavor to secure the financing to
undertake exploration of the area covered by the Licenses. Offshore
may seek a joint venture partner with exploration experience and operational
capability to undertake our exploration activities and assist with
financing. Our activities are subject to risks and uncertainties
described herein under “RISK FACTORS.” Potential investors in the
Company’s shares are strongly urged to review carefully such RISK
FACTORS.
Our head
office is at 110 East Broward Boulevard, Suite 1700, Ft. Lauderdale, FL 33301
and our administration office is at 1226 White Oaks Blvd., Oakville, Ontario
Canada L6H 2B9. Our telephone number is 877-655-0501 and our fax
number is 866-786-6415.
WE
HAVE NO RESERVES. WE ARE IN AN EXPLORATION STAGE
ONLY. READERS ARE STRONGLY URGED TO READ THE “RISK FACTORS” SECTION
OF THIS PROSPECTUS.
Neither
the Prime Minister, the Minister of Energy or any Governmental Department of the
Government of the Bahamas, or any person or body acting on their behalf, has
formed or expressed an opinion that the Licensed Areas are, from their
geological formation or otherwise, likely to contain petroleum.
Securities Being
Offered. We have 45,450,000 shares of common stock, par value
$0.0001 per share (“Shares”) issued and outstanding as of March 31,
2010. The Selling Shareholders are offering up to 20,502,500
Shares. No public market exists for the Shares or any other security
issued by Offshore. Offshore will undertake to include its Shares for
trading on the OTC Bulletin Board, however, no assurance can be given that such
market will be established. Offshore will not undertake to list, or
include for quotation, any other security of the Company on any exchange or
quotation system. The Selling Shareholders must sell the Shares at a
price of $0.10 per Share until a market for the Shares develops, if at
all. Such offering price is not based upon our net worth, total asset
value or any other objective measure of value based on accounting
measurements. If a market for the Shares develops, the Selling
Shareholders may offer to sell their Shares at prevailing market prices or at
negotiated prices. There is no minimum number of shares that must be
sold in this offering.
- 4 -
Risk Factors. Any
investment in our common stock should be considered a high-risk investment for
many reasons, including the reasons listed in “RISK FACTORS” and because of the
nature of oil and gas exploration. Only investors who can afford to
lose their entire investment should invest in these securities.
Use of
Proceeds. The Selling Shareholders are selling shares of
common stock covered by this prospectus for their own account. We
will not receive any of the proceeds from the sale of these shares by the
Selling Shareholders. Our working capital and any additional
financing we obtain in the future will be used to fund our operations and
administrative expenses, maintain our Licenses and fund exploration for oil and
gas in the areas subject to our Licenses, when received. See
PROPERTIES – Licenses for Exploration. We are paying all of the
expenses relating to the registration of the Selling Shareholders’ Shares, but
we will not pay any commissions or expenses of the actual sale of the
Shares.
- 5 -
SUMMARY
FINANCIAL DATA
The
following summary financial data should be read in conjunction with MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, the
audited FINANCIAL STATEMENTS OF OFFSHORE for the twelve-month periods ended
December 31, 2009 and 2008, and the unaudited FINANCIAL STATEMENTS OF OFFSHORE
for the three months ended March 31, 2010 and March 31, 2009 including the notes
thereto, contained elsewhere in this Prospectus.
Balance
|
As
at
|
As
at
|
||||||
Sheet
Data
|
Mar.
31, 2010
|
Mar.
31, 2009
|
||||||
(unaudited)
|
(unaudited)
|
|||||||
Cash
|
$ | 747,793 | $ | 100 | ||||
Deposits
|
$ | 720,000 | $ | Nil | ||||
Prepaid
assets
|
$ | 725 | $ | Nil | ||||
Oil
and Gas Properties
|
$ | 2,279,644 | $ | Nil | ||||
Total
Assets
|
$ | 3,748,162 | $ | 100 | ||||
Liabilities
|
$ | 1,586,998 | $ | 36,859 | ||||
Total
Stockholders’ Equity (Deficiency)
|
$ | 2,161,164 | $ | (36,759 | ) |
For
the
|
For
the
|
|||||||
three
months
|
three
months
|
|||||||
Statement
of
|
ended
|
ended
|
||||||
Operations
Data
|
Mar.
31, 2010
|
Mar.
31, 2009
|
||||||
(unaudited)
|
(unaudited)
|
|||||||
Revenue
from Operations
|
$ | Nil | $ | Nil | ||||
Other
Income-Interest
|
$ | 774 | $ | Nil | ||||
Net
Loss
|
$ | 145,072 | $ | 26,101 |
Balance
|
As
at
|
As
at
|
||||||
Sheet
Data
|
Dec.
31, 2009
|
Dec.
31, 2008
|
||||||
(Audited)
|
(Audited)
|
|||||||
Cash
|
$ | 796,930 | $ | Nil | ||||
Deposits
|
$ | 720,000 | $ | Nil | ||||
Oil
and Gas Properties
|
$ | 2,279,644 | $ | Nil | ||||
Total
Assets
|
$ | 3,796,574 | $ | Nil | ||||
Liabilities
|
$ | 1,544,284 | $ | 10,758 | ||||
Total
Stockholders’
|
||||||||
Equity
(Deficiency)
|
$ | 2,252,290 | $ | (10,758 | ) |
For
the
|
For
the
|
|||||||
Statement
of
|
year
ended
|
year
ended
|
||||||
Operations
Data
|
Dec.
31, 2009
|
Dec.
31, 2008
|
||||||
(Audited)
|
(Audited)
|
|||||||
Revenue
from Operations
|
$ | Nil | $ | Nil | ||||
Other
Income-Interest
|
$ | 913 | $ | Nil | ||||
Net
Loss
|
$ | 201,230 | $ | 10,862 |
- 6 -
RISK
FACTORS
1.
|
THE
COMPANY HAS NO SOURCE OF OPERATING REVENUE AND EXPECTS TO INCUR
SIGNIFICANT EXPENSES BEFORE ESTABLISHING AN OPERATING COMPANY, IF IT IS
ABLE TO ESTABLISH AN OPERATING COMPANY AT
ALL.
|
Currently,
the Company has no source of revenue, limited working capital and no commitments
to obtain additional financing. The Company will require significant
additional working capital to maintain its Licenses, when granted, and to carry
out its exploration programs in the Licensed Areas. Failure to raise
the necessary capital to maintain our Licenses and commence exploration could
cause the Company to go out of business.
2.
|
BECAUSE
OF OUR LIMITED RESOURCES AND THE SPECULATIVE NATURE OF OUR BUSINESS, THERE
IS SUBSTANTIAL DOUBT AS TO OUR ABILITY TO CONTINUE AS A GOING
CONCERN.
|
The
report of our independent auditors on our audited financial statements for the
twelve-month periods ended December 31, 2009 and 2008, indicates that there are
a number of factors that raise substantial doubt about our ability to continue
as a going concern. Our continued operations are dependent on our
ability to obtain financing and upon our ability to achieve future profitable
operations from the development of our oil exploration properties. If
we are not able to continue as a going concern, it is likely that our investors
will lose their investment.
3.
|
DRILLING
FOR OIL AND NATUAL GAS IN THE OCEAN RUNS HIGHER RISKS THAN ON-SHORE
DRILLING, INCLUDING ENVIRONMENTAL
DAMAGE.
|
Significant
damage to the environment could result from our operations. Our
insurance policies and contractual rights to indemnity may not adequately cover
losses and clean-up liability, and we may not have insurance coverage for rights
to indemnity against such risks. Moreover, pollution and
environmental risks generally are subject to significant deductibles and are not
totally insurable. Drilling contractors are required to carry
insurance and protect the Company as a named insured, however there is no
assurance this will be adequate, depending on the nature of the
problem. Failure of the drilling contractor to maintain proper safety
procedures could void all their insurance. In addition, the accident
in the Gulf of Mexico may cause the cost of obtaining insurance for offshore
drilling to rise dramatically. It is too early for the Company to
project any such increase in insurance expense.
4
|
NEW
REGULATIONS MAY BE INTRODUCED GOVERNING OFFSHORE DRILLING WHICH MAY
INCREASE OUR OPERATING COSTS.
|
Changes
in regulation of offshore drilling may be initiated as a result of the accident
in the Gulf of Mexico. Such new or increased regulation could
increase our operating expenses and affect the value the Licenses and any wells
that may be developed. The Company cannot predict whether any such
changes in regulation will be enacted or what its effect on our business would
be.
The
proposed Licensed areas are subject to existing regulations outlined in the
Bahamian Petroleum Act of 1971 and the regulations promulgated thereunder which
cover: (a) the prevention of waste, (b) the discharge of materials into the
environment, (c) the conservation of oil and natural gas, (d) pollution, (e)
permits for drilling operations, (f) drilling bonds and (g) reports concerning
operations, spacing of wells, and the unitization and pooling of
properties. Failure to comply with any laws and regulations may result in
the loss of one or more Licenses, and/or assessment of administrative, civil and
criminal penalties. Moreover, changes in any of the above outlined laws or
regulations could have a material adverse effect on our business.
- 7 -
5.
|
WE
HAVE NO TRACK RECORD
|
The
Company has no exploration track record or operating history upon which an
evaluation of its future success or failure can be made.
6.
|
OUR
DEVELOPMENT AND EXPLORATION OPERATIONS REQUIRE SUBSTANTIAL CAPITAL AND WE
MAY BE UNABLE TO OBTAIN NEEDED CAPITAL OR FINANCING ON SATISFACTORY TERMS,
WHICH COULD LEAD TO A LOSS OF OUR
LICENSES.
|
Our
Licenses with the Bahamian Government, if we are successful in obtaining them,
will require us to pay rent and meet minimum annual investment thresholds for
the exploration and, if warranted, development of the Licensed Areas, as more
fully described in the section entitled, “PROPERTIES – Licenses for
Exploration.” Rent has been prepaid for the first year. In
the second and third years of the initial term of the Licenses, our Subsidiaries
will pay an aggregate of $600,000 and $800,000 in rent respectively. In addition
to the payment of rent, with respect to each of the eight Licenses, Atlantic and
Bahamas must invest specified amounts in the exploration and development of the
Licensed Areas. Such investments must be for qualifying activities
and expenses as specified in the License. In the first year of each
License, each Subsidiary must invest an aggregate of $250,000 in its Licensed
Areas. Each Subsidiary must then invest an aggregate of $375,000 in
its Licensed Areas in the second and third years in order to maintain their
respective Licenses. Consequently, the Subsidiaries will invest in
qualifying expenditures an aggregate of $500,000 in the first year of the
Licenses and $750,000 in each of the second and third years of the
Licenses. The Company believes it has sufficient capital and
exploration credits to ensure it meets its operating requirements over the next
year. Overall, the Company believes it must raise $4 million to meet
the conditions of the initial three-year term of all eight
Licenses. If we are unable to meet such conditions, we will lose some
or all of our Licenses and cease doing business, in which case our shareholders
will lose their investment in the Company.
7.
|
IF
THE COMPANY DEVELOPS HYDROCARBON RESOURCES, THERE IS NO ASSURANCE THAT
PRODUCTION WILL BE PROFITABLE.
|
Even if
the Company finds hydrocarbon resources, there is no assurance that it will be
able to produce them or that a production operation would be profitable on any
of its Licenses.
8.
|
OIL
AND NATURAL GAS PRICES ARE VOLATILE AND SUBSTANTIAL DECLINES WILL
ADVERSELY AFFECT OUR FINANCIAL RESULTS AND IMPEDE OUR
GROWTH.
|
Profitability
and liquidity are substantially dependent upon prevailing prices for oil and
natural gas, which can be extremely volatile. Even relatively modest drops in
prices can significantly affect financial results. Prices for oil and natural
gas may fluctuate widely in response to relatively minor changes in the supply
of, and demand for, oil and natural gas, market uncertainty and a wide variety
of additional factors that are beyond our control, such as the domestic and
foreign supply of oil and natural gas; the price of foreign imports; the ability
of members of the Organization of Petroleum Exporting Countries to agree to and
maintain oil price and production controls; technological advances affecting
energy consumption, domestic and foreign governmental regulations, and
variations between product prices at sales points and applicable index
prices. In addition, regional oil and gas prices may vary from
national prices due to regional factors such as regional gas production being
constrained by regional gas pipeline capacity.
- 8 -
9
|
OIL
AND GAS OPERATIONS ARE INHERENTLY FINANCIALLY
RISKY.
|
The
nature of the oil and gas business involves a variety of financial risks,
particularly the risk of drilling wells that are found to be unable to produce
any oil and/or gas or unable to produce and sell oil and/or gas at prices
sufficient to repay the costs of the wells. It is possible that we
may in the future recognize substantial impairment expenses when uneconomic
wells and declines in oil and gas prices result in impairments of the
capitalized costs of our oil and gas Licenses.
10.
|
THE
COMPANY IS HIGHLY DEPENDENT UPON ITS OFFICERS AND
DIRECTORS. BECAUSE OF THEIR INVOLVEMENT IN OTHER SIMILAR
BUSINESSES WHICH MAY BE COMPETITORS, THEY MAY HAVE A CONFLICT OF
INTEREST.
|
None of
the Company’s officers or directors works for the Company on a full-time
basis. There are no proposals or definitive arrangements to engage
them on a full-time basis. None of the officers or directors have
employment agreements with the Company or its Subsidiaries. All of
the directors are officers or directors of other companies in similar
exploration businesses. Such business activities may be considered a
conflict of interest because these individuals must continually make decisions
on how much of their time they will allocate to the Company as against their
other business projects, which may be competitive. Also, the Company
has no key man life insurance policy on any of its senior management or
directors. The loss of one or more of these officers or directors
could adversely affect the ability of the Company to carry on
business.
11.
|
OUR
STOCK IS SUBSTANTIALLY CONTROLLED BY FOUR OF OUR DIRECTORS AND AS A
RESULT, FOR THE FORSEEABLE FUTURE OUR DIRECTORS WILL BE ABLE TO CONTROL
OUR OVERALL DIRECTION.
|
Ryan
Bateman, John Rainwater, Mickey Wiesinger and Gary Adams are members of our
Board of Directors and, together, own or control 29.6% of our outstanding
shares. As a result, they will be able to substantially effect the
outcome of all matters requiring stockholder approval, including the election of
directors. Such ownership by three directors, which may have the
effect of delaying, deferring or preventing a change of control, is likely to
continue for the foreseeable future and significantly diminishes control and
influence that other stockholders may have in the Company.
12.
|
FUTURE
FINANCINGS INVOLVNG THE SALE OF OUR COMMON STOCK COULD DILUTE CURRENT
SHAREHOLDERS.
|
Because
the Company will require additional capital to explore the area covered by the
Licenses, if they are granted, the Company expects to issue Shares in the
future. As a result of any financing involving the issuance of the
Company’s equity securities, existing shareholders will own a smaller
proportional interest in the Company.
13.
|
THERE
ARE PENNY STOCK SECURITIES LAW CONSIDERATIONS THAT COULD LIMIT YOUR
ABILITY TO SELL YOUR SHARES.
|
Our
common stock is considered a "penny stock" and the sale of our stock by you will
be subject to the "penny stock rules" of the Securities and Exchange
Commission. The penny stock rules require broker-dealers to take
steps before making any penny stock trades in customer accounts. As a
result, the market for our shares could be illiquid and there could be delays in
the trading of our stock which would negatively affect your ability to sell your
shares and could negatively affect the trading price of your
shares.
- 9 -
14.
|
STATE
BLUE SKY LAWS MAY LIMIT RESALE OF THE SHARES OF COMMON
STOCK.
|
The
holders of our Shares and persons who desire to purchase them in any trading
market that might develop in the future should be aware that there may be
significant state law restrictions upon the ability of investors to resell our
shares. Accordingly, investors should consider any secondary market for our
securities to be a limited one including a trading market on the
OTC Bulletin Board. If our Shares are traded on the OTC Bulletin
Board we intend to seek coverage and publication of information regarding the
company in an accepted publication which permits a “manual exemption.”
This manual exemption permits a security to be distributed in a particular
state without being registered if the company issuing the security has a listing
for that security in a securities manual recognized by the state. However, it is
not enough for the security to be listed in a recognized manual. The
listing entry must contain (i) the names of issuers, officers, and
directors, (ii) an issuer’s balance sheet, and (iii) a profit and loss
statement for either the fiscal year preceding the balance sheet or for the most
recent fiscal year of operations. Furthermore, the manual exemption is a
non-issuer exemption restricted to secondary trading transactions, making it
unavailable for issuers selling newly-issued securities. Most of the accepted
manuals are those published in Standard and Poor’s, Moody’s Investor Service,
Fitch’s Investment Service, and Best’s Insurance Reports, and many states
expressly recognize these manuals. A smaller number of states declare that they
‘recognize securities manuals’ but do not specify the recognized
manuals.
15.
|
THE
LARGE NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE
MARKET PRICE OF OUR COMMON STOCK.
|
The
sale, or availability for sale, of a substantial number of Shares in the public
market could materially adversely affect the market price of our Shares and
could impair our ability to raise additional capital through the sale of our
equity securities. At the completion of this offering by the Selling
Shareholders, assuming the sale of all 20,502,500 Shares covered by this
prospectus, there will be approximately 45,450,000 Shares issued and
outstanding. Of these shares, 9,947,500 are freely transferable and eligible for
resale under Rule 144 as of the date hereof and 15 million will be
freely transferable and eligible for resale under Rule 144 after May 31,
2010.
16.
|
WE
HAVE PROVISIONS IN OUR CERTIFICATE OF INCORPORATION THAT SUBSTANTIALLY
LIMIT THE PERSONAL LIABILITY OF MEMBERS OF OUR BOARD OF DIRECTORS AND THAT
ALLOW US TO INDEMNIFY OUR OFFICERS AND
DIRECTORS.
|
Certain
provisions in our certificate of incorporation could make it very difficult for
you to bring any legal actions against our directors for violations of their
duties as directors or could require us to pay any amounts incurred by our
directors in any such actions. In addition, two of our directors are
not United States Citizens and shareholders could have difficulty pursuing legal
remedies in foreign jurisdictions.
DETERMINATION
OF OFFERING PRICE
The
offering price has been estimated solely for the purpose of calculating the
registration fee payable to the Securities and Exchange Commission in connection
with this prospectus. The offering price is not an indication of
value nor has it been established by any recognized methodology for deriving the
value of the Shares.
- 10 -
DILUTION
We will
likely be required to issue more common stock from treasury in order to raise
additional capital. If common stock is issued to raise additional
capital, it will result in the dilution of the existing
shareholders.
The
Shares to be sold by the Selling Shareholders are common stock that is currently
issued and outstanding. Accordingly, there will be no dilution to our
existing shareholders as a result of the sale of the Shares covered by this
prospectus.
Pursuant
to the Share Purchase Agreement, more fully described in the section entitled
“DESCRIPTION OF BUSINESS,” NPT (as defined in “DESCRIPTION OF BUSINESS – The
Share Purchase Agreement”) acquired 15 million restricted Shares of the
Company. The Company and NPT agreed on a purchase price of $3,000,000
for all of the shares of Atlantic and Bahamas based upon the amounts expended by
NPT to obtain the Licenses, technical data about the area covered by the
Licenses and other costs incurred by NPT. After netting out the value
of the Promissory Note the Company arrived at the cost per share of the
15,000,000 Shares issued to NPT to be $0.10 per share. For more information
regarding NPT see “CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS”
herein.
The
Company has no commitment for additional financing. In the event the
Licenses are granted by the Government of the Bahamas, the Company may seek
additional financing through a public offering, private placements of our
securities, a joint venture or through loans or some combination of the
foregoing. Any such financing involving the issuance of our capital stock will
be dilutive to the existing shareholders.
DESCRIPTION
OF BUSINESS
We are an
oil and gas exploration company. Our objective is to explore and, if
warranted and feasible, to develop oil and/or gas production on sites covered by
our Licenses which are located in waters off the shore of the Commonwealth of
the Bahamas.
The
Share Purchase Agreement
On
November 30, 2009, the Company closed a Share Purchase Agreement with NPT Oil
Corporation Ltd, a Cayman Islands company (“NPT”) to purchase from NPT all of
the equity stock of Atlantic Petroleum Ltd., a Cayman Islands
company (“Atlantic”) and Bahamas Exploration Limited, a Cayman
Islands company (“Bahamas”). Atlantic and Bahamas together are
sometimes referred to herein as our “Subsidiaries.” Pursuant to the
Share Purchase Agreement, Offshore paid total consideration to NPT of $3,000,000
consisting of: (a) 15 million Shares of Offshore, valued at $0.10 per share for
a total of $1.5 million and (b) a promissory note with a face amount of $1.5
million payable over a two-year term and bearing interest at 5% (the “Promissory
Note”). NPT assigned to its own shareholders all of the Shares of
Offshore issued upon closing of the Share Purchase Agreement. For
more information see “CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS.”
NPT was
incorporated in October of 2006 for the purpose of investing in oil and gas
exploration assets. In June of 2007, it entered into preliminary
negotiations with a company that previously held the exploration rights for the
area covered by the Licenses, known as the “Blake Plateau project” and more
fully described below in “PROPERTIES” (the “Licensed Area”). In
October of 2007, NPT purchased all of the data relating to the Licensed
Area and engaged the prior operator to act as a consultant to assist NPT in
obtaining from the Bahamian Government the legal right to explore the Licenses
Area. NPT’s then wholly-owned subsidiaries, Atlantic and Bahamas, applied
to the Government of the Bahamas for such exploration rights (referred to herein
as the “Licenses”).
- 11 -
As of
the date of this registration statement, the issuance of the Licenses by the
Bahamian Government is pending. The Company will not pursue
effectiveness of this registration statement until the Licenses have been
granted to our Subsidiaries.
PROPERTIES
The
License Applications
The
Subsidiaries each have applied to the Government of the Commonwealth of the
Bahamas for certain rights to explore for oil and gas in territorial waters
controlled by the Commonwealth of the Bahamas. We refer to such
exploration rights as the “Licenses.” The Subsidiaries have applied
for a total of eight Licenses that are more fully described below in “PROPERTIES
– Licenses for Exploration.” The geographic location and area covered
by the Licenses (the “Licensed Areas”) and a description of the work that has
been performed on the Licensed Areas is described below in “PROPERTIES –
Description of Licensed Areas”. As of May 25, 2010, the Bahamian Government
published in three Bahamian publications the description of the licenses to be
granted. Publication is the final step prior to issuance of the
Licenses. There is no assurance that the Licenses will be
granted. We will not list our shares on any exchange, or
further pursue the effectiveness of this registration statement until our
Subsidiaries have received the Licenses.
Upon
issuance, Offshore will endeavor to secure the financing to undertake
exploration of the area covered by the Licenses. Our activities are
subject to risks and uncertainties described herein under “RISK
FACTORS.” Potential investors in the Company’s Shares are strongly
urged to review carefully such RISK FACTORS.
A
portion of the purchase price paid by the Company to acquire the Subsidiaries
was to obtain the following information. This information forms the
basis of our knowledge of the Licensed Areas.
|
·
|
A
1977 2D seismic data shoot by Tenneco
Inc.
|
|
·
|
Geophysical
analysis of a qualified engineer performed in1977 including 2D seismic
data
|
|
·
|
Geophysical
analysis of a qualified engineer regarding the 1977 seismic
data
|
|
·
|
Gravity
and magnetic data relating to the Blake Plateau,
Bahamas
|
|
·
|
An
Oil migration model relating to the Licensed
Areas
|
|
·
|
Ocean
floor seep satellite data - Bahamas
|
|
·
|
Core
pressure analysis studies relating to the Licensed
Areas
|
|
·
|
Source
rock study and analysis of the Licensed
Areas
|
|
·
|
Analog
field analysis with volumetric
calculations
|
|
·
|
A
Logistical and marketing study –
Bahamas
|
|
·
|
Misc.
geological maps of the Bahamas including the Licensed
Areas
|
The
amount invested by the Subsidiaries to obtain the above information is eligible
to be applied against work commitments required by the Licenses.
Licenses for
Exploration
The
Subsidiaries’ Licenses are pending and, we believe, close to being issued by the
Bahamian Government. While the terms and conditions of the Licenses
cannot be stated with certainty until issuance, we anticipate, based upon drafts
of the Licenses and discussions with the Bahamian Government, that the rights to
be granted to the Subsidiaries will consist of eight separate Licenses covering
geographic areas specified in each License and described below in “Description
of Licensed Areas.” They are designated as follows.
- 12 -
Subsidiary Holding License
|
Name Assigned to Specific Licensed Area
|
|
Atlantic
Petroleum Ltd
|
License
No.
