ITEM 1. BUSINESS
FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States Dollars (US$) unless otherwise stated and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all references to "common shares" refer to the common shares in our capital stock.
As used in this annual report, the terms "we", "us", "our" and "Western Standard" mean Western Standard Energy Corp., and our wholly-owned subsidiary, Western Standard Energy Limited, unless otherwise indicated.
CORPORATE OVERVIEW
We are an exploration stage company engaged in the acquisition, exploration, and, if warranted, development of prospective oil and gas properties.
We were incorporated in the State of Nevada on February 2, 2005 under the name Comtrix Inc. From incorporation until June 2005, our operating activities consisted primarily of developing fingerprint recognition products for residential buildings in China. Our management investigated opportunities and challenges in the business of developing fingerprint recognition products and security for residential buildings in China and determined that the business did not present the best opportunity for our company to realize value for our shareholders. Accordingly, we abandoned this business plan and focused on the identification of other suitable business opportunities and/or business combinations.
On June 23, 2006, we executed a letter of intent with Lusora Corp. wherein the existing shareholders of Lusora Corp. agreed to exchange issued and outstanding shares of its common stock for the same number of shares of our company. Also effective June 23, 2006, we changed our name from "Comtrix Inc." to "Lusora Healthcare Systems Inc." In addition, effective June 23, 2006 we effected a 25 for one forward stock split of our authorized, issued and outstanding common stock. As a result, our authorized capital increased from 75,000,000 shares of common stock with a par value of $0.001 to 1,857,000,000 shares of common stock with a par value of $0.001.
Effective September 7, 2007, we changed our name from "Lusora Healthcare Systems Inc." to "Western Standard Energy Corp" when we decided to change the focus of our business plan from wireless personal security and monitoring systems to acquisition and exploration in the oil and gas industry. In addition on September 7, 2007, we effected a 1.5 for one stock split of our authorized and issued and outstanding common stock. As a result, our authorized capital increased from 1,875,000,000 shares of common stock with a par value of $0.001 to 2,812,500,000 shares of common stock with a par value of $0.001.
On November 7, 2007, the Company merged with its subsidiary, Lusora Inc., to simplify the administration of its United States operations into one corporate entity.
On February 3, 2010, the Company affected a one new for 1,000 old reverse stock split (1000:1) of its authorized, issued and outstanding common stock. As a result, our authorized capital decreased from 2,812,500,000 shares of common stock with a par value of $0.00l to 2,812,500 shares of common stock with a par value of $0.001.
On February 16, 2010, the Company issued 100,000 shares of its common stock to Monaco Capital Inc., a Belize company, at a price per share of $0.00125 pursuant to a private placement subscription agreement. Following completion of the private placement, Monaco now owns 100,000 of the Company's common shares, which constitutes 52% of the Company's issued and outstanding common stock.
On April 14, 2010 the stockholders approved a resolution to increase the Company's authorized share capital from 2,812,500 shares of common stock to 200,000,000 shares of common stock.
COMPETITION
The oil and natural gas industry is intensely competitive, and we compete with numerous other oil and gas exploration and production companies. Many of these companies have substantially greater resources than we have. Not only do they explore for and produce oil and natural gas, but many also carry on midstream and refining operations and market petroleum and other products on a regional, national or worldwide basis. The operations of other companies may be able to pay more for exploratory prospects and productive oil and natural gas properties. They may also have more resources to define, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit. In addition, during periods of low oil and natural gas market prices, these companies may have a greater ability to continue exploration activities.
Our larger or integrated competitors may have the resources to be better able to absorb the burden of existing, and any changes to federal, state, and local laws and regulations more easily than we can, which would adversely affect our competitive position. Our ability to discover reserves and acquire additional properties in the future will be dependent upon our ability and resources to evaluate and select suitable properties and to consummate transactions in this highly competitive environment. In addition, we may be at a disadvantage in producing oil and natural gas properties and bidding for exploratory prospects, because we have fewer financial and human resources than other companies in our industry. Should a larger and better financed company decide to directly compete with us, and be successful in its efforts, our business could be adversely affected.
PATENTS AND TRADEMARKS
We do not own any patents or trademarks.
MARKETING AND CUSTOMERS
The market for oil and natural gas that we will produce depends on factors beyond our control, including the extent of domestic production and imports of oil and natural gas, the proximity and capacity of natural gas pipelines and other transportation facilities, demand for oil and natural gas, the marketing of competitive fuels and the effects of state and federal regulation. The oil and gas industry also competes with other industries in supplying the energy and fuel requirements of industrial, commercial and individual consumers.
PRINCIPAL AGREEMENTS AFFECTING OUR ORDINARY BUSINESS
We do not own any real estate. Our interests are comprised of leaseholds subject to the terms and provisions of lease agreements that provide us with the right to drill and maintain wells in specific geographic areas. All of our lease arrangements that comprise our acreage positions are established using industry-standard terms that have been established and engrained in the oil and gas industry for many years.
In general, our lease agreements stipulate five year terms. Bonuses and royalty payments are made on a case-by-case basis consistent with industry standard pricing. Once a well is drilled and if production established, the well is considered "held by production," meaning the lease continues as long as oil is being produced. Other locations within the drilling unit created for a well may
also be drilled at any time with no time limit as long as the lease is held by production. The majority of our North Dakota leases and, where applicable our potential royalty interests, have two years remaining on the terms.
Some of our acreage is subject to joint venture and farm out agreements, and we expect that we will continue to evaluate potential partners and arrangements to develop our positions. The provisions of each relationship are and will be subject to separately negotiated arrangements. We do not rely on any material patents, trademarks, license, franchises, labor contracts or other similar arrangements during our ordinary course of business.
