Attached files
As filed with the Securities and Exchange Commission on December 10, 2013
Registration No.333-191164
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
AMENDMENT NO. 1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FUELS, INC.
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(Exact name of registrant as specified in its charter)
WYOMING 1381 83-0326780
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(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
P.O. Box 917, Casper, Wyoming, 82602/ Phone (307)472-3000
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(Address and telephone number of principal executive offices)
Roy C. Smith, President
P.O. Box 917, Casper, Wyoming, 82602/ Phone (307)472-3000
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(Name, address and telephone number of agent for service)
COPIES OF ALL COMMUNICATIONS TO:
Michael A. Littman, Attorney at Law
7609 Ralston Road, Arvada, CO, 80002 phone 303-422-8127 / fax 303-431-1567
Approximate date of commencement of proposed sale to the public: As soon as
possible after this Registration Statement becomes effective.
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. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer [___] Accelerated filer [___]
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Non-accelerated filer [___] Smaller reporting company [_X_]
(Do not check if a smaller
reporting company)
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER SHARE PRICE(1) FEE
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Common Stock by Selling 1,020,000 $0.10 $102,000 $13.91(2)
Shareholders
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(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(o) under the Securities Act.
(2) The Registration Fee of $13.91 was paid in September 2013.
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 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
ii
(SUBJECT TO COMPLETION)
PROSPECTUS
FUELS, INC.
1,020,000 SHARES OF COMMON STOCK OF SELLING SHAREHOLDERS
We are registering 1,020,000 shares listed for sale on behalf of selling
shareholders. We will NOT receive any proceeds from sales of shares by selling
shareholders.
Our selling shareholders plan to sell common shares at $0.10, until such time as
a market develops for any of the securities and thereafter at such prices as the
market may dictate from time to time. There is no market price for the stock and
our pricing is arbitrary with no relation to market value, liquidation value,
earnings or dividends. The price was arbitrarily set at $0.10 per share, based
on speculative concept unsupported by any other comparables.
We have set the initial fixed prices as follows:
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TITLE PER SECURITY
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Common Stock $0.10
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At any time after a market develops, our security holders may sell their
securities at market prices or at any price in privately negotiated
transactions.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK; SEE "RISK FACTORS" BEGINNING ON
PAGE 5 TO READ ABOUT FACTORS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF THE
COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC") OR ANY STATE OR PROVINCIAL SECURITIES
COMMISSION, NOR HAS THE SEC OR ANY STATE OR PROVINCIAL SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
We intend to have an application filed on our behalf by a market maker for
approval of common stock for quotation on the Over-the Counter/Bulletin Board
quotation system tradable separately, subject to effectiveness of the
Registration Statement. It has not yet been filed, nor is there any selected
broker/dealer as yet. Our common stock is presently not listed on any national
securities exchange or the NASDAQ Stock Market or any other venue.
This offering will be on a delayed and continuous basis for sales of selling
shareholders shares. The selling shareholders are not paying any of the offering
expenses and we will not receive any of the proceeds from the sale of the shares
by the selling shareholders (See "Description of Securities - Shares").
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.
The date of this Prospectus is December 10, 2013.
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TABLE OF CONTENTS
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PART I - INFORMATION REQUIRED Page No.
IN PROSPECTUS
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ITEM 1. Front of Registration Statement and Outside Front Cover Page
of Prospectus
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ITEM 2. Prospectus Cover Page 1
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ITEM 3. Prospectus Summary Information, Risk Factors and Ratio of 3
Earnings to Fixed Charges
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ITEM 4. Use of Proceeds 11
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ITEM 5. Determination of Offering Price 12
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ITEM 6. Dilution 12
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ITEM 7. Selling Security Holders 13
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ITEM 8. Plan of Distribution 14
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ITEM 9. Description of Securities 14
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ITEM 10. Interest of Named Experts and Counsel 15
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ITEM 11. Information with Respect to the Registrant 15
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a. Description of Business 15
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b. Description of Property 21
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c. Legal Proceedings 21
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d. Market for Common Equity and Related Stockholder Matters 21
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e. Financial Statements 22
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f. Selected Financial Data 23
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g. Supplementary Financial Information 23
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h. Management's Discussion and Analysis of Financial Condition 23
and Results of Operations
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i. Changes In and Disagreements With Accountants on Accounting 25
and Financial Disclosure
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j. Quantitative and Qualitative Disclosures About Market Risk 25
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k. Directors and Executive Officers 26
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l. Executive and Directors Compensation 27
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m. Security Ownership of Certain Beneficial Owners and 28
Management
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n. Certain Relationships, Related Transactions, Promoters And 29
Control Persons
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ITEM 11 A. Material Changes 29
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ITEM 12. Incorporation of Certain Information by Reference 29
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ITEM 12 A. Disclosure of Commission Position on Indemnification for 29
Securities Act Liabilities
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PART II - INFORMATION NOT
REQUIRED IN PROSPECTUS
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ITEM 13. Other Expenses of Issuance and Distribution 30
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ITEM 14. Indemnification of Directors and Officers 30
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ITEM 15. Recent Sales of Unregistered Securities 31
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ITEM 16. Exhibits and Financial Statement Schedules 31
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ITEM 17. Undertakings 31
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Signatures 32
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ITEM 3. PROSPECTUS SUMMARY INFORMATION, RISK FACTORS AND RATIO OF EARNINGS TO
FIXED CHARGES
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OUR COMPANY
Fuels, Inc. ("We," "Us," "Our") was organized under the laws of the State of
Wyoming on May 25, 1999. It is a Wyoming corporation organized for the purpose
of engaging in any lawful business with a current plan to engage in the
acquisition, exploration, and if warranted, development of oil and gas
prospects. We intend to seek to participate in oil and gas prospects located in
the state of Wyoming and may participate in oil and gas prospects located in the
states of Wyoming, Kansas, New Mexico, Texas, Oklahoma and Colorado. We have a
working interest in an oil and gas lease in Natrona County, Wyoming, upon which
we are developing geological data from which to determine potential drilling
targets. We then intend to attempt to syndicate drilling participation in an
exploratory well on the lease. Our main emphasis will be to acquire, either by
lease or purchase, an interest in oil or gas properties for exploration, when
available, with third parties.
We have begun initial minimal operations and are currently without revenue. We
have no employees at the present time. Through the period ended December 31,
2012, the executive officers contributed their services and have not begun to be
compensated.
We are in the developmental stage of our business, and we anticipate that
operations will begin in late 2013.
Our Auditors have issued a going concern opinion and the reasons noted for
issuing the opinion are our lack of revenues and modest capital.
Factors that make this offering highly speculative or risky are:
o There is no market for any securities;
o We have no revenues or sales;
o We are start up company;
o We have no experience in the energy exploration business as a company;
o We are undercapitalized.
Our executive offices are located at P.O. Box 917, Casper, Wyoming, 82602 and
the telephone number is (307)472-3000.
JUMPSTART OUR BUSINESS STARTUPS ACT
We qualify as an "emerging growth company" as defined in Section 101 of the
Jumpstart our Business Startups Act ("JOBS Act") as we do not have more than
$1,000,000,000 in annual gross revenue and did not have such amount as of
December 31, 2012, our last fiscal year.
We may lose our status as an emerging growth company on the last day of our
fiscal year during which (i) our annual gross revenue exceeds $1,000,000,000 or
(ii) we issue more than $1,000,000,000 in non-convertible debt in a three-year
period. We will lose our status as an emerging growth company if at any time we
are deemed to be a large accelerated filer. We will lose our status as an
emerging growth company on the last day of our fiscal year following the fifth
anniversary of the date of the first sale of common equity securities pursuant
to an effective registration statement.
As an emerging growth company, we may take advantage of specified reduced
reporting and other burdens that are otherwise applicable to generally reporting
companies. These provisions include:
- A requirement to have only two years of audited financial statement
and only two years of related Management Discussion and Analysis
Disclosures:
- Reduced disclosure about the emerging growth company's executive
compensation arrangements; and
- No non-binding advisory votes on executive compensation or golden
parachute arrangements.
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As an emerging growth company, we are exempt from Section 404(b) of the
Sarbanes-Oxley Act of 2002 and Section 14A(a) and (b) of the Securities Exchange
Act of 1934. Such sections are provided below:
Section 404(b) of the Sarbanes-Oxley Act of 2002 requires a public
company's auditor to attest to, and report on, management's assessment
of its internal controls.
Sections 14A(a) and (b) of the Securities and Exchange Act, implemented
by Section 951 of the Dodd-Frank Act, require companies to hold
shareholder advisory votes on executive compensation and golden
parachute compensation.
We have already taken advantage of these reduced reporting burdens in this
registration statement, which are also available to us as a smaller reporting
company as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
As long as we qualify as an emerging growth company, we will not be required to
comply with the requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002
and Section 14A(a) and (b) of the Securities Exchange Act of 1934.
In addition, Section 107 of the JOBS Act also provides that an emerging growth
company can take advantage of the extended transition period provided in Section
7(a)(2)(B) of the Securities Act of 1933, as amended (the "Securities Act") for
complying with new or revised accounting standards. We are choosing to
irrevocably opt out of the extended transition period for complying with new or
revised accounting standards under Section 102(b)(2) of the JOBS Act.
SUMMARY OF FINANCIAL INFORMATION
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As at September 30, 2013
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Total Assets $2,500
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Current Liabilities $-0-
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Stockholders' Equity $2,500
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From May 25, 1999 to September 30, 2013
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Revenues $-0-
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Net Loss at September 30, 2013 $-0-
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As of September 30, 2013 and December 31, 2012, accumulated deficit for our
business was $2,100. We anticipate that we will operate in a deficit position
and continue to sustain net losses for the foreseeable future.
THE OFFERING
We are registering 1,020,000 shares listed for sale on behalf of selling
shareholders.
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Common shares outstanding before this offering 3,220,000
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Maximum common shares being offered by selling shareholders 1,020,000
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We are authorized to issue 50,000,000 shares of common stock. Our current
shareholders, officers and directors collectively own 3,220,000 shares of
restricted common stock. These shares were issued at a price of $0.003 per share
for 720,000 shares and $0.001 for 2,500,000 shares.
There is currently no public market for our shares as it is presently not traded
on any market or securities exchange.
GLOSSARY
The following are definitions of terms used in this Memorandum:
BBL. An abbreviation for the term "barrel" which is a unit of
measurement of volume of oil or related petroleum products. One barrel (one bbl)
is the equivalent of 42 U.S. gallons or approximately 159 liters.
DEVELOPMENT WELL. A well drilled to a known producing formation in a
previously discovered field, usually offsetting a producing well on the same or
an adjacent oil and gas lease.
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EXPLORATORY WELL. A well drilled either (a) in search of a new and as
yet undiscovered pool of oil or gas or (b) with the hope of significantly
extending the limits of a pool already developed (also known as a "wildcat
well").
FARMOUT. An agreement whereby the owner of the leasehold or working
interest agrees to assign a portion of his interest in certain acreage subject
to the drilling of one or more specific wells or other performance by the
assignee as a condition of the assignment. Under a farmout, the owner of the
leasehold or working interest may retain some interest such as an overriding
royalty interest, an oil and gas payment, offset acreage or other type of
interest.
GROSS ACRE. An acre in which a working interest is owned. The number of
gross acres is the total number of acres in which an interest is owned (see "Net
Acre" below).
LEASES. Full or partial interests in oil or gas properties authorizing
the owner of the lease to drill for, produce and sell oil and gas upon payment
of rental, bonus, royalty or any of them. Leases generally are acquired from
private landowners (fee leases) and from federal and state governments on
acreage held by them.
MCF. An abbreviation for "1,000 cubic feet," which is a unit of
measurement of volume for natural gas.
NET WELL OR ACRE. A net well or acre exists when the sum of the
fractional ownership working interests in gross wells or acres equals one. The
number of net wells or acres is the sum of the factional working interests owned
in gross wells or acres expressed as whole number and fractions thereof.
OVERRIDING ROYALTY. An interest in the gross revenues or production
over and above the landowner's royalty carved out of the working interest and
also unencumbered with any expenses of operation, development or maintenance.
PROSPECT. A geological area which is believed to have the potential for
oil or gas production.
WORKING INTEREST. An interest in an oil and gas lease entitling the
holder at its expense to conduct drilling and production operations on the
leased property and to receive the net revenues attributable to such interest,
after deducting the landowner's royalty, any overriding royalties, production
costs, taxes and other costs.
OUR COMPANY RISK FACTORS
Our securities, as offered hereby, are highly speculative and should be
purchased only by persons who can afford to lose their entire investment in us.
Each prospective investor should carefully consider the following risk factors,
as well as all other information set forth elsewhere in this prospectus, before
purchasing any of the shares of our common stock.
OUR BUSINESS IS A DEVELOPMENT STAGE COMPANY AND UNPROVEN AND THEREFORE RISKY.
We have only very recently adopted the business plan described herein-above.
Potential investors should be made aware of the risk and difficulties
encountered by a new enterprise in the energy business, especially in view of
the intense competition from existing businesses in the industry.
WE HAVE BOTH A MINIMAL OPERATING HISTORY AND A LACK OF REVENUE HISTORY AND
INVESTORS CANNOT VIEW OUR PAST PERFORMANCE SINCE WE ARE A START-UP COMPANY.
We were formed on May 25, 1999 for the purpose of engaging in any lawful
business and have adopted a plan to engage the acquisition, exploration, and if
warranted, development of natural resource properties in the last year. We have
had no revenues in the last five years. We are not profitable and the business
effort is considered to be in an early development stage. We must be regarded as
a new or development venture with all of the unforeseen costs, expenses,
problems, risks and difficulties to which such ventures are subject.
WE ARE NOT DIVERSIFIED AND WE WILL BE DEPENDENT ON ONLY ONE BUSINESS.
Because of the limited financial resources that we have, it is unlikely that we
will be able to diversify our operations. Our probable inability to diversify
our activities into more than one area will subject us to economic fluctuations
within the energy industry and therefore increase the risks associated with our
operations due to lack of diversification.
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WE CAN GIVE NO ASSURANCE OF SUCCESS OR PROFITABILITY TO OUR INVESTORS.
There is no assurance that we will ever operate profitably. There is no
assurance that we will generate revenues or profits, or that the market price of
our common stock will be increased thereby.
WE HAVE A SHORTAGE OF WORKING CAPITAL IN THE FUTURE WHICH COULD JEOPARDIZE OUR
ABILITY TO CARRY OUT OUR BUSINESS PLAN.
Our capital needs consist primarily of expenses related to geological
evaluation, general and administrative and potential exploration participation
and could exceed $250,000 in the next twelve months. Such funds are not
currently committed, and at the time of this filing we do not have cash on hand
to support our operations.
We have no operating history and no revenues and it may be unlikely that we will
raise that additional working capital.
WE WILL HAVE SIGNIFICANT ADDITIONAL FINANCING REQUIREMENTS TO FUND OUR FUTURE
ACTIVITIES.
If we find oil and gas reserves to exist on a prospect we will need substantial
additional financing to fund the necessary exploration and development work.