1 Aphrodite
|
|
License
No. 2 Mercury
|
||
License
No. 3 Neptune
|
||
License
No. 4 Venus
|
||
Bahamas
Exploration Limited
|
License
No. 5 Apollo
|
|
License
No. 6 Poseidon
|
||
License
No. 7 Hermes
|
||
License
No.
8 Zeus
|
Term
In each
case, the License will have an initial term of three (3) years with one option
to renew for another three-year term. After the second renewal term,
the Licenses can be renewed for two more three-year terms at the discretion of
the Bahamian Government as to all or a portion of the Licensed Area. At any time
during the term of the Licenses, or any renewal terms, if we drill a well that
can be developed into a producing well, the Subsidiary holding the License has a
right to convert the License into a Lease. The terms and conditions
of such a Lease are described below in “Development and Conversion into
Lease.”
Rent
Each
License requires annual rent of $50,000 in the first year (already paid in each
case with the application for the License) and $75,000 in the second year. The
annual rent in the third year and any subsequent renewal years would be $100,000
per License.
Investment in
Development
In
addition to the payment of rent, Atlantic and Bahamas must invest specified
amounts in the exploration and development of the Licensed Areas. In
the first year of each License, each of the Subsidiaries must invest an
aggregate of $250,000 in qualifying expenditures for its four Licensed
Areas. The Subsidiaries each must then invest an aggregate of
$375,000 in qualifying expenditures for its four Licensed Areas in the second
and third years in order to maintain their respective
Licenses. Consequently, the Subsidiaries will invest an aggregate of
$500,000 in the first year of the Licenses and $750,000 for each of the second
and third years of the Licenses. Of the amount due, Atlantic and
Bahamas will receive credit for work performed and expense incurred to obtain
information about the Licensed Areas prior to the date hereof. In the
event a Subsidiary has qualifying expenditures for a given Licensed Area greater
than the amount required by the License, the surplus can be used to offset
annual expenditure obligations in subsequent years. If, at the end of
the License term or any renewal period thereafter, a Subsidiary has not met the
aggregate expenditure obligations for such term, such Subsidiary would owe a
penalty to the Bahamian Government equal to one-half of the amount
deficient.
Development and Conversion
Into Lease
Each
License entitles its holder to explore and operate oil and gas rigs in the
Licensed Area, subject to certain approvals of the Bahamian Government,
including approval of any and all third party operators or joint
venturers. In the event that we drill a well that can be developed
into a producing well, the Subsidiary holding the License has a right to convert
the License into a Lease which would contain substantially identical terms and
conditions. The Lease would have an initial term of ten years with
one option to renew for an additional ten-year renewal term. We would
pay royalties to the Bahamian Government as follows.
- 13 -
Production Levels
|
Percentage Royalty based upon fair
market value of the oil produced1
|
First
75,000 barrels/day
|
12½%
of FMV
|
75,000
– 150,000 barrels/day
|
15%
of FMV
|
150,000
– 250,000 barrels/day
|
17½
of FMV
|
All
amounts in excess of 250,000 barrels
|
20%
of FMV
|
Natural
Gas
|
12
½ % FMV
|
1 All
royalty amounts are to be paid in U.S. dollars, unless an arrangement for
payment in kind has been made. The fair market value of the petroleum
shall be determined by the mutual agreement of the parties. Rent paid
under the Lease shall be credited against royalty payments.
In the
event a producing well is drilled and commences operation during the term of a
License and such License has not been converted into a lease, the Subsidiary
would be required to pay to the Bahamian Government royalties in an amount
identical to the royalty that would be owned pursuant to a lease.
Additional
Agreements
Each
Subsidiary is required to maintain insurance issued by carriers approved by the
Bahamian Government. In addition, each of the Subsidiaries is
required to post a bond of $1 million backing funding and performance of the
investment in development to be undertaken pursuant to the Licenses, as
described above in “Investment in Development”. Such bond must be
backed by cash or cash equivalents or issued by an approved financial
institution, and the amount of the bond is to be reduced at the end of each year
by an amount equal to the actual amount expended on
exploration.
The
Subsidiaries are required to have a manager that is a Bahamian resident, and a
qualified engineer must supervise any and all exploration and operation
undertaken on the Licensed Areas. The terms of the Licenses do not
clearly state when a Bahamian manager is required to be on-site. The
Company expects to engage a local manager within six months of the Licenses
being granted, such engagement to be on a consulting basis until such time as
activity on the project requires a full-time manager. The Company
expects to contract for its offshore exploration drilling and will employ
contractors with professional engineers on staff. The Company will
engage an engineer to oversee drilling operations. Compensation for
this engineer will be set at industry standard rates, based upon the experience
of the engineer.
The
Licenses may not be assigned without the written consent of the Bahamian
Government.
We are
generally obligated to conduct our operations in a manner that prevents
contamination of the environment. The Bahamian Government is
authorized to oversee our operations and enforce these requirements pursuant to
the Bahamian Petroleum Act.
Additional Agreements under
Lease
In the
event any License is converted into a lease, as described above, the
Subsidiaries-lessee would be required to sell to refineries in the Bahamas up to
25% of the oil produced from such well. During the term of any lease
the Subsidiary-lessee would be required to indemnify the Bahamian Government
from any third party claims. In addition, the Bahamian Government
would have the right to appoint a Bahamian Governmental official to such
Subsidiary’s Board of Directors and the right to pre-empt the purchase of the
output of a producing well in the event of war.
- 14 -
Neither
the Prime Minister, the Minister of Energy or any Governmental Department of the
Government of the Bahamas, or any person or body acting on their behalf, has
formed or expressed an opinion that the Licensed Areas are, from their
geological formation or otherwise, likely to contain petroleum.
Description
of Licensed Areas
The
following map shows the location of the Licensed Area.
The
following are legal descriptions of the area covered by the License applications
of our two Subsidiaries.
ATLANTIC
PETROLEUM LTD.
Limits of
Area Aphrodite
All those
lands or submarine areas or both situate in the Commonwealth of the Bahamas and
having an approximate area of 848,630 acres.
- 15 -
The
following coordinates specify the Southwestern corner of each of the ten (10)
submarine blocks to be covered by License No. 1 (Area Aphrodite).
Block
No.
|
Longitude
|
Latitude
|
||
16
|
79°
|
00'
W
|
26°
|
50'
N
|
17
|
78°
|
50'
W
|
26°
|
50'
N
|
18
|
78°
|
20'
W
|
26°
|
40'
N
|
19
|
78°
|
30'
W
|
26°
|
50'
N
|
20
|
78°
|
20'
W
|
26°
|
50'
N
|
9
|
79°
|
00'
W
|
27°
|
00'
N
|
46
|
79°
|
00'
W
|
26°
|
40'
N
|
3
|
78°
|
50'
W
|
26°
|
40'
N
|
5
|
78°
|
30'
W
|
26°
|
40'
N
|
4
|
78°
|
40'
W
|
26°
|
40'
N
|
Limits of
Area Mercury
All those
lands or submarine areas or both situate in the Commonwealth of the Bahamas and
having an approximate area of 848,630 acres.
The
following coordinates specify the Southwestern corner of each of the ten (10)
submarine blocks to be covered by License No. 2 (Area Mercury).
Block
No.
|
Longitude
|
Latitude
|
||
47
|
78°
|
20'W
|
27°
|
20'
N
|
37
|
78°
|
40'W
|
27°
|
30'
N
|
38
|
78°
|
30'W
|
27°
|
30'
N
|
39
|
78°
|
20'W
|
27°
|
30'
N
|
29
|
78°
|
20'W
|
27°
|
40'
N
|
18
|
78°
|
20'W
|
27°
|
50'
N
|
6
|
78°
|
20'W
|
28°
|
00'
N
|
7
|
78°
|
10'W
|
28°
|
00'
N
|
8
|
78°
|
00'W
|
28°
|
00'
N
|
20
|
78°
|
00'W
|
27°
|
50
N
|
Limits of
Area Neptune
All those
lands or submarine areas or both indicated on the attached plat situate in the
Commonwealth of the Bahamas and having an approximate area of 848,630
acres.
The
following coordinates specify the Southwestern corner of each of the ten (10)
submarine blocks to be covered by License No. 3 (Area Neptune).
- 16 -
Block
No.
|
Longitude
|
Latitude
|
||
40
|
78°
|
10'W
|
27°
|
30'N
|
30
|
78°
|
10'W
|
27°
|
40'N
|
31
|
78°
|
00'W
|
27°
|
40'N
|
32
|
77°
|
50'W
|
27°
|
40'N
|
19
|
78°
|
10'W
|
27°
|
50'N
|
21
|
77°
|
50'W
|
27°
|
50'N
|
22
|
77°
|
40'W
|
27°
|
50'N
|
9
|
77°
|
50'W
|
28°
|
00'N
|
10
|
77°
|
40'W
|
28°
|
00'N
|
11
|
77°
|
30'W
|
28°
|
00'N
|
Limits of
Area Venus
All those
lands or submarine areas or both indicated on the attached plat situate in the
Commonwealth of the Bahamas and having an approximate area of 848,630
acres.
The
following coordinates specify the Southwestern corner of each of the ten (10)
submarine blocks to be covered by License No. 4 (Area Venus).
Block
No.
|
Longitude
|
Latitude
|
||
11
|
78°
|
40'W
|
27°
|
00'
N
|
12
|
78°
|
30'W
|
27°
|
00'
N
|
13
|
78°
|
20'W
|
27°
|
00'
N
|
45
|
78°
|
10'W
|
27°
|
00'
N
|
10
|
78°
|
50'W
|
27°
|
00'
N
|
1
|
79°
|
00'W
|
27°
|
10'
N
|
2
|
78°
|
50'W
|
27°
|
10'
N
|
6
|
78°
|
10'W
|
27°
|
10'
N
|
43
|
79°
|
00'W
|
27°
|
20'
N
|
48
|
78°
|
10'W
|
27°
|
20'
N
|
BAHAMAS
EXPLORATION LIMITED
Limits of
Area Apollo
All those
lands or submarine areas or both situate in the Commonwealth of the Bahamas and
having an approximate area of 848,630 acres.
The
following coordinates specify the Southwestern corner of each of the ten (10)
submarine blocks to be covered by License No. 5 (Area Apollo).
- 17 -
Block
No.
|
Longitude
|
Latitude
|
||
1
|
79°
|
10'W
|
28°
|
00'
N
|
2
|
79°
|
00'W
|
28°
|
00'
N
|
3
|
78°
|
50'W
|
28°
|
00'
N
|
4
|
78°
|
40'W
|
28°
|
00'
N
|
16
|
78°
|
40'W
|
27°
|
50'
N
|
41
|
79°
|
20'W
|
27°
|
20'
N
|
33
|
79°
|
20'W
|
27°
|
30'
N
|
23
|
79°
|
20'W
|
27°
|
40'
N
|
12
|
79°
|
20'W
|
27°
|
50'
N
|
13
|
79°
|
10'W
|
27°
|
50'
N
|
Limits of
Area Hermes
All those
lands or submarine areas or both situate in the Commonwealth of the Bahamas and
having an approximate area of 848,630 acres.
The
following coordinates specify the Southwestern corner of each of the ten (10)
submarine blocks to be covered by License No. 6 (Area Hermes).
Block
No.
|
Longitude
|
Latitude
|
||
14
|
79°
|
20'W
|
26°
|
50'
N
|
7
|
79°
|
20'W
|
27°
|
00'
N
|
49
|
79°
|
20'W
|
27°
|
10'
N
|
50
|
79°
|
10'W
|
27°
|
10'
N
|
8
|
79°
|
10'W
|
27°
|
00'
N
|
15
|
79°
|
10'W
|
26°
|
50'N
|
42
|
79°
|
10'W
|
27°
|
20'N
|
34
|
79°
|
10'W
|
27°
|
30'
N
|
24
|
79°
|
10'W
|
27°
|
40'N
|
35
|
79°
|
00'W
|
27°
|
30'N
|
Limits of
Area Poseidon
All those
lands or submarine areas or both situate in the Commonwealth of the Bahamas and
having an approximate area of 848,630 acres.
The
following coordinates specify the Southwestern corner of each of the ten (10)
submarine blocks to be covered by License No. 7 (Area
Poseidon).
- 18 -
Block No.
|
Longitude
|
Latitude
|
||||
44
|
78°
|
50'W
|
27°
|
20'N
|
||
36
|
78°
|
50'W
|
27°
|
30'N
|
||
25
|
79°
|
00'W
|
27°
|
40'N
|
||
26
|
78°
|
50'W
|
27°
|
40'N
|
||
27
|
78°
|
40'W
|
27°
|
40'N
|
||
28
|
78°
|
30'W
|
27°
|
40'N
|
||
14
|
79°
|
00'W
|
27°
|
50'N
|
||
15
|
78°
|
50'W
|
27°
|
50'N
|
||
17
|
78°
|
30'W
|
27°
|
50'N
|
||
5
|
78°
|
30'W
|
28°
|
00'N
|
Limits of
Area Zeus
All those
lands or submarine areas or both situate in the Commonwealth of the Bahamas and
having an approximate area of 169,726 acres.
The
following coordinates specify the Southwestern corner of each of the two (2)
submarine blocks to be covered by License No. 8 (Area Zeus).
Block No.
|
Longitude
|
Latitude
|
4
|
78° 40'W
|
27° 20'N
|
5
|
78° 30'W
|
27° 20'N
|
The
eight proposed License Areas cover a total of 6,110,136 acres.
Further
Exploration
The
Company has sufficient capital and exploration credits to ensure it meets its
operating requirements over the next year. In the event the Licenses
are granted, results of specific exploration activity on the proposed License
Areas will be released as they become available.
Regulations
Governing Gas and Oil in the Commonwealth of the Bahamas
Our
exploration activities are governed by the Government of the Bahamas, Petroleum
Act which regulates all petroleum exploration in the Bahamas and their
territorial waters. The Act covers among other things, the granting
of licenses, royalties to be paid to the government, pollution control, bonding,
exemption from customs and duties and other ancillary rights. Upon
the granting of the Licenses, the Company and its Subsidiaries will be in
compliance with all currently applicable regulations of the Bahamian
Government. It is possible that additional regulation of offshore
drilling will be enacted by the Bahamian Government. See “RISK
FACTORS,” herein.
FISCAL
YEAR
Our
fiscal year end is December 31st.
- 19 -
TRANSFER
AGENT
Our
Transfer Agent and Registrar for the Common Stock is Olde Monmouth Stock
Transfer Co. Inc., 200 Memorial Parkway, Atlantic Highlands, New Jersey
07716.
EMPLOYEES
We have
no full-time employees. We rely primarily upon consultants and
contractors to accomplish our administration and exploration
activities. We are not subject to a union labor contract or
collective bargaining agreement. Management services are provided by
our executive officers on an "as-needed" basis. We have no employment
agreement with any of our officers and directors and we carry no key-man life
insurance.
STOCK
OPTION PLAN
On
September 8, 2008, we adopted the 2008 Stock Option Plan (the "Plan") under
which our officers, directors, consultants, advisors and employees may receive
stock options. The aggregate number of shares of common stock that
may be issued under the plan is 5,000,000. The purpose of the Plan is
to assist us in attracting and retaining selected individuals to serve as
directors, officers, consultants, advisors, and employees of Offshore who
contribute to our success, and to achieve long-term objectives that will inure
to the benefit of all shareholders through the additional incentive inherent in
the ownership of our common stock. Options granted under the plan
will be either "incentive stock options", intended to qualify as such under the
provisions of section 422 of the Internal Revenue Code of 1986, as from time to
time amended (the "Code") or "unqualified stock options". For the
purposes of the Plan, the term "subsidiary" shall mean “Subsidiary Corporation,”
as such term is defined in section 424(f) of the Code, and "affiliate" shall
have the meaning set forth in Rule 12b-2 of the Exchange Act.
The Plan
will be administered by the Board of Directors who will set the terms under
which options are granted. No options have been granted under the
Plan as of the date of this prospectus.
COMPETITION
There is
aggressive competition within the industry to discover and acquire properties
considered to have commercial potential. We compete for the
opportunity to participate in promising exploration projects with other
entities, many of which have much greater resources than we do. In
addition, we compete with others in efforts to obtain financing to explore and
develop oil and gas properties.
HISTORY
We were
incorporated in the State of New York on September 8, 1999 under the name
"Enviroclens Inc." as a wholly owned subsidiary of another
corporation. Our then parent-corporation formed the Company in order
to pursue a proposed business opportunity that was unrelated to its core
business. On September 30, 2002, our former parent corporation issued
shares of the Company as a dividend to its shareholders. The intended
project did not proceed. On January 23, 2007, the Company moved its
jurisdiction and was re-domiciled in the State of Delaware. On May 9,
2007, we changed our name to “Offshore Petroleum Corp.”
On
September 15, 2008, John Rainwater and Mickey Wiesinger were appointed to the
Board of Directors. At that time, Todd D. Montgomery, the then President and
sole Director of the Company, resigned. On March 12, 2009, Ryan
Bateman was appointed to the Board of Directors and on December 1, 2009, Gary
Adams was appointed to the Board of Directors. On December 16, 2009,
Howard Barth was appointed to the Board of Directors. On January 14,
2010, Mr. Rainwater was made Chairman of the Board of
Directors.
- 20 -
The
Cayman Islands Subsidiaries, Atlantic and Bahamas were each acquired pursuant to
a Share Purchase Agreement with NPT which closed as of November 30,
2009. As of the closing date, the Subsidiaries each had pending
applications with the Government of the Commonwealth of the Bahamas for certain
rights to explore for oil and gas in territorial waters controlled by the
Commonwealth of the Bahamas. For more information
regarding the Share Purchase Agreement and our Subsidiaries see “DESCRIPTION OF
BUSINESS” AND “PROPERTIES” herein. For more information regarding NPT see
“CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS” herein.
Private
Placements
The
Company completed private placements of 9,350,000 shares of its common stock at
$0.10 per share on the following dates with the following
investors. These private placements were exempt from registration
under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to
exemptions provided by Regulation D and Regulation S promulgated
thereunder.
Name
|
Date Issued
|
Shares
|
$
|
||||||||
Sirius
Intervest Ltd.
|
April
14, 2009
|
1,000,000 | 100,000 | ||||||||
Allentown
Consulting Corp.
|
June
25, 2009
|
1,500,000 | 150,000 | ||||||||
Catalyst
Trading Inc
|
April
28, 2009
|
750,000 | 75,000 | ||||||||
Steven
Pearce
|
April
28, 2009
|
500,000 | 50,000 | ||||||||
Zul
Rashid
|
May
1, 2009
|
200,000 | 20,000 | ||||||||
Sirius
Intervest Ltd.
|
May
8, 2009
|
1,000,000 | 100,000 | ||||||||
Zul
Rashid
|
Sept
29, 2009
|
150,000 | 15,000 | ||||||||
Benjamin
Marler
|
Sept
30, 2009
|
50,000 | 5,000 | ||||||||
Shane
Manning
|
October
14, 2009
|
100,000 | 10,000 | ||||||||
Hubert
Manning
|
October
15, 2009
|
100,000 | 10,000 | ||||||||
Wade
Alexander
|
October
27, 2009
|
250,000 | 25,000 | ||||||||
Cottonwood
Investments, LLC
|
November
16, 2009
|
2,000,000 | 200,000 | ||||||||
Ray
Westall
|
November
16, 2009
|
250,000 | 25,000 | ||||||||
J.
L. Guerra, Jr.
|
November
25, 2009
|
500,000 | 50,000 | ||||||||
Pineview
Worldwide Corp.
|
December
4, 2009
|
1,000,000 | 100,000 | ||||||||
Total
|
9,350,000 | 935,000 |
- 21 -
MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PLAN OF
OPERATIONS
In the
event that we are successful in obtaining the Licenses from the Bahamian
Government through our Subsidiaries, our main focus will be raising the
additional financing necessary to pay rent owed under the Licenses for their
initial three-year term and meet our exploration expenditure
obligations. For more information regarding the Licenses please see
“PROPERTIES - Licenses for Exploration,” herein. We may seek a joint
venture partner with exploration experience and operational capability to
undertake our exploration activities and assist with financing. We
will require substantial additional capital to implement this plan and
additional financing to bring any one or more sites in the Licensed Area to
production, if production is warranted and feasible. We may raise
additional capital through a public offering, private placements of our
securities, a joint venture or through loans or some combination of the
foregoing. We estimate that we will have to raise approximately $4
million to fulfill the terms of the initial three years of the eight Licenses,
if granted. A future financing involving the issuance of Shares will
dilute the existing shareholders. If, following exploration, we
believe that any one or more sites in the Licensed Area warrants development, we
will engage a third party to undertake a feasibility study to asses whether a
reserve exists. If a reserve is found to exist, we will consider
options for development, including a joint venture with a significant producing
company or obtaining further financing and contracting for development and
production.
Discussion
of Operations & Financial Condition for the three month period ended March
31, 2010 and the twelve-month periods ended December 31, 2009 and
2008.
Offshore
has no source of revenue and we continue to operate at a loss. We
have no oil or gas reserves of any kind. We expect our operating
losses to continue for so long as we remain in an exploration stage and perhaps
thereafter. As at March 31, 2010 we had accumulated losses of
$369,818 and as at December 31, 2009, we had accumulated losses of
$224,746. Our ability to emerge from the exploration stage and
conduct production operations is dependent, in large part, upon our ability to
raise additional financing. The report of our independent auditors,
on our audited financial statements for the twelve-month periods ended December
31, 2009 and 2008, indicates that there are a number of factors that raise
substantial doubt about our ability to continue as a going
concern. Our continued operations are dependent on our ability to
obtain financing and upon our ability to achieve future profitable operations
from the development of our oil exploration properties. If we are not
able to continue as a going concern, it is likely that our investors will lose
their investment.
As
described in greater detail below, the Company’s major endeavor for the three
month period ended March 31, 2010 has been pursuing the issuance
of the Licenses by the Bahamian Government. For the year
ended December 31, 2009 the Company’s major endeavor was its effort to complete
the acquisition of Atlantic and Bahamas and to raise additional working
capital. If and when the Licenses are granted by the Bahamian
Government, we will continue our efforts to raise additional capital to pursue
exploration activities on the Licensed Areas.
- 22 -
SELECTED FINANCIAL
INFORMATION FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 2010 AND MARCH 31,
2009
Three months ended
|
Three months ended
|
|||||||
March 31, 2010
|
March 31, 2009
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Revenues
|
Nil
|
Nil
|
||||||
Net
Loss
|
$ | 145,072 | $ | 26,101 | ||||
Loss
per share-basic and diluted
|
$ | 0.01 | $ | 0.00 | ||||
Total
Assets
|
$ | 3,748,162 | $ | 100 | ||||
Total
Liabilities
|
$ | 1,586,998 | $ | 36,859 | ||||
Cash
dividends declared per share
|
Nil
|
Nil
|
For the
three month period ended March 31, 2010, total assets included cash of $747,793,
deposits for License applications of $720,000, prepaid assets of $725 and oil
and gas properties of $2,279,644. The Company had $100 of cash
in assets at March 31, 2009.
Revenues
No
revenue was generated by the Company’s operations during the three month period
ended March 31, 2010 or the three month period ended March 31,
2009.
Three month period ended
March 31, 2010 (unaudited)
(a) General and Administrative
Expense
Included
in operating expenses for the three month period ended March 31, 2010 are
general and administrative expenses of $106,900, as compared with $26,101 for
the three month period ended March 31, 2009. General and
administrative expense represented 73% of the total operating expense the three
month period ended March 31, 2010 and 100% of the total operating expense for
the three month period ended March 31, 2009. General and
administrative expense increased by $80,799 in the three month period ended
March 31, 2010, compared to the three month period ended March 31,
2009. These expenses include (a) $29,453 in fees for general
administrative services including bookkeeping and support for private
placements, (b) $4,580 in general office expense, (c) $2,603 for transfer agent
fees, (d) $2,967 in filing fees (e) $3,977 in investor relations expenses (f)
$18,042 in legal expense, (g) $18,750 in interest expense on the promissory note
payable to NPT and (h) $427 in bank charges.
(b) Project
Expense
The
Company had no exploration activity prior to March 31, 2010 and as a result
there were no project expenses for the three month periods ended March 31, 2010
and March 31, 2009.