RESEARCH AND DEVELOPMENT
We did not incur expenditures in research and development over the last two fiscal years.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
Our operations are subject to various rules, regulations and limitations impacting the oil and natural gas exploration and production industry as whole.
REGULATION OF OIL AND NATURAL GAS PRODUCTION
Our oil and natural gas exploration, production and related operations, when developed, are subject to extensive rules and regulations promulgated by federal, state, tribal and local authorities and agencies. For example, some states in which we may operate require permits for drilling operations, drilling bonds and reports concerning operations and impose other requirements relating to the exploration and production of oil and natural gas. Such states may also have statutes or regulations addressing conservation matters, including provisions for the unitization or pooling of oil and natural gas properties, the establishment of maximum rates of production from wells, and the regulation of spacing, plugging and abandonment of such wells. Failure to comply with any such rules and regulations can result in substantial penalties. The regulatory burden on the oil and gas industry will most likely increase our cost of doing business and may affect our profitability. Although we believe we are currently in substantial compliance with all applicable laws and regulations, because such rules and regulations are frequently amended or reinterpreted, we are unable to predict the future cost or impact of complying with such laws. Significant expenditures may be required to comply with governmental laws and regulations and may have a material adverse effect on our financial condition and results of operations.
ENVIRONMENTAL MATTERS
Our operations and properties are subject to extensive and changing federal, state and local laws and regulations relating to environmental protection, including the generation, storage, handling, emission, transportation and discharge of materials into the environment, and relating to safety and health. The recent trend in environmental legislation and regulation generally is toward stricter standards, and this trend will likely continue. These laws and regulations may:
* require the acquisition of a permit or other authorization before construction or drilling commences and for certain other activities; * limit or prohibit construction, drilling and other activities on certain lands lying within wilderness and other protected areas; and * impose substantial liabilities for pollution resulting from its operations.
The permits required for our operations may be subject to revocation, modification and renewal by issuing authorities. Governmental authorities have the power to enforce their regulations, and violations are subject to fines or injunctions, or both. In the opinion of management, we are in substantial compliance with current applicable environmental laws and regulations, and have no material commitments for capital expenditures to comply with existing environmental requirements. Nevertheless, changes in existing environmental laws and regulations or in interpretations thereof could have a significant impact on the Company, as well as the oil and natural gas industry in general.
The COMPREHENSIVE ENVIRONMENTAL, RESPONSE, COMPENSATION, AND LIABILITY ACT OF 1980 (CERCLA) and comparable state statutes impose strict, joint and several liability on owners and operators of sites and on persons who disposed of or arranged for the disposal of "hazardous substances" found at such sites. It is not uncommon for the neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. The FEDERAL RESOURCE CONSERVATION AND RECOVERY ACT (RCRA) and comparable state statutes govern the disposal of "solid waste" and "hazardous waste" and authorize the imposition of substantial fines and penalties for noncompliance. Although CERCLA currently excludes petroleum from its definition of "hazardous substance," state laws affecting our operations may impose clean-up liability relating to petroleum and petroleum related products. In addition, although RCRA classifies certain oil field wastes as "non-hazardous," such exploration and production wastes could be reclassified as hazardous wastes thereby making such wastes subject to more stringent handling and disposal requirements.
The ENDANGERED SPECIES ACT (ESA) seeks to ensure that activities do not jeopardize endangered or threatened animal, fish and plant species, nor destroy or modify the critical habitat of such species. Under ESA, exploration and production operations, as well as actions by federal agencies, may not significantly impair or jeopardize the species or its habitat. ESA provides for criminal penalties for wilful violations of the Act. Other statutes that provide protection to animal and plant species and that may apply to our operations include, but are not necessarily limited to, the FISH AND WILDLIFE COORDINATION ACT, the FISHERY CONSERVATION AND MANAGEMENT ACT, the MIGRATORY BIRD TREATY ACT and the NATIONAL HISTORIC PRESERVATION ACT. Although we believe that our operations will be in substantial compliance with such statutes, any change in these statutes or any reclassification of a species as endangered could subject the Company to significant expenses to modify our operations or could force the Company to discontinue certain operations altogether.
EMPLOYEES
We currently have one full time employee, our Chief Executive Officer Peter Jenks. Mr Jenks is responsible for all significant policy-making decisions and has been assisted in the implementation of the Company's business by counsel and consultants. We do not expect a significant change in the number of full time employees over the next 12 months and will continue using the services of independent consultants and contractors to perform various professional services, particularly in the area of land services and drilling. We believe that this use of third-party service providers will enhance our ability to contain general and administrative expenses during this stage of our development.
REPORTS TO SECURITY HOLDERS
We file reports and other information with the SEC. This annual report on Form 10-K, historical information about our Company and other information can be inspected and copied at the Public Reference Room of the SEC located at Room 1580, 100 F Street, N.E., Washington D.C. 20549. Copies of such materials, including copies of any portion of this annual report on Form 10-K, can be obtained from the Public Reference Room of the SEC at prescribed rates. You can call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room. Such materials may also be accessed electronically by means of the SEC's home page on the Internet (http://www.sec.gov).
ITEM 1A.
ITEM 1A. RISK FACTORS
In addition to other information in this current report, the following risk factors should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition. As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward-looking statements. Additional risks and uncertainties not presently known to us, or that we currently consider to be immaterial, may also impact our business, operating results, liquidity and financial condition. If any such risks occur, our business, operating results, liquidity and financial condition could be materially affected in an adverse manner. Under such circumstances, the trading price of our securities could decline, and you may lose all or part of your investment.
RISKS ASSOCIATED WITH OUR COMPANY
BECAUSE WE MAY NEVER EARN REVENUES FROM OUR OPERATIONS, OUR BUSINESS MAY FAIL AND THEN INVESTORS MAY LOSE ALL OF THEIR INVESTMENT IN OUR COMPANY.