Furthermore, if the results of that exploration and development work are
successful, we will need substantial additional funds for continued development.
We will not have sufficient proceeds from this offering to conduct such work
and, therefore, we will need to obtain the necessary funds either through debt
or equity financing, some form of cost-sharing arrangement with others, or the
sale of all or part of the property. There is no assurance that we will be
successful in obtaining any financing. These various financing alternatives may
dilute the interest of our shareholders and/or reduce our interest in the
properties. (See "Use of Proceeds" and "Our Business")
WE MAY DEPEND UPON OUTSIDE ADVISORS, WHO MAY NOT BE AVAILABLE ON REASONABLE
TERMS AND AS NEEDED.
To supplement the business experience of our officers and directors, we may be
required to employ accountants, technical experts, appraisers, attorneys, or
other consultants or advisors. Our Board without any input from stockholders
will make the selection of any such advisors. Furthermore, we anticipate that
such persons will be engaged on an "as needed" basis without a continuing
fiduciary or other obligation to us. In the event we consider it necessary to
hire outside advisors, we may elect to hire persons who are affiliates, if they
are able to provide the required services.
OUR OFFICERS AND DIRECTORS ARE NOT EMPLOYED FULL-TIME BY US WHICH COULD BE
DETRIMENTAL TO THE BUSINESS.
Our directors and officers are, or may become, in their individual capacities,
officers, directors, controlling shareholder and/or partners of other entities
engaged in a variety of businesses. Thus, our officers and directors may have
potential conflicts including their time and efforts involved in participation
with other business entities. Each officer and director of our business is
engaged in business activities outside of our business, and the amount of time
they devote as Officers and Directors to our business will be up to 5 hours per
week. (See "Executive Team")
We do not know of any reason other than outside business interests that would
prevent them from devoting full-time to our Company, when the business may
demand such full-time participation.
OUR OFFICERS AND DIRECTORS MAY HAVE CONFLICTS OF INTEREST WHICH MAY NOT BE
RESOLVED FAVORABLY TO US.
Certain conflicts of interest may exist between us and our officers and
directors. Our Officers and Directors have other business interests to which
they devote their attention and may be expected to continue to do so although
management time should be devoted to our business. As a result, conflicts of
interest may arise that can be resolved only through exercise of such judgment
as is consistent with fiduciary duties to us. See "Directors and Executive
Officers" (page 26), and "Conflicts of Interest" (page 26). Our officers are
spending part-time in this business - up to 5 hours per week.
WE HAVE AGREED TO INDEMNIFICATION OF OFFICERS AND DIRECTORS AS IS PROVIDED BY
WYOMING STATUTE.
Wyoming Statutes provide for the indemnification of our directors, officers,
employees, and agents, under certain circumstances, against attorney's fees and
other expenses incurred by them in any litigation to which they become a party
arising from their association with or activities our behalf. We will also bear
the expenses of such litigation for any of our directors, officers, employees,
or agents, upon such person's promise to repay us therefore if it is ultimately
determined that any such person shall not have been entitled to indemnification.
This indemnification policy could result in substantial expenditures by us that
we will be unable to recoup.
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OUR DIRECTORS' LIABILITY TO US AND SHAREHOLDERS IS LIMITED
Wyoming Revised Statutes exclude personal liability of our directors and our
stockholders for monetary damages for breach of fiduciary duty except in certain
specified circumstances. Accordingly, we will have a much more limited right of
action against our directors that otherwise would be the case. This provision
does not affect the liability of any director under federal or applicable state
securities laws.
RISK FACTORS RELATING TO OUR BUSINESS
Any person or entity contemplating an investment in the securities offered
hereby should be aware of the high risks involved and the hazards inherent
therein. Specifically, the investor should consider, among others, the following
risks:
OUR BUSINESS, THE OIL AND GAS BUSINESS HAS NUMEROUS RISKS WHICH COULD RENDER US
UNSUCCESSFUL.
The search for new oil and gas reserves frequently results in unprofitable
efforts, not only from dry holes, but also from wells which, though productive,
will not produce oil or gas in sufficient quantities to return a profit on the
costs incurred. There is no assurance we will find or produce oil or gas from
any of the undeveloped acreage farmed out to us or which may be acquired by us,
nor are there any assurances that if we ever obtain any production it will be
profitable. (See "Business and Properties")
WE HAVE SUBSTANTIAL COMPETITORS WHO HAVE AN ADVANTAGE OVER US IN RESOURCES AND
MANAGEMENT.
We are and will continue to be an insignificant participant in the oil and gas
business. Most of our competitors have significantly greater financial
resources, technical expertise and managerial capabilities than us and,
consequently, we will be at a competitive disadvantage in identifying and
developing or exploring suitable prospects. Competitors resources could
overwhelm our restricted efforts to acquire and explore oil and gas prospects
and cause failure of our business plan.
WE WILL EXPERIENCE SUBSTANTIAL COMPETITION FOR SUPPLIES IN THE ENERGY INDUSTRY.
We will be required to compete with a large number of entities which are larger,
have greater resources and more extensive operating histories than we do.
Shortages of supplies may result from this competition and will lead to
increased costs and delays in operations which will have a material adverse
effect on us.
WE WILL BE SUBJECT TO ALL OF THE MARKET FORCES IN THE ENERGY BUSINESS, MANY OF
WHICH COULD POSE A SIGNIFICANT RISK TO OUR OPERATIONS.
The marketing of natural gas and oil which may be produced by our prospects will
be affected by a number of factors beyond our control. These factors include the
extent of the supply of oil or gas in the market, the availability of
competitive fuels, crude oil imports, the world-wide political situation, price
regulation, and other factors. Recently, there have been dramatic fluctuations
in oil prices. Any significant decrease in the market prices of oil and gas
could materially affect our profitability of oil and gas activities.
There generally are only a limited number of gas transmission companies with
existing pipelines in the vicinity of a gas well or wells. In the event that
producing gas properties are not subject to purchase contracts or that any such
contracts terminate and other parties do not purchase our gas production, there
is assurance that we will be able to enter into purchase contracts with any
transmission companies or other purchasers of natural gas and there can be no
assurance regarding the price which such purchasers would be willing to pay for
such gas. There may, on occasion, be an oversupply of gas in the marketplace or
in pipelines, the extent and duration may affect prices adversely. Such
oversupply may result in reductions of purchases and prices paid to producers by
principal gas pipeline purchasers. (See "Our Business and Competition, Markets,
Regulation and Taxation.")
OUR BUSINESS IS SUBJECT TO SIGNIFICANT WEATHER INTERRUPTIONS.
Our activities may be subject to periodic interruptions due to weather
conditions. Weather-imposed restrictions during certain times of the year on
roads accessing properties could adversely affect our ability to benefit from
production on such properties or could increase the costs of drilling new wells
because of delays.
WE ARE SUBJECT TO SIGNIFICANT OPERATING HAZARDS AND UNINSURED RISK IN THE ENERGY
INDUSTRY.
Our proposed operations will be subject to all of the operating hazards and
risks normally incident to exploring, drilling for and producing oil and gas,
such as encountering unusual or unexpected formations and pressures, blowouts,
environmental pollution and personal injury. We will maintain general liability
insurance but we have not obtained insurance against such things as blowouts and
7
pollution risks because of the prohibitive expense. Should we sustain an
uninsured loss or liability, or a loss in excess of policy limits, our ability
to operate may be materially adversely affected.
WE ARE SUBJECT TO FEDERAL INCOME TAX LAWS AND CHANGES THEREIN WHICH COULD
ADVERSELY IMPACT US.
Federal income tax laws are of particular significance to the oil and gas
industry in which we intend to engage. Legislation has eroded various benefits
of oil and gas producers and subsequent legislation could continue this trend.
Congress is continually considering proposals with respect to Federal income
taxation which could have a material adverse effect on our future operations and
on our ability to obtain risk capital which our industry has traditionally
attracted from taxpayers in high tax brackets.
WE ARE SUBJECT TO SUBSTANTIAL GOVERNMENT REGULATION IN THE ENERGY INDUSTRY WHICH
COULD ADVERSELY IMPACT US.
The production and sale of oil and gas are subject to regulation by state and
federal authorities, the spacing of wells and the prevention of waste. There are
both federal and state laws regarding environmental controls which may
necessitate significant capital outlays, resulting in extended delays,
materially affect our earnings potential and cause material changes in the in
our proposed business. We cannot predict what legislation, if any, may be passed
by Congress or state legislatures in the future, or the effect of such
legislation, if any, on us. Such regulations may have a significant affect on
our operating results.
WE BELIEVE INVESTORS SHOULD CONSIDER CERTAIN NEGATIVE ASPECTS OF OUR PROPOSED
OPERATIONS.
DRY HOLES: We may expend substantial funds acquiring and potentially
participating in exploring properties which we later determine not to be
productive. All funds so expended will be a total loss to us.
TECHNICAL ASSISTANCE: We will find it necessary to employ technical assistance
in the operation of our business. As of the date of this Prospectus, we have not
contracted for any technical assistance. When we need it such assistance is
likely to be available at compensation levels we would be able to pay.
UNCERTAINTY OF TITLE: We will attempt to acquire leases or interests in leases
by option, lease, farmout or by purchase. The validity of title to oil and gas
property depends upon numerous circumstances and factual matters (many of which
are not discoverable of record or by other readily available means) and is
subject to many uncertainties of existing law and our application. We intend to
obtain an oil and gas attorney's opinion of valid title before any significant
expenditure upon a lease.
GOVERNMENT REGULATIONS: The area of exploration of natural resources has become
significantly regulated by state and federal governmental agencies, and such
regulation could have an adverse effect on our operations. Compliance with
statutes and regulations governing the oil and gas industry could significantly
increase the capital expenditures necessary to develop our prospects.
Nature of our Business: Our business is highly speculative, involves the
commitment of high-risk capital, and exposes us to potentially substantial
losses. In addition, we will be in direct competition with other organizations
which are significantly better financed and staffed than we are.
GENERAL ECONOMIC AND OTHER CONDITIONS: Our business may be adversely affected
from time to time by such matters as changes in general economic, industrial and
international conditions; changes in taxes; oil and gas prices and costs; excess
supplies and other factors of a general nature.
WE WILL BE SUBJECT TO MANY FACTORS BEYOND OUR CONTROL.
The acquisition, exploration, development, production and sale of oil and gas
are subject to many factors which are outside our control. These factors include
general economic conditions, proximities to pipelines, oil import quotas, supply
and price of other fuels and the regulation of transportation by federal and
state governmental authorities.
We anticipate substantial competition in our effort to explore oil and gas
properties and may have difficulty in putting together drilling participants and
getting prospects drilled and explored. Established companies have an advantage
over us because of substantially greater resources to devote to property
acquisition and to obtain drilling rigs, equipment and personnel. If we are
unable to compete for capital, participation and drilling rigs, equipment and
personnel, our business will be adversely affected.
8
RISK FACTORS RELATED TO OUR STOCK
OUR PRESENT AND FUTURE SHAREHOLDERS WILL SUFFER DILUTION BY NEW ISSUANCES IN THE
FUTURE WHICH MAY OCCUR.
Upon the sales of shares, there may be substantial dilution to our Security
holders. The sale price of our shares is substantially higher than the pro forma
current net tangible book value per share of our outstanding common stock. The
net tangible book value attributable to our shares as of December 31, 2012 and
2011 was $0 per share, respectively. Net tangible book value per share of common
stock is determined by dividing the number of outstanding shares of common stock
into the net tangible book value attributable to our common stock, which are our
total tangible assets less our total liabilities. See "Dilution" hereinafter on
page 12.
WE MAY IN THE FUTURE ISSUE MORE SHARES WHICH COULD CAUSE A LOSS OF CONTROL BY
OUR PRESENT MANAGEMENT AND CURRENT STOCKHOLDERS.
We may issue further shares as consideration for the cash or assets or services
out of our authorized but unissued common stock that would, upon issuance,
represent a majority of the voting power and equity of our Company. The result
of such an issuance would be those new stockholders and management would control
our Company, and persons unknown could replace our management at this time. Such
an occurrence would result in a greatly reduced percentage of ownership of our
Company by our current shareholders, which could present significant risks to
investors.
WE WILL PAY NO FORESEEABLE DIVIDENDS IN THE FUTURE.
We have not paid dividends on our common stock and do not ever anticipate paying
such dividends in the foreseeable future.
NO PUBLIC MARKET EXISTS FOR OUR COMMON STOCK AT THIS TIME, AND THERE IS NO
ASSURANCE OF A FUTURE MARKET.
There is no public market for our common stock, and no assurance can be given
that a market will develop or that a shareholder ever will be able to liquidate
his investment without considerable delay, if at all. If a market should
develop, the price may be highly volatile. Factors such as those discussed in
the "Risk Factors" section may have a significant impact upon the market price
of the shares offered hereby. Due to the low price of our securities, many
brokerage firms may not be willing to effect transactions in our securities.
Even if a purchaser finds a broker willing to effect a transaction in our
shares, the combination of brokerage commissions, state transfer taxes, if any,
and any other selling costs may exceed the selling price. Further, many lending
institutions will not permit the use of our shares as collateral for any loans.
THE REGULATION OF PENNY STOCKS BY SEC AND FINRA MAY DISCOURAGE THE TRADABILITY
OF OUR SECURITIES.
We are a "penny stock" company. None of our securities currently trade in any
market and, if ever available for trading, will be subject to a Securities and
Exchange Commission rule that imposes special sales practice requirements upon
broker-dealers who sell such securities to persons other than established
customers or accredited investors. For purposes of the rule, the phrase
"accredited investors" means, in general terms, institutions with assets in
excess of $5,000,000, or individuals having a net worth in excess of $1,000,000
or having an annual income that exceeds $200,000 (or that, when combined with a
spouse's income, exceeds $300,000). For transactions covered by the rule, the
broker-dealer must make a special suitability determination for the purchaser
and receive the purchaser's written agreement to the transaction prior to the
sale. Effectively, this discourages broker-dealers from executing trades in
penny stocks. Consequently, the rule will affect the ability of purchasers in
this offering to sell their securities in any market that might develop
therefore because it imposes additional regulatory burdens on penny stock
transactions.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange
Act of 1934, as amended. Because our securities constitute "penny stocks" within
the meaning of the rules, the rules would apply to us and to our securities. The
rules will further affect the ability of owners of shares to sell our securities
in any market that might develop for them because it imposes additional
regulatory burdens on penny stock transactions.
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired consequent investor losses. Our
management is aware of the abuses that have occurred historically in the penny
stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
9
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our securities.
RULE 144 SALES IN THE FUTURE MAY HAVE A DEPRESSIVE EFFECT ON OUR STOCK PRICE.