- 23 -
Liquidity
and Capital Resources for the three month periods ended March 31, 2010 and March
31, 2009
The
following table summarizes the company’s cash flows and cash in
hand:
Three months ended
|
Three months ended
|
|||||||
March 31, 2010
|
March 31, 2009
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Cash
|
$ | 747,793 | $ | 100 | ||||
Working
capital (deficiency)
|
$ | 1,381,520 | $ | (36,759 | ) | |||
Cash
used in operating activities
|
$ | 49,137 | $ | Nil | ||||
Cash
provided by investing activities
|
$ | Nil | $ | Nil | ||||
Cash
provided by financing activities
|
$ | Nil | $ | 100 |
As at
March 31, 2010, the Company had working capital of $1,381,520 as compared to a
working capital deficiency of $36,759 as of March 31, 2009. During the
three-month period ended March 31, 2010 the Company did not raise any additional
capital, nor did it generate any revenues; as a result its ongoing operating
expenses decreased its working capital from December 31, 2009.
- 24 -
SELECTED FINANCIAL
INFORMATION FOR THE YEARS ENDED DECEMBER 31, 2009
AND DECEMBER 31,
2008
Dec. 31, 2009
|
Dec. 31, 2008
|
|||||||
(Audited)
|
(Audited)
|
|||||||
Revenues
|
Nil
|
Nil
|
||||||
Net
Loss
|
$ | 201,230 | $ | 10,862 | ||||
Loss
per share-basic and diluted
|
$ | 0.01 | $ | 0.00 | ||||
Total
Assets
|
$ | 3,796,574 |
Nil
|
|||||
Total
Liabilities
|
$ | 1,544,284 | $ | 10,758 | ||||
Cash
dividends declared per share
|
Nil
|
Nil
|
For the
year ended December 31, 2009, total assets included cash of $796,930, deposits
for License applications of $720,000 and oil and gas properties of
$2,279,644. The Company had no assets as of December 31,
2008. For more information regarding private placements, please see
“Private Placements” below.
Revenues
No
revenue was generated by the Company’s operations during the year ended December
31, 2009 or the year ended December 31, 2008.
Net
Loss
The
significant components of expense that have contributed to the total net loss
are discussed as follows:
Year ended December 31, 2009
(Audited)
(a) General and Administrative
Expense
Included
in operating expenses for the year ended December 31, 2009 are general and
administrative expenses of $172,965, as compared with $10,862 for the year ended
December 31, 2008. General and administrative expense represented 86%
of the total operating expense for the year ended December 31, 2009 and 100% of
the total operating expense for the year ended December 31,
2008. General and administrative expense increased by $162,103 in the
current year, compared to the prior year. These expenses include (a)
$118,190 in fees for general administrative services including bookkeeping and
support for private placements, (b) $13,802 in general office expense, (c)
$1,179 for logo and graphic design, (d) $4,330 for franchise tax and registered
agent fees, (e) $15,426 in legal expense, (f) $12,079 in audit fees, (g) $1,109
in filing fees with the SEC and the Alberta Securities Commission, (h) $6,250 in
interest expense on the promissory note payable to NPT and (i) $600 in bank
charges.
(b) Project
Expense
The
Company had no exploration activity prior to December 31, 2009 and as a result
there were no project expenses for the twelve-month periods ended December 31,
2009 and 2008.
- 25 -
Liquidity
and Capital Resources for the year ended December 31, 2009
The
following table summarizes the company’s cash flows and cash in hand for year
ended December 31, 2009.
Year ended
|
Year ended
|
|||||||
Dec. 31, 2009
|
Dec. 31, 2008
|
|||||||
Cash
|
$ | 796,930 | $ | Nil | ||||
Working
capital (deficiency)
|
$ | 1,472,646 | $ | (10,758 | ) | |||
Cash
used in operating activities
|
$ | 138,170 | $ | 104 | ||||
Cash
provided by investing activities
|
$ | Nil | $ | Nil | ||||
Cash
provided by financing activities
|
$ | 935,100 | $ | 104 |
As at
December 31, 2009, the Company had working capital of $1,472,646 as compared to
a working capital deficiency of $10,758 as of December 31, 2008. Working capital
increased substantially from the prior year as a result of: (a) $935,000 (gross)
in capital raised through a private placement in during the year ended December
31, 2009 by issuing common shares for cash, (b) a deposit of $720,000 held by
the Government of Bahamas, which is included in the purchase price of Atlantic
and Bahamas, and (c) an increase in accounts payable and accrued liabilities of
$33,526.
The
company had negative operating cash flows of $138,170 and no revenue for the
year ended December 31, 2009.
The
negative operating cash flow includes operating losses of $202,143 made up of
general and administrative expenses, as described in further detail under
“Selected Financial Information – Net Loss”, and deferred compensation incurred
during the year ended December 31, 2009.
The
Company had $796,930 in cash at December 31, 2009. The Company is confident it
can meet its cash requirements and maintain its operations during the current
fiscal year.
The
Company had positive cash flows from financing activities of $935,100 for the
year ended December 31, 2009.
During
the year ended December 31, 2009 the Company issued a total of 9,350,000 Shares
for an aggregate of $935,000. Sale of such Shares were exempt from registration
under the Securities Act pursuant to Regulation D or Regulation S promulgated
thereunder.
On
March 9, 2009 the Board of Directors determined that it would be advisable for
the Company to raise $3,000,000 to use as working capital and passed a
resolution authorizing the issuance of up to 30,000,000 Shares at a price of
$0.10 per Share. As of December 31, 2009, the Company had raised $935,000
through the issuance of 9,350,000 Shares, which the Board determined to be
adequate at that time. Consequently, on January 19, 2010 the Board
revoked its prior resolution to raise $3 million and deferred further financing
efforts.
Our main
focus will be raising the additional financing necessary to pay rent owed under
the Licenses, when granted, for their initial three-year term and meet our
exploration expenditure obligations. We may seek a joint venture
partner with exploration experience and operational capability to undertake our
exploration activities and assist with financing. We will require
substantial additional capital to implement this plan and additional financing
to bring any one or more sites in the Licensed Area to production, if production
is warranted and feasible. We may raise additional capital through a
public offering, private placements of our securities, a joint venture or
through loans or some combination of the foregoing. We estimate that
we will require an additional $4 million (approximately) to fulfill the terms of
the initial three year-term of each License. Any future financing
involving the issuance of Shares will dilute the existing
shareholders.
- 26 -
Recent
Accounting Pronouncements
FASB ASC
TOPIC 805 – “Business Combinations.” The objective of this topic is to
enhance the information that an entity provides in its financial reports about a
business combination and its effects. The Topic mandates: (i) how the
acquirer recognizes and measures the assets acquired, liabilities assumed and
any non-controlling interest in the acquiree; (ii) what information to disclose
in its financial reports and; (iii) recognition and measurement criteria for
goodwill acquired. This Topic is effective for any acquisitions made on or
after December 15, 2008. The adoption of this Topic did not have a
material impact on the Company’s financial statements and
disclosures.
FASB ASC
TOPIC 810 – “Noncontrolling Interests.” The objective of this Topic
is to improve the relevance, comparability, and transparency of the financial
information that a reporting entity provides in its consolidated financial
statements by establishing accounting and reporting standards that require: (i)
the ownership interests in subsidiaries held by parties other than the parent be
clearly identified, labeled, and presented in the consolidated statement of
financial position within equity, but separate from the parent's equity; (ii)
the amount of consolidated net income attributable to the parent and to the
noncontrolling interest be clearly identified and presented on the face of the
consolidated statement of income; (iii) changes in a parent's ownership interest
while the parent retains its controlling financial interest in its subsidiary be
accounted for consistently; (iv) when a subsidiary is deconsolidated, any
retained noncontrolling equity investment in the former subsidiary be initially
measured at fair value. The gain or loss on the deconsolidation of the
subsidiary is measured using the fair value of any noncontrolling equity
investment rather than the carrying amount of that retained investment and; (v)
entities provide sufficient disclosures that clearly identify and distinguish
between the interests of the parent and the interests of the non-controlling
owners. This Topic is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2008. Earlier
adoption is prohibited. The adoption of this Topic did not have a
material impact on the Company’s financial statements and
disclosures.
FASB ASC
TOPIC 815 – “Derivatives and Hedging.” The use and complexity of derivative
instruments and hedging activities have increased significantly over the past
several years. This Topic requires enhanced disclosures about an
entity's derivative and hedging activities and thereby improves the transparency
of financial reporting. This Topic is effective for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008, with
early application encouraged. The adoption of this Topic did
not have a material impact on the Company’s financial statements and
disclosures.
FASB ASC
TOPIC 944 – “Financial Services – Insurance.” Diversity exists in
practice in accounting for financial guarantee insurance contracts by insurance
enterprises. That diversity results in inconsistencies in the recognition and
measurement of claim liabilities because of differing views about when a loss
has been incurred. This Topic requires that an insurance enterprise recognize a
claim liability prior to an event of default (insured event) when there is
evidence that credit deterioration has occurred in an insured financial
obligation. This Topic is effective for financial statements issued for fiscal
years beginning after December 15, 2008, and all interim periods within those
fiscal years, except for some disclosures about the insurance enterprise's
risk-management activities. The adoption of this Topic did not have a
material impact on the Company’s financial statements and
disclosures.
- 27 -
FASB ASC
TOPIC 855 - “Subsequent Events.” In May 2009, the FASB issued Topic
855, which establishes general standards of accounting and disclosure of events
that occur after the balance sheet date but before financial statements are
issued or are available to be issued. In particular, this Topic sets forth: (i)
the period after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements, (ii) the circumstances
under which an entity should recognize events or transactions occurring after
the balance sheet date in its financial statements, (iii) the disclosures that
an entity should make about events or transactions that occurred after the
balance sheet date. This Topic should be applied to the accounting and
disclosure of subsequent events. This Topic does not apply to subsequent events
or transactions that are within the scope of other applicable accounting
standards that provide different guidance on the accounting treatment for
subsequent events or transactions. This Topic was effective for interim and
annual periods ending after June 15, 2009.
In
February 2010, the FASB issued ASU 2010-09-Subsequent Event (Topic 855)
Amendments to certain recognition and disclosure requirements. ASU
2010-09 removes the requirements for an SEC filer to disclose a date through
which subsequent events have been evaluated in both issued and revised financial
statements. The Company adopted ASU 2010-09 in February 2010 and did
not disclose the date through which subsequent events have been
evaluated.
FASB ASC
TOPIC 105 - “The FASB Accounting Standard Codification and the Hierarchy of
Generally Accepted Accounting Principles.” In June 2009, the FASB issued Topic
105, which became the source of authoritative GAAP recognized by the FASB to be
applied by nongovernmental entities. Rules and interpretive releases of the SEC
under authority of federal securities laws are also sources of authoritative
GAAP for SEC registrants. On the effective date of this Topic, the Codification
will supersede all then-existing non-SEC accounting and reporting standards. All
other non-SEC accounting literature not included in the Codification will become
non-authoritative. This Topic identifies the sources of accounting principles
and the framework for selecting the principles used in preparing the financial
statements of nongovernmental entities that are presented in conformity with
GAAP and arranged these sources of GAAP in a hierarchy for users to apply
accordingly. This Topic is effective for financial statements issued for interim
and annual periods ending after September 15, 2009. References made
to authoritative FASB guidance throughout the consolidated financial statements
have been updated to the applicable codification section.
FASB ASC
TOPIC 860 - “Accounting for Transfer of Financial Assets and Extinguishment of
Liabilities.” In June 2009, the FASB issued additional guidance under
Topic 860 which improves the relevance, representational faithfulness, and
comparability of the information that a reporting entity provides in its
financial statements about a transfer of financial assets; the effects of a
transfer on its financial position, financial performance, and cash flows; and a
transferor’s continuing involvement, if any, in transferred financial assets.
This additional guidance requires that a transferor recognize and initially
measure at fair value all assets obtained (including a transferor’s beneficial
interest) and liabilities incurred as a result of a transfer of financial assets
accounted for as a sale. Enhanced disclosures are required to provide financial
statement users with greater transparency about transfers of financial assets
and a transferor’s continuing involvement with transferred financial assets.
This additional guidance must be applied as of the beginning of each reporting
entity’s first annual reporting period that begins after November 15, 2009, for
interim periods within that first annual reporting period and for interim and
annual reporting periods thereafter. Earlier application is prohibited. This
additional guidance must be applied to transfers occurring on or after the
effective date. The adoption of this Topic is not expected to have a
material impact on the Company’s financial statements and
disclosures.
- 28 -
FASB ASC
TOPIC 810 - “Consolidation of Variables Interest and Special Purpose
Entities.” In June 2009, the FASB issued Topic 810, which requires an
enterprise to perform an analysis to determine whether the enterprise’s variable
interest or interests give it a controlling financial interest in a variable
interest entity. This analysis identifies the primary beneficiary of a variable
interest entity as the enterprise that has both of the following
characteristics: (i) The power to direct the activities of a variable interest
entity that most significantly impact the entity’s economic performance and (ii)
The obligation to absorb losses of the entity that could potentially be
significant to the variable interest entity or the right to receive benefits
from the entity that could potentially be significant to the variable interest
entity. Additionally, an enterprise is required to assess whether it has an
implicit financial responsibility to ensure that a variable interest entity
operates as designed when determining whether it has the power to direct the
activities of the variable interest entity that most significantly impact the
entity’s economic performance. This Topic requires ongoing reassessments of
whether an enterprise is the primary beneficiary of a variable interest entity
and eliminate the quantitative approach previously required for determining the
primary beneficiary of a variable interest entity, which was based on
determining which enterprise absorbs the majority of the entity’s expected
losses, receives a majority of the entity’s expected residual returns, or both.
This Topic is effective as of the beginning of each reporting entity’s first
annual reporting period that begins after November 15, 2009, for interim periods
within that first annual reporting period, and for interim and annual reporting
periods thereafter. Earlier application is prohibited. The adoption
of this Topic is not expected to have a material impact on the Company’s
financial statements and disclosures.
FASB ASC
TOPIC 820 - “Fair Value measurement and Disclosures”, an Accounting Standard
Update. In September 2009, the FASB issued this Update to amendments to Subtopic
82010, “Fair Value Measurements and Disclosures”. Overall, for the fair value
measurement of investments in certain entities that calculates net asset value
per share (or its equivalent). The amendments in this Update permit, as a
practical expedient, a reporting entity to measure the fair value of an
investment that is within the scope of the amendments in this Update on the
basis of the net asset value per share of the investment (or its equivalent) if
the net asset value of the investment (or its equivalent) is calculated in a
manner consistent with the measurement principles of Topic 946 as of the
reporting entity’s measurement date, including measurement of all or
substantially all of the underlying investments of the investee in accordance
with Topic 820. The amendments in this Update also require disclosures by major
category of investment about the attributes of investments within the scope of
the amendments in this Update, such as the nature of any restrictions on the
investor’s ability to redeem its investments at the measurement date, any
unfunded commitment, and the investment strategies of the investees. The major
category of investment is required to be determined on the basis of the nature
and risks of the investment in a manner consistent with the guidance for major
security types in GAAP on investments in debt and equity securities in paragraph
320-10-50-lB. The disclosures are required for all investments within the scope
of the amendments in this Update regardless of whether the fair value of the
investment is measured using the practical expedient. The amendments in this
Update apply to all reporting entities that hold an investment that is required
or permitted to be measured or disclosed at fair value on a recurring or non
recurring basis and, as of the reporting entity’s measurement date, if the
investment meets certain criteria The amendments in this Update are effective
for the interim and annual periods ending after December 15, 2009. Early
application is permitted in financial statements for earlier interim and annual
periods that have not been issued. The adoption of this Topic did not
have a material impact on the Company’s financial statements and
disclosures.
FASB ASC
TOPIC 740 - “Income Taxes”, an Accounting Standard Update. In September 2009,
the FASB issued this Update to address the need for additional implementation
guidance on accounting for uncertainty in income taxes. For entities that are
currently applying the standards for accounting for uncertainty in income taxes,
the guidance and disclosure amendments are effective for financial statements
issued for interim and annual periods ending after September 15,
2009. The adoption of this Update did not have a material impact on
the Company’s financial statements and disclosures.
- 29 -
In
December 2008, the SEC issued revised reporting requirements for oil and natural
gas reserves that a company holds. Included in the new rule entitled
“Modernization of Oil and Gas Reporting Requirements”, are the following
changes: 1) permitting use of new technologies to determine proved reserves, if
those technologies have been demonstrated empirically to lead to reliable
conclusions about reserve volumes; 2) enabling companies to additionally
disclose their probable and possible reserves to investors, in addition to their
proved reserves; 3) allowing previously excluded resources, such as oil sands,
to be classified as oil and natural gas reserves rather than mining reserves; 4)
requiring companies to report the independence and qualifications of a preparer
or auditor, based on current Society of Petroleum Engineers criteria; 5)
requiring the filing of reports for companies that rely on a third party to
prepare reserve estimates or conduct a reserve audit; and 6) requiring companies
to report oil and natural gas reserves using an average price based upon the
prior 12-month period rather than year-end policies. The new
requirements are effective for registration statements filed on or after January
1, 2010, and for annual reports on Form 10K for fiscal years ending on or after
December 31, 2009. Early adoption is not permitted. The
Company is currently assessing the impact that adoption of this rule will have
on its financial disclosures.
In
January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-03 –
“Oil and Gas Reserve
Estimation and Disclosures.” The ASU aligns the current oil
and gas reserve estimation and disclosure requirements of FASB Accounting
Standards Codification Topic 932, Extractive Activities – Oil and
Gas, with those in SEC Final Rule Release No. 33-8995, Modernization of
Oil and Gas Reporting. The ASU will be effective for reporting
periods ending on or after December 31, 2009. The Company is
currently assessing the impact that adoption of this rule will have on our
financial statements.
Critical
Accounting Policies
The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires us to make estimates
and assumptions that affect reported amounts of assets and liabilities at the
date of the financial statements, the reported amount of revenues and expenses
during the reporting period and related disclosure of contingent assets and
liabilities. On an ongoing basis, we evaluate our estimates and
judgments. To the extent actual results differ from those estimates,
our future results of operations may be affected. Going forward, once
the Company begins exploration and production of its oil and gas reserves (if
reserves are established), we anticipate that the following accounting policies
will become critical to the preparation of our financial
statement: As of the date of this prospectus, the Company has no
“reserves” as that term is used in the oil and gas industry and for financials
reporting purposes. The Company is in an exploration
stage.
Full
Cost Accounting Method
The
Company accounts for its oil and gas producing activities using the full cost
method of accounting as prescribed by the United States Securities and Exchange
Commission (“SEC”). Accordingly, all costs associated with the
acquisition of properties and exploration with the intent of finding proved oil
and gas reserves contribute to the discovery of proved reserves, including the
costs of abandoned properties, dry holes, geophysical costs, and annual lease
rentals are capitalized. All general corporate costs are expensed as
incurred. In general, sales or other dispositions of oil and gas
properties are computed on the units of production method based on all proved
reserves on a country-by-country basis. The net capitalized costs of
evaluated oil and gas properties (full cost ceiling limitation) are not to
exceed their related estimated further net revenues from proved reserves
discounted at 10% and the lower of cost of estimated fair value of unproved
properties, net of tax considerations. These properties are included
in the amortization pool immediately upon the determination that the well is
dry.
Unproved
properties consist of lease acquisition costs and costs on wells currently being
drilled on the properties. The recorded costs of the investment in
unproved properties are not amortized until provided reserves associated with
the projects can be determined or until they are
impaired. Unevaluated oil and gas properties are assessed at least
annually for impairment either individually or on an aggregate
basis.
- 30 -
Estimates
of Proved Oil and Gas Reserves
Estimates
of proved oil and gas reserves will have a significant impact on the carrying
value of our oil and gas properties, the related property amortization expense
and related property impairment expense. Volumes of reserves actually recovered
and cash flows actually received from actual production may differ significantly
from the proved reserve estimates and the related projected cash flows,
respectively. As of the date of this prospectus, the Company has no
“reserves” as that term is used in the oil and gas industry and for financials
reporting purposes. The Company is in an exploration
stage.
Asset
Retirement Obligation
Asset
retirement obligations (“ARO”) associated with the retirement of a tangible
long-lived asset, including natural gas and oil properties, are recognized as
liabilities in the period in which it is incurred and become determinable, with
an offsetting increase in the carrying amount of the associated
assets. The cost of tangible long-lived assets, including the
initially recognized ARO, is depleted, such that the cost of the ARO is
recognized over the useful life of the assets. The ARO is recorded at
fair value, and accretion expense is recognized over time as the discounted fair
value is accreted to the expected settlement value.
The fair
value of the ARO is measured using expected future cash flow, discounted at the
Company’s credit-adjusted risk-free interest rate.
Impairment
of Long-Lived Assets
The
carrying value of intangible assets and other long-lived assets are reviewed on
a regular basis for the existence of facts or circumstances that may suggest
impairment. The Company recognizes impairment when the sum of the
expected undiscounted future cash flows is less than the carrying amount of the
asset. Impairment losses, if any, are measured as the excess of the
carrying amount of the asset over its estimated fair
value. Impairment on the properties with unproved reserves is
evaluated by considering criteria such as future drilling plans for the
properties, the results of geographic and geologic data related to the unproved
properties and the remaining term of the property leases.
Basis
loss per share
Basic
loss per share is computed using the weighted average number of shares
outstanding during the period. Diluted earnings per share are
computed similar to basic income per share except that the denominator is
increased to include the number of common stock equivalents. Common
stock equivalents represent the dilutive effect of the assumed exercise of any
outstanding stock equivalents, using the treasury stock method, at either the
beginning of the respective period presented or the date of issuance, whichever
is later, and only if the common stock equivalents are considered dilutive based
upon the Company’s net income (loss) position at the calculation
date. There are no common stock equivalents outstanding and, thus,
diluted and basic loss per share are the same.
Income
Taxes
The
Company recognizes deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial statements
or tax returns. Deferred income taxes are provided using the
liability method. Under the liability method, deferred income taxes
are recognized for all significant temporary differences between the tax and
financial statement bases of assets and liabilities.
Current
income tax expense (recovery) is the amount of income taxes expected to be
payable (recoverable) for the current period. A deferred tax asset
and/or liability is computed for both the expected future impact of differences
between the financial statement and tax bases of assets and liabilities and for
the expected future tax benefit to be derived from tax
losses. Valuation allowances are established when necessary to reduce
deferred tax asset to the amount expected to be “more likely than not” realized
in future tax returns. Tax law and rate changes are reflected in
income in the period such changes are enacted.
- 31 -
Off-Balance
Sheet Arrangement
The
Company had no off balance sheet transactions at March 31, 2010 or December 31,
2009.
Contractual
Obligations and Commercial Commitments
As of
January 1, 2009, the Company entered into a Consulting Services Contract with
Lance Capital Corp. (“Lance”) pursuant to which Lance will administer the
Company’s daily corporate operations for a period of one year. Under
the Consulting Services Contract the Company is required to pay Lance $7,500 per
month as consideration for such services. Lance provides a full
compliment of administrative and corporate services, including bookkeeping,
investor support, contract negotiation and administration, oversight of
consultants, oversight of and assistance in all public filings and financial
statements, assistance to a market maker in the OTC Bulletin Board listing
process if required, oversight of the website (when applicable) and
administration of the Company’s expense payments pursuant to internal control
procedures implemented by the Board of Directors.
On
October 20, 2009, the Company entered into a Consulting Agreement with Pembroke
Communications Corp. (“Pembroke”) for certain consulting services for a term of
expiring September 30, 2011. The Company issued 1,500,000 Shares of
restricted common stock which shall be deemed earned by Pembroke in equal
installments of 500,000 shares on April 1, 2010, October 1, 2010 and April 1,
2011. The Consultant must return any unearned shares upon early
termination of the Consulting Agreement. Pursuant to the Consulting
Agreement, Pembroke will assist the Company in communicating its announcements,
publicizing financial statements and accessing institutional and other investors
throughout the world. The Pembroke office with which we have
contracted is based in Panama.
On
October 20, 2009, the Company entered into a Consulting Agreement with Power One
Capital Corp. (“Power One”) for certain consulting services for a term of
expiring September 30, 2011. The Company issued 1,500,000 Shares of
restricted common stock. Pursuant to an Amendment to the Consulting
Agreement with Power One dated June, 2010, such shares shall be deemed earned by
Power One in equal installments of 500,000 shares on April 1, 2010, October 1,
2010 and April 1, 2011. The Consultant must return any unearned
shares upon early termination of the Consulting Agreement. Power One
will assist the Company with strategic and operating advice and may introduce
strategic investors to the Company. If the Company seeks a joint
venture partner to assist it with drilling and other exploration operations in
the Licensed Areas, Power One will assist the Company in finding a suitable
joint venture partner and negotiating the joint venture
agreement. The Power One office with which we have contracted is
based in Panama.