We have no history of revenues from operations. We have yet to generate positive earnings and there can be no assurance that we will ever operate profitably. Our company has a limited operating history and is in the exploration stage. The success of our company is significantly dependent on the uncertain events of the discovery and exploitation of mineral reserves on our properties or selling the rights to exploit those mineral reserves. If our business plan is not successful and we are not able to operate profitably, then our stock may become worthless and investors may lose all of their investment in our Company.
Prior to completion of our exploration stage, we anticipate that we will incur increased operating expenses without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from the exploration of our mineral claims in the future, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide no assurance that we will generate any revenues or ever achieve profitability. If we are unsuccessful in addressing these risks, our business will fail and investors may lose all of their investment in our Company.
WE HAVE HAD A HISTORY OF LOSSES AND NO REVENUE, WHICH RAISE SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.
Since inception, we have incurred aggregate net losses of $4,776,139 from operations. We can offer no assurance that we will ever operate profitably or that we will generate positive cash flow in the future. To date, we have not generated any revenues from our operations. Our history of losses and no revenues raise substantial doubt about our ability to continue as a going concern. We will not be able to generate significant revenues in the future. As a result, our management expects the business to continue to experience negative cash flow for the foreseeable future and cannot predict when, if ever, our business might become profitable. We will need to raise additional funds, and such funds may not be available on commercially acceptable terms, if at all. If we are unable to raise funds on acceptable terms, we may not be able to execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements. This may seriously harm our business, financial condition and results of operations.
The current ongoing global economic crisis could lead to an extended recession in the U.S. and around the world. An extended slowdown in economic activity caused by a recession would reduce national and worldwide demand for oil and natural gas and result in lower commodity prices for long periods of time. Prices for oil and natural gas have already decreased significantly from highs in 2008. We have put our exploration programs on hold, which is having a material adverse impact on our business, financial condition and results of operations. If oil and gas prices do not increase before we can no longer afford to pay our debts as they come due, our exploration program will likely never become economically feasible, we will go out of business and investors will lose their entire investment in our Company.
Since October 2008, oil prices have decreased by two thirds off their highest prices and natural gas prices have decreased in half or more during the same time period. Costs of exploration, development and production have not yet adjusted to current economic conditions or in proportion to the significant reduction in product prices. Prolonged, substantial decreases in oil and natural gas prices would likely have a material adverse effect on our business, financial condition and results of operations, could further limit our access to funds through the sale of our equity securities or through loans to satisfy our capital requirements.
Capital and credit markets have experienced unprecedented volatility and disruption during 2009 and continue to be unpredictable. Given the current levels of market volatility and disruption, the availability of funds from those markets has diminished substantially. Further, arising from concerns about the stability of financial markets generally and the solvency of borrowers specifically, the cost of accessing the credit markets has increased as many lenders have raised interest rates, enacted tighter lending standards or altogether ceased to provide funding to borrowers.
Due to these capital and credit market conditions, we cannot be certain that funding will be available to us in amounts or on terms that we believe are acceptable. We have decided to put our exploration program on hold until carrying them out becomes economically feasible. This hold on our exploration program is having a material adverse impact on our business, financial condition and results of operations. If oil and gas prices do not increase before we can no longer afford to pay our debts as they come due, our exploration program will likely never become economically feasible, we will go out of business and investors will lose their entire investment in our Company.
RISKS RELATING TO OUR BUSINESS AND THE OIL AND GAS INDUSTRY
WE ARE A NEW ENTRANT INTO THE OIL AND GAS INDUSTRY WITHOUT A PROFITABLE OR LONG OPERATING HISTORY. WE DO NOT HAVE ANY INCOME PRODUCING OIL AND GAS PROPERTIES AND WE HAVE LIMITED FINANCIAL RESOURCES. THERE IS NO MEANS BY WHICH INVESTORS CAN EVALUATE OUR POTENTIAL FOR SUCCESS AND THERE IS NO ASSURANCE THAT WE WILL EVER OPERATE PROFITABLY.
We are an exploration stage company with only a limited operating history upon which to base an evaluation of our current business and future prospects. We have only begun engaging in the oil and gas exploration and development business since entering into the assignment agreement with Power Energy Enterprises SA in August 2007 and we do not have an established history of locating and developing properties that have oil and gas reserves. As a result, the revenue and income potential of our business is unproven. In addition, because of our limited operating history, we have limited insight into trends that may emerge and affect our business. Errors may be made in predicting and reacting to relevant business trends and we will be subject to the risks, uncertainties and difficulties frequently encountered by early-stage companies in evolving markets. We may not be able to successfully address any or all of these risks and uncertainties. Failure to adequately do so could cause our business, results of operations and financial condition to suffer.
OUR PROPOSED OPERATIONS WILL REQUIRE SIGNIFICANT CAPITAL EXPENDITURES FOR WHICH WE MAY NOT HAVE SUFFICIENT FUNDING AND IF WE DO OBTAIN ADDITIONAL FINANCING, OUR EXISTING SHAREHOLDERS MAY SUFFER SUBSTANTIAL DILUTION.
We intend to rely on external sources of financing to meet our capital requirements to continue acquiring, exploring and developing oil and gas properties and to otherwise implement our business plan. We plan to obtain such funding through the debt and equity markets, but we cannot assure that we will be able to obtain additional funding when it is required or that it will be available to us on commercially acceptable terms, if at all. In addition, any additional equity financing may involve substantial dilution to our then existing shareholders. Furthermore, additional debt financing could lead to:
* a substantial portion of operating cash flow being dedicated to the payment of principal and interest; * being more vulnerable to competitive pressures and economic downturns; and * restrictions on our operations.
