UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark One)

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

[   ]

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from [   ] to [   ]

Commission file number  000-30193

NATION ENERGY INC.

(Exact name of registrant as specified in its charter)


Wyoming

 

59-2887569

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)


Suite 900
609 West Hastings Street
Vancouver, British Columbia

 

V6B 4W4

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number  (800) 400-3969

Former Name, former address and former fiscal year, if changed since last report:  N/A

Indicate by checkmark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  

Yes [X]     No [   ]


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


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


Large accelerated filer

[  ]

(Do not check if a smaller reporting company)

Accelerated filer

[  ]

Non-accelerated filer

[  ]

Smaller reporting company[X]



Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ X ]     No [ ]

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS:

Indicate by checkmark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes [   ]     No [   ]   N/A

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.  16,020,000 common shares, par value $0.001, issued and outstanding as of November 14, 2012.


TABLE OF CONTENTS


PART I.  FINANCIAL INFORMATION


Item 1.

Financial Statements

Condensed Balance Sheets as of September 30, 2012 (unaudited) and March 31, 2012

Condensed Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended September 30, 2012 and 2011, and Cumulative from June 1, 2008 (date of Inception of the Development Stage) through September 30, 2012 (unaudited)

Condensed Statements of Cash Flows for the Six Months Ended September 30, 2012 and 2011, and Cumulative from June 1, 2008 (date of Inception of the Development Stage) through September 30, 2012 (unaudited)

Notes to Condensed Financial Statements (unaudited)


Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures


PART II.

OTHER INFORMATION


Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

(Removed and Reserved)

Item 5.

Other Information

Item 6.

Exhibits

Signatures


Nation Energy, Inc.

(A Development Stage Company)

Condensed Balance Sheets

    
    

ASSETS

    
 

September 30,

 

March 31,

 

2012

 

2012

 

(Unaudited)

  

Current assets:

   

     Cash

 $                 10,468

 

 $           10,794

         Total current assets

                    10,468

 

              10,794

    
 

 $                 10,468

 

 $           10,794

    
    

LIABILITIES AND STOCKHOLDERS' (DEFICIT)

    

 Current liabilities:

   

      Accounts payable

 $                 29,378

 

 $           29,511

      Accounts payable and accrued expenses - related party

                  600,662

 

            546,560

      Loans payable - related party

                  707,831

 

            643,416

             Total current liabilities

              1,337,871

 

        1,219,487

   

   

 Stockholders' (deficit)

   

      Preferred stock, $.001 par value; 5,000,000

   

        shares authorized; none outstanding

                             -   

 

                       -   

      Common stock, $.001 par value; 50,000,000

 $                 16,020

 

 $           16,020

        shares authorized; 16,020,000 shares issued

   

        and outstanding

   

      Additional paid-in capital

              6,868,380

 

        6,868,380

      Accumulated (deficit) prior to the development stage

             (6,839,714)

 

       (6,839,714)

      Accumulated (deficit) during the development stage

             (1,095,276)

 

          (994,914)

      Accumulated comprehensive (loss):   

   

         Foreign currency translation (loss)

                (276,813)

 

          (258,465)

 

             (1,327,403)

 

       (1,208,693)

    
 

 $                 10,468

 

 $           10,794


The accompanying notes are an integral part of these financial statements

F-1


Nation Energy, Inc.

(A Development Stage Company)

Condensed  Statements of Operations and Comprehensive Loss

For the Three and Six Months Ended September 30, 2012 and 2011

and Cumulative Amounts from June 1, 2008 (Inception of the Development Stage)

to September 30, 2012

(Unaudited)

          
         

June 1, 2008

 

For the Three Months Ended

 

For the Six Months Ended

 

(Inception of

 

September 30

 

September 30

 

September 30

 

September 30

 

Development Stage)

 

2012

 

2011

 

2012

 

2011

 

to September 30, 2012

          

Revenue:

 $                    -   

   

 $                    -   

 

 $                    -   

   

 $                    -   

   

 $                    -   

Direct expenses:

         

    Royalties

-

 

-

 

-

 

-

 

-

    Operating

-

 

-

 

-

 

-

 

-

          

Operating income

-

 

-

 

-

 

-

 

-

 

 

   

 

    

    Operating income

-

 

-

 

-

 

-

 

-

          

General and administrative

         

  expenses

17,209

 

38,600

 

31,302

 

85,610

 

647,422

          

     Income (loss) before other

         

          income (expense)

(17,209)

 

(38,600)

 

(31,302)

 

(85,610)

 

(647,422)

          

Other income (expense)

         

   Interest (expense)

(35,186)

 

(27,797)

 

(69,060)

 

(55,970)

 

(448,679)

   Interest income

-

 

-

 

-

 

-

 

825

 

(35,186)

 

(27,797)

 

(69,060)

 

(55,970)

 

(447,854)

          

Net income (loss)

(52,395)

 

(66,397)

 

(100,362)

 

(141,580)

 

(1,095,276)

          

Foreign currency translation gain

         

    (loss)

(18,416)

 

64,043

 

(18,348)

 

60,598

 

(131,905)

          

Comprehensive income (loss)

 $       (70,811)

   

 $         (2,354)

 

 $    (118,710)

   

 $      (80,982)

   

 $   (1,227,181)

          

Per share information:

         
          

    Weighted average number of

         

       common shares outstanding

         

           - basic and diluted

16,020,000

 

16,020,000

 

16,020,000

 

16,020,000

  
          

    Net income (loss) per common

         

         share - basic and diluted

 $           (0.00)

   

 $           (0.00)

 

 $           (0.01)

   

 $           (0.01)

  


The accompanying notes are an integral part of these financial statements

F-2


Nation Energy, Inc.