On
November 30, 2009, the Company closed a Share Purchase Agreement with NPT to
purchase from NPT all of the equity stock of two Cayman Island
companies. Pursuant to the Share Purchase Agreement, Offshore
acquired its two Subsidiaries, Atlantic Petroleum Ltd. and Bahamas Exploration
Limited, pending the issuance of the Licenses, as described
above. Offshore paid $3,000,000 for the equity stock of the two
subsidiaries to NPT as follows: (a) 15 million Shares of Offshore valued at
$0.10 per share and (b) a promissory note with a face amount of $1.5 million
payable over a two-year term and bearing interest at a rate of 5% per
year.
Each
of the eight Licenses, if and when granted, will have an initial three-year term
and require advance annual rental payments of $50,000 per License in the first
year (already paid upon application for the Licenses), $75,000 in the second
year and $100,000 in the third year. In the event the Licenses are
granted, Atlantic and Bahamas each are required to spend an aggregate of
$250,000 on qualifying exploration and/or development expenditures in the first
year on their four respective Licensed Areas and an aggregate of $375,000 in
each of the two following years. Each of Atlantic and Bahamas are
required to post a $1,000,000 bond for performance of the work
commitments. See the section entitled “PROPERTIES – Licenses for
Exploration” for more information.
- 32 -
DISCLOSURE
CONTROLS AND PROCEDURES
Our Chief
Executive Officer (CEO) and Chief Financial Officer (CFO) evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures, as required by Exchange Act Rule 13a-15(e). Based on that
evaluation, our CEO and CFO concluded that our disclosure controls and
procedures were effective.
Management
of Offshore is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial
reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the
Securities Exchange Act of 1934 as a process designed by, or under the
supervision of, the company's principal executive officer and principal
financial officers and effected by the company's board of directors, 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 accounting principles generally accepted in the
United States and includes those policies and procedures that:
* Pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the
company;
* Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting principles
generally accepted in the United States and that receipts and expenditures of
the company are being made only in accordance with authorizations of management
and directors of the company; and
* Provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the company's assets that could have a
material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Even those systems determined to be
effective can provide only reasonable assurance with respect to financial
statement preparation and presentation. Because of the inherent
limitations of internal control, there is a risk that material misstatements may
not be prevented or detected on a timely basis by internal control over
financial reporting. However, these inherent limitations are known
features of the financial reporting process. Therefore, it is
possible to design into the process safeguards to reduce this risk.
In making
this assessment, management, used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission in the Internal
Control-Integrated Framework. Based on its assessment, management has concluded
that the Company's disclosure controls and procedures and internal control over
financial reporting is effective based on those criteria.
There
have been no changes to the Company’s internal controls over financial reporting
since they were adopted by the Board of Directors on June 15, 2009.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of
the date of this prospectus, there are 45,450,000 shares of common stock
outstanding, held by 564 shareholders of record. We are registering a
total of 20,502,500 Shares in this prospectus, which will be available for
re-sale when this prospectus becomes effective.
- 33 -
We
have outstanding 24,947,500 Shares not covered by this
prospectus. Such shares are considered “restricted shares” under
applicable U.S. securities regulations and cannot be re-sold unless an exemption
from registration under the Securities Act is available. Other than the Shares
covered by this prospectus, we have not agreed to register any of our securities
under the Securities Act for sale by shareholders.
To date
we have not paid any dividends on our common stock and we do not expect to
declare or pay any dividends on our common stock in the foreseeable
future. Payment of any dividends will depend upon our future
earnings, if any, our financial condition, and other factors deemed relevant by
the Board of Directors.
- 34 -
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS
Board
of Directors
The
following persons are Directors of Offshore Petroleum as of the date of this
prospectus. Each Director will serve until the next meeting of
shareholders or until replaced.
Name
|
Position Held with the Company
|
Date First
Elected or
Appointed
|
Age
|
Estimate of
Time to be
Allocated to the
Company (1)
|
||||
John
Rainwater
|
Director
and Chairman of the Board,
President
and Chief Executive Officer
|
September
15, 2008
|
62
|
30%
|
||||
Mickey
Wiesinger
|
Director,
Chief Financial Officer and
Secretary
|
September
15, 2008
|
60
|
30%
|
||||
Ryan
Bateman
|
Director
|
March
12, 2009
|
36
|
15%
|
||||
Gary
Adams
|
Director
|
December
1, 2009
|
59
|
As
Required
|
||||
Howard
Barth
|
|
Director
|
|
December 16,
2009
|
|
57
|
|
As
Required
|
(1)
|
The
estimates of time to be allocated to the business of the Company in this
column will increase at such time as the Company commences exploration
activities. Mr. Adams and Mr. Barth will make themselves
available for committee and board meetings as
required.
|
Business
Experience
The
following table lists the positions held by our directors in other companies and
the periods during which such positions were held.
Name
|
Company
|
Symbol
|
Position
|
Dates
|
||||
John
Rainwater
|
JROC
(JR’s Oil Company)
|
CEO
|
Presently
|
|||||
Pacific
Energy Resources, Ltd. (TSX)
|
PFE
|
Exec.
V.P.
|
July.
2006- Nov. 2008
|
|||||
COO
|
Nov
2008 – Sept 2009
|
|||||||
Carneros
Energy, Inc.
|
CEO
|
April
2001 – Sept. 2006
|
||||||
R
& R Offshore Resources, Ltd.
|
Managing
Director
|
April
1998- present
|
||||||
Gothic
Energy Corporation (OTCBB)
|
GOTH
|
VP
Corp Dev
|
1994
– 1998
|
|||||
Energy
Exchange Corporation (NYSE)
|
EEX
|
CEO
|
1981
– 1986
|
|||||
Mickey
Wiesinger
|
JROC
(JR’s Oil Company)
|
CFO
|
Presently
|
|||||
Pacific
Energy Resources, Ltd. (TSX)
|
PFE
|
CFO
|
July
2006 – Dec. 2008
|
|||||
Carneros
Energy, Inc.
|
CFO
|
2001
– July 2006
|
||||||
Ryan
Bateman
|
Bateman
& Company, Ltd.
|
Managing
Director
|
Dec.
2004 – present
|
|||||
Milo
Holdings Ltd
|
President
and sole Director
|
Dec.
2008 to Present
|
||||||
Gary
Adams
|
Adams
Affiliates, Inc.
|
President
|
Presently
|
|||||
Howard
Barth
|
China
Auto Logistics Inc. (OTCBB)
|
CALG
|
Director
|
Nov.
2008 – present
|
||||
New
Oriental Energy & Chemical Corporation (NASDAQ)
|
NOEC
|
Director
|
April
2007 – present
|
|||||
Nuinsco
Resources Inc. (TSX)
|
NWI
|
Director
|
Dec.
2005 – present
|
|||||
Yukon
Gold Corporation Inc. (OTCBB)
|
YGDC
|
Director
|
June
2005 – May 2009
|
|||||
Orsus
Zelent Technologies Inc. (AMEX)
|
ORS
|
Director
|
Feb.
2007 – Oct. 2008
|
|||||
|
Uranium
Hunter Corporation (OTCBB)
|
|
URHN
|
|
Director
|
|
Mar.
2007 – Oct.
2008
|
- 35 -
John Rainwater – Mr. Rainwater
has over thirty years experience as an executive in the public and private oil
and gas industry, both domestically and internationally. He has
served as the Chief Executive Officer of Energy Exchange Corporation (NYSE),
Integrated Petroleum Corporation, and Carneros Energy Corporation (a Warburg
Pincus portfolio company). He co-founded and served as an officer and
director of Gothic Energy Corporation (NASDAQ) and has been the Managing
Director of R&R Offshore Resources since its inception. He also
was the chief operating officer and executive vice president of Pacific Energy
Resources Ltd, a TSX-listed company which filed for bankruptcy protection in
March of 2009 (See “Involvement in Certain Legal Proceedings”
below). In 1986 Mr. Rainwater served as the financial advisor to Sol
Petroleum of Argentina in connection with Sol Petroleum’s acquisition of OXY’s
Bolivia production and acreage. Companies that he has founded and/or
managed have drilled more than 1,000 oil and gas wells in the U.S., Canada,
Bolivia, and international waters. Mr. Rainwater holds a Bachelor of
Science in economics/finance magna cum laude and a MBA in management magna cum
laude from the University of Tulsa. He also serves as a Board Member
of the California Independent Producers Association and the Board of Petroleum
Industry Advisors to Gerson Lehman Partners of New York.
Mickey Wiesinger – Mr.
Wiesinger is a certified public accountant. He earned a Bachelor of Business
Administration degree from Texas A&M University and a Masters of Business
Administration degree from the University of Phoenix. Mr. Wiesinger
served as Accounting Manager of Superior Oil Company from 1972 until
1982, in both the Philippine Islands and in the U.S. Mr. Wiesinger
has also served as Vice President and Chief Financial Officer of Ferguson
Energy, a California Independent producer, Carneros Energy Corporation (a
Warburg Pincus portfolio company) and Pacific Energy Resources Ltd. (a
TSX-listed company).
Ryan Bateman – Mr. Bateman
has 15 years of
experience in the investment industry. Mr. Bateman is chairman and
founder of Bateman Financial, an international financial firm specializing in
asset management, trading and advisory. Prior to forming Bateman
Financial, Mr. Bateman was in the asset management department of the LOM
Group where he concentrated on public and private financings for six
years. From 1997 to 1999, Mr. Bateman worked at Emerging Equities
Inc., specializing in venture capital financing. Prior to 1997, Mr.
Bateman was employed with Citibank NA London, Manager of Special Situations for
the European debt derivatives group. Mr. Bateman is President and
sole Director of Milo Holdings Ltd. a private holding company that he
owns.
Gary Adams - Mr. Adams has
over thirty years experience as an executive in the public and private oil and
gas industry, both domestically and internationally. He is President
of Adams Affiliates, Inc. located in Tulsa, Oklahoma. He founded and
served as President of CNG, a company focused on the mid-stream business of
gathering, processing, treating and marketing of natural gas and natural gas
liquids. Mr. Adams was also involved in the oilfield supply business
in the ownership of two companies that operated in the US, SE Asia and
Canada. He served as Executive Vice President of OKC Corporation,
Dallas. Mr. Adams was Assistant to the President of a large savings
and loan business. He holds a Bachelors Degree from the University of
Kansas.
Howard Barth – Mr. Barth has
operated his own public accounting firm in Toronto since 1985 and has over 30
years experience as a public accountant serving a wide variety of
clientele. He serves as a director and Chairman of the Audit
Committee for New Oriental Energy & Chemical Corporation (a Nasdaq listed
company), China Auto Logistics Inc. (a Nasdaq listed company), MDHO Holdings
Inc. (an OTCBB listed company). Previously he has served as director
and Chairman of the Audit Committee for Nuinsco Resources Limited (a TSX listed
company), Yukon Gold Corporation (dual listed on the OTCBB and TSX), Orsus
Xelent Technologies Inc. (an Amex listed company) and as a director of Uranium
Hunter Corporation (an OTCBB listed company). Mr. Barth is a member
of the Canadian Institute of Chartered Accountants and the Ontario Institute of
Chartered Accountants.
- 36 -
Family
Relationships
There are
no family relationships between any Director, executive officer or significant
employee of the Company.
Committees
of the Board
Our Board
of Directors has the authority to appoint committees to perform certain
management and administrative functions. Currently, we have an Audit
Committee with a financial expert. We do not have any other
committees.
Audit
Committee
The Audit
Committee is comprised of three directors: Mickey Wiesinger, Gary Adams and
Howard Barth. Mr. Adams and Mr. Barth are independent
directors. The Audit Committee assists the Board of Directors in its
oversight of the quality and accuracy of the Company’s financial statements and
in assessing the effectiveness of the Company’s internal
controls. The Audit Committee also oversees the work of the Company’s
independent auditor. The Audit Committee has reviewed the financial
statements of the Company included with this prospectus.
Pursuant
to the Audit Committee’s Charter, the Audit Committee must consist of at least
two members of the Board of Directors and not less than two members of the Audit
Committee must be independent directors. At least one member of the Audit
Committee shall have financial expertise, in the judgment of the Board,
including accounting or related financial management expertise. The Audit
Committee must meet at least four times per year. The Audit Committee also must
meet separately with the Chief Executive Officer and with the Chief Financial
Officer of the Company, at least annually.
In
addition to overseeing financial and reporting compliance, the Audit Committee
is authorized to establish “whistle blower” procedures and is empowered, in its
charter, to conduct any special investigation and/or engage expert assistance to
conduct an investigation in the discretion of the Audit Committee.
The Audit
Committee must report to the Board no less than annually with respect to its
examinations and recommendations.
Involvement
in Certain Legal Proceedings
Our
Directors, officers and control persons have not been involved in any of the
following events during the past ten years:
(a) any
bankruptcy petition filed by or against any business of which such person was a
general partner or executive officer either at the time of the bankruptcy except
as follows: John Rainwater was the chief operating officer of Pacific
Energy Resources Ltd. (“Pacific”), which filed for Chapter 11 bankruptcy
protection in the United States District Court of Delaware in March of
2009. Mr. Rainwater oversaw operation of Pacific’s producing asset in
Alaska, but was not involved in the financial transactions of Pacific which led
to its bankruptcy. Mr. Wiesinger was Pacific’s chief financial
officer until February of 2007, two years prior to the bankruptcy. At
the time of the bankruptcy, Mr. Wiesinger was a manager of special projects and
not an officer of Pacific.
- 37 -
(b) any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses),
(c) being
subject to any order, judgment or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his involvement in any type
of business, securities or banking activities, or
being
found by a court of competent jurisdiction (in a civil action), the SEC or the
Commodity Futures Trading Commission to have violated a federal or state
securities or commodities law, and the judgment has not been reversed, suspended
or vacated.
Code
of Ethics
On June
15, 2009, our Board of Directors adopted a code of business conduct and ethics
policy, referred to herein as the “Code of Ethics.” The adoption of
the Code of Ethics allows us to focus our Board of Directors on areas of ethical
risk, provide guidance to Directors and officers to help them recognize and deal
with ethical issues, provide mechanisms to report unethical conduct and help
foster a culture of honesty and accountability.
EXECUTIVE
COMPENSATION
Except
for compensation paid for services provided by entities owned by some of our
officers and Directors, as more particularly described in CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS, no officer or Director has received any remuneration
from us, directly or indirectly, since our inception. Although we
have no compensation plan currently, it is possible that we will adopt such a
plan in the future to pay or accrue compensation for our officers and Directors
for services related to the operation of our business. Although we
have no retirement, incentive, defined benefit, actuarial, pension or
profit-sharing programs for the benefit of Directors, officers or other
employees currently, it is possible that we will adopt such plans in the future.
We have no employment contract or compensatory plan or arrangement with any of
our Directors or officers. We have a Stock Option Plan that is
described in STOCK OPTION PLAN.
- 38 -
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
We
have 45,450,000 shares of common stock issued and outstanding. The
last column of the table below reflects the voting rights of each officer and/or
director as a percentage of the total voting shares outstanding as of June 30,
2010.
Name and Address
Of Beneficial Owner
|
Number of Shares of
Common Stock
|
Percentage of Class
Held
|
|||
John
Rainwater
|
3,806,000 |
8.4%
of Common Shares
|
|||
Mickey
Wiesinger
|
672,000 |
1.5%
of Common Shares
|
|||
Ryan
Bateman
|
6,940,000 | (1) |
15.3%
of Common Shares
|
||
Gary
Adams
|
2,000,000 | (2) |
4.4%
of Common Shares
|
||
TOTAL
|
13,418,000 |
29.6%
|
|
(1)
|
4,477,000
of Ryan Bateman’s shares are held by Milo Holdings Ltd., a corporation
controlled by Mr. Bateman.
|
|
(2)
|
2,000,000
shares held by Cottonwood Investments, LLC are 50% owned by Adams
Affiliates, Inc., which is controlled by family members of Gary Adams and
50% owned by Melissa Nolley Adams, wife of Gary
Adams.
|
As a
group, management and the directors own or control 29.6% of the issued and
outstanding shares of the Company.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The
Officers and Directors have received no compensation for their services to the
Company as of the date of this report.
As of
the date this Registration Statement, Ryan Bateman, John Rainwater and Mickey
Wiesinger, each a director and/or an officer of the Company, are also
shareholders of NPT, from which the Company acquired its Subsidiaries and
interest in the Licensed Areas. The following table shows the
respective interests of Messrs. Bateman, Rainwater and Wiesinger in each of NPT
and the Company prior to the Share Purchase Agreement.
- 39 -
As of
September, 2009
Name
|
Position with
Offshore
|
Position and
Interest in
NPT
|
Number of Shares of
Offshore
|
|||
John
Rainwater
|
Director
and Chairman of the Board, President and Chief Executive
Officer
|
Shareholder
holding 25.49% of the equity of NPT
|
-0-
|
|||
Mickey
Wiesinger
|
Director,
Chief Financial Officer and Secretary
|
Shareholder
holding 3.02% of equity of NPT
|
-0-
|
|||
Ryan
Bateman
|
Director
|
President,
Director and Shareholder holding 50.98% of equity of
NPT
|
-0-
|
The
Company issued an aggregate of 15,000,000 Shares to NPT upon the closing of the
Share Purchase Agreement and issued to NPT a Promissory Note in the amount of
$1,500,000, bearing interest at a rate of 5% per annum with a two-year
term. Mr. Bateman, who is the President and director of NPT and also
its controlling shareholder, negotiated the Share Purchase Agreement on behalf
of NPT. Mr. Bateman abstained from voting when the Board of Directors
of Offshore approved the Share Purchase Agreement. Mr. Rainwater and
Mr. Wiesinger, both officers and directors of Offshore, negotiated on behalf of
the Company. Following the consummation of the Share Purchase
Agreement NPT elected to assign the Shares received thereunder to its own
stockholders.
- 40 -
The
following table reflects the respective interests of Messrs. Rainwater,
Wiesinger and Bateman in the Company following consummation of the
Share Purchase Agreement and subsequent NPT Assignment.
Name
|
Position Held
with Company
|
Number of Shares of the
Company Owned
Following Closing of the
Share Purchase
Agreement
|
Percentage of Class Held
|
|||
John
Rainwater
|
Director
and Chairman of the Board, President and Chief Executive
Officer
|
3,806,000 |
8.4%
of common stock
|
|||
Mickey
Wiesinger
|
Director,
Chief Financial Officer and Secretary
|
672,000 |
1.48%
of common stock
|
|||
Ryan
Bateman
|
Director
|
6,940,000 |
15.32%
of common
stock
|
Of the
Shares that are beneficially owned by Mr. Bateman, 4,477,000 of the 6,940,000
Shares are held by Milo Holdings Ltd., a corporation controlled by Mr.
Bateman.
ORGANIZATION
WITHIN THE LAST FIVE YEARS
We were
incorporated in the State of New York on September 8, 1999 under the name
"Enviroclens Inc." as a wholly owned subsidiary of another
corporation. Our then parent-corporation formed the Company in order
to pursue a proposed business opportunity that was unrelated to its core
business. On September 30, 2002, our former parent corporation issued
shares of the Company as a dividend to its shareholders. The intended project
did not proceed. On January 23, 2007, the Company moved its
jurisdiction and was re-domiciled in the State of Delaware. On May 9,
2007, we changed our name to “Offshore Petroleum Corp.”
All
transactions among the Company and related parties are described in “CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS” above.
DESCRIPTION
OF SECURITIES
The
following description is a summary of the material terms of our common
stock. This summary is subject to and qualified in its entirety by
our Articles of Incorporation as amended, our Bylaws and by the applicable
provisions of the State of Delaware law. Our authorized capital stock
consists of 200,000,000 shares of Common Stock having a par value of $0.0001 per
share. There is no cumulative voting for the election of directors.
There are no preemptive rights to purchase shares. The holders of shares of
common stock are entitled to dividends, out of funds legally available
therefore, when and as declared by the Board of Directors. The Board of
Directors has never declared a dividend and does not anticipate declaring a
dividend in the future. Each outstanding share of common stock entitles the
holder thereof to one vote per share on all matters presented to the
shareholders for a vote. In the event of liquidation, dissolution or winding up
of our affairs, holders are entitled to receive, ratably, our net assets
available to shareholders after payment of all creditors. All of our issued and
outstanding shares of common stock are duly authorized, validly issued, fully
paid, and non-assessable. To the extent that our unissued shares of
common stock are subsequently issued, the relative interests of existing
shareholders will be diluted.
- 41 -
USE
OF PROCEEDS
We will
not receive any of the proceeds from the sale of the shares of common stock
offered hereunder by the selling shareholders. We will not pay any
commissions or any of the expenses of the selling shareholders related to the
sale of these shares.
DETERMINATION
OF OFFERING PRICE
The
offering price has been estimated solely for the purpose of calculating the
registration fee payable to the Securities and Exchange Commission in connection
with this prospectus. The offering price is not an indication of
value nor has it been established by any recognized methodology for deriving the
value of the Shares.
SELLING
SHAREHOLDERS AND PLAN OF DISTRIBUTION
The
registration statement, of which this prospectus forms a part, relates to our
registration, for the account of the Selling Shareholders listed below, of an
aggregate of 20,502,500 shares of common stock.
The
Selling Shareholders must sell the Shares at $0.10 per Share until a market for
the Shares develops, if at all. Such offering price is not based upon
our net worth, total asset value or any other objective measure of value based
on accounting measurements. If a market for the Shares develops, the
Selling Shareholders may offer to sell their shares at prevailing market prices
or at negotiated prices. The sale of the Selling Shareholders' Shares
by the Selling Shareholders may be effected from time to time in transactions,
which may include block transactions by or for the account of the selling
shareholders, in the over-the-counter market or in negotiated transactions, or
through the writing of options on the selling shareholders' shares, a
combination of these methods of sale, or otherwise. Sales may be made at market
prices prevailing at the time of sale, or at negotiated prices. We are not aware
of any underwriting arrangements that have been entered into by the selling
shareholders. We will file a post-effective amendment to our
registration statement with the SEC if any selling shareholder enters into an
agreement to sell shares through broker-dealers acting as principals after the
date of this prospectus.
The
Selling Shareholders, during the time each is engaged in distributing shares
covered by this prospectus, must comply with the requirements of Regulation M
under the Exchange Act. Generally, under those rules and regulations
they may not: (i) engage in any stabilization activity in connection with our
securities, and (ii) bid for or purchase any of our securities or attempt to
induce any person to purchase any of our securities other than as permitted
under the Exchange Act.
The
Selling Shareholders and broker-dealers, if any, acting in connection with these
sales might be deemed to be "underwriters" within the meaning of Section 2(11)
of the Securities Act. Any commission they receive and any profit upon the
resale of the securities might be deemed to be underwriting discounts and
commissions under the Securities Act.
Rules 15g-1
through 15g-9 promulgated under the Securities Exchange Act of 1934, as amended,
impose sales practice and disclosure requirements on FINRA broker-dealers who
make a market in "a penny stock". A penny stock generally includes
any non-FINRA equity security that has a market price of less than $5.00 per
share. Our shares may be quoted on the OTC Bulletin Board, and the price of our
shares may fall within a range which would cause our shares to be considered a
“penny stock”. The additional sales practice and disclosure
requirements imposed upon broker-dealers handling “penny stocks” may discourage
broker-dealers from effecting transactions in our shares, which could severely
limit the market liquidity of the shares and impede the sale of our shares in
the market.
- 42 -
Under the
“penny stock” regulations, a broker-dealer selling “penny stocks” to anyone
other than an established customer or "accredited investor" (generally, an
individual with net worth in excess of $1,000,000 or an annual income exceeding
$200,000, or $300,000 together with his or her spouse) must make a special
suitability determination for the purchaser and must receive the purchaser's
written consent to the transaction prior to purchase, unless the broker-dealer
or the transaction is otherwise exempt.
In
addition, the “penny stock” regulations require the broker-dealer to deliver,
prior to any transaction involving a “penny stock,” a disclosure schedule
prepared by the Commission relating to the “penny stock” market, unless the
broker-dealer or the transaction is otherwise exempt. A broker-dealer is also
required to disclose commissions payable to the broker-dealer and the registered
representative and current quotations for the securities. Finally, a
broker-dealer is required to send monthly statements disclosing recent price
information with respect to the “penny stock” held in a customer's account and
information with respect to the limited market in “penny stocks.” All
of the foregoing may affect the marketability of the securities.
Sales of
any shares of common stock by the Selling Shareholders may depress the price of
the common stock in any market that may develop for the common
stock.