If sufficient capital resources are not available, we might be forced to curtail our drilling and other activities or be forced to sell some assets on an untimely or unfavorable basis, which would have an adverse effect on our business, financial condition and results of operations.
OUR EXPLORATORY DRILLING OPERATIONS LIKELY WILL NOT BE SUCCESSFUL, OUR BUSINESS MAY FAIL AND INVESTORS MAY LOSE THEIR ENTIRE INVESTMENT IN OUR COMPANY.
There can be no assurance that our future drilling activities will be successful. We may not recover all or any portion of our capital investment in the wells. Unsuccessful drilling activities would have a material adverse effect upon our results of operations and financial condition and would likely result in the ultimate failure of our business operations. The cost of drilling, completing, and operating wells is often uncertain, and a number of factors can delay or prevent drilling operations including: (i) unexpected drilling conditions; (ii) pressure or irregularities in formation; (iii) equipment failures or accidents; (iv) adverse weather conditions; and (v) shortages or delays in availability of drilling rigs and delivery of equipment.
It is unlikely that we will find commercially viable reserves of oil or gas on any of our properties subject to our agreements or any other properties that we acquire rights to in the future. If we do not discover commercially viable reserves of oil and gas, our business would fail and investors would lose all of their investment in our Company.
EXPLORATORY DRILLING INVOLVES MANY RISKS AND WE MAY BECOME LIABLE FOR POLLUTION OR OTHER LIABILITIES, WHICH MAY HAVE AN ADVERSE EFFECT ON OUR FINANCIAL POSITION.
Drilling operations generally involve a high degree of risk. Hazards such as unusual or unexpected geological formations, power outages, labor disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labor, and other risks are involved. We may become subject to liability for pollution or hazards against which we cannot adequately insure or which we may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position and operations.
SHORTAGES OF RIGS, EQUIPMENT, SUPPLIES AND PERSONNEL COULD DELAY OR OTHERWISE ADVERSELY AFFECT OUR COST OF OPERATIONS OR OUR ABILITY TO OPERATE ACCORDING TO OUR BUSINESS PLANS.
If drilling activity increases in North Dakota or elsewhere in the United States in general, a shortage of drilling and completion rigs, field equipment and qualified personnel could develop. These costs have recently increased sharply and could continue to do so. The demand for and wage rates of qualified drilling rig crews generally rise in response to the increasing number of active rigs in service and could increase sharply in the event of a shortage. Shortages of drilling and completion rigs, field equipment or qualified personnel could delay, restrict or curtail our exploration and development operations, which could in turn harm our operating results.
OUR FUTURE PERFORMANCE IS DEPENDENT UPON OUR ABILITY TO IDENTIFY, ACQUIRE AND DEVELOP OIL AND GAS PROPERTIES. IF WE FAIL TO DO THIS WELL, OUR BUSINESS MAY FAIL.
Our future performance depends upon our ability to identify, acquire and develop oil and gas reserves that are economically recoverable. Our success will depend upon our ability to acquire working and revenue interests in properties upon which oil and gas reserves are ultimately discovered in commercial quantities, and our ability to develop prospects that contain proven oil and gas reserves to the point of production. Without successful acquisition and exploration activities, we will not be able to develop oil and gas reserves or generate revenues. We cannot provide you with any assurance that we will be able to identify and acquire oil and gas reserves on acceptable terms or that oil and gas deposits will be discovered in sufficient quantities to enable us to recover our exploration and development costs or sustain our business.
The successful acquisition and development of oil and gas properties requires an assessment of recoverable reserves, future oil and gas prices and operating costs, potential environmental and other liabilities, and other factors. Such assessments are necessarily inexact and their accuracy inherently uncertain. In addition, no assurance can be given that our exploitation and development activities will result in the discovery of any reserves. Our operations may be curtailed, delayed or cancelled as a result of lack of adequate capital and other factors, such as lack of availability of rigs and other equipment, title problems, weather, compliance with governmental regulations or price controls, mechanical difficulties, unusual or unexpected formations or pressures or work interruptions. In addition, the costs of exploitation and development may materially exceed our initial estimates.
OUR BUSINESS MAY SUFFER IF WE DO NOT ATTRACT AND RETAIN TALENTED PERSONNEL.
Our success will depend in large measure on the abilities, expertise, judgment, discretion, integrity and good faith of our management and other personnel in conducting the business of our company. We have a small management team, and the loss of a key individual or inability attract suitably qualified staff could materially adversely impact our business.
Our success depends on the ability of our management and employees to interpret market and geological data correctly and to interpret and respond to economic market and other conditions in order to locate and adopt appropriate investment opportunities, monitor such investments, and ultimately, if required, to successfully divest such investments. Further, no assurance can be given that our key personnel will continue their association or employment with us or that replacement personnel with comparable skills can be found. We have sought to and
will continue to ensure that management and any key employees are appropriately compensated; however, their services cannot be guaranteed. If we are unable to attract and retain key personnel, our business may be adversely affected.
OUR MANAGEMENT TEAM DOES NOT HAVE EXTENSIVE EXPERIENCE IN PUBLIC COMPANY MATTERS, WHICH COULD IMPAIR OUR ABILITY TO COMPLY WITH LEGAL AND REGULATORY REQUIREMENTS.
Our management team has had limited public company management experience or responsibilities, which could impair our ability to comply with legal and regulatory requirements such as the SARBANES-OXLEY ACT OF 2002 and applicable federal securities laws, including filing required reports and other information required on a timely basis. It may be expensive to implement and effect programs and policies in an effective and timely manner that adequately respond to increased legal, regulatory compliance and reporting requirements imposed by such laws and regulations, and we may not have the resources to do so. Our failure to comply with such laws and regulations could lead to the imposition of fines and penalties and further result in the deterioration of our business.