(A Development Stage Company)

Condensed Statements of Cash Flows

For the Six Months Ended September 30, 2012 and 2011

and Cumulative Amounts from June 1, 2008(Inception of the Development Stage)

to September 30, 2012

(Unaudited)

      
     

June 1, 2008

 

For the Six Months Ended

 

(Inception of

 

September 30,

 

September 30,

 

Development Stage)

 

2012

 

2011

 

to September 30, 2012

      

Cash flows from operating activities:

     

  Net loss

 $         (100,362)

 

 $         (141,580)

 

 $                      (1,095,276)

Adjustments to reconcile net loss to net cash

     

 provided by (used in) operating activities:

     

Changes in working capital:

     

  Decrease in accounts receivable

-

 

-

 

111,596

   Decrease in prepaid expense

-

 

-

 

5,000

  Decrease in accounts payable

(133)

 

(23,488)

 

(1,349)

  Increase in accounts payable - related party

54,102

 

121,616

 

160,611

Net cash (used in) operating activities

(46,393)

 

(43,452)

 

(819,418)

      

Cash flows from investing activities:

     

  Proceeds from sale of oil and gas properties

-

 

-

 

1,158,710

Net cash provided by investing activities

-

 

-

 

1,158,710

      

Cash flows from financing activities:

     

   Proceeds from loan payable - related party

64,415

 

43,117

 

226,928

   Payments on loan payable - related party

-

 

-

 

(508,067)

Net cash provided by (used in) financing activities

64,415

 

43,117

 

(281,139)

      

Effect of currency rate change (loss)

 $           (18,348)

 

 $                   (17)

 

 $                            (95,646)

      

Net increase (decrease) in cash

(326)

 

(352)

 

(37,493)

      

Beginning balance, cash

10,794

 

9,270

 

47,961

      

Ending balance, cash

 $             10,468

 

 $               8,918

 

 $                             10,468

      

Supplemental cash flow information:

     

Cash paid for interest

 $                      -   

 

 $                      -   

 

 $                           374,718

Cash paid for income taxes

 $                      -   

 

 $                      -   

 

 $                                       -   

      

Non-cash investing and financing activities:

     

Non-cash related party advance

 $                      -   

 

 $                      -   

 

 $                             24,945


The accompanying notes are an integral part of these financial statements

F-3

Nation Energy Inc.

(A Development Stage Company)

Notes to Condensed Unaudited Interim Financial Statements

September 30, 2012


Note 1. Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. They do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included in the accompanying unaudited financial statements. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the financial statements and notes thereto, included in the Company’s Form 10-K as of and for the year ended March 31, 2012 (“The Annual Report”).

Effective June 1, 2008, the Company sold all of its oil and gas properties in the Smoky Hill area of Alberta and is currently reviewing other prospects. To implement any new business plan, significant financing will be required and the Company will need to be successful in its efforts to identify, acquire and develop a new business venture.

The Company is currently in the development stage as defined by Accounting Standards Codification subtopic 915-10 “Development Stage Entities” (“ASC 915-10”). Upon the sale of all of its oil and gas assets, the Company re-entered the development stage effective June 1, 2008. Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise. For the period from inception through September 30, 2012, the Company has an accumulated (deficit) of ($6,839,714) and accumulated (deficit) during the development stage of ($1,095,276). Certain prior period amounts have been reclassified for comparative purposes.


Note 2. Recent Accounting Pronouncements

There have been no recent accounting pronouncements or changes in accounting pronouncements compared to the recent accounting pronouncements described in the Annual Report that are of material significance, or have potential material significance, to the Company.


Note 3. Going Concern

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. The Company has incurred (losses) from inception through June 1, 2008 of ($6,839,714) and further (losses) of ($1,095,276) during the development stage. The Company has working capital and stockholders’ (deficits) of ($1,327,403) at September 30, 2012, and working capital and stockholders’ (deficits) of ($1,208,693) at March 31, 2012. The Company is reliant on raising capital to initiate its business plan. The Company’s ability to continue as a going concern is contingent upon being able to secure financing and attain profitable operations.

The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.


Note 4. Earnings Per Share

Basic earnings (loss) per share are calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share are calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding.


Note 5. Related Party Transactions

On January 1, 2009 the Company entered into a written agreement revising the previous verbal agreement with Caravel Management Corp (“Caravel”). The agreement provides for administrative services, office rent and supplies for $8,258 per month. On November 1, 2010, the Company revised its written agreement to provide administrative services, office rent and supplies for $3,500 per month. Caravel is wholly owned by the Company’s sole officer and director. Total expenses recognized under this agreement for the six months ended September 30, 2012 and 2011 were $21,000 and $23,007, respectively. Total expenses recognized under this agreement for the three months ended September 30, 2012 and 2011 were $10,500 and $11,248, respectively.

On March 31, 2006, we entered into a revised loan agreement with a related party. The loan bears interest at 15% per annum, calculated and compounded monthly and is payable quarterly. Any principal amount outstanding under the loan is payable upon demand. The loan payable is in Canadian dollars and is secured by a Promissory Note.

During the six months ended September 30, 2012 we increased the debt by an additional US $64,415. During the three months ended September 30, 2012 we increased the debt by an additional US $24,905. As of September 30, 2012, the balance of the loan and accrued interest payable was US $960,329 compared to US $872,935 at March 31, 2012.


Note 6. Subsequent Events

There were no events subsequent to the balance sheet date through the date of this filing that would require disclosure.