At the
time a particular offer of the shares is made by or on behalf of a selling
stockholder, to the extent required, a prospectus supplement will be distributed
which will set forth the number of shares being offered and the terms of the
offering, including the name or names of any underwriters, dealers, or agents,
the purchase price paid by any underwriter for shares purchased from the selling
stockholder and any discounts commissions, or concessions allowed or re-allowed
or paid to dealers, and the proposed selling price to the public.
Under the
Securities Exchange Act of 1934, as amended, and its regulations, any person
engaged in the distribution of shares of common stock offered by this prospectus
may not simultaneously engage in market-making activities with respect to the
common stock during the applicable "cooling off" period prior to the
commencement of this distribution. In addition, and without limiting
the foregoing, the Selling Shareholders will be subject to applicable provisions
of the Exchange Act and its rules and regulations, including without limitation
Regulation M promulgated under the Exchange Act, in connection with transactions
in the shares, which provisions may limit the timing of purchases and sales of
shares of common stock by the Selling Shareholders.
The
following table sets forth information known to us regarding ownership of our
common stock by each of the selling shareholders as of the date hereof and as
adjusted to reflect the sale of shares offered by this
prospectus. None of the Selling Shareholders has had any position
with, held any office of, or had any other material relationship with us during
the past three years,
We
believe, based on information supplied by the following persons that the persons
named in this table have sole voting and investment power with respect to all
shares of common stock which they beneficially own. Because the
Selling Shareholders may sell all or only a portion of the 20,502,500 shares of
common stock registered hereby, we cannot estimate the number of these shares
that will be held by the Selling Shareholders upon termination of the
offering. The information in the last column of the table below
assumes that the Selling Shareholders sell all of their shares offered in this
prospectus.
- 43 -
SELLING
SHAREHOLDERS
Shareholder
|
No. of
Shares
Owned
|
Relationship
with Issuer
|
Shares
Owned
After
Offering
|
||||
Robert
Lush
|
450,000 |
None
|
None
|
||||
Pippin
Investments (1)
|
2,140,000 |
None
|
None
|
||||
Sunny
Ventures Co. Ltd. (2)
|
2,140,000 |
None
|
None
|
||||
Atlantic
Power Co. (3)
|
2,140,000 |
None
|
None
|
||||
Darion
Investments Inc. (4)
|
2,140,000 |
None
|
None
|
||||
Liberty
Point Investments SA (5)
|
2,140,000 |
None
|
None
|
||||
Republic
Asset Management Corp. (6)
|
2,140,000 |
None
|
None
|
||||
S.
K. Kelley & Associates Inc. (7)
|
2,110,000 |
None
|
None
|
||||
Joanne
Hughes
|
30,000 |
None
|
None
|
||||
Three
Eff Corporation (8)
|
2,072,500 |
None
|
None
|
||||
Power
One Capital Corp. (9)
|
1,500,000 |
None
|
None
|
||||
Pembroke
Communications Corp. (10)
|
1,500,000 |
None
|
None
|
||||
20,502,500 |
(1)
|
Pippin
Investments is controlled by Kevin Bell, Belize City,
Belize.
|
(2)
|
Sunny
Ventures Co. Ltd. is controlled by Theodore Blackmore, Belize
City, Belize.
|
(3)
|
Atlantic
Power Co. is controlled by Daniel Leinweber, Republic of
Panama.
|
(4)
|
Darion
Investments Inc. is controlled by Philip Young, Republic of
Panama.
|
(5)
|
Liberty
Point Investments SA is controlled by David Faulkner, Republic of
Panama.
|
(6)
|
Republic
Asset Management Corp. is controlled by Cody Bateman, Republic of
Panama. Cody Bateman is Ryan Bateman’s brother. Ryan
Bateman is a director of the Company and a principal of Bateman &
Company Ltd., a broker-dealer registered in the Cayman
Islands. Ryan Bateman disclaims any control over Cody Bateman
and Republic Asset Management. Ryan Bateman is not a Selling
Shareholder and has no current agreement or understanding, directly or
indirectly, with respect to the re-sale of the shares he owns personally
or controls through Milo Holdings Ltd. Bateman & Company
Ltd. has no current agreement or understanding, directly or indirectly,
with respect to the re-sale of the shares owned or controlled by Ryan
Bateman.
|
(7)
|
S.
K. Kelley & Associates Inc. is controlled by Patricia Kelley,
Oakville, Ontario, Canada.
|
(8)
|
Three
Eff Corporation is controlled by Habsburg Foundation, Willemstad, Curacao
Netherlands Antilles.
|
(9)
|
Power
One Capital Corp. is controlled by Herrara Sotto, in the Republic of
Panama.
|
- 44 -
(10)
|
Pembroke
Communications Corp. is controlled by Melvin Cisneros, in the Republic of
Panama.
|
We intend
to keep this prospectus effective for one year from the date of this prospectus,
although we reserve the right to terminate the distribution under this
prospectus prior to that time.
State
Blue Sky Information Relating to the Shares
The
Selling Shareholders may offer and sell their Shares only in States in the
United States where exemptions from registration under State securities laws are
available. The Company intends to obtain an exemption, known as the
“manual exemption,” in approximately 38 States where such exemption is
available. Generally, the manual exemption is available to issuers
that maintain an up-to-date listing that includes certain information about the
issuer in a recognized securities manual. The Company intends to
obtain a listing in “Standard & Poor’s Corporation Records,” or Mergent’s
(formerly Moody’s) Manuals and News Reports, both recognized
securities manuals The States that provide the manual exemption
include: Alaska, Arizona, Arkansas, Colorado, Connecticut, Delaware, the
District of Columbia, Florida, Guam, Hawaii, Idaho, Indiana, Iowa, Kansas,
Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri,
Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North
Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode
Island, South Carolina, South Dakota, Texas, U.S. Virgin Islands, Utah,
Washington, West Virginia, and Wyoming. Each State’s law is
different. Some of the States provide a general exemption for
issuers’ securities that are listed in a “recognized securities manual” (or
similar language) while other States have provisions that name the recognized
securities manuals that qualify an issuer for the exemption in that
State. Investors, Selling Shareholders and securities professionals
are advised to check each State’s securities laws and regulations (known as
“Blue Sky” laws) to ascertain whether an exemption exists for the Company’s
shares in a particular state. When our registration statement (of
which this prospectus forms a part) becomes effective, and a selling security
holder indicates in which state(s) he desires to sell his shares, the Company
will be able to identify whether it will need to register or will rely on an
exemption there from.
LEGAL
PROCEEDINGS
We are
not a party to any existing or pending legal proceeding and none of our property
is the subject of a pending legal proceeding.
LEGAL
MATTERS
The
validity of the issuance of the common stock offered in this prospectus has been
passed upon by Kavinoky Cook LLP, Buffalo, New York.
EXPERTS
The
financial statements for the period from the date of inception (September 8,
1999) through December 31, 2009 were audited by Schwartz Levitsky Feldman LLP,
independent auditors, as set forth in their report thereon appearing in this
prospectus, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and
auditing. Information regarding the Licenses was prepared by the
Company.
- 45 -
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
The
Delaware Business Corporation Act and our by-laws, provide that we shall
indemnify our officers and directors and hold harmless each person who was, is
or is threatened to be made a party to or is otherwise involved in any
threatened proceedings by reason of the fact that he or she is or was our
director or officer, against losses, claims, damages, liabilities and expenses
actually and reasonably incurred or suffered in connection with such proceeding.
However, the statutory indemnity does not apply to: (a) acts or omissions of the
director finally adjudged to be intentional misconduct or a knowing violation of
law; (b) unlawful distributions; or (c) any transaction with respect to which it
was finally adjudged that such director personally received a benefit in money,
property, or services to which the director was not legally
entitled. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to our directors, officers and
controlling persons pursuant to the forgoing provisions or otherwise, we have
been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable.
HOW
TO GET MORE INFORMATION
We have
filed with the Securities and Exchange Commission a registration statement on
Form S-1 under the Securities Act with respect to the securities offered by this
prospectus. This prospectus, which forms a part of the registration
statement, does not contain all the information set forth in the registration
statement, as permitted by the rules and regulations of the
Commission. For further information with respect to us and the
securities offered by this prospectus, reference is made to the registration
statement. The material terms of all exhibits have been expressed in
this prospectus. Statements contained in this prospectus as to the
contents of any contract or other document that we have filed as an exhibit to
the registration statement are qualified in their entirety by reference to the
exhibits for a complete statement of their terms and conditions. The
registration statement and other information may be read and copied at the
Commission's Public Reference Room at 100 F Street, NE, Washington, D.C.
20549. The public may obtain information on the operation of the
Public Reference Room by calling the Commission at
1-800-SEC-0330. The Commission maintains a web site at
http://www.sec.gov that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the Commission
and you can reach us at info@offshorepetroleumcorp.com. Stafford
Kelley acts as the Information Officer for the Company and can be reached at
905-845-8168.
Upon
effectiveness of the registration statement, we will be subject to the reporting
and other requirements of the Exchange Act and we intend to furnish our
stockholders annual reports containing financial statements audited by our
independent auditors and to make available quarterly reports containing
unaudited financial statements for each of the first three quarters of each
year.
GLOSSARY
OF TERMS
Proved
reserves
|
The
estimated quantities of oil, natural gas and natural gas liquids which
geological and engineering data demonstrate with reasonable certainty to
be commercially recoverable from known reservoirs under current economic
and operating conditions, operating methods, and government
regulations.
|
Seismic
|
Geophysical
prospecting using the generation and propagation of elastic waves at the
earth’s surface, reflecting from the subsurface strata, detection,
measurement and recording back at the earth’s surface and subsequent
analysis of the data. A trace is the data recorded at a single
station. A series of traces comprises a line. The
subsurface structure may be identified by a consistent pattern on each
trace along a section of the line. A grid of lines is acquired
to define potential traps from hydrocarbon accumulation. 2D
seismic is the conventional technique, as distinct from 3D seismic in
which investigations are sufficiently closely spaced to allow a three
dimensional picture of the subsurface to be
obtained.
|
- 46 -
INDEX
TO FINANCIAL STATEMENTS
OFFSHORE
PETROLEUM CORP.
(A
Delaware Corporation)
Interim
Consolidated Balance Sheets as of March 31, 2010 (unaudited) and December 31,
2009 (audited)
Interim
Consolidated Statements of Operations and Comprehensive Loss for the three
months ended March 31, 2010 and March 31, 2009 and for the period from inception
(September 8, 1999) to March 31, 2010
Interim
Consolidated Statements of Changes in Stockholders' Equity for the three months
ended March 31, 2010 and for the period from inception (September 8, 1999) to
March 31, 2010
Interim
Consolidated Statements of Cash Flows for the three months ended March 31, 2010
and March 31, 2009 and for the period from inception (September 8, 1999) to
March 31, 2010
Consolidated
Notes to the Financial Statements
Audited
Consolidated Financial Statements of Offshore Petroleum Corp. for the Years
Ended December
31, 2009 and 2008
Report of
Independent Registered Public Accounting Firm
Consolidated
Balance Sheets as of
December 31, 2009 and December 31, 2008
Consolidated
Statements of
Operations and Comprehensive Loss for the Years Ended December 31, 2009
and December 31, 2008 and for the period from inception (September 8, 1999) to
December 31, 2009
Consolidated
Statements of
Changes in Stockholders' Equity/(Deficiency) for the Years Ended December
31, 2009 and December 31, 2008 and for the period from inception (September 8,
1999) to December 31, 2009
Consolidated
Statements of Cash
Flows for the Years Ended December 31, 2009 (Restated) and December 31,
2008 and for the period from inception (September 8, 1999) to December 31, 2009
(Restated)
Notes to
Financial Statements
F-1
OFFSHORE
PETROLEUM CORP.
(FORMERLY
ENVIROCLENS INC.)
(AN
EXPLORATION STAGE COMPANY)
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2010
(Amounts
expressed in US Dollars)
(Unaudited-Prepared
by Management)
CONTENTS
Interim
Consolidated Balance Sheets as of March 31, 2010 (unaudited) and December
31, 2009 (audited)
|
F-3
|
|
Interim
Consolidated Statements of Operations and Comprehensive Loss for the three
months
|
||
ended
March 31, 2010 and March 31, 2009 and for the period from
inception
|
||
(September
8, 1999) to March 31, 2010
|
F-4
|
|
Interim
Consolidated Statements of Changes in Stockholders' Equity for
the
|
||
three
months ended March 31, 2010 and for the period from inception (September
8, 1999)
|
||
to
March 31, 2010
|
F-5
|
|
Interim
Consolidated Statements of Cash Flows for the three months
ended
|
||
March
31, 2010 and March 31, 2009 and for the period from inception (September
8, 1999)
|
||
to
March 31, 2010
|
F-6
|
|
Consolidated
Notes to the Financial Statements
|
|
F-7 -
F-12
|
F-2
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Interim
Consolidated Balance Sheets as at March 31, 2010 and 2009
(Amounts
expressed in US Dollars)
(Unaudited-Prepared
by Management)
Mar
31,
|
Dec
31,
|
|||||||
2010
|
2009
|
|||||||
(unaudited)
|
(audited)
|
|||||||
$
|
$
|
|||||||
ASSETS
|
||||||||
Current
|
||||||||
Cash
|
747,793 | 796,930 | ||||||
Deposits
(note 4)
|
720,000 | 720,000 | ||||||
Prepaid
assets
|
725 | - | ||||||
Total
Current Assets
|
1,468,518 | 1,516,930 | ||||||
Long
Term
|
||||||||
Oil
and gas properties (note 5)
|
2,279,644 | 2,279,644 | ||||||
Total
Assets
|
3,748,162 | 3,796,574 | ||||||
LIABILITIES
|
||||||||
Current
|
||||||||
Accounts
payable
|
58,698 | 19,522 | ||||||
Accrued
liabilities
|
28,300 | 24,762 | ||||||
Total
Current Liabilities
|
86,998 | 44,284 | ||||||
Promissory
note (note 6)
|
1,500,000 | 1,500,000 | ||||||
Total
Liabilities
|
1,586,998 | 1,544,284 | ||||||
Going
Concern (note 3)
|
||||||||
Commitments
and Contingencies (note 10)
|
||||||||
Subsequent
Events (note 11)
|
||||||||
STOCKHOLDERS'
EQUITY/(DEFICIENCY)
|
||||||||
Capital
Stock (note 7)
|
||||||||
Common
stock, $0.0001 par value, 200,000,000 shares authorized, 45,450,000 issued
and outstanding (December 31, 2009 -
45,300,000)
|
4,545 | 4,530 | ||||||
Additional
Paid-in Capital
|
2,758,313 | 2,743,328 | ||||||
Deferred
Stock Compensation (note 9)
|
(231,876 | ) | (270,822 | ) | ||||
Deficit
Accumulated During the Exploration Stage
|
(369,818 | ) | (224,746 | ) | ||||
Total
Stockholders' Equity
|
2,161,164 | 2,252,290 | ||||||
Total
Liabilities and Stockholders' Equity
|
3,748,162 | 3,796,574 |
APPROVED
ON BEHALF OF THE BOARD
Director
|
|||
Director
|
F-3
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Interim
Consolidated Statements of Operations and Comprehensive Loss
For
the three months ended March 31, 2010 and 2009
And
for the period from inception (September 8, 1999) to March 31, 2010
(Amounts
expressed in US Dollars)
(Unaudited-Prepared
by Management)
|
For
the
|
For
the
|
||||||||||
|
three
months
|
three
months
|
||||||||||
Cumulative
|
ended
|
ended
|
||||||||||
Since
|
Mar.
31
|
Mar.
31
|
||||||||||
Inception
|
2010
|
2009
|
||||||||||
$
|
$
|
$
|
||||||||||
Operating
Expenses
|
||||||||||||
General
and administrative
|
303,381 | 106,900 | 26,101 | |||||||||
Amortization
of deferred compensation
|
68,124 | 38,946 | - | |||||||||
Total
Operating Expenses
|
371,505 | 145,846 | 26,101 | |||||||||
Loss
from Operations
|
(371,505 | ) | (145,846 | ) | (26,101 | ) | ||||||
Other
income – interest
|
1,687 | 774 | - | |||||||||
Loss
Before Income Taxes
|
(369,818 | ) | (145,072 | ) | (26,101 | ) | ||||||
Provision
for income taxes
|
- | - | - | |||||||||
Net
Loss and Comprehensive Loss
|
(369,818 | ) | (145,072 | ) | (26,101 | ) | ||||||
Basic
and Diluted loss per share
|
(0.01 | ) | (0.00 | ) | ||||||||
Weighted
Average Number of Shares Outstanding - Basic and Diluted
|
27,644,470 | 17,950,000 |
F-4
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Interim
Consolidated Statements of Changes in Stockholders' Equity
from
inception (September 8, 1999) to March 31, 2010
(Amounts
expressed in US Dollars)
(Unaudited-Prepared
by Management)
Deficit
|
Accumulated
|
|||||||||||||||||||||||
Common
Stock
|
Paid-in
|
Deferred
|
during
the
|
Total
|
||||||||||||||||||||
Number
|
Additional
|
Stock
Based
|
Exploration
|
Stockholders'
|
||||||||||||||||||||
of
Shares
|
Amount
|
Capital
|
Compensation
|
Stage
|
Equity
|
|||||||||||||||||||
$
|
$
|
$
|
$
|
$
|
||||||||||||||||||||
For
the period from inception (September 8, 1999) through January 1,
2006
|
17,950,000 | 1,795 | 7,574 | 9,369 | ||||||||||||||||||||
Net
loss
|
- | - | - | (9,369 | ) | (9,369 | ) | |||||||||||||||||
Balance,
December 31, 2006
|
17,950,000 | 1,795 | 7,574 | (9,369 | ) | - | ||||||||||||||||||
Contribution
to additional paid-in capital
|
- | - | 3,285 | 3,285 | ||||||||||||||||||||
Net
loss
|
- | - | - | (3,285 | ) | (3,285 | ) | |||||||||||||||||
Balance,
December 31, 2007 (audited)
|
17,950,000 | 1,795 | 10,859 | (12,654 | ) | - | ||||||||||||||||||
Contribution
to additional paid-in capital
|
104 | 104 | ||||||||||||||||||||||
Net
loss
|
- | - | - | (10,862 | ) | (10,862 | ) | |||||||||||||||||
Balance
December 31, 2008 (audited)
|
17,950,000 | 1,795 | 10,963 | (23,516 | ) | (10,758 | ) | |||||||||||||||||
Common
shares issued for cash (net)
|
9,350,000 | 935 | 934,065 | - | - | 935,000 | ||||||||||||||||||
Common
stock issued to a consultant
|
3,000,000 | 300 | 299,700 | - | - | 300,000 | ||||||||||||||||||
Common
stock issued on acquisition of a subsidiary
|
15,000,000 | 1,500 | 1,498,500 | - | - | 1,500,000 | ||||||||||||||||||
Unamortized
deferred stock compensation
|
(270,822 | ) | (270,822 | ) | ||||||||||||||||||||
Contribution
to capital
|
100 | 100 | ||||||||||||||||||||||
Net
loss
|
- | - | - | (201,230 | ) | (201,230 | ) | |||||||||||||||||
Balance
December 31, 2009 (audited)
|
45,300,000 | 4,530 | 2,743,328 | (270,822 | ) | (224,746 | ) | 2,252,290 | ||||||||||||||||
Common
stock issued to a consultant
|
150,000 | 15 | 14,985 | - | - | 15,000 | ||||||||||||||||||
Amortized
deferred stock compensation
|
38,946 | 38,946 | ||||||||||||||||||||||
Net
loss
|
- | - | - | (145,072 | ) | (145,072 | ) | |||||||||||||||||
Balance
March 31, 2010 (unaudited)
|
45,450,000 | 4,545 | 2,758,313 | (231,876 | ) | (369,818 | ) | 2,161,164 |
(The
accompanying notes are an integral part of these financial
statements.)
F-5
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Interim
Consolidated Statements of Cash Flows for the three months ended
March 31,
2010 and 2009
And
for the period from inception (September 8, 1999) to March 31, 2010
(Amounts
expressed in US Dollars)
(Unaudited-Prepared
by Management)
Cumulative
|
For
the three
|
For
the three
|
||||||||||
Since
|
months
ended
|
months
ended
|
||||||||||
Inception
|
Mar.
31, 2010
|
Mar.
31, 2009
|
||||||||||
$
|
$
|
$
|
||||||||||
Cash
Flows from Operating Activities
|
||||||||||||
Net
loss
|
(369,818 | ) | (145,072 | ) | (26,101 | ) | ||||||
Changes
in non-cash working capital
|
||||||||||||
Shares
issued for consultant services expenses
|
83,124 | 53,946 | - | |||||||||
Prepaid
assets
|
(725 | ) | (725 | ) | - | |||||||
Accounts
payable
|
59,054 | 39,176 | 26,101 | |||||||||
Accrued
liabilities
|
28,300 | 3,538 | - | |||||||||
Net
cash used in operating activities
|
(200,065 | ) | (49,137 | ) | - | |||||||
Cash
Flows from Financing Activities
|
||||||||||||
Issuance
of common shares for cash
|
936,795 | - | - | |||||||||
Contribution
to capital
|
11,063 | - | 100 | |||||||||
Net
cash provided by financing activities
|
947,858 | - | 100 | |||||||||
Net
Change in Cash
|
747,793 | (49,137 | ) | 100 | ||||||||
Cash-
beginning of year
|
- | 796,930 | - | |||||||||
Cash
- end of year
|
747,793 | 747,793 | 100 | |||||||||
Supplemental
Cash Flow Information
|
||||||||||||
Interest
paid
|
- | - | - | |||||||||
Income
taxes paid
|
- | - | - | |||||||||
Promissory
Note issued as consideration for oil and gas properties
|
1,500,000 | 1,500,000 | - |
(The
accompanying notes are an integral part of these financial
statements.)
F-6
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
March
31, 2010
(Amounts
expressed in US Dollars)
(Unaudited-Prepared
by Management)
1.
|
Basis
of Presentation
|
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with U.S.
generally accepted accounting principles (GAAP); however, such information
reflects all adjustments (consisting solely of normal recurring adjustments),
which are, in the opinion of management, necessary for a fair statement of the
results for the interim periods. The condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and Notes thereto together with management’s discussion and analysis
of financial condition and results of operations contained in the Company’s
annual financial statement for the year ended December 31, 2009 which is
included in the S-1 Registration Statement filed by the Company. In the opinion
of management, the accompanying condensed consolidated financial statements
reflect all adjustments of a normal recurring nature considered necessary to
fairly state the financial position of the Company at March 31, 2010 and
December 31, 2009, the results of its operations for the three month periods
ended March 31, 2010 and March 31, 2009, and its cash flows for the three month
periods ended March 31, 2010 and March 31, 2009. In addition, some of the
Company’s statements in this quarterly report may be considered forward-looking
and involve risks and uncertainties that could significantly impact expected
results. The results of operations for the three month period ended March 31,
2010 are not necessarily indicative of results to be expected for the full
year.
The
consolidated financial statements include the accounts of the Company and its
subsidiaries, Atlantic Petroleum Ltd. and Bahamas Exploration
Limited. All material inter-company accounts and transactions have
been eliminated.
2.
|
Nature
of Business and Operations
|
Offshore
Petroleum Corp. (the "Company"), was originally incorporated on September 8,
1999 as Enviroclens Inc. under the laws of the State of New York. On December
13, 2006, Enviroclens dissolved its business in the State of New York and was
incorporated in the State of Delaware on January 23, 2007. On May 9, 2007 the
Company changed its name to Offshore Petroleum Corp. The
Company has the authority to issue 200,000,000 shares of common stock, par value
$.0001 per share.
On
November 18, 2009 the Company entered into a Share Purchase Agreement with NPT
Oil Corporation Ltd (NPT) to acquire all of the outstanding shares of Atlantic
Petroleum Ltd. (Atlantic) and Bahamas Exploration Limited
(Bahamas). Upon payment of the purchase price at the closing, NPT
sold and delivered to the Company, free and clear of all claims, security
interests, liens or other encumbrances of any nature and the Company purchased
all of the shares. The agreement was completed on November 30, 2009 and the
consideration was deposited in escrow at which time the Company deposited the
purchase price consisting of 15,000,000 shares of its common stock and a
promissory note for $1,500,000 in escrow and NPT deposited all of the
outstanding shares of Atlantic and Bahamas in escrow all to be released on
delivery of the eight Licenses executed by the Bahamian Government on or before
March 31, 2010. On March 25, 2010 the parties to the Share Purchase
Agreement waived all conditions and all consideration was released from
escrow. The promissory note issued by the Company shall bear interest
at the rate of 5% per annum and is payable over a period of two
years.