THE OIL AND GAS INDUSTRY IS HIGHLY COMPETITIVE, AND WE MAY NOT HAVE SUFFICIENT RESOURCES TO COMPETE EFFECTIVELY.
The oil and gas industry is highly competitive. We compete with oil and gas companies and other individual producers and operators, many of which have longer operating histories and substantially greater financial and other resources than we do, as well as companies in other industries supplying energy, fuel and other needs to consumers. Our larger competitors, by reason of their size and relative financial strength, can more easily access capital markets than we can and may enjoy a competitive advantage in the recruitment of qualified personnel. They may be able to absorb the burden of any changes in laws and regulation in the jurisdictions in which we do business and handle longer periods of reduced prices for oil and gas more easily than we can. Our competitors may be able to pay more for oil and gas leases and properties and may be able to define, evaluate, bid for and purchase a greater number of leases and properties than we can. Further, these companies may enjoy technological advantages and may be able to implement new technologies more rapidly than we can. Our ability to acquire additional properties in the future will depend upon our ability to conduct efficient operations, evaluate and select suitable properties, implement advanced technologies and consummate transactions in a highly competitive environment.
COMPLYING WITH ENVIRONMENTAL AND OTHER GOVERNMENT REGULATIONS COULD BE COSTLY AND COULD NEGATIVELY IMPACT OUR PRODUCTION.
Our business is governed by numerous laws and regulations at various levels of government. These laws and regulations govern the operation and maintenance of our facilities, the discharge of materials into the environment and other environmental protection issues. Such laws and regulations may, among other potential consequences, require that we acquire permits before commencing drilling and restrict the substances that can be released into the environment with drilling and production activities. Under these laws and regulations, we could be liable for personal injury, clean-up costs and other environmental and property damages, as well as administrative, civil and criminal penalties. Accordingly, we could be liable, or could be required to cease production on properties, if environmental damage occurs.
The costs of complying with environmental laws and regulations in the future may harm our business. Furthermore, future changes in environmental laws and regulations could occur that result in stricter standards and enforcement, larger fines and liability, and increased capital expenditures and operating costs, any of which could have a material adverse effect on our financial condition or results of operations.
THE OIL AND GAS EXPLORATION AND PRODUCTION INDUSTRY HISTORICALLY IS A CYCLICAL INDUSTRY AND MARKET FLUCTUATIONS IN THE PRICES OF OIL AND GAS COULD ADVERSELY AFFECT OUR BUSINESS. THE RECENT DECREASES IN OIL AND GAS PRICES HAVE MADE OUR EXPLORATION PROGRAM LESS VIABLE AND WE HAVE TEMPORARILY PUT OUR EXPLORATION PROGRAM ON HOLD. IF THE SITUATION DOES NOT IMPROVE BEFORE WE RUN OUT OF MONEY, WE WILL LIKELY GO OUT OF BUSINESS AND INVESTORS WILL LOSE THEIR ENTIRE INVESTMENT IN OUR COMPANY.
Prices for oil and gas tend to fluctuate significantly in response to factors beyond our control. These factors include:
* weather conditions in the United States and wherever our property interests are located; * economic conditions, including demand for petroleum-based products, in the United States wherever our property interests are located; * actions by OPEC, the Organization of Petroleum Exporting Countries; * political instability in the Middle East and other major oil and gas producing regions; * governmental regulations, both domestic and foreign; * domestic and foreign tax policy; * the pace adopted by foreign governments for the exploration, development, and production of their national reserves; * the price of foreign imports of oil and gas; * the cost of exploring for, producing and delivering oil and gas; * the discovery rate of new oil and gas reserves; * the rate of decline of existing and new oil and gas reserves; * available pipeline and other oil and gas transportation capacity; * the ability of oil and gas companies to raise capital; * the overall supply and demand for oil and gas; and * the availability of alternate fuel sources.
Changes in commodity prices may significantly affect our capital resources, liquidity and expected operating results. Price changes will directly affect revenues and can indirectly impact expected production by changing the amount of funds available to reinvest in exploration and development activities. Reductions in oil and gas prices not only reduce revenues and profits, but could also reduce the quantities of reserves that are commercially recoverable. Significant declines in prices could result in non-cash charges to earnings due to impairment.
Changes in commodity prices may also significantly affect our ability to estimate the value of producing properties for acquisition and divestiture and often cause disruption in the market for oil and gas producing properties, as buyers and sellers have difficulty agreeing on the value of the properties. Price volatility also makes it difficult to budget for and project the return on acquisitions and the development and exploitation of projects. We expect that commodity prices will continue to fluctuate significantly in the future.
WE MAY NOT IDENTIFY ALL OF LIABILITIES ASSOCIATED WITH OUR PROPERTY INTERESTS OR OBTAIN PROTECTION FROM SELLERS AGAINST THEM, WHICH COULD CAUSE US TO INCUR LOSSES.
Although we have reviewed and evaluated the North Dakota properties subject to our agreements, such review and evaluation might not necessarily reveal all existing or potential problems. This is also true for any future acquisitions made by us. Inspections may not always be performed on every well, and environmental problems, such as groundwater contamination, are not necessarily observable even when an inspection is undertaken. Even when problems are identified, a seller may be unwilling or unable to provide effective contractual protection against all or part of those problems, and we may assume environmental and other risks and liabilities in connection with the acquired properties.
TITLE DEFICIENCIES COULD RENDER THE LEASES THAT WE MAY ACQUIRE IN THE FUTURE WORTHLESS WHICH COULD HAVE ADVERSE EFFECTS ON OUR FINANCIAL CONDITION OR RESULTS OF OPERATIONS.