All of the outstanding shares of common stock held by our present officers,
directors, and affiliate stockholders are "restricted securities" within the
meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted
shares, these shares may be resold only pursuant to an effective registration
statement or under the requirements of Rule 144 or other applicable exemptions
from registration under the Act and as required under applicable state
securities laws. We are registering all of our outstanding shares so officers,
directors and affiliates will be able to sell their shares if this Registration
Statement becomes effective. Rule 144 provides in essence that a person who has
held restricted securities for six months, under certain conditions, sell every
three months, in brokerage transactions, a number of shares that does not exceed
the greater of 1.0% of a company's outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to the sale. There is
no limit on the amount of restricted securities that may be sold by a
nonaffiliate after the owner has held the restricted securities for a period of
two years. A sale under Rule 144 or under any other exemption from the Act, if
available, or pursuant to subsequent registration of shares of common stock of
present stockholders, may have a depressive effect upon the price of the common
stock in any market that may develop.
OUR STOCK WILL IN ALL LIKELIHOOD BE THINLY TRADED AND AS A RESULT YOU MAY BE
UNABLE TO SELL AT OR NEAR ASK PRICES OR AT ALL IF YOU NEED TO LIQUIDATE YOUR
SHARES.
The shares of our common stock, if listed, may be thinly-traded on the OTC
Bulletin Board, meaning that the number of persons interested in purchasing our
common shares at or near ask prices at any given time may be relatively small or
non-existent. This situation is attributable to a number of factors, including
the fact that we are a small company which is relatively unknown to stock
analysts, stock brokers, institutional investors and others in the investment
community that generate or influence sales volume, and that even if we came to
the attention of such persons, they tend to be risk-averse and would be
reluctant to follow an unproven, early stage company such as ours or purchase or
recommend the purchase of any of our Securities until such time as we became
more seasoned and viable. As a consequence, there may be periods of several days
or more when trading activity in our Securities is minimal or non-existent, as
compared to a seasoned issuer which has a large and steady volume of trading
activity that will generally support continuous sales without an adverse effect
on Securities price. We cannot give you any assurance that a broader or more
active public trading market for our common Securities will develop or be
sustained, or that any trading levels will be sustained. Due to these
conditions, we can give investors no assurance that they will be able to sell
their shares at or near ask prices or at all if they need money or otherwise
desire to liquidate their securities of our Company.
OUR COMMON STOCK MAY BE VOLATILE, WHICH SUBSTANTIALLY INCREASES THE RISK THAT
YOU MAY NOT BE ABLE TO SELL YOUR SECURITIES AT OR ABOVE THE PRICE THAT YOU MAY
PAY FOR THE SECURITY.
Because of the limited trading market expected to develop for our common stock
and because of the possible price volatility, you may not be able to sell your
shares of common stock when you desire to do so. The inability to sell your
Securities in a rapidly declining market may substantially increase your risk of
loss because of such illiquidity and because the price for our Securities may
suffer greater declines because of our price volatility.
The price of our common stock that will prevail in the market after this
offering may be higher or lower than the price you may pay. Certain factors,
some of which are beyond our control, that may cause our share price to
fluctuate significantly include, but are not limited to the following:
o Variations in our quarterly operating results;
o Loss of a key relationship or failure to complete significant
transactions;
o Additions or departures of key personnel; and
o Fluctuations in stock market price and volume.
Additionally, in recent years the stock market in general, and the
over-the-counter markets in particular, have experienced extreme price and
volume fluctuations. In some cases, these fluctuations are unrelated or
disproportionate to the operating performance of the underlying company. These
market and industry factors may materially and adversely affect our stock price,
regardless of our operating performance. In the past, class action litigation
often has been brought against companies following periods of volatility in the
market price of those companies common stock. If we become involved in this type
of litigation in the future, it could result in substantial costs and diversion
of management attention and resources, which could have a further negative
effect on your investment in our stock.
10
MANY OF OUR SHARES OF COMMON STOCK WILL IN THE FUTURE BE AVAILABLE FOR RESALE.
ANY SALES OF OUR COMMON STOCK, IF IN SIGNIFICANT AMOUNTS, ARE LIKELY TO DEPRESS
THE MARKET PRICE OF OUR SECURITIES.
Assuming all of the shares of common stock we are offering under this
Registration Statement are sold and all of the shares of common stock held by
the selling security holders registered hereby are sold, we would have 1,020,000
shares that are freely tradable. Even our officers and directors are registering
their shares for sale under this prospectus.
Unrestricted sales of 1,020,000 shares of stock by our selling stockholders
could have a huge negative impact on our share price and the market for our
shares.
OUR NEW INVESTORS WILL SUFFER A DISPROPORTIONATE RISK AND THERE WILL BE
IMMEDIATE DILUTION OF PURCHASERS' INVESTMENTS.
Our present shareholders have acquired their securities at a cost significantly
less than that which the investors purchasing pursuant to shares will pay for
their stock holdings or at which future purchasers in the market may pay.
Therefore, in the future new investors will bear most of the risk of loss.
OUR BUSINESS IS HIGHLY SPECULATIVE AND THE INVESTMENT IS THEREFORE RISKY.
Due to the speculative nature of our business, it is probable that the
investment in shares offered hereby will result in a total loss to the investor.
Investors should be able to financially bear the loss of their entire
investment. Investment should, therefore, be limited to that portion of
discretionary funds not needed for normal living purposes or for reserves for
disability and retirement.
WE ARE NOT A REPORTING COMPANY AT THIS TIME, BUT WILL BECOME ONE DUE TO THIS
REGISTRATION.
There is no trading market for our common stock. We will be subject to the
reporting requirements under the Securities and Exchange Act of 1934, Section
13a, after the effectiveness of this offering, pursuant to Section 15d of the
Securities Act and we intend to be registered under Section 12(g). As a result,
shareholders will have access to the information required to be reported by
publicly held companies under the Exchange Act and the regulations thereunder.
We intend to provide our shareholders with quarterly unaudited reports and
annual reports containing financial information prepared in accordance with
generally accepted accounting principles audited by independent certified public
accountants and intend to register under the Securities Exchange Act, Section
12(g).
WE HAVE DETERMINED AN ARBITRARY OFFERING PRICE OF OUR SHARES.
Our offering price of our shares has been determined arbitrarily by us with no
established criteria of value. There is no direct relationship between these
prices and our assets, book value, lack of earnings, shareholder's equity, or
any other recognized standard of value of our business.
ITEM 4. USE OF PROCEEDS
-----------------------
We will not receive any proceeds from the sale of the shares being registered on
behalf of our selling shareholders.
We may raise additional funds through a private placement of shares of our
common stock. At this time there is no committed source for such funds and we
cannot give any assurances of being able to raise such funds. We can assure that
we will require additional funds to carry out our business plan. The
availability and terms of any future financing will depend on market and other
conditions.
Our lack of funds could and would severely limit our operations, and might
render us unable to carry out our business plan.
11
ITEM 5. DETERMINATION OF OFFERING PRICE
---------------------------------------
We have no established market for our common stock.
Our selling shareholders plan to sell shares at $0.10, until such time as a
market develops for any of the securities and thereafter at such prices as the
market may dictate from time to time. There is no market price for the stock and
our pricing is arbitrary with no relation to market value, liquidation value,
earnings or dividends.
---------------------------------- ---------------------------------------------
TITLE PER SECURITY
---------------------------------- ---------------------------------------------
Common Stock $0.10
---------------------------------- ---------------------------------------------
We have arbitrarily determined our offering price for shares to be sold pursuant
to this offering at $0.10. The 720,000 shares of stock already purchased by
original officers and directors at $0.003 and other shareholders were sold for
$0.002 per Share. We issued 2,500,000 shares at $0.001 to Robert G. Fowler in
2013 for the Assignment of interests in an oil and gas lease in Wyoming. The
additional major factors that were included in determining the initial sales
price to our founders and private investors were the lack of liquidity since
there was no present market for our stock and the high level of risk considering
our lack of operating history.
The share price bears no relationship to any criteria of goodwill value, asset
value, market price or any other measure of value and was arbitrarily determined
in the judgment of our Board of Directors.
ITEM 6. DILUTION
----------------
We are registering shares of existing shareholders. Since our inception on May
25, 1999, our original officers and directors purchased 720,000 shares at $0.003
per share. Robert G. Fowler was issued 2,500,000 shares of our common stock at
$0.001 per share for the Assignment of the mineral lease in Natrona County,
Wyoming.
The following table sets forth with respect to existing shareholders and new
investors, a comparison of the number of our shares of common stock purchased
the percentage ownership of such shares, the total consideration paid, the
percentage of total consideration paid and the average price per Share. All
percentages are computed based upon cumulative shares and consideration assuming
sale of all shares in the line item as compared to maximum in each previous
line.
--------------------------------------------------------------------------------
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------------------------------------------------------------------
NUMBER PERCENT(1) AMOUNT PERCENT(2) PRICE/SHARE
--------------------------------------------------------------------------------
1) Existing Shareholders 3,220,000 100% $4,600 100% $0.0014
--------------------------------------------------------------------------------
"Net tangible book value" is the amount that results from subtracting the total
liabilities and intangible assets from the total assets of an entity. Dilution
occurs because we determined the offering price based on factors other than
those used in computing book value of our stock. Dilution exists because the
book value of shares held by existing stockholders is lower than the offering
price offered to new investors.
(1) Percentage relates to total percentage of shares sold up to such
increment.
(2) Percentage relates to total percentage of capital raised post
offering.
As at December 31, 2011, the net tangible book value of our stock was $0 per
share and at December 31, 2012 was $0 per share. Our existing stockholders have
purchased a total of 3,220,000 shares, of which 1,020,000 are being registered,
for an aggregate amount of $102,000 or an average cost of $0.10 per share.
12
ITEM 7. SELLING SECURITY HOLDERS
---------------------------------
The selling shareholders, including officers and directors, obtained their
shares of our stock in private placements of 720,000 shares occurring at
inception in 1999 to founders at $0.003 per share. Robert G. Fowler contributed
an Assignment of lease acreage for 2,500,000 shares at $0.001 per share.
Other than the stock transactions discussed above, we have not entered into any
transaction nor are there any proposed transactions in which any founder,
director, executive officer, significant shareholder of our company or any
member of the immediate family of any of the foregoing had or is to have a
direct or indirect material interest, except that of Robert G. Fowler, the
majority shareholder who received his shares in exchange for an Assignment of
interest in an oil and gas lease in Natrona County, Wyoming, to us for $10 and
the issuance of shares and the value thereof.
No person who may, in the future, be considered a promoter of this offering,
will receive or expect to receive assets, services or other considerations from
us except those persons who are our salaried employees or directors. No assets
will be, nor expected to be, acquired from any promoter on behalf of us. We have
not entered into any agreements that require disclosure to the shareholders.
All of the securities listed below are being registered in this Registration
Statement, which include all of the securities outstanding as of date hereof.
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
SECURITIES BY EACH
SHAREHOLDER BEFORE COMMON SHARES OFFERED % OWNED BEFORE SHARES OWNED
NAME OFFERING FOR SHAREHOLDERS ACCOUNT OFFERING AFTER OFFERING
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Hunt, Andrea K. 10,000 10,000 0.31 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Fowler, Michael D. (5) 10,000 10,000 0.31 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Hunt, Shelby K. 10,000 10,000 0.31 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Smith, Roy C. (1) 100,000 100,000 3.10 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Seal, Terry 5,000 5,000 0.15 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Ostlund, Robert L. 5,000 5,000 0.15 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Geis, Megan K. 10,000 10,000 0.31 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Conrad, Clayton R. 2,500 2,500 * 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Merritt, Dennis S. 2,500 2,500 * 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Holden, Cynthia Ann 2,500 2,500 * 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Merritt, Dinah 10,000 10,000 0.31 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Merritt, Z.S. 10,000 10,000 0.31 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Myatt, Aline 2,500 2,500 * 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Fleet, Lourie J. 10,000 10,000 0.31 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Cheney, Linda J. 10,000 10,000 0.31 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Morrison, Lesha J. 10,000 10,000 0.31 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Butler, Brandy 12,500 12,500 0.38 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Rodgers, Jessica L. 12,500 12,500 0.38 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Caughron, James 5,000 5,000 0.15 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Fowler, Lorraine E. (5) 6,000 6,000 0.18 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Barnes, Deborah A. 4,000 4,000 0.12 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Luedtke, Cynthia K. 4,000 4,000 0.12 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Flanery, Susan F. 4,000 4,000 0.12 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Kuckelburg, Brenda L. 4,000 4,000 0.12 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Marcrum, Belinda K. 4,000 4,000 0.12 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Fowler, Sandra B. (5) 4,000 4,000 0.12 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Fowler, Robert D. (5) 10,000 10,000 0.31 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Schoenleber, Rashelle L. 10,000 10,000 0.31 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Cotton, Leslie J. 10,000 10,000 0.31 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Wilson, Laurie 7,500 7,500 0.23 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Schauss, Steve 7,500 7,500 0.23 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
13
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
SECURITIES BY EACH
SHAREHOLDER BEFORE COMMON SHARES OFFERED % OWNED BEFORE SHARES OWNED
NAME OFFERING FOR SHAREHOLDERS ACCOUNT OFFERING AFTER OFFERING
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Hockaday, Thomas A. 15,000 15,000 0.46 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Johnson, Michael 15,000 15,000 0.46 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Bradley, John E. 15,000 15,000 0.46 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Fowler, Guy E. (5) 30,000 30,000 0.93 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Gordon, Everett M. (2) 90,000 90,000 2.79 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Schmidt, Harlan A. 15,000 15,000 0.46 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Golliher M.D., Warren N. 15,000 15,000 0.46 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Butler, Michael R. (3) 120,000 120,000 3.72 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Fowler, Robert G. (4) (5) 2,530,000 330,000 78.57 2,200,000
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Fowler, Sharon K. (4) (5) 30,000 30,000 0.93 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
Hinds, Philip G. 30,000 30,000 0.93 0
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
TOTAL 3,220,000 1,020,000 94.29 2,200,000
--------------------------------- ---------------------- -------------------------- --------------------- ------------------
*Less than 1%
MATERIAL RELATIONSHIPS
(1) President and Director
(2) Director
(3) Secretary, Treasurer and Director
(4) Mrs. Sharon K. Fowler is the wife of Mr. Robert G. Fowler.
(5) These individuals are members of Mr. Robert G. Fowler and Mrs. Sharon K.
Fowler family. Mr. Robert G. Fowler and Mrs. Sharon K. Fowler disavow any
ownership, direct or indirect in the shares held by these individuals.
Other than the material relationships, discussed above, the listed selling
security holders have not had a material relationship with the registrant.
ITEM 8. PLAN OF DISTRIBUTION
----------------------------
There is no market for the securities at this time and our pricing is arbitrary
with no relation to market value, liquidation value, earnings or dividends.
Until a public market develops, we are registering our shares for sale at the
following prices:
---------------------------------- ---------------------------------------------
TITLE PER SECURITY
---------------------------------- ---------------------------------------------
Common Stock $0.10
---------------------------------- ---------------------------------------------
After effectiveness of this registration statement, at any time after a market
develops, our selling shareholders may sell their securities at market prices or
at any price in privately negotiated transactions.
The prices for sale of shares were arbitrarily set at $0.10 per share, and bear
no relationship to any quantification of value.
Our selling shareholders may be deemed underwriters in this offering.