Under
the terms of the Agreement, the Company acquired from NPT certain technical
information about the properties to be licensed by Atlantic and Bahamas in
exchange for all of the issued and outstanding stock of Atlantic and Bahamas in
exchange for 15,000,000 shares of the Company’s common stock at the agreed price
of $0.10 per share and a promissory note for $1,500,000 for a total
purchase price of $3,000,000. The result of the purchase was that the Company
owned all the outstanding shares of Atlantic and Bahamas and there were no
remaining non-controlling interests in Atlantic and
Bahamas.
F-7
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
March
31, 2010
(Amounts
expressed in US Dollars)
(Unaudited-Prepared
by Management)
2.
|
Nature
of Business and Operations, con’t.
|
The
transaction was measured at the fair value, being the market value of the equity
instruments delivered on the transaction date
We
followed the guidance provided by FASB ASC TOPIC 805 – “Business Combinations.”
The objective of which is to enhance the information that an entity
provides in its financial reports about a business combination and its effects.
The fair
value of the assets acquired was allocated as follows:
$
|
||||
Cash
|
356 | |||
Deposit
for License Applications
|
720,000 | |||
Oil and Gas Technical
Information
|
2,279,644 | |||
Consideration Given
|
3,000,000 |
There was
no goodwill acquired and as per the Agreement the Company and NPT agreed to
include the costs of obtaining the technical information in the purchase price
and all amounts due from Atlantic and Bahamas were forgiven and
cancelled on November 30, 2009, the closing date of the
Agreement. Prior to the acquisition NPT had incurred costs totaling
$1,407,944 on behalf of Atlantic and Bahamas. NPT has an obligation to pay any
further costs incurred by Atlantic and Bahamas in relation to the acquisition of
the license.
3.
|
Going
Concern
|
The
Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business.
The
Company is in the development stage and has not yet realized revenues from its
planned operations. The Company has incurred a cumulative loss of
$369,818 from inception to March 31, 2010 and has funded operations through the
sale of capital stock.
The
Company raised $935,000 through the issuance of capital stock during the year
ended December 31, 2009. Management’s plan is to raise additional funds through
future equity financing until it achieves profitable operations from its
activities.
4.
|
Deposits
|
The total
amount of $720,000 represents deposits made for oil exploration application fees
in the specific amounts of $400,000 for Atlantic and $320,000 for Bahamas
respectively. The deposit is refundable in the event the licenses are not
granted. If the licenses are granted, then the deposit will be used towards
application and licensing fees, and as a result this is not included in the
value of the oil and gas properties.
F-8
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
March
31, 2010
(Amounts
expressed in US Dollars)
(Unaudited-Prepared
by Management)
5.
|
Oil
and Gas Properties
|
Mar.
31, 2010 & Dec. 31, 2009
|
||||||||
Atlantic &
|
||||||||
Bahamas
|
Total
|
|||||||
Unproved
properties
|
||||||||
-
acquisition costs
|
$ | 2,279,644 | $ | 2,279,644 | ||||
$ | 2,279,644 | $ | 2,279,644 |
On
November 18, 2009 the Company entered into a Share Purchase Agreement with NPT
Oil Corporation Ltd (NPT) to acquire all of the outstanding shares of Atlantic
and Bahamas. Under the terms of the Agreement, the Company acquired
from NPT certain technical information about the properties to be licensed by
Atlantic and Bahamas pursuant to the delivery of the Licenses and all of the
issued and outstanding stock of Atlantic and Bahamas in exchange for 15,000,000
shares of the Company’s common stock at the agreed price of $0.10 per share and
a promissory note for $1,500,000.
6.
|
Promissory
Note
|
The
promissory note is for the principal amount of $1,500,000 and is due to the
order of NPT. The note is payable over a two year term and bears interest of 5%
per annum. Interest expense in the amounts of $18,750 for the three months
ending March 31, 2010 and $6,250 for the month of December, 2009 have been
accrued.
7.
|
Capital
Stock
|
Year ended December 31,
1999
In August
1999, NatQuote Financial Inc. was presented with a business opportunity in the
bottle cleaning and sterilization industry. While NatQuote decided it did not
fit with its core business objectives, its major shareholder requested that the
opportunity be pursued on behalf of the Company and its
shareholders.
NatQuote’s
President, J. Paul Hines was instructed to form a new corporation, Enviroclens
Inc., incorporated in the State of New York, on September 9, 1999, to carry out
the new business. In consideration for the assignment it was agreed that
NatQuote would be issued 1,795,000 common shares of Enviroclens Inc. at par
value.
Year ended December 31,
2002
In
September 2002 the Board of Directors of NatQuote Financial Inc. resolved to
assign all their rights to receive shares of Enviroclens Inc. to their
shareholders by order of a stock dividend. To effect this assignment NatQuote
requested that Enviroclens Inc. split its own shares 10:1 for a total of
17,950,000 common shares.
Year ended December 31,
2005
In
November 2005, the Board of Directors of Enviroclens Inc. resolved to terminate
its interest in the bottle sanitization Business opportunity and instead seek
other opportunities.
Year ended December 31,
2007
In
February 2007 the Board of Directors approved the sale of 17,052,500 of the
Company’s common shares to Roman Marble Marketing Company. Of the
17,052,500 common shares sold, 16,525,200 were held by J. Paul Hines and 527,300
were held by his company, Ship Island Investments Ltd.
F-9
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
March
31, 2010
(Amounts
expressed in US Dollars)
(Unaudited-Prepared
by Management)
7.
|
Capital
Stock, con’t.
|
In May
2007 the Board of Directors of Enviroclens Inc. resolved to change the Company
name to Offshore Petroleum Corp.
Year ended December 31,
2008
In
September 2008, the Board of Directors approved the sale of 17,052,500 common
shares of the Company by Roman Marble Marketing Company to a number of other
investors.
Year ended December 31,
2009
On March
9, 2009 the Company authorized the issuance of 30,000,000 common shares of the
Company at $0.10 per share in private placements for a total amount of
$3,000,000. By December 31, 2009, the Company had raised $935,000 through the
issuance of 9,350,000 common shares at a share price of $0.10 per
share.
On
October 20, 2009, the Company issued 3,000,000 shares for two consulting
agreements at a price of $0.10 per share (refer to note 10).
On
November 18, 2009, the Company issued 15,000,000 shares under a Share Purchase
Agreement at a price of $0.10 per share (refer to note 10).
Three months ended March 31,
2010
On
January 12, 2010 Lance Capital Ltd. was compensated with 150,000 shares of the
Company for consulting services valued at $0.10 per share.
On
January 19, 2010 the Company revoked the resolution approved on March 9, 2009
authorizing the issuance of 30,000,000 common shares at $0.10 for a total of
$3,000,000 as it was felt that the $935,000 raised would be adequate capital at
this time and once the stock was trading, more capital could be raised at a
higher price, reducing dilution.
8.
|
Employee
Stock Option Plan
|
In
September 2008, the Board of Directors approved an employee stock option plan
("2008 Stock Option Plan"), the purpose of which is to enhance the
Company's stockholder value and financial performance by attracting, retaining
and motivating the Company's directors, key employees, consultants and to
encourage stock ownership by such individuals by providing them with a means to
acquire a proprietary interest in the Company's success through stock ownership.
Under the 2008 Stock Option Plan, directors, employees and consultants who
provide services to the Company may be granted incentive options and
nonstatutory Stock Options to acquire common shares of the Company at not less
than 110 percent of the fair market value of the stock on the date of
grant. Options will have a term of 5 years. The total
number of shares reserved for issuance under the 2008 Stock Option Plan is
5,000,000. As of December 31, 2009, no options were granted under the
2008 Stock Option Plan.
9.
|
Deferred
Stock Compensation
|
The
Company issued 1,500,000 restricted common stock each to two consultants, for a
total of 3,000,000 common stock valued at $300,000. The Company
expensed proportionate consulting expenses of $38,946 during the three months
ended March 31, 2010 and $29,178 during the year ended December 31, 2009. The
balance of $231,876 is reflected as deferred stock compensation expense under
the stockholders’ equity in the balance sheet.
F-10
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
March
31, 2010
(Amounts
expressed in US Dollars)
(Unaudited-Prepared
by Management)
10.
|
Commitments
and Contingencies
|
As of
January 1, 2009, the Company entered into a Consulting Services Contract with
Lance Capital Corp. (“Lance”) pursuant to which Lance will administer the
Company’s daily corporate operations for a period of one year. Under
the Consulting Services Contract the Company is required to pay Lance $7,500 per
month as consideration for such services. Lance provides a full
compliment of administrative and corporate services, including bookkeeping,
investor support, contract negotiation and administration, oversight of
consultants, oversight of and assistance in all public filings and financial
statements, assistance to a market maker in the OTC Bulletin Board listing
process if required, oversight of the website (when applicable) and
administration of the Company’s expense payments pursuant to internal control
procedures implemented by the Board of Directors.
On
October 20, 2009, the Company entered into a Consulting Agreement with Pembroke
Communications Corp. (“Pembroke”) for certain consulting services for a term of
expiring September 30, 2011. The Company issued 1,500,000 shares of restricted
common stock of the Company which will be deemed earned in equal
installments of 500,000 Shares on April 1, 2010, October 1, 2010 and April 1,
2011. The Consultant must return any unearned shares upon termination of the
Consulting Agreement. Pursuant to the Consulting Agreement, Pembroke
will assist the Company in communicating its announcements, publicizing
financial statements and accessing institutional and other investors throughout
the world. The Pembroke office with which we have contracted is based
in Panama.
On
October 20, 2009, the Company entered into a Consulting Agreement with Power One
Capital Corp. (“Power One”) for certain consulting services for a term of
expiring September 30, 2011. The Company issued 1,500,000 Shares of restricted
common stock of the Company. Pursuant to an Amendment to the Consulting
Agreement with Power One dated June 17, 2010 such Shares shall be
deemed earned by Power One in equal installments of 500,000 Shares on April 1,
2010, October 1, 2010 and April 1, 2011. Power One must return any unearned
shares upon termination of the Consulting Agreement. Power One will
assist the Company with strategic and operating advice and may introduce
strategic investors to the Company. If the Company seeks a joint
venture partner to assist it with drilling and other exploration operations in
the Licensed Areas, Power One will assist the Company in finding a suitable
joint venture partner and negotiating the joint venture
agreement. The Power One office with which we have contracted is
based in Panama.
On
November 30, 2009 the Company closed a Share Purchase Agreement with NPT Oil
Corporation Ltd (NPT) to purchase from NPT all of the equity stock of
two Cayman Island Companies. Pursuant to the Share Purchase Agreement, Offshore
acquired its two Subsidiaries, Atlantic and Bahamas, pending the issuance of the
Licenses, as described above. Offshore paid $3,000,000 for the equity
stock of the two subsidiaries to NPT as follows: (a) 15 million Shares of
Offshore valued at $0.10 per share and (b) a promissory note with a face amount
of $1.5 million payable over a two-year term and bearing interest at
5%.
Each of
the eight Licenses to be received by Atlantic and Bahamas will have an initial
three-year term and require advance annual rental payments of $50,000 per
License in the first year (already paid upon application for the Licenses),
$75,000 in the second year and $100,000 in the third year. Atlantic
and Bahamas each are required to spend an aggregate of $250,000 on qualifying
exploration and/or development expenditures in the first year on their four
respective Licensed Areas and an aggregate of $375,000 in each of the two
following years. Each of Atlantic and Bahamas are required to post a
$1,000,000 bond for performance of the work commitments. See the
section entitled “PROPERTIES – Licenses for Exploration” for more
information.
F-11
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
March
31, 2010
(Amounts
expressed in US Dollars)
(Unaudited-Prepared
by Management)
11.
|
Subsequent
events
|
There
were no subsequent events to report.
F-12
INDEX
TO FINANCIAL STATEMENTS
OFFSHORE
PETROLEUM CORP.
(FORMERLY
ENVIROCLENS INC.)
(AN
EXPLORATION STAGE COMPANY)
CONSOLIDATED
FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2009 AND 2008
(Amounts
expressed in US Dollars)
CONTENTS
Report
of Independent Registered Public Accounting Firm
|
F-14
|
Consolidated
Balance Sheets as of December 31, 2009 and December 31,
2008
|
F-15
|
Consolidated
Statements of Operations and Comprehensive Loss for the years ended
December 31, 2009 and December 31, 2008 and for the period from inception
(September 8, 1999) to December 31, 2009
|
F-16
|
Consolidated
Statements of Changes in Stockholders' Equity/(Deficiency) for the years
ended December 31, 2009 and December 31, 2008 and for the period from
inception (September 8, 1999) to December 31, 2009
|
F-17
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2009 (restated)
and December 31, 2008 and for the period from inception (September 8,
1999) to December 31, 2009 (restated)
|
F-18
|
Consolidated
Notes to the Financial Statements
|
F-19
-
F-33
|
F-13
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of
Offshore
Petroleum Corp.
(An
Exploration Stage Company)
We have
audited the accompanying consolidated balance sheets of Offshore Petroleum Corp.
(an Exploration Stage Company) as at December 31, 2009 and 2008 and the related
consolidated statements of operations and comprehensive loss, cash flows and
stockholders’ equity (deficiency) for the years ended December 31, 2009 and 2008
and for the period from inception (September 8, 1999) to December 31, 2009.
These consolidated 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 the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. 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 consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Offshore Petroleum Corp. as
at December 31, 2009 and 2008 and the results of its operations and its cash
flows for the years ended December 31, 2009 and 2008 (restated and for the
period from inception (September 8, 1999) to December 31, 2009 (restated) in
conformity with United States generally accepted accounting
principles.
As
discussed in Note 17 to the financial statements, the statement of cash flows
have been restated to remove a non cash item previously included in the
statement of cash flows.
The
company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the company’s internal controls
over financial reporting. Accordingly, we express no such opinion.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 3
to the financial statements, the Company is an exploration stage company, has no
established source of revenues, has yet to achieve profitable operations, has
accumulated losses since its inception and expects to incur further losses in
the development of its business. These conditions raise substantial doubt about
its ability to continue as a going concern. Management’s plans
regarding these matters are also described in the notes to the consolidated
financial statements. The consolidated financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.
“SCHWARTZ
LEVITSKY FELDMAN LLP”
Toronto,
Ontario, Canada
|
Chartered
Accountants
|
March
17, 2010, except for note 16
|
Licensed
Public Accountants
|
which
is as of May 17, 2010 and
|
|
note
17 which is as of June 22, 2010
|
F-14
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Balance Sheets as at December 31, 2009 and 2008
(Amounts
expressed in US Dollars)
2009
|
2008
|
|||||||
$
|
$
|
|||||||
ASSETS
|
||||||||
Current
|
||||||||
Cash
|
796,930 | - | ||||||
Deposits
(note 5)
|
720,000 | - | ||||||
Total
Current Assets
|
1,516,930 | - | ||||||
Long
Term
|
||||||||
Oil
and gas properties (note 6)
|
2,279,644 | - | ||||||
Total
Assets
|
3,796,574 | |||||||
LIABILITIES
|
||||||||
Current
|
||||||||
Accounts
payable
|
19,522 | - | ||||||
Accrued
liabilities
|
24,762 | 10,758 | ||||||
Total
Current Liabilities
|
44,284 | 10,758 | ||||||
Promissory
note (note 7)
|
1,500,000 | |||||||
Total Liabilities
|
1,544,284 | 10,758 | ||||||
Going Concern (note
3)
|
||||||||
Commitments and
Contingencies (note 14)
|
||||||||
Subsequent Events (note
15)
|
||||||||
STOCKHOLDERS'
EQUITY/(DEFICIENCY)
|
||||||||
Capital Stock (note
9)
|
||||||||
Common
stock, $0.0001 par value, 200,000,000 shares authorized, 45,300,000 issued
and outstanding (December 31, 2008 -17,950,000)
|
4,530 | 1,795 | ||||||
Additional
Paid-in Capital
|
2,743,328 | 10,963 | ||||||
Deferred Stock Compensation
(note 12)
|
(270,822 | ) | - | |||||
Deficit
Accumulated During the Exploration Stage
|
(224,746 | ) | (23,516 | ) | ||||
Total
Stockholders' Equity/(Deficiency)
|
2,252,290 | (10,758 | ) | |||||
Total
Liabilities and Stockholders' Equity/(Deficiency)
|
3,796,574 | - |
APPROVED
ON BEHALF OF THE BOARD
John Rainwater
|
Director
|
Mickey Wiesinger
|
Director
|
(The
accompanying notes are an integral part of these financial
statements.)
F-15
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Statements of Operations and Comprehensive Loss
For
Year Ended December 31, 2009 and 2008
And
for the period from inception (September 8, 1999) to December 31,
2009
(Amounts
expressed in US Dollars)
Cumulative
|
||||||||||||
Since
|
||||||||||||
Inception
|
2009
|
2008
|
||||||||||
$
|
$
|
$
|
||||||||||
Operating Expenses
|
||||||||||||
General
and administrative
|
196,481 | 172,965 | 10,862 | |||||||||
Amortization
of deferred compensation
|
29,178 | 29,178 | ||||||||||
Total
Operating Expenses
|
225,659 | 202,143 | 10,862 | |||||||||
Loss
from Operations
|
(225,659 | ) | (202,143 | ) | (10,862 | ) | ||||||
Other
income – interest
|
913 | 913 | - | |||||||||
Loss
Before Income Taxes
|
(224,746 | ) | (201,230 | ) | (10,862 | ) | ||||||
Provision
for income taxes
|
- | - | - | |||||||||
Net
Loss and Comprehensive Loss
|
(224,746 | ) | (201,230 | ) | (10,862 | ) | ||||||
Basic
and Diluted loss per share
|
(0.01 | ) | (0.00 | ) | ||||||||
Weighted
Average Number of Shares Outstanding -
Basic
and Diluted
|
23,839,452 | 17,950,000 |
(The
accompanying notes are an integral part of these financial
statements.)
F-16
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Statements of Changes in Stockholders' Equity/(Deficiency) for the year
ended
December
31, 2009 and December 31, 2008 and for the period from
inception
(September 8, 1999) to December 31, 2009
(Amounts
expressed in US Dollars)
Accumulated
|
||||||||||||||||||||||||
Deficit
|
Total
|
|||||||||||||||||||||||
Common Stock
|
Paid-in
|
Deferred
|
during the
|
Stockholders'
|
||||||||||||||||||||
Number
|
Additional
|
Stock Based
|
Exploration
|
Equity/
|
||||||||||||||||||||
of Shares
|
Amount
|
Capital
|
Compensation
|
Stage
|
(Deficiency)
|
|||||||||||||||||||
$
|
$
|
$
|
$
|
$
|
||||||||||||||||||||
For
the period from inception (September 8, 1999) through January 1,
2006
|
17,950,000 | 1,795 | 7,574 |
9,369
|
||||||||||||||||||||
Net
loss
|
- | - | - | (9,369 | ) | (9,369 | ) | |||||||||||||||||
Balance,
December 31, 2006
|
17,950,000 | 1,795 | 7,574 | (9,369 | ) | - | ||||||||||||||||||
Contribution
to additional paid-in capital
|
- | - | 3,285 | 3,285 | ||||||||||||||||||||
Net
loss
|
- | - | - | (3,285 | ) | (3,285 | ) | |||||||||||||||||
Balance,
December 31, 2007
|
17,950,000 | 1,795 | 10,859 | (12,654 | ) | - | ||||||||||||||||||
Contribution
to additional paid-in capital
|
104 | 104 | ||||||||||||||||||||||
Net
loss
|
- | - | - | (10,862 | ) | (10,862 | ) | |||||||||||||||||
Balance
December 31, 2008
|
17,950,000 | 1,795 | 10,963 | (23,516 | ) | (10,758 | ) | |||||||||||||||||
Common
shares issued for cash (net)
|
9,350,000 | 935 | 934,065 | - | - | 935,000 | ||||||||||||||||||
Common
stock issued to a consultant
|
3,000,000 | 300 | 299,700 | - | - | 300,000 | ||||||||||||||||||
Common
stock issued on acquisition of a subsidiary
|
15,000,000 | 1,500 | 1,498,500 | - | - | 1,500,000 | ||||||||||||||||||
Unamortized
deferred stock compensation
|
(270,822 | ) | (270,822 | ) | ||||||||||||||||||||
Contribution
to capital
|
100 | 100 | ||||||||||||||||||||||
Net
loss
|
- | - | - | (201,230 | ) | (201,230 | ) | |||||||||||||||||
Balance
December 31, 2009
|
45,300,000 | 4,530 | 2,743,328 | (270,822 | ) | (224,746 | ) | 2,252,290 |
(The
accompanying notes are an integral part of these financial
statements.)
F-17
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Statements of Cash Flows for the years ended
December
31, 2009 (Restated) and 2008
And
for the period from inception (September 8, 1999) to December 31, 2009
(Restated)
(Amounts
expressed in US Dollars)
Cumulative
|
||||||||||||
Since
|
||||||||||||
Inception
|
2009
|
2008
|
||||||||||
(Restated)
|
(Restated)
|
|||||||||||
$
|
$
|
$
|
||||||||||
Cash
Flows from Operating Activities
|
||||||||||||
Net
loss
|
(224,746 | ) | (201,230 | ) | (10,862 | ) | ||||||
Changes
in non-cash working capital
|
||||||||||||
Shares
issued for consultant services expenses
|
29,178 | 29,178 | — | |||||||||
Accounts
payable
|
19,878 | 19,878 | — | |||||||||
Accrued
liabilities
|
24,762 | 14,004 | 10,758 | |||||||||
Net
cash used in operating activities
|
(150,928 | ) | (138,170 | ) | (104 | ) | ||||||
Cash
Flows from Investing Activities
|
||||||||||||
Net
cash provided by investing activities
|
— | — | — | |||||||||
Cash
Flows from Financing Activities
|
||||||||||||
Issuance
of common shares for cash
|
936,795 | 935,000 | — | |||||||||
Contribution
to capital
|
11,063 | 100 | 104 | |||||||||
Net
cash provided by financing activities
|
947,858 | 935,100 | 104 | |||||||||
Net
Change in Cash
|
796,930 | 796,930 | — | |||||||||
Cash-
beginning of year
|
— | — | — | |||||||||
Cash
- end of year
|
796,930 | 796,930 | - | |||||||||
Supplemental
Cash Flow Information
|
||||||||||||
Interest
paid
|
— | — | — | |||||||||
Income
taxes paid
|
— | — | — | |||||||||
Promissory
Note issued as consideration for oil and gas
properties
|
1,500,000 | 1,500,000 | — |
(The
accompanying notes are an integral part of these financial
statements.)
F-18
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
December
31, 2009 and 2008
(Amounts
expressed in US Dollars)
1.
|
Nature
of Business and Operations
|
Offshore
Petroleum Corp. (the "Company"), was originally incorporated on September 8,
1999 as Enviroclens Inc. under the laws of the State of New York. On December
13, 2006, Enviroclens dissolved its business in the State of New York and was
incorporated in the State of Delaware on January 23, 2007. On May 9, 2007 the
Company changed its name to Offshore Petroleum Corp. The
Company has the authority to issue 200,000,000 shares of common stock, par value
$.0001 per share.
On
November 18, 2009 the Company entered into a Share Purchase Agreement with NPT
Oil Corporation Ltd (NPT) to acquire all of the outstanding shares of Atlantic
Petroleum Ltd. (Atlantic) and Bahamas Exploration Limited
(Bahamas). Upon payment of the purchase price at the closing, NPT
sold and deliver to the Company, free and clear of all claims, security
interests, liens or other encumbrances of any nature and the Company purchase
all of the shares. The agreement was completed on November 30,
2009. The Company paid a purchase price of $3,000,000 consisting of
15,000,000 shares of its common stock and delivered a promissory note for
$1,500,000 to NPT. The promissory note issued by the Company bears
interest at the rate of 5% per annum and is payable over two
years.
Under
the terms of the Agreement, the Company also acquired from NPT certain technical
information about the properties to be licensed by Atlantic and
Bahamas. The result of the purchase was that the Company owns all of
the outstanding shares of Atlantic and Bahamas and there are no remaining
non-controlling interests in Atlantic and Bahamas. The transaction was measured
at the fair value, being the market value of the equity instruments delivered on
the transaction date.
We
followed the guidance provided by FASB ASC TOPIC 805 – “Business Combinations.”
The objective of which is to enhance the information that an entity
provides in its financial reports about a business combination and its effects.