The existence of a material title deficiency can render a lease worthless and can result in a large expense to our business. It is our practice in acquiring oil and gas leases or undivided interests in oil and gas leases to forgo the expense of retaining lawyers to examine the title to the oil or gas interest to be placed under lease or already placed under lease. Instead, we rely upon the judgment of oil and gas landmen who perform the field work in examining records in the appropriate governmental office before attempting to place under lease a specific oil or gas interest. We do not anticipate that we, or the person or company acting as operator of the wells located on the properties that we may lease in the future, will obtain counsel to examine title to the lease until the well is about to be drilled. As a result, we may be unaware of deficiencies in the marketability of the title to the lease. Such deficiencies may render the lease worthless.
RISKS ASSOCIATED WITH OUR COMMON STOCK
IF WE ISSUE ADDITIONAL SHARES IN THE FUTURE, IT WILL RESULT IN THE DILUTION OF OUR EXISTING SHAREHOLDERS.
Our certificate of incorporation authorizes the issuance of up to 200,000,000 shares of common stock with a par value of $0.001. Our board of directors may choose to issue some or all of such shares to acquire one or more businesses or to provide additional financing in the future. The issuance of any such shares will result in a reduction of the book value and market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will cause a reduction in the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our corporation.
TRADING ON THE OTC BULLETIN BOARD MAY BE VOLATILE AND SPORADIC, WHICH COULD DEPRESS THE MARKET PRICE OF OUR COMMON STOCK AND MAKE IT DIFFICULT FOR OUR STOCKHOLDERS TO RESELL THEIR SHARES.
Our common stock is quoted on the OTC Bulletin Board service of the Financial Industry Regulatory Authority ("FINRA"). Trading in stock quoted on the OTC Bulletin Board is often thin and characterized by wide fluctuations in trading prices due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board is not a stock exchange, and trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a quotation system like Nasdaq or a stock exchange like the American Stock Exchange. Accordingly, our shareholders may have difficulty reselling any of their shares.
OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S PENNY STOCK REGULATIONS AND FINRA'S SALES PRACTICE REQUIREMENTS, WHICH MAY LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK.
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.
FINRA SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK.
In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission (see above for a discussion of penny stock rules), FINRA rules require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable
ITEM 2.
ITEM 2. PROPERTIES
EXECUTIVE OFFICES AND RESIDENT AGENT
Effective November 30, 2009, we use an office at 7 New Road, Second Floor, #6 Belize City, Belize.
Our resident agent for service of process is Nevada Agency and Transfer Company, 50 West Liberty Street, Suite 880, Reno NV 89501.
OIL AND GAS PROPERTIES
UNDEVELOPED ACREAGE
The Company's unproven oil and gas properties are as follows:
(A) STARBUCK EAST SHALLOW GAS PROSPECTS - VALLEY COUNTY, MONTANA
The Company paid a total of $960,551 in acquisition and exploration costs for the Starbuck East Shallow Gas Prospects in Valley County, Montana. Since the Company was unable to reach an agreement with Coastal Petroleum Company ("CPC") to modify the terms of the farmout agreement, the Company decided not to drill a second test well and therefore considered its interest in the Starbuck East Shallow Gas Prospects permanently impaired. As a result the Company took a one-time impairment charge of $960,551.
(B) LODGEPOLE REEF-BAKKEN OIL AND GAS PROSPECTS - STARK AND SLOPE COUNTIES, NORTH DAKOTA
On November 3, 2008, we entered into a letter of intent with East Dickinson Oil and Gas Co. for the assignment of 11 State of North Dakota four year oil & gas exploration leases located in and around Dickinson, North Dakota, amounting to approximately 775 acres. Nine of the Leases have a 12.5% royalty and two of the Leases have a 16.7% royalty, all payable to the State. A total of $10,000 was paid for the 11 leases, which were immediately assigned to the Company. On September 18, 2009 we entered into a memorandum of understanding with Oil for America whereby we agreed to sell the 11 State Lease prospects in Stark County for cash consideration of $13,500, reserving a 4.5% over-riding royalty for ourselves. The leases were assigned back to Oil for America on September 18, 2009.
On April 17, 2008, we entered into a memorandum of understanding with Oil For America whe4reby we would receive a 100% working interest after payout in the Rocheford 27-1 Lodgepole Reef prospect in Stark County for cash consideration of $22,690. This amount was paid following verification by a third party geologist of the potential oil and gas reserves involved. On
November 15, 2009 we entered into a memorandum of understanding with Oil for America whereby we agreed to sell the Rocheford 27-1 Lodgepole Reef prospect in Stark County for cash consideration of $25,000, reserving a 3% over-riding royalty for ourselves. The leases were assigned back to Oil for America on November 23, 2009.
On December 17, 2009, the Company entered into an assignment and purchase agreement with a former director to assign the remaining oil and gas properties in the Lodgepole Reef-Bakken Oil and Gas Prospects in return for forgiveness of outstanding debt totalling $213,542, resulting in a gain of $93,542.
(C) On May 6, 2008, we entered into a memorandum of understanding with Oil for America to identify and acquire up to 4 of 1,280 acre Bakken prospects at a cost yet to be determined. The Company exercised its option on one of the 1,280 acre Bakken prospects and paid $40,000 to Oil for America on July 31, 2008 as part of this leasing operation with an estimated total cost of $160,000. The Company will have a 100% working interest, subject only to landowner royalties and a 20% back-in working interest for Oil for America after royalty payout. On October 10, 2008, the leases contained herein were legally assigned to the Company. The leases expired in July, 2010 and as a result, the Company took a one-time impairment charge of $40,000.