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

This quarterly report contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management’s plans and objectives for our future operations. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" and the risks set out below, any of which may cause our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:

·

risks and uncertainties relating to the interpretation of drill results, the geology, range and continuity of mineral deposits;

·

results of initial feasibility, pre-feasibility and feasibility studies, and the possibility that future exploration, development or mining results will not be consistent with our expectations;

·

mining and development risks, including risks related to accidents, equipment breakdowns, labor disputes or other unanticipated difficulties with or interruptions in production;

·

the potential for delays in exploration or development activities or the completion of feasibility studies;

·

risks related to the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses;

·

risks related to commodity price fluctuations;

·

the uncertainty of profitability based upon our history of losses;

·

risks related to failure to obtain adequate financing on a timely basis and on acceptable terms for our planned exploration and development projects;

·

risks related to environmental regulation and liability;

·

risks that the amounts reserved or allocated for environmental compliance, reclamation, post-closure control measures, monitoring and on-going maintenance may not be sufficient to cover such costs;

·

risks related to tax assessments;

·

political and regulatory risks associated with mining development and exploration;

·

other risks and uncertainties related to our prospects, properties and business strategy; and

·

our company is categorized as a “shell company” as that term is used in the Commission’s rules.

This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements.

Forward looking statements are made based on management’s beliefs, estimates, and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performances or achievements, except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with generally accepted accounting principles (“US GAAP”).

As used in this quarterly report, the terms "we", "us", "our", and "Nation Energy" mean Nation Energy Inc., unless otherwise indicated.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.

Our Current Business

We currently have no business and operate as a shell company. We are in the process of evaluating the merits of joint venture opportunities in the resource sector.

Plan of Operation

The following is a discussion and analysis of our plan of operation and the factors that could affect our future financial condition. This discussion and analysis should be read in conjunction with our unaudited financial statements and the notes thereto included elsewhere in this quarterly report.

For the next twelve months we plan to continue to evaluate joint venture opportunities and oil and gas development and production opportunities.

Cash Requirements During the Next Twelve Months

Over the next twelve months, we intend to use funds to evaluate new business acquisitions, as follows:

Estimated Funding Required During the Next Twelve Months

 

General and Administrative

$60,000

Professional Fees

55,000

   

Total

$115,000

We have suffered recurring losses from operations.  The continuation of our company as a going concern is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed. Management's plan in this regard is to raise additional capital through a debt or an equity offering.  The financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our company discontinue operations.

Due to the uncertainty of our ability to meet our current operating expenses noted above, in their report on the annual financial statements for the year ended March 31, 2012, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern.  Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

The continuation of our business is dependent upon obtaining further financing, a successful program of exploration, and, finally achieving a profitable level of operations.  The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders.  Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

There are no assurances that we will be able to obtain further funds required for our continued operations.  We are pursuing various financing alternatives to meet our immediate and long-term financial requirements.  There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms.  If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due.  In such event, we will be forced to scale down or perhaps even cease our operations.

Disclosure of Outstanding Share Data

As at the date of this annual report, we had 16,020,000 shares of common stock issued and outstanding.  We do not have any warrants, options or shares of any other class issued and outstanding as of the date of this annual report.


RESULTS OF OPERATIONS – Three Months Ended September 30, 2012 and 2011

The following summary of our results of operations should be read in conjunction with our financial statements for the period ended September 30, 2012, which are included herein.

Our operating results for the three months ended September 30, 2012, for the three months ended September 30, 2011 and the changes between those periods for the respective items are summarized as follows:


 

Three Months Ended September 30, 2012

Three Months Ended September 30, 2011

Difference Increase/(Decrease) %

General and administrative

$17,209

$38,600

(55)%

Interest expense

$35,186

$27,797

27%

Net (loss)

$(52,395)

$(66,397)

(21)%

We generated a net (loss) of $(52,395) for the three months ended September 30, 2012 compared to a net (loss) of $(73,296) for the three months ended September 30, 2011.  Net (loss) per common share for the three months ended September 30, 2012 was ($0.003) compared to ($0.005) per common share for the three months ended September 30, 2011.  General and administrative expenses decreased to $17,209 during the three months ended September 30, 2012 from $38,600 during the three months ended September 30, 2011.   The decrease was primarily due to the higher amount of accounting, filing and legal fees associated with filing past financial statements to bring our filings up to date with the SEC during 2011.

Interest expense for the three months ended September 30, 2012 totalled $35,186 compared to $27,797 for the three months ended September 30, 2011.  The increase reflected a higher average outstanding balance of shareholder loans in the current period.

We reported a foreign currency translation loss of $(18,416) to September 30, 2012 compared to a gain of $64,043 to September 30, 2011.  Our loan and accrued interest were incurred and are calculated in Canadian dollars while the reporting currency is the US dollar.  The value of the Canadian dollar in the second quarter of fiscal 2013 increased significantly compared to a corresponding significant decrease in the value of the Canadian dollar during the prior fiscal periods resulting in the gain on translation for that period.  

The major components of our general and administrative expenses for the year are outlined in the table below:


 

Three Months Ended September 30, 2012

Three Months Ended September 30, 2011

Difference Increase/(Decrease) %

Administration fees

$10,500

$11,248

(7)%

Office & MIS

$286

$4,948

(94)%

Legal fees

$118

$2,014

(94)%

Transfer Agent & Filing Fees

$1,305

$15,390

(92)%

Accounting

$5,000

$5,000

(0)%

Total Expenses

$17,209

$38,600

(55)%

General and administrative expenses decreased to $17,209 in fiscal 2013 from $38,600 in fiscal 2012.  General expenses included a decrease in administration fees to $10,500 in fiscal 2013 from $11,248 in fiscal 2012, due to a decrease in the monthly management fees paid to a related party.  Office expenses and Management Information System fees decreased to $286 in fiscal 2013 from $4,948. Legal fees decreased to $118 in fiscal 2013 from $2,014 in the prior fiscal year mainly due to legal fees associated with the update of our filings in fiscal 2012.  Filing fees and transfer agent fees decreased to $1,305 in fiscal 2013 from $15,390 in the prior fiscal period.  Accounting fees remained the same for the three months ended September 30, 2013 compared to the three months ended September 30, 2012.  