The fair
value of the assets acquired was allocated as follows:
Cash
|
$ | 356 | ||
Deposit
for License Applications
|
720,000 | |||
Oil and Gas Technical
Information
|
2,279,644 | |||
Consideration Given
|
3,000,000 |
There was
no goodwill acquired and as per the Agreement the Company and NPT agreed to
include the costs of obtaining the technical information in the purchase price
and all amounts due from Atlantic and Bahamas were forgiven and
cancelled on November 30, 2009, the closing date of the
Agreement. Prior to the acquisition NPT had incurred costs totaling
$1,407,944 on behalf of Atlantic and Bahamas. NPT has an obligation to pay any
further costs incurred by Atlantic and Bahamas in relation to the acquisition of
the license.
The
consolidated financial statements include the accounts of the Company and its
subsidiaries, Atlantic Petroleum Ltd. and Bahamas Exploration
Limited. All material inter-company accounts and transactions have
been eliminated.
F-19
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
December
31, 2009 and 2008
(Amounts
expressed in US Dollars)
2.
|
Financial
Instruments
|
The
Company follows ASC 820-10, “Fair Value Measurements and Disclosures” (ASC
820-10), which among other things, defines fair value, establishes a consistent
framework for measuring fair value and expands disclosure for each major asset
and liability category measured at fair value on either a recurring or
nonrecurring basis. Fair value is an exit price, representing the amount that
would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants. As such, fair value is a
market-based measurement that should be determined based on assumptions that
market participants would use in pricing an asset or liability. As a basis for
considering such assumptions, a three-tier fair value hierarchy has been
established, which prioritizes the inputs used in measuring fair value as
follows:
• Level
1—Inputs are unadjusted, quoted prices in active markets for identical assets or
liabilities at the measurement date.
Assets
that are generally included in this category are cash equivalents comprised of
money market funds, restricted cash and short-term investments.
• Level
2—Inputs (other than quoted prices included in Level 1) are either directly or
indirectly observable for the asset or liability through correlation with market
data at the measurement date and for the duration of the instrument’s
anticipated life.
At
December 31, 2009 and 2008, the Company did not have any assets or liabilities
classified as Level 2.
• Level
3—Inputs reflect management’s best estimate of what market participants would
use in pricing the asset or liability at the measurement date. Consideration is
given to the risk inherent in the valuation technique and the risk inherent in
the inputs to the model.
Assets
and liabilities measured at fair value as of December 31, 2009 and 2008 are
classified below based on the three fair value hierarchy tiers described
above:
Fair value measurements using
|
||||||||||||||||
Carrying Value
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
December
31, 2009:
|
||||||||||||||||
Assets
|
||||||||||||||||
Cash
equivalents
|
$ | 796,930 | $ | 796,930 | $ | - | $ | - | ||||||||
Deposits
|
720,000 | 720,000 | - | - | ||||||||||||
Total
assets
|
$ | 1,516,930 | $ | 1,516,930 | $ | - | $ | - | ||||||||
December
31, 2008:
|
||||||||||||||||
Assets
|
||||||||||||||||
Cash
equivalents
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Deposits
|
- | - | - | - | ||||||||||||
Oil
and gas properties
|
- | - | - | - | ||||||||||||
Total
assets
|
$ | - | $ | - | $ | - | $ | - |
F-20
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
December
31, 2009 and 2008
(Amounts
expressed in US Dollars)
2.
|
Financial
Instruments, cont.
|
Carrying Value
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
December
31, 2009:
|
||||||||||||||||
Liabilities
|
||||||||||||||||
Accounts
payable
|
$ | 19,522 | $ | 19,522 | $ | - | $ | - | ||||||||
Accrued
liabilities
|
24,762 | 24,762 | - | - | ||||||||||||
Promissory
note
|
1,500,000 | 1,500,000 | - | - | ||||||||||||
Total
liabilities
|
$ | 1,544,284 | $ | 1,544,284 | $ | - | $ | - | ||||||||
December
31, 2008:
|
||||||||||||||||
Liabilities
|
||||||||||||||||
Accrued
liabilities
|
$ | 10,758 | $ | 10,758 | $ | - | $ | - | ||||||||
Total
liabilities
|
$ | 10,758 | $ | 10,758 | $ | - | $ | - |
3.
|
Going
Concern
|
The
Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business.
The
Company is in the development stage and has not yet realized revenues from its
planned operations. The Company has incurred a cumulative loss of
$224,746 from inception to December 31, 2009 and has funded operations through
the sale of capital stock and additional paid-in capital.
The
Company raised $935,000 through the issuance of capital stock. Management’s plan
is to raise additional funds through future equity financing until it achieves
profitable operations from its activities.
4.
|
Summary
of Significant Accounting Policies
|
The
accounting policies of the Company are in accordance with accounting principles
generally accepted in the United States of America and their basis of
application is consistent with that of the previous year. Outlined
below are the significant accounting policies:
Basis
of Presentation
a)
|
Cash
and Cash Equivalents
|
Cash
consists of cash and cash equivalents, which are short-term, highly liquid
investments with original terms to maturity of 90 days or less.
b)
|
Stock
Based Compensation
|
All
awards granted to employees and non-employees are valued at fair value using the
Black-Scholes option pricing model and recognized on a straight line basis over
the service periods of each award. Equity instruments issued in exchange for the
receipt of goods or services from other than employees. Costs are
measured at the estimated fair market value of the consideration received or the
estimated fair value of the equity instruments issued, whichever is more
reliably measurable. The value of equity instruments issued for
consideration to other than employee services is determined on the earlier of a
performance commitment or completion of performance by the provider of goods or
services.
There was
no stock-based compensation expense relating to employees and non employees for
the periods presented.
F-21
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
December
31, 2009 and 2008
(Amounts
expressed in US Dollars)
4.
|
Summary
of Significant Accounting Policies,
cont.
|
c)
|
Use
of Estimates
|
Preparation
of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
related notes to financial statements.
These
estimates are based on management's best knowledge of current events and actions
the Company may undertake in the future. Actual results may ultimately differ
from such estimates. Significant estimates include accruals.
d)
|
Income
taxes
|
The Company recognizes deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Deferred income
taxes are provided using the liability method. Under the liability method,
deferred income taxes are recognized for all significant temporary differences
between the tax and financial statement bases of assets and
liabilities.
Current income tax expense (recovery)
is the amount of income taxes expected to be payable (recoverable) for the
current period. A deferred tax asset and/or liability is computed for both the
expected future impact of differences between the financial statement and tax
bases of assets and liabilities and for the expected future tax benefit to be
derived from tax losses. Valuation allowances are established when necessary to
reduce deferred tax asset to the amount expected to be “more likely than not”
realized in future tax returns. Tax law and rate changes are reflected in income
in the period such changes are enacted.
e)
|
Comprehensive
Income
|
In
addition to items included in net income, comprehensive income includes items
currently charged or credited directly to stockholders’ equity, such as foreign
currency translation adjustments. There are no items in comprehensive
income.
|
f)
|
Full
Cost Accounting Method
|
The
Company accounts for its oil and gas producing activities using the full cost
method of accounting as prescribed by the United States Securities and Exchange
Commission (“SEC”). Accordingly, all costs associated with the acquisition of
properties and exploration with the intent of finding proved oil and gas
reserves contribute to the discovery of proved reserves, including the costs of
abandoned properties, dry holes, geophysical costs, and annual lease rentals are
capitalized. All general corporate costs are expensed as incurred. In general,
sales or other dispositions of oil and gas properties are computed on the units
of production method based on all proved reserves on a country-by-country basis.
The net capitalized costs of evaluated oil and gas properties (full cost ceiling
limitation) are not to exceed their related estimated further net revenues from
proved reserves discounted at 10%, and the lower of cost of estimated fair value
of unproved properties, net of tax considerations. These properties are included
in the amortization pool immediately upon the determination that the well is
dry.
Unproved
properties consist of lease acquisition costs and costs on wells currently being
drilled on the properties. The recorded costs of the investment in unproved
properties are not amortized until proved reserves associated with the projects
can be determined or until they are impaired. Unevaluated oil and gas properties
are assessed at least annually for impairment either individually or on an
aggregate basis.
F-22
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
December
31, 2009 and 2008
(Amounts
expressed in US Dollars)
4.
|
Summary
of Significant Accounting Policies,
cont.
|
g)
|
Estimates
of Proved Oil and Gas Reserves
|
Estimates
of proved oil and gas reserves will have a significant impact on the carrying
value of the Company’s oil and gas properties, the related property amortization
expense and related property impairment expense. Volumes of reserves actually
recovered and cash flows actually received from actual production may differ
significantly from the proved reserve estimates and the related projected cash
flows, respectively.
|
h)
|
Asset
Retirement Obligation
|
Asset
retirement obligations (“ARO”) associated with the retirement of a tangible
long-lived asset, including natural gas and oil properties, are recognized as
liabilities in the period in which it is incurred and becomes determinable, with
an offsetting increase in the carrying amount of the associated assets. The cost
of tangible long-lived assets, including the initially recognized ARO, is
depleted, such that the cost of the ARO is recognized over the useful life of
the assets. The ARO is recorded at fair value, and accretion expense is
recognized over time as the discounted fair value is accreted to the expected
settlement value.
The fair
value of the ARO is measured using expected future cash flow, discounted at the
Company’s credit-adjusted risk-free interest rate.
|
i)
|
Impairment
of Long-lived Assets
|
The
carrying value of intangible assets and other long-lived assets are reviewed on
a regular basis for the existence of facts or circumstances that may suggest
impairment. The Company recognizes impairment when the sum of the expected
undiscounted future cash flows is less than the carrying amount of the asset.
Impairment losses, if any, are measured as the excess of the carrying amount of
the asset over its estimated fair value. Impairment on the properties with
unproved reserves is evaluated by considering criteria such as future drilling
plans for the properties, the results of geographic and geologic data related to
the unproved properties and the remaining term of the property
leases.
|
j)
|
Basic
loss per share
|
Basic
loss per share is computed using the weighted average number of shares
outstanding during the period. Diluted earnings per share are computed similar
to basic income per share except that the denominator is increased to include
the number of common stock equivalents. Common stock equivalents represent the
dilutive effect of the assumed exercise of any outstanding stock equivalents,
using the treasury stock method, at either the beginning of the respective
period presented or the date of issuance, whichever is later, and only if the
common stock equivalents are considered dilutive based upon the Company’s net
income (loss) position at the calculation date. There are no common stock
equivalents outstanding and, thus, diluted and basic loss per share are the
same.
|
k)
|
Recent
Accounting Pronouncements
|
FASB ASC
TOPIC 805 – “Business Combinations.” The objective of this topic is to
enhance the information that an entity provides in its financial reports about a
business combination and its effects. The Topic mandates: (i) how the
acquirer recognizes and measures the assets acquired, liabilities assumed and
any non-controlling interest in the acquiree; (ii) what information to disclose
in its financial reports and; (iii) recognition and measurement criteria for
goodwill acquired. This Topic is effective for any acquisitions made on or
after December 15, 2008. The adoption of this Topic did not have a material
impact on the Company’s financial statements and disclosures.
F-23
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
December
31, 2009 and 2008
(Amounts
expressed in US Dollars)
4.
|
Summary
of Significant Accounting Policies,
cont.
|
l)
|
Recent
Accounting Pronouncements
|
FASB ASC
TOPIC 810 – “Noncontrolling Interests.” The objective of
this Topic is to improve the relevance, comparability, and transparency of the
financial information that a reporting entity provides in its consolidated
financial statements by establishing accounting and reporting standards that
require: (i) the ownership interests in subsidiaries held by parties other than
the parent be clearly identified, labeled, and presented in the consolidated
statement of financial position within equity, but separate from the parent's
equity; (ii) the amount of consolidated net income attributable to the parent
and to the noncontrolling interest be clearly identified and presented on the
face of the consolidated statement of income; (iii) changes in a parent's
ownership interest while the parent retains its controlling financial interest
in its subsidiary be accounted for consistently; (iv) when a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value. The gain or loss on the
deconsolidation of the subsidiary is measured using the fair value of any
noncontrolling equity investment rather than the carrying amount of that
retained investment and; (v) entities provide sufficient disclosures that
clearly identify and distinguish between the interests of the parent and the
interests of the non-controlling owners. This Topic is effective for fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. Earlier adoption is prohibited. The adoption of
this Topic did not have a material impact on the Company’s financial statements
and disclosures.
FASB ASC
TOPIC 815 – “Derivatives and Hedging.” The use and complexity of
derivative instruments and hedging activities have increased significantly over
the past several years. This Topic requires enhanced disclosures
about an entity's derivative and hedging activities and thereby improves the
transparency of financial reporting. This Topic is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The adoption of this Topic
did not have a material impact on the Company’s financial statements and
disclosures.
FASB ASC
TOPIC 944 – “Financial Services – Insurance.” Diversity
exists in practice in accounting for financial guarantee insurance contracts by
insurance enterprises. That diversity results in inconsistencies in the
recognition and measurement of claim liabilities because of differing views
about when a loss has been incurred. This Topic requires that an insurance
enterprise recognize a claim liability prior to an event of default (insured
event) when there is evidence that credit deterioration has occurred in an
insured financial obligation.
This
Topic is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and all interim periods within those fiscal years,
except for some disclosures about the insurance enterprise's risk-management
activities. The adoption of this Topic did not have a material impact on
the Company’s financial statements and disclosures.
FASB
ASC TOPIC 855 - “Subsequent Events.” In May 2009, the FASB issued
Topic 855, which establishes general standards of accounting and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. In particular, this Topic sets forth :
(i) the period after the balance sheet date during which management of a
reporting entity should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements, (ii) the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, (iii) the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. This Topic should be applied to the
accounting and disclosure of subsequent events. This Topic does not apply to
subsequent events or transactions
that are within the scope of other applicable accounting standards that provide
different guidance on the accounting treatment for subsequent events or
transactions. This Topic was effective for interim and annual periods ending
after June 15, 2009.
F-24
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
December
31, 2009 and 2008
(Amounts
expressed in US Dollars)
4.
|
Summary
of Significant Accounting Policies,
cont.
|
l)
|
Recent
Accounting Pronouncements, cont.
|
In
February 2010, the FASB issued ASU 2010-09-Subsequent Event (Topic 855)
Amendments to certain recognition and disclosure requirements. ASU 2010-09
removes the requirements for an SEC filer to disclose a date through which
subsequent events have been evaluated in both issued and revised financial
statements. The Company adopted ASU 2010-09 in February 2010 and did
not disclose the date through which subsequent events have been
evaluated.
FASB ASC
TOPIC 105 - “The FASB Accounting Standard Codification and the Hierarchy of
Generally Accepted Accounting Principles.” In June 2009, the FASB issued Topic
105, which became the source of authoritative GAAP recognized by the FASB to be
applied by nongovernmental entities. Rules and interpretive releases of the SEC
under authority of federal securities laws are also sources of authoritative
GAAP for SEC registrants. On the effective date of this Topic, the Codification
will supersede all then-existing non-SEC accounting and reporting standards. All
other non-SEC accounting literature not included in the Codification will become
non-authoritative. This Topic identifies the sources of accounting principles
and the framework for selecting the principles used in preparing the financial
statements of nongovernmental entities that are presented in conformity with
GAAP and arranged these sources of GAAP in a hierarchy for users to apply
accordingly. This Topic is effective for financial statements issued for interim
and annual periods ending after September 15, 2009. References made to
authoritative FASB guidance throughout the consolidated financial statements
have been updated to the applicable codification section.
FASB ASC
TOPIC 320 - “Recognition and Presentation of Other-Than-Temporary
Impairments.” In April 2009, the FASB issued Topic 320 amends
the other-than-temporary impairment guidance in GAAP for debt securities to make
the guidance more operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities in the financial
statements. This Topic does not amend existing recognition and measurement
guidance related to other-than-temporary impairments of equity securities. The
Topic is effective for interim and annual reporting periods ending after June
15, 2009, with early adoption permitted for periods ending after March 15, 2009.
Earlier adoption for periods ending before March 15, 2009, is not permitted.
This Topic does not require disclosures for earlier periods presented for
comparative purposes at initial adoption. In periods after initial adoption,
this Topic requires comparative disclosures only for periods ending after
initial adoption. The adoption of this Topic did not have a material impact on
the Company’s financial statements and disclosures.
FASB ASC
TOPIC 860 - “Accounting for Transfer of Financial Assets and Extinguishment of
Liabilities.” In June 2009, the FASB issued additional guidance under
Topic 860 which improves the relevance, representational faithfulness, and
comparability of the information that a reporting entity provides in its
financial statements about a transfer of financial assets; the effects of a
transfer on its financial position, financial performance, and cash flows; and a
transferor’s continuing involvement, if any, in transferred financial assets.
This additional guidance requires that a transferor recognize and initially
measure at fair value all assets obtained (including a transferor’s beneficial
interest) and liabilities incurred as a result of a transfer of financial assets
accounted for as a sale. Enhanced disclosures are required to provide financial
statement users with greater transparency about transfers of financial assets
and a transferor’s continuing involvement with transferred financial assets.
This additional guidance must be applied as of the beginning of each reporting
entity’s first annual reporting period that begins after November 15, 2009, for
interim periods within that first annual reporting period and for interim and
annual reporting periods thereafter. Earlier application is prohibited. This
additional guidance must be applied to transfers occurring on or after the
effective date. The adoption of this Topic is not expected to have a
material impact on the Company’s financial statements and
disclosures.
F-25
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
December
31, 2009 and 2008
(Amounts
expressed in US Dollars)
4.
|
Summary
of Significant Accounting Policies,
cont.
|
l)
|
Recent
Accounting Pronouncements, cont.
|
FASB ASC
TOPIC 810 - “Consolidation of Variables Interest and Special Purpose
Entities.” In June 2009, the FASB issued Topic 810, which requires an
enterprise to perform an analysis to determine whether the enterprise’s variable
interest or interests give it a controlling financial interest in a variable
interest entity. This analysis identifies the primary beneficiary of a variable
interest entity as the enterprise that has both of the following
characteristics: (i)The power to direct the activities of a variable interest
entity that most significantly impact the entity’s economic performance and
(ii)The obligation to absorb losses of the entity that could potentially be
significant to the variable interest entity or the right to receive benefits
from the entity that could potentially be significant to the variable interest
entity. Additionally, an enterprise is required to assess whether it has
an implicit financial responsibility to ensure that a variable interest entity
operates as designed when determining whether it has the power to direct the
activities of the variable interest entity that most significantly impact the
entity’s economic performance. This Topic requires ongoing reassessments of
whether an enterprise is the primary beneficiary of a variable interest entity
and eliminate the quantitative approach previously required for determining the
primary beneficiary of a variable interest entity, which was based on
determining which enterprise absorbs the majority of the entity’s expected
losses, receives a majority of the entity’s expected residual returns, or both.
This Topic is effective as of the beginning of each reporting entity’s first
annual reporting period that begins after November 15, 2009, for interim periods
within that first annual reporting period, and for interim and annual reporting
periods thereafter. Earlier application is prohibited. The adoption of this
Topic is not expected to have a material impact on the Company’s financial
statements and disclosures.
FASB ASC
TOPIC 820 - “Fair Value measurement and Disclosures”, an Accounting Standard
Update. In September 2009, the FASB issued this Update to amend Subtopic 820-10,
“Fair Value Measurements and Disclosures”. Overall, for the fair value
measurement of investments in certain entities that calculates net asset value
per share (or its equivalent). The amendments in this Update permit, as a
practical expedient, a reporting entity to measure the fair value of an
investment that is within the scope of the amendments in this Update on the
basis of the net asset value per share of the investment (or its equivalent) if
the net asset value of the investment (or its equivalent) is calculated in a
manner consistent with the measurement principles of Topic 946 as of the
reporting entity’s measurement date, including measurement of all or
substantially all of the underlying investments of the investee in accordance
with Topic 820. The amendments in this Update also require disclosures by major
category of investment about the attributes of investments within the scope of
the amendments in this Update, such as the nature of any restrictions on the
investor’s ability to redeem its investments at the measurement date, any
unfunded commitment, and the investment strategies of the investees. The major
category of investment is required to be determined on the basis of the nature
and risks of the investment in a manner consistent with the guidance for major
security types in GAAP on investments in debt and equity securities in paragraph
320-10-50-lB. The disclosures are required for all investments within the scope
of the amendments in this Update regardless of whether the fair value of the
investment is measured using the practical expedient. The amendments in this
Update apply to all reporting entities that hold an investment that is required
or permitted to be measured or disclosed at fair value on a recurring or non
recurring basis and, as of the reporting entity’s measurement date, if the
investment meets certain criteria The amendments in this Update are effective
for the interim and annual periods ending after December 15, 2009. Early
application is permitted in financial statements for earlier interim and annual
periods that have not been issued. The adoption of this Topic did not have
a material impact on the Company’s financial statements and
disclosures.
F-26
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
December
31, 2009 and 2008
(Amounts
expressed in US Dollars)
4.
|
Summary
of Significant Accounting Policies,
cont.
|
l)
|
Recent
Accounting Pronouncements, cont.
|
FASB ASC
TOPIC 740 - “Income Taxes”, an Accounting Standard Update. In September 2009,
the FASB issued this Update to address the need for additional implementation
guidance on accounting for uncertainty in income taxes. For entities that are
currently applying the standards for accounting for uncertainty in income taxes,
the guidance and disclosure amendments are effective for financial statements
issued for interim and annual periods ending after September 15, 2009. The
adoption of this Update did not have a material impact on the Company’s
financial statements and disclosures.
In
December 2008, the SEC issued revised reporting requirements for oil and natural
gas reserves that a company holds. Included in the new rule entitled
-Modernization of Oil and Gas Reporting Requirements”, are the following
changes: 1) permitting use of new technologies to determine proved reserves, if
those technologies have been demonstrated empirically to lead to reliable
conclusions about reserve volumes; 2) enabling companies to additionally
disclose their probable and possible reserves to investors, in addition to their
proved reserves; 3) allowing previously excluded resources, such as oil sands,
to be classified as oil and natural gas reserves rather than mining reserves; 4)
requiring companies to report the independence and qualifications of a preparer
or auditor, based on current Society of Petroleum Engineers criteria; 5)
requiring the filing of reports for companies that rely on a third party to
prepare reserve estimates or conduct a reserve audit; and 6) requiring companies
to report oil and natural gas reserves using an average price based upon the
prior 12-month period, rather than year-end prices. The new requirements are
effective for registration statements filed on or after January 1, 2010, and for
annual reports on Form 10K for fiscal years ending on or after December 31,
2009. Early adoption is not permitted. The Company is currently assessing the
impact that adoption of this rule will have on its financial
disclosures.
In
January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-03 -
“Oil and Gas Reserve
Estimation and Disclosures.” The ASU aligns the current oil and gas
reserve estimation and disclosure requirements of FASB Accounting Standards
Codification Topic 932, Extractive Activities — Oil and
Gas, with those in SEC Final Rule Release No. 33-8995, Modernization of
Oil and Gas Reporting. The ASU will be effective for reporting periods ending on
or after December 31, 2009. The Company is currently assessing the impact that
adoption of this rule will have on our financial statements.
5.
|
Deposits
|
The total
amount of $720,000 represents deposits made for oil exploration application fees
in the specific amounts of $400,000 for Atlantic and $320,000 for Bahamas
respectively. The deposit is refundable in the event the licenses are not
granted. If the licenses are granted, then the deposit will be used towards
application and licensing fees, and as a result this is not included in the
value of the oil and gas properties.
6.
|
Oil
and Gas Properties
|
December 31, 2009
|
||||||||
Atlantic &
Bahamas
|
Total
|
|||||||
Unproved properties | ||||||||
-
acquisition costs
|
$ | 2,279,644 | $ | 2,279,644 | ||||
$ | 2,279,644 | $ | 2,279,644 |
F-27
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
December
31, 2009 and 2008
(Amounts
expressed in US Dollars)
6.
|
Oil
and Gas Properties, cont.
|
On
November 18, 2009 the Company entered into a Share Purchase Agreement with NPT
Oil Corporation Ltd (NPT) to acquire all of the outstanding shares of Atlantic
and Bahamas. Under the terms of the Agreement, the Company acquired
from NPT certain technical information about the properties to be licensed by
Atlantic and Bahamas pursuant to the delivery of the Licenses and all of the
issued and outstanding stock of Atlantic and Bahamas in exchange for 15,000,000
shares of the Company’s common stock at the agreed price of $0.10 per share and
a promissory note for $1,500,000.
7.
|
Promissory
Note
|
The
promissory note is for the principal amount of $1,500,000 and is payable to the
order of NPT. The note is payable over a two-year period and bears interest of
5% per annum until all principal and interest has been fully repaid. Interest
expense on the note at December 31, 2009 was $6,250 and has been
accrued.