At August 31, 2010 the Company had no oil and gas interests.
We intend to acquire additional oil and gas interests in the future. Management believes that future growth of our company will primarily occur through the acquisition of oil and gas properties following extensive due diligence by our company. However, we may elect to proceed through collaborative agreements, joint venture agreements or other agreements with other experts in the oil and gas industry in order to share expertise and reduce operating costs. The analysis of new property interests will be undertaken by or under the supervision of our management, advisory board and board of directors. Although the oil and gas industry is currently very competitive, management believes that many undervalued prospective properties are available for acquisition and exploration purposes.
Since we are an exploration stage company, there is no assurance that a commercially viable oil and gas reserve exists on any of our property interests, and a great deal of additional exploration will be required before a final evaluation of the economic and legal feasibility for our future expansion is determined. To date, we have not discovered an economically viable oil and gas reserve on any of our property interests, and there is no assurance that we will discover one.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.
ITEM 4.
ITEM 4. (REMOVED AND RESERVED)
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
Our common stock is quoted on the OTC Bulletin Board under the symbol "WSEG". The following table shows the quarterly range of high and low bid information for our common stock over the fiscal quarters for the last two fiscal years as quoted on the OTC Bulletin Board. The bid prices represent quotations by dealers without adjustments for retail mark-ups, mark-downs or commissions and may not represent actual transactions. Investors should not rely on historical prices of our common stock as an indication of its future price performance.
The last sale price of our common stock as reported on Yahoo! Finance on November 22, 2010, was $5.00 per share.
Quarter Ended Bid High Bid Low ------------- -------- ------- 08/31/2010 $14.50 $14.50 05/28/2010 $15.00 $15.00 02/26/2010 $ 5.50 $ 5.50 11/30/2009 $0.030 $0.030 08/31/2009 $0.042 $0.042 05/29/2009 $0.047 $0.402 02/27/2009 $0.055 $ 0.30 11/28/2008 $0.185 $ 0.00
TRANSFER AGENT
Our shares of common stock are in registered form. Our transfer agent for our common stock is the Nevada Agency and Trust Company at 50 West Liberty Street, Suite 880, Reno, NV 89501, Tel: 775-322-0626 Fax: 775-322-5623
HOLDERS OF COMMON STOCK
As of November 30, 2010, we have 25 registered shareholders holding 192,136 shares of our common stock.
DIVIDENDS
We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings, if any, to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED SECURITIES
On February 16, 2010, we issued 100,000 shares units of our securities at a price of $0.125 per unit to one offshore company pursuant to a private placement subscription agreement dated February 16, 2010. The shares were issuant pursuant to Regulation S of the Securities Act of 1932 on the basis that the investor represented to the Company that they were not a "US person" as such term is defined in Regulation S.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
The following table is a summary of purchases made by or on behalf of our Company or any "affiliated purchaser," of shares or other units of any class of the our equity securities that is registered by the issuer pursuant to section 12 of the Exchange Act.
ITEM 6
ITEM 6 SELECTED FINANCIAL DATA
Not applicable.
ITEM 7
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this annual report on Form 10-K.
Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
In addition to the prospective properties described above, we intend to acquire additional oil and gas interests in the future pending recovery of the North American economy. Management believes that future growth of our company will primarily occur through the acquisition of oil and gas properties following extensive due diligence. However, we may elect to proceed through collaborative agreements, joint venture agreements or other agreements with other experts in the oil and gas industry in order to share expertise and reduce operating costs. The analysis of new property interests will be undertaken by or under the supervision of our management, advisory board and board of directors. Although the oil and gas industry is currently very competitive, management believes that many undervalued prospective properties are available for acquisition and exploration purposes.
Since we are an exploration stage company, there is no assurance that a commercially viable oil and gas reserve exists on any of our property interests, and a great deal of additional exploration will be required before a final evaluation of the economic and legal feasibility for our future expansion is determined. To date, we have not discovered an economically viable oil and gas reserve on any of our property interests, and there is no assurance that we will discover one.
Our plan of operation is to conduct exploration work on each of our property interests in order to ascertain whether any possess commercially exploitable oil and gas reserves. There can be no assurance that such oil and gas reserves exist on any of our property interests.
Even if we complete our proposed exploration programs on our property interests and we are successful in identifying an oil and gas reserve, we will have to spend substantial funds on further drilling and engineering studies before we will know whether we have a commercially viable oil and gas reserve.
LIQUIDITY
ANTICIPATED CASH REQUIREMENTS
Over the next 12 months, we have estimated our minimum cash requirements as follows:
Operating Expenses Management and consulting fees $ Nil Professional fees 25,000 General, administration and all other expenses 10,000 ------- 35,000 Oil and gas acquisition and exploration expenditures 50,000 ------- TOTAL $85,000 =======
For the 12 months ended August 31, 2010, we recorded a net operating loss of $62,801 and have an accumulated deficit of $4,776,139 since inception. As at August 31, 2010, we had cash of Nil and for the next 12 months, management estimates minimum cash requirements of $85,000 to fund our on-going operations and planned oil and gas acquisition and exploration activities. Accordingly, we do not have sufficient funds to meet our plan of operation over the next 12 months and will need to obtain further financing.
Our financial condition for the years ended August 31, 2010 and 2009 and the changes between those periods for the respective items are summarized as follows:
WORKING CAPITAL
Our working capital position as at August 31, 2010 compared to August 31, 2009 and the cash flows for the years then ended are summarized below:
12 months Ended August 31, 2010 2009 --------- --------- Current Assets $ -- $ 1,872 Current Liabilities (106,039) (244,669) Working Capital (Deficiency) $(106,039) $(242,797)
The decrease in our working capital position was primarily due to the decrease in oil & gas properties totaling $120,000 in return for forgiveness of outstanding debt totaling $213,542 and forgiveness of funds due a former director totaling $24,000.