The selling shareholders are not paying any of the offering expenses and we will
not receive any of the proceeds from the sale of the shares by the selling
shareholders.
ITEM 9. DESCRIPTION OF SECURITIES
---------------------------------
The securities being registered and/or offered by this Prospectus are shares.
COMMON STOCK
We are presently authorized to issue fifty million (50,000,000) shares of our
common stock. A total of three million, two hundred twenty thousand (3,220,000)
common shares are issued and outstanding on December 1, 2013.
COMMON SHARES
All shares are equal to each other with respect to voting, liquidation, and
dividend rights. Special shareholders' meetings may be called by the officers or
director, or upon the request of holders of at least one-tenth (1/10th) of the
outstanding shares. Holders of shares are entitled to one vote at any
14
shareholders' meeting for each share they own as of the record date fixed by the
board of directors. There is no quorum requirement for shareholders' meetings.
Therefore, a vote of the majority of the shares represented at a meeting will
govern even if this is substantially less than a majority of the shares
outstanding. Holders of shares are entitled to receive such dividends as may be
declared by the board of directors out of funds legally available therefore, and
upon liquidation are entitled to participate pro rata in a distribution of
assets available for such a distribution to shareholders. There are no
conversion, pre-emptive or other subscription rights or privileges with respect
to any shares. Reference is made to our Articles of Incorporation and our
By-Laws as well as to the applicable statutes of the State of Wyoming for a more
complete description of the rights and liabilities of holders of shares. It
should be noted that the board of directors without notice to the shareholders
may amend the By-Laws. Our shares do not have cumulative voting rights, which
means that the holders of more than fifty percent (50%) of the shares voting for
election of directors may elect all the directors if they choose to do so. In
such event, the holders of the remaining shares aggregating less than fifty
percent (50%) of the shares voting for election of directors may not be able to
elect any director.
PREFERRED SHARES
We have no preferred shares authorized.
TRANSFER AGENT
Effective upon the completion of this offering, the transfer agent for our
securities is Interstate Transfer Company, 6076 S 900 E, Suite 101, Salt Lake
City, Utah, 84121, phone (801) 281-9746.
ITEM 10. INTEREST OF NAMED EXPERTS AND COUNSEL
----------------------------------------------
We have not hired or retained any experts or counsel on a contingent basis, who
would receive a direct or indirect interest in us, or who is, or was, our
promoter, underwriter, voting trustee, director, officer or employee.
ITEM 11. INFORMATION WITH RESPECT TO THE REGISTRANT
---------------------------------------------------
A. DESCRIPTION OF BUSINESS
--------------------------
HISTORY OF FUELS, INC.
Our Company, Fuels, Inc., was formed May 25, 1999. We are a Wyoming corporation
organized for the purpose of engaging in the acquisition, exploration, and if
warranted, development of natural resource properties and prospects located in
the state of Wyoming and may participate in oil and gas prospects located in the
states of Wyoming, Kansas, New Mexico, Texas, Oklahoma and Colorado. Our main
emphasis will be to acquire, either by lease, farmout, or purchase, an interest
in oil or gas prospects or properties for exploration, when available, with
third parties.
COMPANY OVERVIEW
We have been inactive during the last 5 years. In February 2013, we issued
2,500,000 shares of its restricted common stock to an unrelated third party in
exchange as part of an Assignment on an oil and gas lease located in Natrona
County, Wyoming. The shares were valued at $2,500 at the time of the transaction
($0.001 per share). The Assignment provides us with an 82.5% interest in the oil
and gas lease. The oil and gas lease covers 1,280 gross acres. As a result of
the Assignment, we maintain an 82.5% interest in the lease with a 100% working
interest.
We have no recent operating history and no representation is made, nor is any
intended that we will able to carry on our activities profitably. The viability
of the proposed business effort is dependent upon sufficient funds being raised,
of which there is no assurance. Roy C. Smith, President, Chief Executive Officer
and director as well as Michael R. Butler and Everett M. Gordon have prior
experience in the acquisition, evaluation, exploration and development of oil
and gas properties. Roy C. Smith, Michael R. Butler and Everett M. Gordon devote
part-time efforts to our affairs.
AREAS OF INTEREST AND PROPERTY
A primary area of interest is the geologic province which consists of numerous
oil and gas productive areas and zones. We have a working interest in one lease,
and because of varying geologic conditions across central and eastern Wyoming,
it is impossible to predict with accuracy what geologic situation might be
encountered on specific leases. There is no producing acreage and no reserves.
15
Our acreage is located in Natrona County, Wyoming consisting of 1,280 gross
acres. The lease was originally acquired by Robert G. Fowler in 2006. There were
three criteria used in selecting the lease: a) it is near to known production of
oil; b) it is located in a proven oil producing area; and c) the production
potential is from relatively shallow formations, up to 5,000 ft.
We may participate in a well on this acreage with industry partners, on terms
not yet determined. If a well is productive, we would drill other wells with our
partners.
We will consider the following criteria when evaluating whether to acquire or
participate in an oil and gas prospect:
1) proximity to existing production;
2) depth of existing productions;
3) location in a known producing region;
4) whether there is well control data from nearby drill sites;
5) geologic evaluations by local geologists of production potential;
6) reasonable cost of acquisition;
7) term of lease and drilling commitment, if any; and
8) reasonable drilling cost estimates.
GEOLOGY OF OIL AND GAS LEASE PROSPECT
Our oil and gas lease in Natrona County, Wyoming is located the central part of
Wyoming. The lease is located near the CastleCreek Field which was first drilled
to a depth of 5,036 feet in 1951. The Castle Creek field has had a cumulative
production of 32,375 bbls and 13,444 Mcfs of gas at the end of 2012. The areas
of the lease lie within the Wind River Basin to the south of the Casper Arch.
PLEASE REFER TO EXHIBIT 99.1
16
The Casper Arch is a structural arch that is a transitional area between the
Bighorn and Laramie Mountains and the Powder River and Wind River Basin. This
area is primarily an uplifted area that is not high enough to form a mountain
range. The rocks of the Wind River Basin thrust southwestward overriding the
synclinal axis of the Wind River Basin. The Wind River Basin is a west-east
trending, asymmetrical intermontane basin covering about 11,700 square miles.
The Basin is bounded on the west by the Wind River Mountains and on the north by
the Owl Creek Mountains. The Wind River Basin is about 200 miles long and 100
miles wide.
Rocks in the area range in age from Precambrian to Tertiary. The southeast part
of the Wind River Basin contains the thickest section of sedimentary rock.
Precambrian crystalline basement rocks here are as much as 21,000 to 22,000 feet
deep. The most prolific areas in the Basin have been the Tensleep, Sandstone,
Land Formation, Fort Union Formation, Muddy Sandstone, and Mesaverde Formation.
Stratigraphic Nomenclature Chart for the Wind River Basin
PLEASE REFER TO EXHIBIT 99.2
17
COMPETITION, MARKETS, REGULATION AND TAXATION
COMPETITION.
There are a large number of companies and individuals engaged in the exploration
for minerals and oil and gas; accordingly, there is a high degree of competition
for desirable properties. Almost all of the companies and individuals so engaged
have substantially greater technical and financial resources than we do.
MARKETS.
The availability of a ready market for oil and gas discovered, if any, will
depend on numerous factors beyond our control, including the proximity and
capacity of refineries, pipelines, and the effect of state regulation of
production and of federal regulations of products sold in interstate commerce,
and recent intrastate sales. The market price of oil and gas are volatile and
beyond our control. The market for natural gas is also unsettled, and gas prices
have increased dramatically in the past four years with substantial fluctuation,
seasonally and annually.
There generally are only a limited number of gas transmission companies with
existing pipelines in the vicinity of a gas well or wells. In the event that
producing gas properties are not subject to purchase contracts or that any such
contracts terminate and other parties do not purchase our gas production, there
is no assurance that we will be able to enter into purchase contracts with any
transmission companies or other purchasers of natural gas and there can be no
assurance regarding the price which such purchasers would be willing to pay for
such gas. There presently exists an oversupply of gas in the certain areas of
the marketplace due to pipeline capacity, the extent and duration of which is
not known. Such oversupply may result in restrictions of purchases by principal
gas pipeline purchasers.
EFFECT OF CHANGING INDUSTRY CONDITIONS ON DRILLING ACTIVITY.
Lower oil and gas prices have caused a decline in drilling activity in the U.S.
from time to time. However, such reduced activity has also resulted in a decline
in drilling costs, lease acquisition costs and equipment costs, and an
improvement in the terms under which drilling prospects are generally available.
We cannot predict what oil and gas prices will be in the future and what effect
those prices may have on drilling activity in general, or on our ability to
generate economic drilling prospects and to raise the necessary funds with which
to drill them.
FEDERAL REGULATIONS.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL CONSIDERATION.
Oil and Gas: The oil and gas business in the United States is subject to
regulation by both federal and state authorities, particularly with respect to
pricing, allowable rates of production, marketing and environmental matters.
The production of crude oil and gas has, in recent years, been the subject of
increasing state and federal controls. No assurance can be given that newly
imposed or changed federal laws will not adversely affect the economic viability
of any oil and gas properties we may acquire in the future. Federal income and
"windfall profit" taxes have in the past affected the economic viability of such
properties.
The above paragraphs only give a brief overview of potential state and federal
regulations. Because we have only acquired specific properties, and because of
the wide range of activities in which we may participate, it is impossible to
set forth in detail the potential impact federal and state regulations may have
on us.
COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS.
Our operations are subject to local, state and federal laws and regulations
governing environmental quality and pollution control. To date our compliance
with these regulations has had no material effect on our operations, capital,
earnings, or competitive position, and the cost of such compliance has not been
material. We are unable to assess or predict at this time what effect additional
regulations or legislation could have on our activities.
THE DEPARTMENT OF ENERGY. The Department of Energy Organization Act (Pub. L. No.
95-91) became effective October 1, 1977. Under this Act various agencies,
including the Federal Energy Administration (FEA) and the Federal Power
Commission (FPC), have been consolidated to constitute the cabinet-level
Department of Energy (DOE). The Economic Regulatory Administration (ERA), a
semi-independent administration within the DOE, now administers most of the
regulatory programs formerly managed by the FEA, including oil pricing and
18
allocation. The Federal Energy Regulatory Commission (FERC), an independent
agency within the DOE, has assumed the FPC's responsibility for natural gas
regulation.
REGULATION AND PRICING OF NATURAL GAS. Our operations may be subject to the
jurisdiction of the Federal Energy Regulatory Commission (FERC) with respect to
the sale of natural gas for resale in interstate and intrastate commerce. State
regulatory agencies may exercise or attempt to exercise similar powers with
respect to intrastate sales of gas. Because of its complexity and broad scope,
the price impact of future legislation on the operation of us cannot be
determined at this time.
CRUDE OIL AND NATURAL GAS LIQUIDS PRICE AND ALLOCATION REGULATION.
Pursuant to Executive Order Number 12287, issued January 28, 1981, President
Reagan lifted all existing federal price and allocation controls over the sale
and distribution of crude oil and natural gas liquids. Executive Order Number
12287 was made effective as of January 28, 1981, and consequently, sales of
crude oil and natural gas liquids after January 27, 1981 are free from federal
regulation. The price for such sales and the supplier-purchaser relationship
will be determined by private contract and prevailing market conditions. As a
result of this action, oil which may be sold by us will be sold at deregulated
or free market prices. At various times, certain groups have advocated the
reestablishment of regulations and control on the sale of domestic oil and gas.
STATE REGULATIONS.
Our production of oil and gas, if any, will be subject to regulation by state
regulatory authorities in the states in which we may produce oil and gas. In
general, these regulatory authorities are empowered to make and enforce
regulations to prevent waste of oil and gas and to protect correlative rights
and opportunities to produce oil and gas as between owners of a common
reservoir. Some regulatory authorities may also regulate the amount of oil and
gas produced by assigning allowable rates of production.
PROPOSED LEGISLATION.
A number of legislative proposals have been and probably will continue to be
introduced in Congress and in the legislatures of various states, which, if
enacted, would significantly affect the petroleum industries. Such proposals and
executive actions involve, among other things, the imposition of land use
controls such as prohibiting drilling activities on certain federal and state
lands in roadless wilderness areas. At present, it is impossible to predict what
proposals, if any, will actually be enacted by Congress or the various state
legislatures and what effect, if any, such proposals will have. However,
President Clinton's establishment of numerous National Monuments by executive
order has had the effect of precluding drilling across vast areas of the Rocky
Mountain West.
ENVIRONMENTAL LAWS.
Oil and gas exploration and development are specifically subject to existing
federal and state laws and regulations governing environmental quality and
pollution control. Such laws and regulations may substantially increase the
costs of exploring for, developing, or producing oil and gas and may prevent or
delay the commencement or continuation of a given operation.
All of our operations involving the exploration for or the production of any
minerals are subject to existing laws and regulations relating to exploration
procedures, safety precautions, employee health and safety, air quality
standards, pollution of stream and fresh water sources, odor, noise, dust, and
other environmental protection controls adopted by federal, state and local
governmental authorities as well as the right of adjoining property owners. We
may be required to prepare and present to federal, state or local authorities
data pertaining to the effect or impact that any proposed exploration for or
production of minerals may have upon the environment. All requirements imposed
by any such authorities may be costly, time consuming, and may delay
commencement or continuation of exploration or production operations.
It may be anticipated that future legislation will significantly emphasize the
protection of the environment, and that, as a consequence, our activities may be
more closely regulated to further the cause of environmental protection. Such
legislation, as well as future interpretation of existing laws, may require
substantial increases in equipment and operating costs to us and delays,
interruptions, or a termination of operations, the extent to which cannot now be
predicted.
TITLE TO PROPERTIES.
We are not the record owner of our interest in our properties and rely instead
on contracts with the owner or operator of the property, pursuant to which,
among other things, we have, is the right to have our interest placed of record.
As is customary in the oil and gas industry, a preliminary title examination
will be conducted at the time unproved properties or interests are acquired by
us. Prior to commencement of drilling operations on such acreage and prior to
the acquisition of proved properties, we will conduct a title examination before
proceeding with operations or the acquisition of proved properties, as we may
deem appropriate.
19
Our properties are subject to royalty, overriding royalty and other interests
customary in the industry, liens incident to agreements, current taxes and other
burdens, minor encumbrances, easements and restrictions. Although we are not
aware of any material title defects or disputes with respect to its undeveloped
acreage, to the extent such defects or disputes exist, we would suffer title
failures.
BACKLOG OF ORDERS.
We currently have no orders for sales at this time.
GOVERNMENT CONTRACTS.
We have no government contracts.
COMPANY SPONSORED RESEARCH AND DEVELOPMENT.
We are not conducting any research.
NUMBER OF PERSONS EMPLOYED.
As of December 1, 2013, we had no full-time employees. Officers and Directors
work on an as needed part-time basis up to 5 hours per week.