RESULTS OF OPERATIONS – Six Months Ended September 30, 2012 and 2011

The following summary of our results of operations should be read in conjunction with our financial statements for the period ended September 30, 2012, which are included herein.

Our operating results for the six months ended September 30, 2012, for the six months ended September 30, 2011 and the changes between those periods for the respective items are summarized as follows:


 

Six Months Ended September 30, 2012

Six Months Ended September 30, 2011

Difference Increase/(Decrease) %

General and administrative

$31,302

$85,610

(63)%

Interest expense

$69,060

$55,970

23%

Net (loss)

$(100,362)

$(141,580)

(29)%

We generated a net (loss) of $(100,362) for the six months ended September 30, 2012 compared to a (loss) of $(141,580) for the six months ended September 30, 2011.  Net (loss) per common share for the six months ended September 30, 2012 was ($0.006) compared to ($0.009) per common share for the six months ended September 30, 2011.  General and administrative expenses decreased to $31,302 during the six months ended September 30, 2012 from $85,610 during the six months ended September 30, 2011.   The decrease was primarily due to the higher amount of accounting, filing and legal fees associated with filing past financial statements to bring our filings up to date with the SEC during 2011.

Interest expense for the six months ended September 30, 2012 totalled $69,060 compared to $55,970 for the three months ended September 30, 2011.  The increase reflected higher average outstanding balance of shareholder loans in the current period.

We reported a foreign currency translation loss of $(18,348) for the six months ending September 30, 2012 compared to a gain of $60,598 for the six months ended September 30, 2011.  Our loan and accrued interest were incurred and are calculated in Canadian dollars while the reporting currency is the US dollar.  The value of the Canadian dollar in the second quarter of fiscal 2013 increased compared significantly compared to a corresponding significant decrease in the value of the Canadian dollar during the prior fiscal periods resulting in the gain on translation for that period.  

The major components of our general and administrative expenses for the year are outlined in the table below:


 

Six Months Ended September 30, 2012

Six Months Ended September 30, 2011

Difference Increase/(Decrease) %

Administration fees

$21,000

$23,007

(9)%

Office & MIS

$859

$5,502

(84)%

Legal fees

$118

$9,485

(99)%

Transfer Agent & Filing Fees

$1,325

$37,416

(96)%

Accounting

$8,000

$10,200

(22)%

Total Expenses

$31,302

$85,610

(63)%

General and administrative expenses decreased to $31,302 in fiscal 2013 from $85,610 in fiscal 2012.  General expenses included a decrease in administration fees to $21,000 in fiscal 2013 from $23,007 in fiscal 2012, due to a decrease in the monthly management fees paid to a related party.  Office expenses and Management Information System fees decreased to $859 in fiscal 2013 from $5,502 during fiscal 2012. Legal fees decreased to $118 in fiscal 2013 from $9,485 in the prior fiscal year mainly due to legal fees associated with the update of our filings in fiscal 2012.  Filing fees and transfer agent fees decreased to $1,325 in fiscal 2013 from $37,416 in the prior fiscal period.  Accounting fees decreased to $8,000 for the six months ended September 30, 2013 compared to $10,200 for the six months ended September 30, 2012.  


Liquidity and Financial Condition

Working Capital

 

Six Months Ended September 30, 2012

At March 31, 2012

Current Assets

$10,468

$10,794

Current Liabilities

$1,337,871

$1,219,487

Working Capital (Deficiency)

($1,327,403)

($1,208,693)

Cash Flows  

 

Six Months Ended                 September 30, 2012

Six Months  Ended                      September 30, 2011

Cash flows (used in) Operating Activities

$(46,393)

$(43,450)

Cash flows provided by Investing Activities

$Nil

$Nil

Cash flows provided by Financing Activities

$64,415

$43,117

Effect of exchange rate changes on cash

$(18,348)

$(17)

Net (decrease) in cash

$(326)

$(350)

Operating Activities

Net cash (used in) operating activities was $(46,393) in the six months ended September 30, 2012 compared with net cash used in operating activities of $(43,450) in the same period in 2011.  The increase in cash (used in) operating activities of $2,942 is mainly attributed to both a decrease in the net (loss) for the current year offset by a decreased change in accounts payable.  

Investing Activities

Net cash provided by investing activities amounted to $Nil for both years.  


Financing Activities

Net cash provided by financing activities was $64,415 in the six months ended September 30, 2012 compared to net cash provided by financing activities of $43,117 in the six months ended September 30, 2011.  The difference resulted from advances under the loan agreement of $21,298 in the six months ended September 30, 2012.  All activities derive from loan proceeds from a related party.

Loans Payable

On March 31, 2006, we entered into a revised loan agreement with a related party.  The loan bears interest at 15% per annum, calculated and compounded monthly and payable quarterly.  Any principal amount outstanding under the loan is payable upon demand.  The loan payable is in Canadian dollars and is secured by a Promissory Note.  As at March 31, 2012 the loan, together with accrued interest totalled US $872,935.  During the six months ended September 30, 2012, we increased the debt by an additional US $64,415.  Together with accrued interest the loan balance totalled US $960,329 at September 30, 2012.  

Going Concern

The audited financial statements accompanying our annual report on Form 10-K for the year ended March 31, 2012 have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business.  Our company has incurred losses since inception in excess of $7.9 million and has only generated modest profitable operations when we commenced gas production in fiscal 2006.  We have relied solely on shareholder advances to participate and continue operations.