8.
|
Segmented
Information
|
The
assets of the Company are segmented as follows: cash in the amount of $796,930
is held in a United States banking institution, deposits in the amount of
$720,000 are held by the Government of the Commonwealth of the Bahamas and oil
and gas properties in the amount of $2,279,644 are located in territorial waters
controlled by the Commonwealth of the Bahamas.
9.
|
Capital
Stock
|
Year ended December 31,
1999
In August
1999, NatQuote Financial Inc. was presented with a business opportunity in the
bottle cleaning and sterilization industry. While NatQuote decided it did not
fit with its core business objectives, its major shareholder requested that the
opportunity be pursued on behalf of the Company and its
shareholders.
NatQuote’s
President, J. Paul Hines was instructed to form a new corporation, Enviroclens
Inc., incorporated in the State of New York, on September 9, 1999, to carry out
the new business. In consideration for the assignment it was agreed that
NatQuote would be issued 1,795,000 common shares of Enviroclens Inc. at par
value.
Year ended December 31,
2002
In
September 2002 the Board of Directors of NatQuote Financial Inc. resolved to
assign all their rights to receive shares of Enviroclens Inc. to their
shareholders by order of a stock dividend. To effect this assignment NatQuote
requested that Enviroclens Inc. split its own shares 10:1 for a total of
17,950,000 common shares.
Year ended December 31,
2005
In
November 2005, the Board of Directors of Enviroclens Inc. resolved to terminate
its interest in the bottle sanitization Business opportunity and instead seek
other opportunities.
F-28
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
December
31, 2009 and 2008
(Amounts
expressed in US Dollars)
9.
|
Capital
Stock, cont.
|
Year ended December 31,
2007
In
February 2007 the Board of Directors approved the sale of 17,052,500 of the
Company’s common shares to Roman Marble Marketing Company. Of the
17,052,500 common shares sold, 16,525,200 were held by J. Paul Hines and 527,300
were held by his company, Ship Island Investments Ltd.
In May
2007 the Board of Directors of Enviroclens Inc. resolved to change the Company
name to Offshore Petroleum Corp.
Year ended December 31,
2008
In
September 2008, the Board of Directors approved the sale of 17,052,500 common
shares of the Company by Roman Marble Marketing Company to a number of other
investors.
Year ended December 31,
2009
On March
9, 2009 the Company authorized the issuance of 30,000,000 common shares of the
Company at 10 cents per share in private placements for a total amount of
$3,000,000. By December 31, 2009, the Company had raised $935,000 through the
issuance of 9,350,000 common shares at a share price of $0.10 per
share.
On
October 20, 2009, the Company issued 3,000,000 shares for two consulting
agreements at a price of $0.10 per share (refer to note 14).
On
November 18, 2009, the Company issued 15,000,000 shares under a Share Purchase
Agreement at a price of $0.10 per share (refer to note 14).
10.
|
Employee
Stock Option Plan
|
In
September 2008, the Board of Directors approved an employee stock option plan
("2008 Stock Option Plan"), the purpose of which is to enhance the
Company's stockholder value and financial performance by attracting, retaining
and motivating the Company's directors, key employees, consultants and to
encourage stock ownership by such individuals by providing them with a means to
acquire a proprietary interest in the Company's success through stock ownership.
Under the 2008 Stock Option Plan, directors, employees and consultants who
provide services to the Company may be granted incentive options and
nonstatutory Stock Options to acquire common shares of the Company at not less
than 110 percent of the fair market value of the stock on the date of
grant. Options will have a term of 5 years. The total
number of shares reserved for issuance under the 2008 Stock Option Plan is
5,000,000. As of December 31, 2009, no options were granted under the
2008 Stock Option Plan.
11.
|
Changes
in Directors and Management
|
|
a)
|
Mr.
J. Paul Hines was appointed the sole director of Enviroclens Inc. on its
incorporation and resigned on February 24,
2007.
|
|
b)
|
On
February 23, 2007 Todd Montgomery was appointed as the sole director of
Enviroclens Inc. and on May 9, 2007 the company’s name was changed to
Offshore Petroleum Corp. Todd Montgomery subsequently resigned on
September 16, 2008.
|
|
c)
|
On
September 15, 2008 John Rainwater and Mickey Wiesinger were appointed
directors of the Company.
|
F-29
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
December
31, 2009 and 2008
(Amounts
expressed in US Dollars)
11.
|
Changes
in Directors and Management, cont.
|
|
d)
|
On
March 12, 2009 Ryan Bateman was appointed a director of the
Company.
|
|
e)
|
On
December 1, 2009 Gary Adams was appointed a director of the
Company.
|
|
f)
|
On
December 16, 2009 Howard Barth was appointed a director of the
Company
|
12.
|
Deferred
Stock Compensation
|
The
Company issued 1,500,000 restricted common stock each to two consultants, for a
total of 3,000,000 common stock valued at $300,000. The Company
expensed proportionate consulting expenses of $29,178 during the year ended
December 31, 2009 and the balance of $270,822 is reflected as deferred stock
compensation expense under the stockholders’ equity in the balance
sheet.
13.
|
Income
Taxes
|
The
Company's current and deferred income taxes are as follows:
2009
|
2008
|
|||||||
Loss
before income taxes
|
$ | (201,230 | ) | $ | (10,862 | ) | ||
Expected
income tax recovery at the statutory rates of 35% (2008 -
35%)
|
$ | (70,430 | ) | $ | (3,802 | ) | ||
Increase
in income taxes resulting from:
|
||||||||
Valuation
allowance
|
70,430 | 3,802 | ||||||
Provision
for income taxes
|
$ | - | $ | - |
The
Company has deferred income tax assets as follows:
2009
|
2008
|
|||||||
Net
operating loss carry forward
|
$ | 224,746 | $ | 23,516 | ||||
Deferred
Income tax on loss carry forward
|
$ | 78,661 | 8,231 | |||||
Valuation
allowance
|
$ | (78,661 | ) | (8,231 | ) | |||
Deferred
income taxes
|
$ | - | $ | - |
As of
December 31, 2009 the Company has non-capital losses of approximately $224,746
available to offset future taxable incomes which expire as follows:
2026
|
$ | 9,369 | ||
2027
|
$ | 3,285 | ||
2028
|
$ | 10,862 | ||
2029
|
$ | 201,230 | ||
$ | 224,746 |
F-30
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
December
31, 2009 and 2008
(Amounts
expressed in US Dollars)
14.
|
Commitments
and Contingencies
|
As of
January 1, 2009, the Company entered into a Consulting Services Contract with
Lance Capital Corp. (“Lance”) pursuant to which Lance will administer the
Company’s daily corporate operations for a period of one year. Under
the consulting services contract the Company is required to pay Lance $7,500 per
month as consideration for such services. Lance provides a full
compliment of administrative and corporate services, including bookkeeping,
investor support, contract negotiation and administration, oversight of
consultants, oversight of and assistance in all public filings and financial
statements, assistance to a market maker in the OTC Bulletin Board listing
process if required, oversight of the website (when applicable) and
administration of the Company’s expense payments pursuant to internal control
procedures implemented by the Board of Directors.
On
October 20, 2009, the Company entered into a Consulting Agreement with Pembroke
Communications Corp. (“Pembroke”) for certain consulting services for a term of
expiring September 30, 2011. The Company issued 1,500,000 shares of restricted
common stock of the Company which will be deemed earned in equal
installments of 500,000 Shares on April 1, 2010, October 1, 2010 and April 1,
2011. The Consultant must return any unearned shares upon termination of the
Consulting Agreement. Pursuant to the Consulting Agreement, Pembroke
will assist the Company in communicating its announcements, publicizing
financial statements and accessing institutional and other investors throughout
the world. The Pembroke office with which we have contracted is based
in Panama.
On
October 20, 2009, the Company entered into a Consulting Agreement with Power One
Capital Corp. (“Power One”) for certain consulting services for a term of
expiring September 30, 2011. The Company issued 1,500,000 Shares of restricted
common stock of the Company. Pursuant to an Amendment to the Consulting
Agreement with Power One dated June 17, 2010 such Shares shall be
deemed earned by Power One in equal installments of 500,000 Shares on April 1,
2010, October 1, 2010 and April 1, 2011. Power One must return any unearned
shares upon termination of the Consulting Agreement. Power One will
assist the Company with strategic and operating advice and may introduce
strategic investors to the Company. If the Company seeks a joint
venture partner to assist it with drilling and other exploration operations in
the Licensed Areas, Power One will assist the Company in finding a suitable
joint venture partner and negotiating the joint venture
agreement. The Power One office with which we have contracted is
based in Panama.
On
November 30, 2009 the Company closed a Share Purchase Agreement with
NPT to purchase from NPT all of the equity stock of two Cayman Island
companies. Pursuant to the Share Purchase Agreement, Offshore acquired its two
Subsidiaries Atlantic and Bahamas, pending the issuance of the Licenses, as
described above.
Offshore
paid $3,000,000 for the equity stock of the two subsidiaries to NPT as follows:
(a) 15 million Shares of Offshore valued at $0.10 per share and (b) a promissory
note with a face amount of $1.5 million payable over a two-year term and bearing
interest at 5%.
Each of
the eight Licenses to be received by Atlantic and Bahamas will have an initial
three-year term and require advance annual rental payments of $50,000 per
License in the first year (already paid upon application for the Licenses),
$75,000 in the second year and $100,000 in the third year. Atlantic
and Bahamas each are required to spend an aggregate of $250,000 on qualifying
exploration and/or development expenditures in the first year on their four
respective Licensed Areas and an aggregate of $375,000 in each of the two
following years. Each of Atlantic and Bahamas are required to post a
$1,000,000 bond for performance of the work commitments. See the
section entitled “PROPERTIES – Licenses for Exploration” for more
information.
F-31
NPT has
confirmed that for the period of the escrow, Offshore controls the shares of
Atlantic and Bahamas that are held in escrow and that Offshore is permitted to
vote such shares and otherwise exercise the rights of a shareholder during the
period that they are held in such escrow as if Offshore had full possession of
such shares.
On
December 22, 2009, by way of an Addendum, the date of December 31, 2009 for
delivery of the Licenses from the Bahamian Government and completion of the
Escrow condition, where referred to in the Share Purchase Agreement was extended
to February 15, 2010. All other terms and conditions of the Agreement remained
the same.
15.
|
Subsequent
events
|
On
January 12, 2010 Lance Capital Ltd. was compensated with 150,000 shares of the
Company for consulting services valued at $0.10 per share.
F-32
OFFSHORE
PETROLEUM CORP.
(Formerly
Enviroclens Inc.)
(An
Exploration Stage Company)
Consolidated
Notes to the financial statements
December
31, 2009 and 2008
(Amounts
expressed in US Dollars)
15.
|
Subsequent
events, cont.
|
On
January 19, 2010 the Company revoked a prior resolution approved on March 9,
2010 authorizing the issuance of 30,000,000 common shares at $0.10 for a total
of $3,000,000. The Company’s board determined that the
$935,000 previously raised would be adequate working capital for the ensuing
twelve-month period and that more capital could be raised at a higher price,
thereby reducing dilution to existing shareholders.
On
February 15, 2010, by way of an Addendum, the date of December 31, 2009 for
delivery of the Licenses from the Bahamian Government and completion of the
Escrow condition, where referred to in the Share Purchase Agreement was extended
to on or before March 31, 2010. All other terms and conditions of the Agreement
remained the same.
On
March 25, 2010, a Closing Agreement was entered into by and among the Company
and NPT for the Share Purchase Agreement dated November 18, 2009 (this
“Closing Agreement”). The Company and NPT agreed that the requirements contained
in the Purchase Agreement for the issuance of the Licenses and related approvals
of the Bahamian Government were waived by both parties. The Company
and NPT further agreed that all conditions of closing contained in the Purchase
Agreement are considered satisfied by both Offshore and NPT. The Company
and NPT instructed the Escrow Agent to deliver all closing documents in the
possession of the Escrow Agent to the appropriate party, as contemplated in the
Purchase Agreement. The duties of the Escrow Agent were deemed to
have been satisfied and the Escrow Agent will have no further responsibility to
the parties to the Purchase Agreement.
16.
|
Revision
to financial statements
|
Certain
notes to the financial statements have been updated to reflect information
available as of May 17, 2010.
17.
|
Restatement
of cash flows
|
The
Company's deposit for license application in the amount of $720,356 was
previously reported as a source of cash from operating activities and a use of
cash from investing activities in its previously filed statements of cash flows
for the year ended December 31, 2009 and the period from inception (September 8,
1999) to December 31, 2009. The Company has restated its statements for these
periods to exclude these amounts because the company, in fact, acquired this
asset in a non-cash transaction involving the issuance of debt. The following
tables reflect the material captions in the statements of cash flows as they
were previously reported and as they are restated in the accompanying financial
statements:
December
31, 2009
As previously
reported
|
Adjustments
|
As Restated
|
||||||||||
Net
cash used in operating activities
|
(858,526 | ) | 720,356 | (138,170 | ) | |||||||
Net
cash provided by Investing activities
|
720,356 | (720,356 | ) | - | ||||||||
Cumulative
since inception
|
||||||||||||
Net
cash used in operating activities
|
(871,284 | ) | 720,356 | (150,928 | ) | |||||||
Net
cash provided by investing activities
|
720,356 | (720,356 | ) | - |
These
changes have no effect on the shareholders’ equity, the consolidated balance
sheet and the consolidated statement of operations and comprehensive
loss.
F-33
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION
OF DIRECTORS
Our
by-laws indemnify each person (including the heirs, executors, administrators,
or estate of such person) who is or was a director or officer of Offshore
Petroleum to the fullest extent permitted or authorized by current or future
legislation or judicial or administrative decision against all fines,
liabilities, costs and expenses, including attorney’s fees, arising out of his
or her status as a director, officer, agent, employee or
representative. The foregoing right of indemnification shall not be
exclusive of other rights to which those seeking an indemnification may be
entitled. Offshore Petroleum may maintain insurance, at its expense,
to protect itself and all officers and directors against fines, liabilities,
costs and expenses, whether or not Offshore Petroleum would have the legal power
to indemnify them directly against such liability.
Costs,
charges, and expenses (including attorney’s fees) incurred by a person referred
to above in defending a civil or criminal proceeding shall be paid by Offshore
Petroleum in advance of the final disposition thereof upon receipt of any
undertaking to repay all amounts advanced if it is ultimately determined that
the person is not entitled to be indemnified by Offshore Petroleum and upon
satisfaction of other conditions required by current or future
legislation.
If this
indemnification or any portion of it is invalidated on any ground by a court of
competent jurisdiction, Offshore Petroleum nevertheless indemnifies each person
described above to the fullest extent permitted by all portions of this
indemnification that have not been invalidated and to the fullest extent
permitted by law.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of Offshore
Petroleum pursuant to the foregoing provisions, or otherwise, be advised that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is therefore
unenforceable.
EXHIBITS
INDEX
The
following exhibits are filed as part of this registration
statement.
Exhibit No.
|
Description
|
|
3.1
|
Certificate
of Incorporation of the Company filed on September 7, 1999 with the New
York Secretary of State (previously filed with the Company’s Registration
Statement on Form S-1 on January 26, 2010)
|
|
3.2
|
By
Laws of the Company (previously filed with the Company’s Registration
Statement on Form S-1 on January 26, 2010)
|
|
3.3
|
Certificate
of Conversion from a Non-Delaware Corporation to a Delaware Corporation
dated January 22, 2007 (previously filed with the Company’s Registration
Statement on Form S-1 on January 26, 2010)
|
|
3.4
|
|
Certificate
of Amendment of the Certificate of Incorporation of the Company dated May
9, 2007 and filed with the Delaware Secretary of State on May 18, 2007
(previously filed with the Company’s Registration Statement on Form S-1 on
January 26, 2010)
|
- 47
-
3.5
|
Certificate
of Amendment of the Certificate of Incorporation of the Company dated
September 8, 2008 and filed with the Delaware Secretary of State on
February 18, 2009 (previously filed with the Company’s
Registration Statement on Form S-1 on January 26, 2010)
|
|
3.6
|
Code
of Ethics adopted as of June 15, 2009 (previously filed with
the Company’s Registration Statement on Form S-1 on January 26,
2010)
|
|
3.7
|
Audit
Committee Charter (previously filed with the Company’s
Registration Statement on Form S-1 on January 26, 2010)
|
|
5.1
|
Legal
Opinion dated January 20, 2010 of Kavinoky Cook LLP (previously
filed with the Company’s Registration Statement on Form S-1 on January 26,
2010)
|
|
10.1
|
Consulting
Services Agreement between the Company and Lance Capital Ltd. dated
January 1, 2009 (previously filed with the Company’s
Registration Statement on Form S-1 on January 26, 2010)
|
|
10.2
|
2008
Stock Option Plan (previously filed with the Company’s
Registration Statement on Form S-1 on January 26, 2010)
|
|
10.3
|
Consulting
Agreement between the Company and Power One Capital Corp. dated
as of October 20, 2009 (previously filed with the Company’s Registration
Statement on Form S-1 on January 26, 2010)
|
|
10.4
|
Consulting
Agreement between the Company and Pembroke Communications Corp. dated as
of October 20, 2009 (previously filed with the Company’s Registration
Statement on Form S-1 on January 26, 2010)
|
|
10.5
|
Share
Purchase Agreement with NPT Oil Corporation Ltd. (previously
filed with the Company’s Registration Statement on Form S-1 on January 26,
2010)
|
|
10.6
|
Closing
Agreement for Share Purchase Agreement with NPT Oil Corporation Ltd. dated
as of March 25, 2010
|
|
10.7
|
Addendum
to Share Purchase Agreement with NPT Oil Corporation Ltd. dated as of
December 22, 2010
|
|
10.8
|
Addendum
to Share Purchase Agreement with NPT Oil Corporation Ltd. dated as of
February 15, 2010
|
|
10.9
|
Addendum
to Consulting Agreement between the Company and Power One Capital Corp.
dated as of June 17, 2010
|
|
23.1
|
Consent
of Schwartz Levitsky Feldman LLP dated January 25,
2010 (previously filed with the Company’s Registration
Statement on Form S-1 on January 26, 2010)
|
|
23.2
|
Consent
of Kavinoky Cook LLP (included in Exhibit 5.1) (previously filed with the
Company’s Registration Statement on Form S-1 on January 26,
2010)
|
|
23.3
|
|
Consent
of Schwartz Levitsky Feldman LLP dated April 13, 2010 (previously filed
with Amendment No. 1 the Company’s Registration Statement on Form S-1 on
April 14,
2010)
|
- 48
-
23.4
|
Consent
of Schwartz Levitsky Feldman LLP dated May 17, 2010 (previously filed with
Amendment No. 2 to the Company’s Registration Statement on Form S-1 on May
25, 2010)
|
|
23.5
|
|
Consent
of Schwartz Levitsky Feldman LLP dated July 8,
2010
|
OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION
The
following table sets forth expenses, incurred or expected to be incurred by
Offshore Petroleum in connect with the registration of the securities being
offered by the selling shareholders. Items marked with an asterisk
(*) represent estimated expenses. We have agreed to pay all the costs
and expenses of this registration. Selling security holders will not
pay any part of these expenses.
SEC
Registration Fee
|
$ | 145.57 | ||
Legal
Fees and Expenses*
|
$ | 80,000.00 | ||
Accounting
Fees and Expenses*
|
$ | 30,000.00 | ||
Printing
|
$ | 1,000.00 | ||
Miscellaneous*
|
$ | 2,000.00 | ||
TOTAL*
|
$ | 113,145.57 |
RECENT
SALE OF UNREGISTERED SECURITIES
The
Company completed private placements of common stock at $0.10 per share from the
following accredited investors in the number of shares and on the dates set out
opposite their names:
Name
|
Shares
|
Date Issued
|
|||
Sirius
Intervest Ltd.
|
1,000,000 |
April
14, 2009
|
|||
Allentown
Consulting Corp.
|
1,500,000 |
June
25, 2009
|
|||
Catalyst
Trading Inc.
|
750,000 |
April
28, 2009
|
|||
Steven
Pearce
|
500,000 |
April
28, 2009
|
|||
Zul
Rashid
|
200,000 |
May
1, 2009
|
|||
Sirius
Intervest Ltd.
|
1,000,000 |
May
8, 2009
|
|||
Zulfikar
Rashid
|
150,000 |
September
29, 2009
|
|||
Benjamin
Marler
|
50,000 |
September
30, 2009
|
|||
Shane
Manning
|
100,000 |
October
26, 2009
|
|||
Hubert
Manning
|
100,000 |
October
26, 2009
|
|||
Wade
Alexander
|
250,000 |
October
27, 2009
|
|||
Cottonwood
Investments
|
2,000,000 |
November
16, 2009
|
|||
Ray
Westall
|
250,000 |
November
16, 2009
|
|||
J.L.
Guerra, Jr.
|
500,000 |
November
25, 2009
|
|||
Pineview
Worldwide Corp.
|
1,000,000 |
December
4,
2009
|
The
Company entered into a Consulting Agreement with Pembroke Communications Corp.
(“Pembroke”) for certain consulting services for a term expiring September 30,
2011. The Company issued 1,500,000 shares of restricted common stock
of the Company which shall be deemed earned by Pembroke in equal installments of
500,000 shares on April 1, 2010, October 1, 2010 and April 1, 2011. Pembroke
must return any unearned Shares in the vent of early termination of the
Consulting Agreement.
- 49
-
The
Company entered into a Consulting Agreement, as amended, with Power One Capital
Corp. (“Power One”) for certain consulting services for a term expiring
September 30, 2011. The Company issued 1,500,000 shares of restricted
common stock of the Company which will be deemed earned in equal installments of
500,000 shares on April 1, 2010, October 1, 2010 and April 1, 2011Power One must
return any unearned shares in the event of early termination of the Consulting
Agreement.
On
January 12, 2010 Lance Capital Ltd. was compensated with 150,000 shares of the
Company for consulting services valued at $0.10 per share.
The
Company completed a Share Purchase Agreement to acquire its Subsidiaries from
NPT, which assigned the Offshore shares it was to receive to its shareholders,
and the following shares were issued to the following persons, in the number of
shares and on the dates set out opposite their names:
Name
|
Shares
|
Date Issued
|
|||
Ryan
Bateman
|
2,463,000 |
November
30, 2009
|
|||
John
Lowell Rainwater
|
3,806,000 |
November
30, 2009
|
|||
NPT
Fund
|
2,238,000 |
November
30, 2009
|
|||
Milo
Holdings Ltd. (1)
|
4,477,000 |
November
30, 2009
|
|||
Mickey
W. Wiesinger
|
672,000 |
November
30, 2009
|
|||
Kevin
Gottshall
|
1,344,000 |
November
30,
2009
|
(1)
|
Milo
Holdings Ltd. is a company that is controlled by Ryan
Bateman.
|
UNDERTAKINGS
The
undersigned Registrant hereby undertakes:
To file,
during any period in which it offers or sells securities, a post-effective
amendment to this registration statement to:
(i)
|
Include
any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
|
(ii)
|
Reflect
in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration
statement;
|
(iii)
|
Include
any additional or changed material information on the plan of
distribution; and
|
(iv)
|
Remove
from registration any of the securities that remain unsold at the end of
the offering.
|
That, for
determining liability under the Securities Act, the Registrant shall treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
- 50
-
In the
event that a claim for indemnification against such liabilities, (other than the
payment by the Registrant of expenses incurred and paid by a director, officer
or controlling person of the Registrant in the successful defense of any action,
suit or proceeding), is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
- 51
-
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form S-1 and authorized this registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Bakersfield, California on July 1, 2010.
OFFSHORE
PETROLEUM CORP.
|
|
By:
|
/s/
John
Rainwater
|
Name:
|
John
Rainwater
|
Title:
|
Chairman
of the Board, President and Chief
|
Executive
Officer
|
In
accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
SIGNATURE
|
TITLE
|
DATE
|
||
/s/
John Rainwater
|
Director,
Chairman of the Board of
|
July2,
2010
|
||
John
Rainwater
|
Directors,
President and Chief
|
|||
Executive
Officer
|
||||
/s/
Mickey Wiesinger
|
Director,
Chief Financial Officer
|
July
2, 2010
|
||
Mickey
Wiesinger
|
and
Secretary
|
|||
/s/
Ryan Bateman
|
Director
|
July
2, 2010
|
||
Ryan
Bateman
|
||||
/s/
Gary Adams
|
Director
|
July
2, 2010
|
||
Gary
Adams
|
||||
/s/
Howard Barth
|
Director
|
July
2, 2010
|
||
Howard
Barth
|
|
|
- 52
-