PLAN OF OPERATIONS
We had no operations prior to and we did not have any revenues during the fiscal
year ended December 31, 2012. We did not recognize any income in the year ended
December 31, 2011. We have minimal capital, minimal cash, and only our
intangible assets consist of our business plan, relationships, contacts and oil
and gas lease prospect. We are illiquid and need cash infusions from investors
or shareholders to provide capital, or loans from any sources.
Our plan of operations is as follows:
MILESTONES
-------------------- -----------------------------------------------------------
4th Quarter 2013 Closure of Registration Statement; Seek Capital for the
Company: Execution of Geological Evaluation
-------------------- -----------------------------------------------------------
1st Quarter 2014 Permit & Drilling Syndication; Seeking Other Prospects
-------------------- -----------------------------------------------------------
2nd Quarter 2014 Commence Drilling Operations; Seeking Additional Capital
for Company
-------------------- -----------------------------------------------------------
Our Budget for operations in next year is as follows:
MAXIMUM
------------------
Geological evaluation of lease expenses $25,000
General and administrative expenses $25,000
Working Capital $75,000
------------------
$125,000
We will need substantial additional capital to support our proposed future
energy operations. We have no revenues. We have NO committed source for any
funds as of date here. No representation is made that any funds will be
available when needed. In the event funds cannot be raised when needed, we may
not be able to carry out our business plan, may never achieve sales or royalty
income, and could fail in business as a result of these uncertainties.
Decisions regarding future participation in exploration wells or geophysical
studies or other activities will be made on a case-by-case basis. We may, in any
particular case, decide to participate or decline participation. If
participating, we may pay our proportionate share of costs to maintain our
proportionate interest through cash flow or debt or equity financing. If
participation is declined, we may elect to farmout, non-consent, sell or
otherwise negotiate a method of cost sharing in order to maintain some
continuing interest in the prospect.
20
OFF BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
B. DESCRIPTION OF PROPERTY
--------------------------
DESCRIPTION OF PROPERTIES/ASSETS/OIL AND GAS PROSPECTS
(a) Real Estate. None.
(b) Title to properties. None.
(c) Oil and Gas Prospects. 82.5% Interest in Oil and Gas Lease
Natrona County, Wyoming, T38N,
R81W, Sections 15 All and 20 All
Gross acres 1,280
(d) Patents. None.
We do not own any property, real or otherwise.
C. LEGAL PROCEEDINGS
--------------------
We are not a party to any pending legal proceedings, nor are we aware of any
civil proceeding or government authority contemplating any legal proceeding.
D. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------
MARKET INFORMATION
Currently there is no public trading market for our stock, and we have not
applied to have the common stock quoted for trading in any venue. We intend to
apply to have the common stock quoted on the OTC Bulletin Board immediately
after this registration statement being declared effective. No trading symbol
has yet been assigned.
The offering of the shares registered hereby could have a material negative
effect on the market price for the stock if it is approved for quotation on the
OTC / BB.
RULES GOVERNING LOW-PRICE STOCKS THAT MAY AFFECT OUR SHAREHOLDERS' ABILITY TO
RESELL SHARES OF OUR COMMON STOCK
Our stock currently is not traded on any stock exchange or quoted on any stock
quotation system. After filing the registration statement in which this
prospectus is included, we intend to solicit a broker to apply for quotation of
common stock on the FINRA's OTC/BB.
Quotations on the OTC/BB reflect inter-dealer prices, without retail mark-up,
markdown or commission and may not reflect actual transactions. Our common stock
will be subject to certain rules adopted by the SEC that regulate broker-dealer
practices in connection with transactions in "penny stocks." Penny stocks
generally are securities with a price of less than $5.00, other than securities
registered on certain national exchanges or quoted on the Nasdaq system,
provided that the exchange or system provides current price and volume
information with respect to transaction in such securities. The additional sales
practice and disclosure requirements imposed upon broker-dealers are and 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 shares
in the secondary market.
The penny stock rules require broker-dealers, prior to a transaction in a penny
stock not otherwise exempt from the rules, to make a special suitability
determination for the purchaser to receive the purchaser's written consent to
the transaction prior to sale, to deliver standardized risk disclosure documents
prepared by the SEC that provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer must also
provide the customer with current bid and offer quotations for the penny stock.
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 SEC 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.
21
HOLDERS
As of the filing of this prospectus, we have 42 shareholders of record of our
common stock. Sales under Rule 144 are also subject to manner of sale provisions
and notice requirements and to the availability of current public information
about us. Under Rule 144(b), a person who has not been one of our affiliates at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least 6 months, is entitled to sell
shares without complying with the manner of sale, volume limitation or notice
provisions of Rule 144.
As of the date of this prospectus, our selling shareholders hold 3,220,000
shares, of which 1,020,000 may be sold pursuant to this Registration Statement,
including those of affiliates who own 2,560,000 and officers/directors who own
310,000 in the aggregate.
DIVIDENDS
As of the filing of this prospectus, we have not paid any dividends to
shareholders. There are no restrictions which would limit our ability to pay
dividends on common equity or that are likely to do so in the future. The
Wyoming Revised Statutes, however, do prohibit us from declaring dividends
where, after giving effect to the distribution of the dividend; we would not be
able to pay our debts as they become due in the usual course of business; or our
total assets would be less than the sum of the total liabilities plus the amount
that would be needed to satisfy the rights of shareholders who have preferential
rights superior to those receiving the distribution.
E. FINANCIAL STATEMENTS
-----------------------
The following is a complete list of the financial statements filed as a part of
this Report.
o Audited financial statements of Fuels, Inc. for the year ended
December 31, 2012 and for the period of May 25, 1999 (inception)
through December 31, 2012 (pages F-1 through F-10)
o Unaudited financial statements for the three and nine months ended
September 30, 2013 and 2012 (pages F-11 through F-19)
22
FUELS, INC.
(A Development Stage Company)
Financial Statements for the year ended
December 31, 2012 and for the period of May 25, 1999 (inception)
through December 31, 2012
(AUDITED)
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF FUELS, INC.:
We have audited the accompanying balance sheet of Fuels, Inc.("the Company") as
of December 31, 2012 and 2011 and the related statement of operations,
stockholders' equity (deficit) and cash flows for the period May 25, 1999
(inception) through December 31, 2012. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statement referred to above present fairly, in all
material respects, the financial position of Fuels, Inc., as of December 31,
2012 and 2011, and the results of its operations and its cash flows for the
period May 25, 1999 (inception) through December 31 2012, in conformity
withgenerally accepted accounting principles in the United States of America.
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 Company's internal control over financial
reporting. Accordingly, we express no such opinion.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's significant operating losses raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ B F Borgers CPA PC
B F BORGERS CPA PC
Denver, CO
December 10, 2013
F-2
FUELS, INC.
(A Development Stage Company)
BALANCE SHEETS
December 31, December 31,
2012 2011
--------------- ---------------
Assets
Current Assets:
Cash $ - $ -
--------------- ---------------
Total Current Assets - -
--------------- ---------------
Other assets:
Farmout Agreement - -
--------------- ---------------
Total Other Assets - -
--------------- ---------------
Total Assets $ - $ -
=============== ===============
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable $ - $ -
--------------- ---------------
Total Current Liabilities - -
Stockholders' Equity
Common stock, $0.001 par value; 50,000,000 shares
authorized, 720,000 shares issued and outstanding
at December 31, 2012 and December 31, 2011, respectively 720 720
Additional paid-in capital 1,380 1,380
Deficit accumulated during the development stage (2,100) (2,100)
--------------- ---------------
Total Stockholders' Equity - -
--------------- ---------------
Total liabilities and stockholders' equity $ - $ -
=============== ===============
See the notes to these financial statements.
F-3
FUELS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For The Year Ended May 25, 1999
December 31, (Inception) to
2012 2011 December 31, 2012
----------------- ----------------- ------------------------
Revenue: $ - $ - $ -
----------------- ----------------- ------------------------
Operational expenses:
General and Administrative Expenses - - 600
Accounting Fees - - 1,400
Filing Fees - - 100
----------------- ----------------- ------------------------
Total operational expenses - - 2,100
----------------- ----------------- ------------------------
Net income (Loss) $ - $ - $ (2,100)
================= ================= ========================
Per share information
Net income (loss) per common share
Basic $ * $ *
Fully diluted * *
----------------- -----------------
Weighted average number of common
stock outstanding 720,000 720,000
----------------- -----------------
* Less than $(0.01) per share.
See the notes to these financial statements.
F-4
FUELS, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
May 25, 1999
For The Year Ended (Inception) to
December 31, December 31,
2012 2011 2012
--------------- ---------------- --------------------
Cash Flows from Operating Activities:
Net Loss $ - $ - $ (2,100)
Adjustments to reconcile net loss to net cash used
in operating activities: - - -
--------------- ---------------- --------------------
Net Cash Used by Operating Activities - - (2,100)
--------------- ---------------- --------------------
Net Cash Used in Investing Activities - - -
--------------- ---------------- --------------------
Cash Flows from Financing Activities:
Proceeds from sale of common stock - - 2,100
--------------- ---------------- --------------------
Net Cash Provided by Financing Activities - - 2,100
--------------- ---------------- --------------------
Net Increase (decrease) in Cash - - -
Cash and Cash Equivalents - Beginning of Period - - -
--------------- ---------------- --------------------
Cash and Cash Equivalents - End of Period $ - $ - $ -
=============== ================ ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest expense $ - - $ -
=============== ================ ====================
Cash paid for income taxes $ - - $ -
=============== ================ ====================
See the notes to these financial statements.
F-5
FUELS, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDER'S EQUITY
FROM MAY 25, 1999 (Inception) THROUGH DECEMBER 31, 2012
Deficit accum
Additional During
Common Stock paid-in Development
Number of shares Amount Capital Stage Totals
---------------- ----------- ----------- ------------- -----------
Issuance of common stock for cash 720,000 $ 720 $ 1,380 $ - $ 2,100
Net loss - - - (1,510) (1,510)
---------------- ----------- ----------- ------------- -----------
Balance - December 31, 1999 720,000 720 1,380 (1,510) 590
---------------- ----------- ----------- ------------- -----------
Net loss - - - (590) (590)
---------------- ----------- ----------- ------------- -----------
Balance - December 31, 2000 720,000 720 1,380 (2,100) -
---------------- ----------- ----------- ------------- -----------
Net loss - - - - -
---------------- ----------- ----------- ------------- -----------
Balance - December 31, 2001 720,000 720 1,380 (2,100) -
---------------- ----------- ----------- ------------- -----------
Net loss - - - - -
---------------- ----------- ----------- ------------- -----------
Balance - December 31, 2002 720,000 720 1,380 (2,100) -
---------------- ----------- ----------- ------------- -----------
Net loss - - - - -
---------------- ----------- ----------- ------------- -----------
Balance - December 31, 2003 720,000 720 1,380 (2,100) -
---------------- ----------- ----------- ------------- -----------
Net loss - - - - -
---------------- ----------- ----------- ------------- -----------
Balance - December 31, 2004 720,000 720 1,380 (2,100) -
---------------- ----------- ----------- ------------- -----------
Net loss - - - - -
---------------- ----------- ----------- ------------- -----------
Balance - December 31, 2005 720,000 720 1,380 (2,100) -
---------------- ----------- ----------- ------------- -----------
Net loss - - - - -
---------------- ----------- ----------- ------------- -----------
Balance - December 31, 2006 720,000 720 1,380 (2,100) -
---------------- ----------- ----------- ------------- -----------
Net loss - - - - -
---------------- ----------- ----------- ------------- -----------
Balance - December 31, 2007 720,000 720 1,380 (2,100) -
---------------- ----------- ----------- ------------- -----------
Net loss - - - - -
---------------- ----------- ----------- ------------- -----------
Balance - December 31, 2008 720,000 720 1,380 (2,100) -
---------------- ----------- ----------- ------------- -----------
Net loss - - - - -
---------------- ----------- ----------- ------------- -----------
Balance - December 31, 2009 720,000 720 1,380 (2,100) -
---------------- ----------- ----------- ------------- -----------
Net loss - - - - -
---------------- ----------- ----------- ------------- -----------
Balance - December 31, 2010 720,000 720 1,380 (2,100) -
---------------- ----------- ----------- ------------- -----------
Net loss - - - - -
---------------- ----------- ----------- ------------- -----------
Balance - December 31, 2011 720,000 720 1,380 (2,100) -
---------------- ----------- ----------- ------------- -----------
Net loss - - - - -
---------------- ----------- ----------- ------------- -----------
Balance - December 31, 2012 720,000 $ 720 $ 1,380 $ (2,100) $ -
================ =========== =========== ============= ===========
See the notes to these financial statements.
F-6
FUELS, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Years Ended December 31, 2012 and 2011
NOTE 1 - BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------------------------------------
BUSINESS
Fuels, Inc. ("the Company") was incorporated in May 25, 1999 in the state of
Wyoming. The Company was originally incorporated for the purpose of general
investing. Due to an inability to raise adequate financing the Company was
forced to cease operations in 2000.
The Company's fiscal year end is December 31st. The Company's financial
statements are presented on the accrual basis of accounting.
BASIS OF PRESENTATION
DEVELOPMENT STAGE COMPANY
The Company has not earned significant revenues from planned operations.
Accordingly, the Company's activities have been accounted for as those of a
"Development Stage Company", as set forth in Statement of Financial Accounting
Standards No. 7 ("SFAS"). Among the disclosures required by SFAS No. 7 are that
the Company's financial statements of operations, stockholders' equity and cash
flows disclose activity since the date of the Company's inception.
GOING CONCERN
The Company's financial statements for the years ended December 31, 2012 and
2011 have been prepared on a going concern basis, which contemplates the
realization of assets and the settlement of liabilities and commitments in the
normal course of business. The Company reported an accumulated deficit of $2,100
as of December 31, 2012. The Company did not recognize revenues from its
activities during the year ended December 31, 2012. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less and money market instruments to be cash equivalents.
F-7
FUELS, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Years Ended December 31, 2012 and 2011
OIL AND GAS PROPERTIES, FULL COST METHOD
The Company uses the full cost method of accounting for oil and gas producing
activities. Costs to acquire mineral interests in oil and gas properties, to
drill and equip exploratory wells used to find proved reserves, and to drill and
equip development wells including directly related overhead costs and related
asset retirement costs are capitalized.
Under this method, all costs, including internal costs directly related to
acquisition, exploration and development activities are capitalized as oil and
gas property costs. Properties not subject to amortization consist of
exploration and development costs which are evaluated on a property-by-property
basis. Amortization of these unproved property costs begins when the properties
become proved or their values become impaired. The Company assesses the
realization of unproved properties, taken as a whole, if any, on at least an
annual basis or when there has been an indication that impairment in value may
have occurred. Impairment of unproved properties is assessed based on
management's intention with regard to future exploration and development of
individually significant properties and the ability of the Company to obtain
funds to finance such exploration and development. If the results of an
assessment indicate that the properties are impaired, the amount of the
impairment is added to the capitalized costs to be amortized.
Costs of oil and gas properties will be amortized using the units of production
method.