Our company’s ability to continue as a going concern is contingent upon being able to secure financing and attain profitable operations.  Our company is currently evaluating business opportunities and will require financing for acquisition of any new business venture.    

Net cash (used in) operating activities in fiscal 2013 totalled $(46,393) versus net cash used in operating activities of $(43,452) in fiscal 2012.  Cash balances were $10,468 and $8,920 as of September 30, 2012 and September 30, 2011, respectively.

We entered into bridge loan agreements with a related party, in 2003 and 2004 to fund operations.  The terms of these bridge loan agreements provided that any principal amount outstanding is payable upon demand and bears interest at 15% per annum, payable quarterly. On March 31, 2006, we consolidated and restructured our loans with the related party.  As part of the restructuring, we borrowed an additional CDN $250,000 (US $203,932).  The new loan bears interest at 15% per annum, calculated and compounded monthly and is payable quarterly. Any principal amount outstanding under the loan is payable upon demand.  The loan is payable in Canadian dollars and is secured by a Promissory Note.  

As at March 31, 2012 the loan, together with accrued interest totalled $872,936.  During the three months ended September 30, 2012, we borrowed an additional $39,510.  Together with accrued interest the loan balance totalled $960,329 at September 30, 2012.  

We have limited operating history.  We can only estimate the future needs for capital based on the current status of our operations, our current plans and current economic condition.  Due to the uncertainties regarding our future activities, we are unable to predict precisely what amount will be used for any particular purpose.

Future Financings

As of September 30, 2012, we had cash of $10,468.  We currently do not have sufficient funds to acquire and develop any future joint ventures.  We anticipate continuing to rely on shareholder loans or equity sales of our common stock in order to fund our business operations.   Issuances of additional shares will result in dilution to our existing stockholders.  There is no assurance that we will achieve any additional sales of our equity or arrange for more debt or other financing to fund any future activities.  


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.


ITEM 4 . CONTROLS AND PROCEDURES

As required by Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive officer and financial officer evaluated our company’s disclosure controls and procedures (as define in Rules 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and financial officer concluded that as of the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and to ensure that such information is accumulated and communicated to our company’s management, including our principal executive officer and financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small staff:

1.

Lack of a sufficient number of independent directors for our board and audit committee. We currently have no independent director on our board, which is comprised of one director. As a publicly-traded company, we strive to have a majority of our board of directors be independent;

2.

Insufficient segregation of duties in our finance and accounting functions due to limited personnel. During the three months ended September 30, 2012, we had limited staff that performed nearly all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statement. This creates certain incompatible duties and lack of review over the financial reporting process that would likely result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement of our interim or annual financial statements that would not be prevented or detected; and

3.

Insufficient corporate governance policies. Although we have a code of ethics which provides broad guidelines for corporate governance, our corporate governance activities and processes are not always formally documented. Specifically, decisions made by the board to be carried out by management should be documented and communicated on a timely basis to reduce the likelihood of any misunderstandings regarding key decisions affecting our operations and management.

We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies. We intend to consider the results of our remediation efforts and related testing as part of our year-end 2012 assessment of the effectiveness of our internal control over financial reporting. Subject to receipt of additional financing, we intend to undertake the below remediation measures to address the material weaknesses described in this annual report. Such remediation activities include the following:

1.

We plan to recruit at least one, preferably two or more, additional independent board members to join our board of directors and audit committee at such time as additional board members are retained; and

2.

We intend to continue to update the documentation of our corporate governance and internal control processes, including formal risk assessment of our financial reporting processes.

It should be noted that a control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of internal control is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

There were no changes in our internal control over financial reporting during the three month period ended September 30, 2012, that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.



PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our director and officer or affiliates, or any registered or beneficial stockholder is an adverse party or has a material interest adverse to our interest.

ITEM 1A. RISK FACTORS

Much of the information included in this quarterly report includes or is based upon estimates, projections or other "forward looking statements". Such forward looking statements include any projections or estimates made by us and our management in connection with our past or future business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.

Such estimates, projections or other "forward looking statements" involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward looking statements".

Our shares of common stock are considered speculative while we continue our search for a new business opportunity. Prospective investors should consider carefully the risk factors set out below.

We have had negative cash flows from operations and if we are not able to obtain further financing, our business operations may fail.

We had a working capital deficit of $(1,327,404) as of September 30, 2012. Accordingly, we will require additional funds, either from equity or debt financing, to maintain our daily operations and to continue to evaluate joint venture opportunities. Obtaining additional financing is subject to a number of factors, including market prices, investor acceptance of any venture we may acquire in the future and investor sentiment. If we are unable to raise additional funds when required, we may be forced to delay our plan of operation and our entire business may fail.

Because of the early stage of development and the nature of our business, our securities are considered highly speculative.

Our securities must be considered highly speculative, generally because of the nature of our business and the early stage of our development. We were engaged in the business of exploring and, if warranted, developing commercial reserves of oil and gas. Our properties were in the exploration, development and production stage and had proven reserves of oil and gas as of March 31, 2008. Accordingly, we realized limited revenues and profit from our operations. Any profitability in the future will be dependent upon acquiring a new business opportunity. In September 2008, we closed the sale of our oil and gas assets in the Smoky Hill area of Alberta. The sale was effective June 1, 2008. We are now actively looking for a new business opportunity, primarily in the resource sector.

The company is categorized as a “shell company” as that term is used in the Commission’s rules.