In applying the full cost method, the Company will perform an impairment test
(ceiling test) at each reporting date, whereby the carrying value of property
and equipment is compared to the "estimated present value," of its proved
reserves discounted at a 10-percent interest rate of future net revenues, based
on current economic and operating conditions, plus the cost of properties not
being amortized, plus the lower of cost or fair market value of unproved
properties included in costs being amortized, less the income tax effects
related to book and tax basis differences of the properties. If capitalized
costs exceed this limit, the excess is charged as an impairment expense.
NET LOSS PER SHARE
Basic net loss per common share is calculated by dividing the net loss
applicable to common shares by the weighted average number of common and common
equivalent shares outstanding during the period. For the years ended December
31, 2012 and 2011, there were no potential common equivalent shares used in the
calculation of weighted average common shares outstanding as the effect would be
anti-dilutive because of the net loss.
STOCK-BASED COMPENSATION
The Company adopted the provisions of and accounts for stock-based compensation
using an estimate of value in accordance with the fair value method. Under the
fair value recognition provisions of this statement, stock-based compensation
cost is measured at the grant date based on the fair value of the award and is
recognized as expense on a straight-line basis over the requisite service
period, which generally is the vesting period. The Company elected the
modified-prospective method, under which prior periods are not revised for
comparative purposes. The valuation method applies to new grants and to grants
that were outstanding as of the effective date and are subsequently modified.
F-8
FUELS, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Years Ended December 31, 2012 and 2011
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of accounts payable is considered to be representative of
respective fair values because of the short-term nature of these financial
instruments.
OTHER COMPREHENSIVE INCOME
The Company has no material components of other comprehensive income (loss) and
accordingly, net loss is equal to comprehensive loss in all periods.
INCOME TAXES
Provision for income taxes represents actual or estimated amounts payable on tax
return filings each year. Deferred tax assets and liabilities are recorded for
the estimated future tax effects of temporary differences between the tax basis
of assets and liabilities and amounts reported in the accompanying balance
sheets, and for operating loss and tax credit carry forwards. The change in
deferred tax assets and liabilities for the period measures the deferred tax
provision or benefit for the period. Effects of changes in enacted tax laws on
deferred tax assets and liabilities are reflected as adjustment to the tax
provision or benefit in the period of enactment.
RECENT ACCOUNTING PRONOUNCEMENTS
There were accounting standards and interpretations issued during the years
ended December 31, 2012 and 2011, none of which are expected to have a material
impact on the Company's financial position, operations or cash flows.
NOTE 3 - STOCKHOLDERS' EQUITY
-----------------------------
The authorized capital stock of the Company is 50,000,000 shares of common stock
with a $0.001 par value. At December 31, 2012, the Company had 720,000 shares of
its common stock issued and outstanding. The Company does not have any preferred
shares issued or authorized.
During the years ended December 31, 2012 and 2011, the Company did not issue any
shares of its common stock.
NOTE 4 - INCOME TAXES
---------------------
The Company is subject to domestic income taxes. The Company has had no income,
and therefore has paid no income tax.
Deferred income taxes arise from temporary timing differences in the recognition
of income and expenses for financial reporting and tax purposes. The Company's
deferred tax assets consist entirely of the benefit from net operating loss
(NOL) carry-forwards. The Company's deferred tax assets are offset by a
valuation allowance due to the uncertainty of the realization of the NOL
carry-forwards. NOL carry-forwards may be further limited by a change in company
ownership and other provisions of the tax laws.
F-9
FUELS, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Years Ended December 31, 2012 and 2011
The Company's deferred tax assets, valuation allowance, and change in valuation
allowance are as follows:
Estimated NOL
Carry-forward Valuation Net Tax
Period Ending benefit Allowance Benefit
---------------------------------------------------------------------
December 31, 2012 $ - - -
December 31, 2011 $ - - -
NOTE 5 - SUBSEQUENT EVENTS
--------------------------
The Company has evaluated it activities subsequent to December 31, 2012 and
through the issuance of the financial statements and found no other reportable
subsequent events.
In February 2013, the Company issued 2,500,000 shares of its restricted common
stock to an unrelated third party in exchange as part of an Assignment on an oil
and gas lease located in Natrona County, Wyoming. The shares were valued at
$2,500 at the time of the transaction ($0.001 per share). The Assignment
provides for the Company to retain 82.5% of the working interest.
F-10
FUELS, INC.
(A Development Stage Company)
Financial statements for the three and nine months ended
September 30, 2013 and 2012
(UNAUDITED)
F-11
FUELS, INC.
(A Development Stage Company)
BALANCE SHEETS
September 30, December 31,
2013 2012
--------------- ---------------
Assets
Current Assets:
Cash $ - $ -
--------------- ---------------
Total Current Assets - -
--------------- ---------------
Other assets:
Farmout Agreement 2,500 -
--------------- ---------------
Total Other Assets 2,500 -
--------------- ---------------
Total Assets $ 2,500 $ -
=============== ===============
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable $ - $ -
--------------- ---------------
Total Current Liabilities - -
Stockholders' Equity
Common stock, $0.001 par value; 50,000,000 shares authorized,
3,220,000 and 720,000 shares issued and outstanding
at September 30, 2013 and December 31, 2012, respectively 3,220 720
Additional paid-in capital 1,380 1,380
Deficit accumulated during the development stage (2,100) (2,100)
--------------- ---------------
Total Stockholders' Equity 2,500 -
--------------- ---------------
Total liabilities and stockholders' equity $ 2,500 $ -
=============== ===============
See the notes to these financial statements.
F-12
FUELS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended For the Nine Months Ended May 25, 1999
September 30, September 30, (Inception) to
2013 2012 2013 2012 September 30, 2013
--------------- ------------- -------------- --------------- ------------------
Revenue: $ - $ - $ - $ - $ -
--------------- ------------- -------------- --------------- ------------------
Operational expenses:
General and Administrative Expenses - - - - 600
Accounting Fees - - - - 1,400
Filing Fees - - - - 100
--------------- ------------- -------------- --------------- ------------------
Total operational expenses - - - - 2,100
--------------- ------------- -------------- --------------- ------------------
Net income (Loss) $ - $ - $ - $ - $ (2,100)
=============== ============= ============== =============== ==================
Per share information
Net income (loss) per common share
Basic $ * $ * $ * $ *
Fully diluted * * * *
--------------- ------------- -------------- ---------------
Weighted average number of common
stock outstanding 3,220,000 720,000 2,881,172 720,000
--------------- ------------- -------------- ---------------
* Less than $(0.01) per share.
See the notes to these financial statements.
F-13
FUELS, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)
May 25, 1999
For the Nine Months Ended (Inception) to
September 30, September 30,
2013 2012 2013
--------------- --------------- --------------------
Cash Flows from Operating Activities:
Net Loss $ - $ - $ (2,100)
Adjustments to reconcile net loss to net cash used
in operating activities: - - -
--------------- --------------- --------------------
Net Cash Used by Operating Activities - - (2,100)
--------------- --------------- --------------------
Net Cash Used in Investing Activities - - -
--------------- --------------- --------------------
Cash Flows from Financing Activities:
Proceeds from sale of common stock - - 2,100
--------------- --------------- --------------------
Net Cash Provided by Financing Activities - - 2,100
--------------- --------------- --------------------
Net Increase (decrease) in Cash - - -
Cash and Cash Equivalents - Beginning of Period - - -
--------------- --------------- --------------------
Cash and Cash Equivalents - End of Period $ - $ - $ -
=============== =============== ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest expense $ - - $ -
=============== =============== ====================
Cash paid for income taxes $ - - $ -
=============== =============== ====================
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING ACTIVITIES:
Issuance of common shares for farmout agreement $ 2,500 - $ 2,500
=============== =============== ====================
See the notes to these financial statements.
F-14
FUELS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDER'S EQUITY
FROM MAY 25, 1999 (INCEPTION) THROUGH SEPTEMBER 30, 2013
(Unaudited)
Deficit accum
Additional During
Common Stock paid-in Development
Number of shares Amount Capital Stage Totals
--------------- ----------- ----------- -------------- -----------
Issuance of common stock for cash 720,000 $ 720 $ 1,380 $ - $ 2,100
Net loss - - - (1,510) (1,510)
--------------- ----------- ----------- -------------- -----------
Balance - December 31, 1999 720,000 720 1,380 (1,510) 590
--------------- ----------- ----------- -------------- -----------
Net loss - - - (590) (590)
--------------- ----------- ----------- -------------- -----------
Balance - December 31, 2000 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- -------------- -----------
Net loss - - - - -
--------------- ----------- ----------- -------------- -----------
Balance - December 31, 2001 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- -------------- -----------
Net loss - - - - -
--------------- ----------- ----------- -------------- -----------
Balance - December 31, 2002 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- -------------- -----------
Net loss - - - - -
--------------- ----------- ----------- -------------- -----------
Balance - December 31, 2003 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- -------------- -----------
Net loss - - - - -
--------------- ----------- ----------- -------------- -----------
Balance - December 31, 2004 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- -------------- -----------
Net loss - - - - -
--------------- ----------- ----------- -------------- -----------
Balance - December 31, 2005 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- -------------- -----------
Net loss - - - - -
--------------- ----------- ----------- -------------- -----------
Balance - December 31, 2006 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- -------------- -----------
Net loss - - - - -
--------------- ----------- ----------- -------------- -----------
Balance - December 31, 2007 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- -------------- -----------
Net loss - - - - -
--------------- ----------- ----------- -------------- -----------
Balance - December 31, 2008 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- -------------- -----------
Net loss - - - - -
--------------- ----------- ----------- -------------- -----------
Balance - December 31, 2009 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- -------------- -----------
Net loss - - - - -
--------------- ----------- ----------- -------------- -----------
Balance - December 31, 2010 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- -------------- -----------
Net loss - - - - -
--------------- ----------- ----------- -------------- -----------
Balance - December 31, 2011 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- -------------- -----------
Net loss - - - - -
--------------- ----------- ----------- -------------- -----------
Balance - December 31, 2012 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- -------------- -----------
Issuance of shares for oil and gas lease 2,500,000 2,500 - - 2,500
Net loss - - - - -
--------------- ----------- ----------- -------------- -----------
Balance - September 30, 2013 3,220,000 $ 3,220 $ 1,380 $ (2,100) $ 2,500
=============== =========== =========== ============== ===========
See the notes to these financial statements.
F-15
FUELS, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Nine Months Ended September 30, 2013 and 2012
NOTE 1 - BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------------------------------------
BUSINESS
Fuels, Inc. ("the Company") was incorporated in May 25, 1999 in the state of
Wyoming. The Company was originally incorporated for the purpose of general
investing. Due to an inability to raise adequate financing the Company was
forced to cease operations in 2000.
The Company's fiscal year end is December 31st. The Company's financial
statements are presented on the accrual basis of accounting.
BASIS OF PRESENTATION
DEVELOPMENT STAGE COMPANY
The Company has not earned significant revenues from planned operations.
Accordingly, the Company's activities have been accounted for as those of a
"Development Stage Company", as set forth in Statement of Financial Accounting
Standards No. 7 ("SFAS"). Among the disclosures required by SFAS No. 7 are that
the Company's financial statements of operations, stockholders' equity and cash
flows disclose activity since the date of the Company's inception.
INTERIM PRESENTATION
In the opinion of the management of the Company, the accompanying unaudited
financial statements include all material adjustments, including all normal and
recurring adjustments, considered necessary to present fairly the financial
position and operating results of the Company for the periods presented. The
financial statements and notes do not contain certain information included in
the Company's financial statements for the year ended December 31, 2012. It is
the Company's opinion that when the interim financial statements are read in
conjunction with the December 31, 2012 Audited Financial Statements, the
disclosures are adequate to make the information presented not misleading.
Interim results are not necessarily indicative of results for a full year or any
future period.
NOTE 2 - GOING CONCERN
----------------------
The Company's financial statements for the two-year ended December 31, 2012 have
been prepared on a going concern basis, which contemplates the realization of
assets and the settlement of liabilities and commitments in the normal course of
business. The Company reported an accumulated deficit of $2,100 as of September
30, 2013. The Company did not recognize revenues from its activities during the
years ended December 31, 2012 and 2013 nor the nine months ended September 30,
2013. These factors raise substantial doubt about the Company's ability to
continue as a going concern.
F-16
FUELS, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Nine Months Ended September 30, 2013 and 2012
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less and money market instruments to be cash equivalents.
OIL AND GAS PROPERTIES, FULL COST METHOD
The Company uses the full cost method of accounting for oil and gas producing
activities. Costs to acquire mineral interests in oil and gas properties, to
drill and equip exploratory wells used to find proved reserves, and to drill and
equip development wells including directly related overhead costs and related
asset retirement costs are capitalized.
Under this method, all costs, including internal costs directly related to
acquisition, exploration and development activities are capitalized as oil and
gas property costs. Properties not subject to amortization consist of
exploration and development costs which are evaluated on a property-by-property
basis. Amortization of these unproved property costs begins when the properties
become proved or their values become impaired. The Company assesses the
realization of unproved properties, taken as a whole, if any, on at least an
annual basis or when there has been an indication that impairment in value may
have occurred. Impairment of unproved properties is assessed based on
management's intention with regard to future exploration and development of
individually significant properties and the ability of the Company to obtain
funds to finance such exploration and development. If the results of an
assessment indicate that the properties are impaired, the amount of the
impairment is added to the capitalized costs to be amortized.
Costs of oil and gas properties will be amortized using the units of production
method.
In applying the full cost method, the Company will perform an impairment test
(ceiling test) at each reporting date, whereby the carrying value of property
and equipment is compared to the "estimated present value," of its proved
reserves discounted at a 10-percent interest rate of future net revenues, based
on current economic and operating conditions, plus the cost of properties not
being amortized, plus the lower of cost or fair market value of unproved
properties included in costs being amortized, less the income tax effects
related to book and tax basis differences of the properties. If capitalized
costs exceed this limit, the excess is charged as an impairment expense.
F-17
FUELS, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Nine Months Ended September 30, 2013 and 2012
NET LOSS PER SHARE
Basic net loss per common share is calculated by dividing the net loss
applicable to common shares by the weighted average number of common and common
equivalent shares outstanding during the period. For the periods ended September
30, 2013 and December 31, 2012, there were no potential common equivalent shares
used in the calculation of weighted average common shares outstanding as the
effect would be anti-dilutive because of the net loss.
STOCK-BASED COMPENSATION
The Company adopted the provisions of and accounts for stock-based compensation
using an estimate of value in accordance with the fair value method. Under the
fair value recognition provisions of this statement, stock-based compensation
cost is measured at the grant date based on the fair value of the award and is
recognized as expense on a straight-line basis over the requisite service
period, which generally is the vesting period. The Company elected the
modified-prospective method, under which prior periods are not revised for
comparative purposes. The valuation method applies to new grants and to grants
that were outstanding as of the effective date and are subsequently modified.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of accounts payable is considered to be representative of
respective fair values because of the short-term nature of these financial
instruments.
OTHER COMPREHENSIVE INCOME
The Company has no material components of other comprehensive income (loss) and
accordingly, net loss is equal to comprehensive loss in all periods.
INCOME TAXES
Provision for income taxes represents actual or estimated amounts payable on tax
return filings each year. Deferred tax assets and liabilities are recorded for
the estimated future tax effects of temporary differences between the tax basis
of assets and liabilities and amounts reported in the accompanying balance
sheets, and for operating loss and tax credit carry forwards. The change in
deferred tax assets and liabilities for the period measures the deferred tax
provision or benefit for the period. Effects of changes in enacted tax laws on
deferred tax assets and liabilities are reflected as adjustment to the tax
provision or benefit in the period of enactment.
RECENT ACCOUNTING PRONOUNCEMENTS
There were accounting standards and interpretations issued during the period
ended September 30, 2013, none of which are expected to have a material impact
on the Company's financial position, operations or cash flows.
F-18
FUELS, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Nine Months Ended September 30, 2013 and 2012
NOTE 4 - OTHER ASSETS
---------------------
In February 2013, the Company issued 2,500,000 shares of its restricted common
stock to an unrelated third party in exchange as part of an Assignment on an oil
and gas lease located in Natrona County, Wyoming. The shares were valued at
$2,500 at the time of the transaction ($0.001 per share). The Assignment
provides for the Company to retain 82.5% of the working interest.
NOTE 5 - STOCKHOLDERS' EQUITY
-----------------------------
The authorized capital stock of the Company is 50,000,000 shares of common stock
with a $0.001 par value. At September 30, 2013, the Company had 3,220,000 shares
of its common stock issued and outstanding. The Company does not have any
preferred shares issued or authorized.
During the nine months ended September 30, 2013, the Company issued 2,500,000
shares of its restricted common stock as part of an assignment for 82.5%
interest in an oil and gas lease in Natrona County, Wyoming. The shares were
valued at $2,500 or $0.001 per share (par value).
NOTE 6 - INCOME TAXES
---------------------
The Company is subject to domestic income taxes. The Company has had no income,
and therefore has paid no income tax.
Deferred income taxes arise from temporary timing differences in the recognition
of income and expenses for financial reporting and tax purposes. The Company's
deferred tax assets consist entirely of the benefit from net operating loss
(NOL) carry-forwards. The Company's deferred tax assets are offset by a
valuation allowance due to the uncertainty of the realization of the NOL
carry-forwards. NOL carry-forwards may be further limited by a change in company
ownership and other provisions of the tax laws.
The Company's deferred tax assets, valuation allowance, and change in valuation
allowance are as follows:
Estimated NOL
Carry-forward Valuation Net Tax
Period Ending benefit Allowance Benefit
---------------------------------------------------------------------
September 30, 2013 $ - - -
December 31, 2012 $ - - -
NOTE 7 - SUBSEQUENT EVENTS
--------------------------
The Company has evaluated it activities subsequent to September 30, 2013 and
through the issuance of the financial statements and found no other reportable
subsequent events.
F-19
F. SELECTED FINANCIAL INFORMATION
---------------------------------
Not applicable.
G. SUPPLEMENTARY FINANCIAL INFORMATION
--------------------------------------
Not applicable.
H. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
--------------------------------------------------------------------------------
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED HEREIN. WE CAUTION READERS
REGARDING CERTAIN FORWARD LOOKING STATEMENTS IN THE FOLLOWING DISCUSSION AND
ELSEWHERE IN THIS REPORT AND IN ANY OTHER STATEMENT MADE BY, OR ON OUR BEHALF.
FORWARD-LOOKING STATEMENTS ARE STATEMENTS NOT BASED ON HISTORICAL INFORMATION
AND WHICH RELATE TO FUTURE OPERATIONS, STRATEGIES, FINANCIAL RESULTS OR OTHER
DEVELOPMENTS. FORWARD LOOKING STATEMENTS ARE NECESSARILY BASED UPON ESTIMATES
AND ASSUMPTIONS THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC
AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND OUR
CONTROL AND MANY OF WHICH, WITH RESPECT TO FUTURE BUSINESS DECISIONS, ARE
SUBJECT TO CHANGE. THESE UNCERTAINTIES AND CONTINGENCIES CAN AFFECT ACTUAL
RESULTS AND COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED
IN ANY FORWARD LOOKING STATEMENTS MADE BY, OR ON OUR BEHALF. WE DISCLAIM ANY
OBLIGATION TO UPDATE FORWARD-LOOKING STATEMENTS.
THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S REPORT ON THE COMPANY'S
FINANCIAL STATEMENTS AS OF DECEMBER 31, 2012, AND FOR EACH OF THE YEARS IN THE
TWO-YEAR PERIOD THEN ENDED, INCLUDES A "GOING CONCERN" EXPLANATORY PARAGRAPH,
THAT DESCRIBES SUBSTANTIAL DOUBT ABOUT THE COMPANY'S ABILITY TO CONTINUE AS A
GOING CONCERN.
PLAN OF OPERATIONS
We had no operations prior to 2011 and we did not have any revenues during the
fiscal year ended December 31, 2012. We did not recognize any income in the
years ended December 31, 2012 and 2011, or during the six months ended June 30,
2013. We have minimal capital, moderate cash and only our intangible assets
which consist of our business plan, relationships and contacts. We are illiquid
and need cash infusions from investors or shareholders to provide capital, or
loans from any sources, none of which have been arranged nor assured.
Our plan of operations is as follows:
MILESTONES
------------------ ------------------------------------------------------------
4th Quarter 2013 Closure of Registration Statement; Seek Capital for the
Company: Execution of Geological Evaluation
------------------ ------------------------------------------------------------
1st Quarter 2014 Permit & Drilling Syndication; Seeking Other Prospects
------------------ ------------------------------------------------------------
2nd Quarter 2014 Commence Drilling Operations; Seeking Additional Capital for
Company
------------------ ------------------------------------------------------------
We will need substantial additional capital to support our proposed future
energy operations. We have no revenues. We have NO committed source for any
funds as of date here. No representation is made that any funds will be
available when needed. In the event funds cannot be raised when needed, we may
not be able to carry out our business plan, may never achieve sales or royalty
income, and could fail in business as a result of these uncertainties.
Decisions regarding future participation in exploration wells or geophysical
studies or other activities will be made on a case-by-case basis. We may, in any
particular case, decide to participate or decline participation. If
participating, we may pay our proportionate share of costs to maintain our
proportionate interest through cash flow or debt or equity financing. If
participation is declined, we may elect to farmout, non-consent, sell or
otherwise negotiate a method of cost sharing in order to maintain some
continuing interest in the prospect.
23
RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2012
During the nine months ended September 30, 2013 and 2012, we did not have
revenues or expenses due to our lack of operations, as explained above.
FOR THE YEAR ENDED DECEMBER 31, 2012 COMPARED TO THE YEAR ENDED DECEMBER 31,
2011
During the year ended December 31, 2012 and 2011, we did not have revenues or
expenses, due to our lack of operations, as explained above.
LIQUIDITY
SEPTEMBER 30, 2013
We had no cash or other liquid assets at September 30, 2013. Our only asset at
September 30, 2013, was our working interest in the oil and gas lease in Natrona
County, Wyoming. We will be reliant upon shareholder loans or private placements
of our equity to fund any kind operations. We have not secured any sources of
loans or private placements at this time. Due to this the Company did not have
any cash flows during the nine months ended September 30, 2013 and 2012.
In February 2013, we issued 2,500,000 shares of its restricted common stock to
an unrelated third party in exchange as part of an Assignment on an oil and gas
lease located in Natrona County, Wyoming. The shares were valued at $2,500 at
the time of the transaction ($0.001 per share). The Assignment provides for us
to retain 82.5% of the working interest.
DECEMBER 31, 2012
We have no cash or other liquid assets at December 31, 2012, and we will be
reliant upon shareholder loans or private placements of equity to fund any kind
of operations. We have secured no sources of loans or private placements at this
time. Due to this the Company did not have any cash flows during the year ended
December 31, 2012 or 2011.
SHORT TERM.
On a short-term basis, we do not generate any revenue or revenues sufficient to
cover operations. Based on prior history, we will continue to have insufficient
revenue to satisfy current and recurring liabilities as it seeks explore.
No commitments to provide additional funds have been made by our management or
other stockholders. Accordingly, there can be no assurance that any additional
funds will be available to us to allow it to cover our expenses as they may be
incurred.
Our assets and liabilities were $0 as of September 30, 2013 and December 31,
2012.
CAPITAL RESOURCES
We have only common stock as our capital resource.
We have no material commitments for capital expenditures within the next year,
however if operations are commenced, substantial capital will be needed to pay
for participation, investigation, exploration, acquisition and working capital.
NEED FOR ADDITIONAL FINANCING
We do not have capital sufficient to meet our cash needs. We will have to seek
loans or equity placements to cover such cash needs. Once exploration commences,
our needs for additional financing is likely to increase substantially.
No commitments to provide additional funds have been made by our management or
other stockholders. Accordingly, there can be no assurance that any additional
funds will be available to us to allow it to cover our expenses as they may be
incurred.
24
CRITICAL ACCOUNTING POLICIES
OIL AND GAS PROPERTIES, FULL COST METHOD
The Company uses the full cost method of accounting for oil and gas producing
activities. Costs to acquire mineral interests in oil and gas properties, to
drill and equip exploratory wells used to find proved reserves, and to drill and
equip development wells including directly related overhead costs and related
asset retirement costs are capitalized.
Under this method, all costs, including internal costs directly related to
acquisition, exploration and development activities are capitalized as oil and
gas property costs. Properties not subject to amortization consist of
exploration and development costs which are evaluated on a property-by-property
basis. Amortization of these unproved property costs begins when the properties
become proved or their values become impaired. The Company assesses the
realization of unproved properties, taken as a whole, if any, on at least an
annual basis or when there has been an indication that impairment in value may
have occurred. Impairment of unproved properties is assessed based on
management's intention with regard to future exploration and development of
individually significant properties and the ability of the Company to obtain
funds to finance such exploration and development. If the results of an
assessment indicate that the properties are impaired, the amount of the
impairment is added to the capitalized costs to be amortized.
Costs of oil and gas properties will be amortized using the units of production
method.
In applying the full cost method, the Company will perform an impairment test
(ceiling test) at each reporting date, whereby the carrying value of property
and equipment is compared to the "estimated present value," of its proved
reserves discounted at a 10-percent interest rate of future net revenues, based
on current economic and operating conditions, plus the cost of properties not
being amortized, plus the lower of cost or fair market value of unproved
properties included in costs being amortized, less the income tax effects
related to book and tax basis differences of the properties. If capitalized
costs exceed this limit, the excess is charged as an impairment expense.
STOCK-BASED COMPENSATION
The Company adopted the provisions of and accounts for stock-based compensation
using an estimate of value in accordance with the fair value method. Under the
fair value recognition provisions of this statement, stock-based compensation
cost is measured at the grant date based on the fair value of the award and is
recognized as expense on a straight-line basis over the requisite service
period, which generally is the vesting period. The Company elected the
modified-prospective method, under which prior periods are not revised for
comparative purposes. The valuation method applies to new grants and to grants
that were outstanding as of the effective date and are subsequently modified.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of accounts payable is considered to be representative of
respective fair values because of the short-term nature of these financial
instruments.
I. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES
--------------------------------------------------------------------------------
Not applicable.
J. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------
Not applicable.
25
K. DIRECTORS AND EXECUTIVE OFFICERS
-----------------------------------
NAME AGE POSITION TERM
---------------------- ----- ---------------------------- -----------
Roy C. Smith 57 President and Director Annual
Michael R. Butler 59 Secretary/Treasurer and
Director Annual
Everett M. Gordon 76 Director Annual
ROY C. SMITH, age 57, has been President and a Director of Fuels, Inc. since
inception. Mr. Smith attended the University of Wyoming and Casper College. He
earned an A.S.S. in Marketing. He began his career in the Oil and Gas business
with his father Charles B. Smith in Gillette, Wyoming. From 1978 until present,
including the last 5 years, he has been a self-employed independent Landman. Mr.
Smith was the President and a Director of Garner Investment, Inc. (nka Hinto
Energy, Inc.) from 2006 until 2011.
Mr. Smith brings to the Board of Directors and management of the Company, not
only his experience in business, but his 35 years of experience in the oil and
gas industry and specifically in the state of Wyoming.
MICHAEL R. BUTLER, age 59, is Secretary/Treasurer and a Director of Fuels, Inc.
since inception. Mr. Butler was employed for 19 years by Amoco Production
Company, an oil and gas producing company operating in the state of Wyoming. In
1997 and 1998, Mr. Butler owned and operated a farm/ranch west of Casper,
Wyoming. Mr. Butler has been trained in and has experience in waterflood
injection, oil and gas producing operations, maintenance, and wetland
development. Mr. Butler is currently a Director of Hindsight, Inc. dba Oil City
Printers, a commercial printing business (since 1988). Mr. Butler was a Director
and Secretary/Treasurer of Garner Investments, Inc. (nka Hinto Energy, Inc.)
from 2006 to 2011. The Art Boutique, Inc. (1996 to 2003), Phillips 44, Inc.,
(1998 - 2001) and Tempus, Inc. (1997 - 2000).
Mr. Butler provides the Board of Directors and management with not only his
experience in business management and management of public companies, but also
his experience in the oil and gas industry.
EVERETT M. GORDON, age 76, has been a Director of Fuels, Inc. since 1998. Mr.
Gordon was employed for 30 years by U.S. Steel Corporation. His last position
with U.S. Steel Corporation was as the Director of Corporate Safety. The
position was responsible for administering the corporate safety function for all
steel operations, divisions and subsidiaries. Mr. Gordon retired in March of
1996. In his retirement he has served as the director of Fuels, Inc. and has
been involved in the development of projects in the oil and gas industry.
Mr. Gordon provides the Board of Directors with experience in business
management.
Our officers are spending up to 5 hours per week on our business at this time.
CONFLICTS OF INTEREST - GENERAL.
Our directors and officers are, or may become, in their individual capacities,
officers, directors, controlling shareholder and/or partners of other entities
engaged in a variety of businesses. Thus, there exist potential conflicts of
interest including, among other things, time, efforts and corporation
opportunity, involved in participation with such other business entities. While
each officer and director of our business is engaged in business activities
outside of our business, the amount of time they devote to our business will be
up to approximately 5 hours per week.
CONFLICTS OF INTEREST - CORPORATE OPPORTUNITIES
Presently no requirement contained in our Articles of Incorporation, Bylaws, or
minutes which requires officers and directors of our business to disclose to us
business opportunities which come to their attention. Our officers and directors
do, however, have a fiduciary duty of loyalty to us to disclose to us any
business opportunities which come to their attention, in their capacity as an
officer and/or director or otherwise. Excluded from this duty would be
opportunities which the person learns about through his involvement as an
officer and director of another company. We have no intention of merging with or
acquiring an affiliate, associate person or business opportunity from any
affiliate or any client of any such person.
26
PROJECTED STAFF
STAFFING
Currently, we have no employees aside from the President who is part time. This
lean staffing is possible in this phase because of our determination to
outsource all operating functions. Our staff positions will be filled as budget
allows and business demands require, and the positions may be altered in
response to business needs.