The Commission’s rules prohibit the use of Form S-8 by a shell company, and require a shell company to file a Form 8-K to report the same type of information that would be required if it were filing to register a class of securities under the Exchange Act whenever the shell company is reporting the event that caused it to cease being a shell company. Being a shell company may adversely impact our ability to offer our stock to officers, directors and consultants, and thereby make it more difficult to attract and retain qualified individuals to perform services for the company, and will likely increase the costs of registration compliance following the completion of a business combination.

A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our operations.

A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Any reduction in our ability to raise equity capital in the future could have a significant negative effect on our business plans and our ability to develop new products. If our stock price declines, we may not be able to raise additional capital sufficient to acquire new business.

Our accounts are subject to currency fluctuations which may materially affect our financial position and results of operations.

As a result of maintaining some of our accounts in Canadian currency; we are subject to foreign exchange fluctuations. Such fluctuations may materially affect our financial position and results of operations. We do not engage in currency hedging activities.

We may not be able to manage the significant strains that future growth may place on our administration infrastructure, systems and controls.

In the event we are able to acquire a new joint venture and experience any rapid expansion over current levels, we could experience rapid growth in revenues, personnel, complexity of administration and in other areas. There can be no assurance that we will be able to manage the significant strains that future growth may place on our administrative infrastructure, systems, and controls. If we are unable to manage future growth effectively, our business, operating results and financial condition may be materially adversely affected.

The loss of John Hislop would have an adverse impact on future development and could impair our ability to succeed.

We are dependent on our ability to hire and retain highly skilled and qualified personnel. We face competition for qualified personnel from numerous industry sources, and there can be no assurance that we will be able to attract and retain qualified personnel on acceptable terms. We do not have key man insurance on our employee. The loss of the services of Mr. Hislop could have a material adverse effect on our operations or financial condition.

Our management currently engages in other oil and gas businesses and, as a result, conflicts could arise.

In addition to their interest in our company, our management currently engages, and intends to engage in the future, in the oil and gas business independently of our company. As a result, conflicts of interest between us and the management of our company might arise.

The British Columbia Securities Commission has issued a cease trade order affecting our company’s common stock in British Columbia


We have received notice that the British Columbia Securities Commission (“BCSC”) issued a Cease Trade Order (the “Order”) with respect to our company’s securities under the British Columbia Securities Act (the “BC Act”). The Order was made due to our company’s failure to file on SEDAR comparative annual financial statements for our financial year ended March 31, 2009, interim financial statements for the interim periods ended December 31, 2008 and December 31, 2008, Form 51-102F1 Management’s Discussion and Analysis for the periods ended December 31, 2008, December 31, 2008 and March 31, 2009 and a Form 51-102F Annual Information Form for the year ended March 31, 2009 (the “2009 Form 51-102F2”).

As of the date of this Quarterly Report on Form 10-Q, we have filed each of these documents as required by the Order and all documents required to be filed on SEDAR to date. We are currently taking steps to obtain a revocation of the Order in accordance with National Policy 12-202 Revocation of a Compliance-related Cease Trade Order.

The Order requires that all trading of our company’s securities in British Columbia, Canada cease until the Executive Director has made an order under section 164 of the BC Act revoking the Order.

The fact that the BCSC issued the Order, and/or any resolution of the Order, may not only cause our company to expend resources, but may also have a negative effect on the Company’s securities, which could result in a decline in the value of our securities or cause them to be valueless. Furthermore, until the Order is lifted, trading of our securities in British Columbia will be prohibited, which could cause our company’s common stock to have less liquidity and will mean that residents of British Columbia will be prohibited from buying and selling our securities.

Trading of our stock may be restricted by the SEC’s “Penny Stock” regulations which may limit a stockholder’s ability to buy and sell our stock.

The U.S. Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to person other than established customers and “accredited investors.” The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and sales person compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to

recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

Since our shares are thinly traded, and trading on the OTC Bulletin Board may be limited and sporadic because it is not an exchange, stockholders may have difficulty reselling their shares or liquidating their investments.

Our shares of common stock are currently listed for public trading on the OTC Markets Group Inc. The trading price of our shares of common stock has been subject to wide fluctuations. Trading prices of our shares of common stock may fluctuate in response to a number of factors, many of which will be beyond our control. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with no current business operation. There can be no assurance that trading prices and price earnings ratios previously experienced by shares of our common stock will be matched or maintained. These broad market and industry factors may adversely affect the market price of the shares of our common stock, regardless of our operating performance.


In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management's attention and resources.

Our By-laws contain provisions indemnifying our officers and directors against all costs, charges and expenses incurred by them.

Our By-laws contain provisions with respect to the indemnification of our officers and directors against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment on transactions, actually and reasonably incurred by him, including an amount paid to settle an action or satisfy a judgment in a civil, criminal or administrative action or proceeding to which he is made a party by reason of his being or having been one of our directors or officers.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of our company under Wyoming law or otherwise, we have been advised that the opinion of the Securities and Exchange Commission is that such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

Investors’ interests in our company will be diluted and investors may suffer dilution in their net book value per share if we issue additional shares or raise funds through the sale of equity securities.

Our constating documents authorize the issuance of 50,000,000 shares of common stock, each with a par value of $0.001. In the event that we are required to issue any additional shares or enter into private placements to raise financing through the sale of equity securities, investors' interests in our company will be diluted and investors may suffer dilution in their net book value per share depending on the price at which such securities are sold. If we issue any such additional shares, such issuances also will cause a reduction in the proportionate ownership and voting power of all other shareholders. Further, any such issuance may result in a change in our control.

Our By-laws do not contain anti-takeover provisions which could result in a change of our management and directors if there is a take-over of our company.

We do not currently have a shareholder rights plan or any anti-takeover provisions in our By-laws. Without any anti-takeover provisions, there is no deterrent for a take-over of our company, which may result in a change in our management and directors.