L. EXECUTIVE AND DIRECTORS COMPENSATION
---------------------------------------
COMPENSATION
The following table sets forth certain information concerning compensation of
the President and our most highly compensated executive officers for the fiscal
years ended December 31, 2012 and 2011 the ("Named Executive Officers"):
SUMMARY EXECUTIVES COMPENSATION TABLE
------------------ -------- -------- ---------- ---------- ---------- ----------------- ----------------- ------------------ -------
NON-QUALIFIED
NON-EQUITY DEFERRED
STOCK OPTION INCENTIVE PLAN COMPENSATION ALL OTHER
SALARY BONUS AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
NAME & POSITION YEAR ($) ($) ($) ($) ($) ($) ($) ($)
------------------ -------- -------- ---------- ---------- ---------- ----------------- ----------------- ------------------ -------
Roy C. Smith, 2012 0 0 0 0 0 0 0 0
President 2011 0 0 0 0 0 0 0 0
------------------ -------- -------- ---------- ---------- ---------- ----------------- ----------------- ------------------ -------
Michael R. 2012 0 0 0 0 0 0 0 0
Butler, 2011 0 0 0 0 0 0 0 0
Secretary and
Treasurer
------------------ -------- -------- ---------- ---------- ---------- ----------------- ----------------- ------------------ -------
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
The Company did not make any equity awards to its officers and/or directors
during the years ended December 31, 2012 and 2011.
DIRECTOR COMPENSATION
The following table sets forth certain information concerning compensation paid
to our directors for services as directors, but not including compensation for
services as officers reported in the "Summary Executives' Compensation Table"
during the year ended December 31, 2012:
------------------ ---------------- ---------------- ---------------- --------------- ---------------- ---------------- ------------
Non-equity Non-qualified
incentive deferred
Fees earned or plan compensation All other
paid in cash Stock awards Option awards compensation earnings compensation Total
Name ($) ($) ($) ($) ($) ($) ($)
------------------ ---------------- ---------------- ---------------- --------------- ---------------- ---------------- ------------
Roy C. Smith $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
------------------ ---------------- ---------------- ---------------- --------------- ---------------- ---------------- ------------
Michael R. Butler $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
------------------ ---------------- ---------------- ---------------- --------------- ---------------- ---------------- ------------
Everett M. Gordon $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
------------------ ---------------- ---------------- ---------------- --------------- ---------------- ---------------- ------------
27
All of our officers and/or directors will continue to be active in other
companies. All officers and directors have retained the right to conduct their
own independent business interests.
It is possible that situations may arise in the future where the personal
interests of the officers and directors may conflict with our interests. Such
conflicts could include determining what portion of their working time will be
spent on our business and what portion on other business interest. To the best
ability and in the best judgment of our officers and directors, any conflicts of
interest between us and the personal interests of our officers and directors
will be resolved in a fair manner which will protect our interests. Any
transactions between us and entities affiliated with our officers and directors
will be on terms which are fair and equitable to us. Our Board of Directors
intends to continually review all corporate opportunities to further attempt to
safeguard against conflicts of interest between their business interests and our
interests.
We have no intention of merging with or acquiring an affiliate, associated
person or business opportunity from any affiliate or any client of any such
person.
Directors receive no compensation for serving.
M. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AS OF DECEMBER
1, 2013
--------------------------------------------------------------------------------
(a) Beneficial owners of five percent (5%) or greater, of our common stock.
There are currently 50,000,000 common shares authorized of which 3,220,000 are
outstanding on December 1, 2013
The following sets forth information with respect to ownership by holders of
more than five percent (5%) of our common stock:
--------------------- --------------------- -------------------- ------------------ ----------------------
POST-OFFERING
NAME AND ADDRESS AMOUNT AND NATURE PRE-OFFERING PERCENT OF CLASS
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNER PERCENT OF CLASS (POST RESALE)
--------------------- --------------------- -------------------- ------------------ ----------------------
Common shares Robert G. Fowler (1) 2,560,000 79.50% 69.25%
P.O. Box 3574
Casper, WY 82602
--------------------- --------------------- -------------------- ------------------ ----------------------
(1) Mr. Fowler owns 2,530,000 shares directly. He owns 30,000 shares indirectly
through his wife Sharon K. Fowler. As part of this Registration Statement,
we are registering 330,000 shares of behalf of Mr. Fowler and 30,000 shares
on behalf of Mrs. Fowler.
(b) The following sets forth information with respect to our common
stock beneficially owned by each Officer and Director, and by all Directors and
Officers as a group as of December 1, 2013.
------------------------ -------------------------------- ---------------------- ----------------
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNER CLASS
------------------------ -------------------------------- ---------------------- ----------------
Common shares Roy C. Smith 100,000 3.10%
President and Director
P.O. Box 3574
Casper, WY 82602
------------------------ -------------------------------- ---------------------- ----------------
Common shares Michael R. Butler 120,000 3.72%
Secretary, Treasurer & Director
13750 Bessemer Bend Rd.
Casper, WY 82604
------------------------ -------------------------------- ---------------------- ----------------
Common shares Everett M. Gordon, Director 90,000 2.79%
107 Lampliter Lane
McMurray, PA 15317
------------------------ -------------------------------- ---------------------- ----------------
All Directors and Executive 310,000 9.62%
Officers as a Group (3 persons)
------------------------ -------------------------------- ---------------------- ----------------
28
N. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, PROMOTERS AND CONTROL PERSONS
-----------------------------------------------------------------------------
Other than the stock transactions discussed below, we have not entered into any
transaction nor are there any proposed transactions in which any of our
founders, directors, executive officers, shareholders or any members of the
immediate family of any of the foregoing had or is to have a direct or indirect
material interest.
In February 2013, we issued 2,500,000 shares of its restricted common stock to
Mr. Robert G. Fowler in exchange as part of an Assignment on an oil and gas
lease located in Natrona County, Wyoming. The shares were valued at $2,500 at
the time of the transaction ($0.001 per share). The Assignment provides for us
to retain 82.5% of the working interest.
There are no promoters being used in relation to this offering. No person who
may, in the future, be considered a promoter of this offering, will receive or
expect to receive assets, services or other considerations from us. No assets
will be, nor expected to be, acquired from any promoter on behalf of us. We have
not entered into any agreements that require disclosure to the shareholders.
ITEM 11A. MATERIAL CHANGES
--------------------------
Not applicable.
ITEM 12. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
----------------------------------------------------------
-------------------- -------------------------------------------- --------------
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------------- -------------------------------------------- --------------
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
5.1 Opinion re: Legality Filed Herewith
10.1 Assignment, February 2013 (1)
23.1 Consent of Attorney Filed Herewith
23.2 Consent of Accountant Filed Herewith
99.1 Oil and Gas Lease Picture Filed Herewith
99.2 Stratigraphic Nomenclature Chart Filed Herewith
-------------------- -------------------------------------------- --------------
(1) Incorporated by reference from the exhibits included in the Company's Form
S-1 filed with the Securities and Exchange Commission (www.sec.gov), dated
September 13, 2013.
ITEM 12A. DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES
--------------------------------------------------------------------------------
The Wyoming Business Corporation Act requires us to indemnify officers and
directors for any expenses incurred by any officer or director in connection
with any actions or proceedings, whether civil, criminal, administrative, or
investigative, brought against such officer or director because of his or her
status as an officer or director, to the extent that the director or officer has
been successful on the merits or otherwise in defense of the action or
proceeding. The Wyoming Business Corporation Act permits a corporation to
indemnify an officer or director, even in the absence of an agreement to do so,
for expenses incurred in connection with any action or proceeding if such
officer or director acted in good faith and in a manner in which he or she
reasonably believed to be in or not opposed to the best interests of us and such
indemnification is authorized by the stockholders, by a quorum of disinterested
directors, by independent legal counsel in a written opinion authorized by a
majority vote of a quorum of directors consisting of disinterested directors, or
by independent legal counsel in a written opinion if a quorum of disinterested
directors cannot be obtained.
The Wyoming Business Corporation Act prohibits indemnification of a director or
officer if a final adjudication establishes that the officer's or director's
acts or omissions involved intentional misconduct, fraud, or a knowing violation
of the law and were material to the cause of action. Despite the foregoing
limitations on indemnification, the Wyoming Business Corporation Act may permit
an officer or director to apply to the court for approval of indemnification
even if the officer or director is adjudged to have committed intentional
misconduct, fraud, or a knowing violation of the law.
The Wyoming Business Corporation Act also provides that indemnification of
directors is not permitted for the unlawful payment of distributions, except for
those directors registering their dissent to the payment of the distribution.
According to our bylaws, we are authorized to indemnify our directors to the
fullest extent authorized under Wyoming Law subject to certain specified
limitations.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and persons controlling
us pursuant to the foregoing provisions or otherwise, we are advised that, in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
29
[OUTSIDE BACK COVER PAGE OF PROSPECTUS]
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
-----------------------------------------------
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
----------------------------------------------------
We have expended, or will expend fees in relation to this registration statement
as detailed below:
================================================================= ==============
EXPENDITURE ITEM AMOUNT
----------------------------------------------------------------- --------------
Attorney Fees $15,500
----------------------------------------------------------------- --------------
Audit Fees $10,000
----------------------------------------------------------------- --------------
Transfer Agent Fees $2,000
----------------------------------------------------------------- --------------
SEC Registration and Blue Sky Registration fees (estimated) $1,000
----------------------------------------------------------------- --------------
Printing Costs and Miscellaneous Expenses (estimated) $1,500
------
----------------------------------------------------------------- --------------
TOTAL $30,000
================================================================= ==============
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
--------------------------------------------------
Fuels, Inc. officers and directors are indemnified as provided by the Wyoming
Revised Statutes and the bylaws.
Under the Wyoming Revised Statutes, director immunity from liability to a
company or its shareholders for monetary liabilities applies automatically
unless it is specifically limited by a company's Articles of Incorporation. Our
Articles of Incorporation do not specifically limit the directors' immunity.
Excepted from that immunity are: (a) a willful failure to deal fairly with us or
our shareholders in connection with a matter in which the director has a
material conflict of interest; (b) a violation of criminal law, unless the
director had reasonable cause to believe that his or her conduct was lawful or
no reasonable cause to believe that his or her conduct was unlawful; (c) a
transaction from which the director derived an improper personal profit; and (d)
willful misconduct.
Our bylaws provide that it will indemnify the directors to the fullest extent
not prohibited by Wyoming law; provided, however, that we may modify the extent
of such indemnification by individual contracts with the directors and officers;
and, provided, further, that we shall not be required to indemnify any director
or officer in connection with any proceeding, or part thereof, initiated by such
person unless such indemnification: (a) is expressly required to be made by law,
(b) the proceeding was authorized by the board of directors, (c) is provided by
us, in sole discretion, pursuant to the powers vested under Wyoming law or (d)
is required to be made pursuant to the bylaws.
Our bylaws provide that it will advance to any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was a director or officer of us, or is or was
serving at the request of us as a director or executive officer of another
company, partnership, joint venture, trust or other enterprise, prior to the
final disposition of the proceeding, promptly following request therefore, all
expenses incurred by any director or officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under the bylaws or otherwise.
Our bylaws provide that no advance shall be made by us to an officer except by
reason of the fact that such officer is or was our director in which event this
paragraph shall not apply, in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made: (a) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (b) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of us.
30
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
------------------------------------------------
We have sold securities within the past three years without registering the
securities under the Securities Act of 1933 as shown in the following table:
($) PAID PER
NAME COMMON SHARES SECURITY DATE OF PURCHASE
---------------- ----------------------- -------------------- ------------------
Robert G. Fowler 2,500,000 Assignment February 2013
EXEMPTIONS FROM REGISTRATION FOR UNREGISTERED SALES
All of the above sales by the Company of its unregistered securities were made
by the Company in reliance upon Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act"). The individual that issued the unregistered securities
was known to the Company and its management, through pre-existing business
relationships. All purchasers were provided access to all material information,
which they requested, and all information necessary to verify such information
and were afforded access to management of the Company in connection with their
purchases. All purchasers of the unregistered securities acquired such
securities for investment and not with a view toward distribution, acknowledging
such intent to the Company. All certificates or agreements representing such
securities that were issued contained restrictive legends, prohibiting further
transfer of the certificates or agreements representing such securities, without
such securities either being first registered or otherwise exempt from
registration in any further resale or disposition.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
---------------------------------------------------
------------ ----------------------------------------- -------------------------
NUMBER DESCRIPTION
------------ ----------------------------------------- -------------------------
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
5.1 Opinion re: Legality Filed Herewith
10.1 Assignment, February 2013 (1)
23.1 Consent of Attorney Filed Herewith
23.2 Consent of Accountant Filed Herewith
99.1 Oil and Gas Lease Picture Filed Herewith
99.2 Stratigraphic Nomenclature Chart Filed Herewith
------------ ----------------------------------------- -------------------------
(1) Incorporated by reference from the exhibits included in the Company's Form
S-1 filed with the Securities and Exchange Commission (www.sec.gov), dated
September 13, 2013.
ITEM 17. UNDERTAKINGS
---------------------
We hereby undertake the following:
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a) (3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after the
effective date of this registration statement, or most recent
post-effective amendment, which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement
or any material change to such information in the registration
statement.
That, for the purpose of determining any liability under the Securities Act,
each post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
To remove from registration by means of a post-effective amendment any of the
securities being registered hereby which remain unsold at the termination of the
Offering.
31
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to the directors, officers and controlling persons pursuant to the
provisions above, 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 the Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities, other
than the payment by us of expenses incurred or paid by one of the directors,
officers, or controlling persons in the successful defense of any action, suit
or proceeding, is asserted by one of the directors, officers, or controlling
persons in connection with the securities being registered, we will unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification is against public policy as expressed in the Securities Act, and
we will be governed by the final adjudication of such issue.
For the purposes of determining liability under the Securities Act of 1933 to
any purchaser, if the Registrant is subject to Rule 430C, each prospectus filed
pursuant to Rule 424(b) as part of a registration statement relating to an
offering, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or prospectus that
is part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such first use, supersede or modify any statement
that was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to such
date of first use.
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 for filing on Form S-1 and authorized this Amended
Registration Statement to be signed on our behalf by the undersigned, thereunto
duly authorized, in the City of Casper, State of Wyoming, on December 10, 2013.
FUELS, INC.
/s/Roy C. Smith December 10, 2013
------------------------------------------------------------
Roy C. Smith
(Principal Executive Officer, President and Chief
Executive Officer)
/s/Michael R. Butler
------------------------------------------------------------
Michael R. Butler December 10, 2013
(Chief Financial Officer/Principal
Accounting Officer/Secretary / Treasurer)
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
/s/Roy C. Smith December 10, 2013
------------------------------------------------------------
Roy C. Smith, Director
/s/Michael R. Butler December 10, 2013
------------------------------------------------------------
Michael R. Butler, Director
/s/Everett M. Gordon December 10, 2013
------------------------------------------------------------
Everett M. Gordon, Director
3