Since our director and officer is not a resident of the United States, investors may find it difficult to enforce, within the United States, any judgments obtained against our company or our director and officer.

We do not currently maintain a permanent place of business within the United States. In addition, our director and officer is not a resident of the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against our company or our officer or director, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.

Risks Relating to the Industry

Exploration for economic reserves of oil and gas is subject to risk and there can be no assurance that we will establish commercial discoveries.

Exploration for economic reserves of oil and gas is subject to a number of risk factors. While the rewards to an investor can be substantial if an economically viable discovery is made, few of the properties that are explored are ultimately developed into producing oil and/or gas wells. There can be no assurance that we will establish commercial discoveries.

A decline in oil and natural gas prices would have an adverse impact on our operations

Our revenues, cash flows and profitability were substantially dependent upon prevailing prices for oil and natural gas. In recent years, oil and natural gas prices, and therefore, the level of drilling, exploration, development and production, have been extremely volatile. Any significant or extended decline in oil or natural gas prices would have a material adverse effect on our business, financial condition and results of operations and could impair access to future sources of capital. Volatility in the oil and natural gas industry results from numerous factors, over which we have no control including:

·

the level of oil and natural gas prices, expectations about future oil and natural gas prices and the ability of international cartels to set and maintain production levels and prices;

·

the cost of exploring for, producing and transporting oil and natural gas;

·

the domestic and foreign supply of oil and natural gas;

·

domestic and foreign governmental regulations;

·

the level and price of foreign oil and natural gas transportation;

·

available pipeline and other oil and natural gas transportation capacity;

·

weather conditions;

·

international political, military, regulatory and economic conditions;

·

the level of consumer demand;

·

the price and the availability of alternative fuels;

·

the effect of worldwide energy conservation measures;

·

the ability of oil and natural gas companies to raise capital;

·

significant declines in oil and natural gas prices for an extended period may;

·

impair our financial condition, liquidity, ability to finance future plans;

·

reduce the amount of oil and natural gas that we could produce economically;

·

cause us to delay or postpone some of our capital projects;

·

reduce our revenues, operating income and cash flow; and

·

reduce the carrying value of oil and natural gas properties.

No assurance can be given that current levels of oil and natural gas prices will continue. We expect oil and natural gas prices, as well as the oil and natural gas industry generally, to continue to be volatile.

Financial success depends on our ability to acquire reserves in the future

Our future success depends upon our ability to find, develop and acquire oil and natural gas reserves that are profitable. Oil and natural gas are depleting assets and production from oil and natural gas from properties declines as reserves are depleted with the rate of decline depending on reservoir characteristics. If we are unable to conduct future successful exploration or development activities or acquire properties containing proved reserves our cash flows, will be adversely affected. Acquiring reserves through exploration, development activities or acquisitions will require significant capital which may not be available to us.

The potential profitability of oil and gas ventures depends upon factors beyond the control of our company.

The potential profitability of oil and gas properties is dependent upon many factors beyond our control. For instance, world prices and markets for oil and gas are unpredictable, highly volatile, potentially subject to governmental fixing, pegging, controls, or any combination of these and other factors, and respond to changes in domestic, international, political, social and economic environments. Additionally, due to worldwide economic uncertainty, the availability and cost of funds for production and other expenses have become increasingly difficult, if not impossible, to project. These changes and events may materially affect our financial performance.

Adverse weather conditions can also hinder drilling operations. A productive well may become uneconomic in the event water or other deleterious substances are encountered which impair or prevent the production of oil and/or gas from the well. In addition, production from any well may be unmarketable if it is impregnated with water or other deleterious substances. The marketability of oil and gas which may be acquired or discovered will be affected by numerous factors beyond our control. These factors include the proximity and capacity of oil and gas pipelines and processing equipment, market fluctuations of prices, taxes, royalties, land tenure, allowable production and environmental protection. The extent of these factors cannot be accurately predicted but the combination of these factors may result in our company not receiving an adequate return on invested capital.

Competition in the oil and gas industry is highly competitive and there is no assurance that we will be successful in acquiring desirable oil and gas leases.

The oil and gas industry is intensely competitive. We compete with numerous individuals and companies, including many major oil and gas companies, which have substantially greater technical, financial and operational resources and staff. Accordingly, there is a high degree of competition for desirable oil and gas leases, suitable properties for drilling operations and necessary drilling equipment, as well as for access to funds. We cannot predict if the necessary funds can be raised or that any project work will be completed. Acreage may not become available or if it is available for leasing we may not be successful in acquiring the leases.


The marketability of natural resources will be affected by numerous factors beyond our control which may result in us not receiving an adequate return on invested capital, to be profitable or viable.

The marketability of natural resources which may be acquired or discovered by us will be affected by numerous factors beyond our control. These factors include market fluctuations in oil and gas pricing and demand, the proximity and capacity of natural resource markets and processing equipment, governmental regulations, land tenure, land use, regulation concerning the importing and exporting of oil and gas and environmental protection regulations. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an adequate return on invested capital, to be profitable or viable.


Oil and gas operations are subject to comprehensive regulation which may cause substantial delays or require capital outlays in excess of those anticipated causing adverse effect on our company.

Oil and gas operations are subject to federal and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Oil and gas operations are also subject to federal and local laws and regulations, which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment. Various permits from government bodies are required for drilling operating to be conducted; no assurance can be given that such permits will be received. Environmental standards imposed by federal, provincial, or local authorities may be changed and any such changes may have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us.

Exploration and production activities are subject to certain environmental regulations which may prevent or delay the commencement of our operations.

In general, our exploration and production activities have been in the past and will continue to be subject to certain federal and local laws and regulations relating to environmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuance of a given operations. Compliance with these laws and regulations did not have a material effect on our operations or financial condition to date. Legislation has been enacted which requires well and facility sites to be abandoned and reclaimed to the satisfaction of state authorities. However, such laws and regulations are frequently changed and we are unable to predict the ultimate cost of compliance. Generally, environmental requirements have not appeared to affect us any differently or to any greater or lesser extent than other companies in the industry. We believe that our operations to date have complied, in all material respects, with all applicable environmental regulations. In the past, our operating partners have maintained insurance coverage customary to the industry; however, we are not fully insured against all environmental risks.

Exploratory drilling involves many risks and we may become liable for pollution or other liabilities which may have an adverse effect on our financial position.

Drilling operations generally involve a high degree of risk. Hazards such as unusual or unexpected geological formations, power outages, labor disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labor, and other risks are involved. We may become subject to liability for pollution or hazards against which we cannot adequately insure or which we may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position and operations.

Any change to governmental regulation/administrative practices may have a negative impact on our ability to operate and our profitability.

The laws, regulations, policies or current administrative practices of any governmental body, organization or regulatory agency in the United States or any other jurisdiction, may be changed, applied or interpreted in a manner which will fundamentally alter the ability of our company to carry on its business. The actions, policies or regulations, or changes thereto, of any government body or regulatory agency or other special interest groups, may have a detrimental effect on our company. Any or all of these situations may have a negative impact on our ability to operate and/or become profitable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Exhibits Required by Item 601 of Regulation S-K

Exhibit Number and Description

(3)

Articles of Incorporation/Bylaws

3.1

Certificate of Merger (Delaware) effective June 12, 2003 (incorporated by reference from our Quarterly Report on Form 10-QSB filed with the Securities and Exchange Commission on August 19, 2003)

3.2

Certificate of Merger (Wyoming) effective June 13, 2003 (incorporated by reference from our Quarterly Report on Form 10-QSB filed with the Securities and Exchange Commission on August 19, 2003)

3.3

Amended & Restated Bylaws (Wyoming) (Incorporated by reference from our Quarterly Report on Form 10QSB filed with the Securities and Exchange Commission on November 14, 2003)

3.4

Certificate of Incorporation (incorporated by reference from our Annual Report on Form 10K filed with the Securities and Exchange Commission on August 13, 2010)

(10)

Material Contracts

10.1

1999 Stock Option Plan (incorporated by reference from our Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on March 31, 2000)

10.2

Farm-in Agreement with Olympia Energy Inc., dated November 21, 2001 (incorporated by reference from our Quarterly Report on Form 10-QSB filed with the Securities and Exchange Commission on February 14, 2002).

10.3

Agreement with Netco Energy Inc. dated January 10, 2005 (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 28, 2005).

10.4

Demand Promissory Note issued to Caravel Management Inc., dated March 31, 2006 (incorporated by reference from our Annual Report on Form 10K filed with the Securities and Exchange Commission on August 13, 2010).

10.5

Petroleum, Natural Gas and Related Rights Conveyance dated September 18, 2008 between Nation Energy Inc., Netco Energy Inc. and EnCana Oil & Gas Partnership (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 24, 2008).

10.6

Termination Agreement dated September 26, 2008 between Nation Energy Inc., and EnCana Oil & Gas Partnership (incorporated by reference from our Annual Report on Form 10K filed with the Securities and Exchange Commission on August 13, 2010).

10.7

Management Services Agreement dated January 1, 2009 between Nation Energy Inc., and Caravel Management Corp. (incorporated by reference from our Annual Report on Form 10K filed with the Securities and Exchange Commission on August 13, 2010).

10.8

Management Services Agreement dated November 1, 2010 between Nation Energy Inc., and Caravel Management Corp. (incorporated by reference from our Annual Report on Form 10K filed with the Securities and Exchange Commission on December 2, 2010)

(14)

Code of Ethics

14.1

Code of Business Conduct and Ethics (incorporated by reference from our Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on July 15, 2004).


(31)

Section 302 Certifications

31.1*

Section 302 Certification under Sarbanes-Oxley Act of 2002

(32)

Section 906 Certifications

32.1*

Section 906 Certification under Sarbanes-Oxley Act of 2002

(99)

Additional Exhibits

99.1

Audit Committee Charter (incorporated by reference from our Annual Report on Form 10K filed with the Securities and Exchange Commission February 9, 2011)

(101)

XBRL-Related Documents

101.INS*

XBRL INSTANCE DOCUMENT

101.SCH*

XBRL TAXONOMY EXTENSION SCHEMA

101.CAL*

XBRL TAXONOMY EXTENSION CALCULATION LINKBASE

101.DEF*

XBRL TAXONOMY EXTENSION DEFINITION LINKBASE

101.LAB*

XBRL TAXONOMY EXTENSION LABEL LINKBASE

101.PRE*

XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

*Filed herewith

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NATION ENERGY INC.

By: “John R. Hislop”

John Hislop, Chief Executive Officer, and Chief Financial Officer,

Date: November 14 , 2012



CERTIFICATIONS

Exhibit 31.1

I, John Hislop, Chief Executive Officer and Chief Financial Officer, certify that:

1.

I have reviewed this Form 10-Q of Nation Energy Inc.

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and reporting financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:  November 14, 2012

“John R. Hislop”

John Hislop,

Chief Executive Officer and Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,


AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, John Hislop Chief Executive Officer and Chief Financial Officer of Nation Energy Inc.(“the Company”) hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(a)

the quarterly report on Form 10-Q of the Company for the quarterly period ended September 30, 2012 (“the Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(b)

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

Dated: November 14, 2012

John R. Hislop

John Hislop

Chief Executive Officer and Chief Financial Officer

Nation Energy Inc.

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 960, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.