CASH FLOWS
12 months Ended August 31, 2010 2009 --------- --------- Net cash used in Operating Activities $ (92,851) $(393,509) Net cash provided by (used in) Investing Activities 38,500 (38,727) Net cash provided by Financing Activities 54,351 362,309 Increase (Decrease) in Cash during the Year $ -- $ (69,927) Cash, Beginning of Year -- 69,927 Cash, End of Year $ -- $ --
During the years ended August 31, 2010 and 2009:
(i) Net cash used in operating activities was $92,851 for our year ended August 31, 2010 compared with cash used in operating activities of $393,509. The decrease of $300,658 in operating activities is mainly attributable to gain on settlement of debt and net losses for the year.
(ii) Net cash provided by investing activities was $38,500 for our year ended August 31, 2010 compared to net cash used in investing activities of $38,727 in the same period in 2009 was mainly attributable to the proceeds from the sale of oil & gas properties.
(iii)Net cash from financing activities was $54,351 for our year ended August 31, 2010 compared to $362,309 in the same period in 2009 was mainly attributable to an increase in loan advances and a decrease in private placement equity financing.
RESULTS OF OPERATIONS
The following summary of our results of operations should be read in conjunction with our audited financial statements for the year ended August 31, 2010 and 2009 which are included herein.
REVENUE
We have not earned any revenues since our inception and we do not anticipate earning revenues until such time as we have begun commercial production from our oil and gas prospects. We are currently in the exploration stage of our business and we can provide no assurances that we will discover commercially exploitable resources on our properties, or if such resources are discovered, that we will be able to begin commercial production.
EXPENSES
Our operating expenses for the year ended August 31, 2010 compared to the same period in 2009 decreased by the net amount of $1,374,659 was primarily due no impairment of oil and gas properties in the current year, a gain on settlement of debt, write down of oil & gas property and an overall decrease in all other expenses.
GOING CONCERN
The audited financial statements accompanying this report have been prepared on a going concern basis, which implies that our Company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. Our Company has not generated revenues since inception, has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of our Company as a going concern is dependent upon: (i) the continued financial support from our shareholders; (ii) the ability of our Company to continue raising necessary equity financing to achieve its operating objectives; (iii) confirmation of the resource value of our oil and gas prospects; and (iv) the eventual attainment of profitable operations. As at August 31, 2010, our Company has a negative working capital of $106,039 and has accumulated losses of $4,776,139 since inception.
Our independent auditors included an explanatory paragraph in their annual report on our financial statements for the year ended August 31, 2010 regarding concerns about our ability to continue as a going concern. In addition, our financial statements contain further note disclosures in this regard. The continuation of our business plan is dependent upon our ability to continue raising sufficient new capital from equity or debt markets in order to fund our on-going operating losses and oil and gas acquisition and exploration activities. The issuance of additional equity securities could result in a significant dilution in the equity interests of our current stockholders.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
BASIS OF PRESENTATION
These financial statements and related notes are presented in accordance with generally accepted accounting principles in the United States of America ("US") and are expressed in US dollars. The Company is an exploration stage company as defined by Statement of Financial Accounting Standard ("SFAS") No. 7, "Accounting and Reporting by Development Stage Enterprises" and has not realized any revenues from its planned operations to date.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are readily apparent from other sources. The actual results experienced by the Company may differ materially from the Company's estimates. To the extent there are material differences, future results may be affected. Estimates used in preparing these financial statements include the carrying value of oil and gas properties, and the fair value of stock-based compensation.
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, other receivables, accounts payable and amounts due to related parties. It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values due to the relatively short maturity of these instruments.
OIL AND GAS PROPERTIES
The Company utilizes the full cost method to account for its investment in oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including such costs as leasehold acquisition costs, capitalized interest costs relating to unproven properties, geological expenditures, tangible and intangible development costs (including direct internal costs), are capitalized into the full cost pool. When the Company commences production from established proven oil and gas reserves, capitalized costs, including estimated future costs to develop the reserves and estimated abandonment costs, will be depleted on the units-of-production method using estimates of proven reserves. Investments in unproved properties and major development projects, including capitalized interest if any, are not depleted until proven reserves associated with the projects can be determined. If the future, exploration of unproven properties are determined to be uneconomical, the amount of such properties is added to the capital costs to be depleted. As of August 31, 2010, all of the Company's oil and gas properties were unproven and excluded from depletion.
The capitalized costs included in the full cost pool are subject to a "ceiling test", which limits such costs to the aggregate of the estimated present value, using a 10% discount rate, of the future net revenues from the proven reserves, based on current economic and operating conditions plus the lower of cost and estimated net realizable value of unproven properties.
Sales of proven and unproven properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proven reserves of oil and gas, in which case the gain or loss is recognized in the statement of operations.
FOREIGN CURRENCY TRANSLATION
The functional and reporting currency of the Company is the United States dollar. The Company accounts for foreign currency transactions in accordance with SFAS No. 52, "Foreign Currency Translation" (ASC 830). Monetary assets and liabilities denominated in foreign currencies are translated into United States Dollars at the period-end exchange rates. Non-monetary assets and liabilities are translated at the historical rates in effect when the assets were acquired or obligations incurred. Transactions occurring during the period are translated at rates in effect at the time of the transaction. The resulting foreign exchange gains and losses are included in operations.
INCOME TAXES
Income taxes are provided for in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), as interpreted by FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" ("FIN 48"). Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities, computed pursuant to FIN 48 and the reported amounts in the consolidated financial statements using the statutory tax rates in effect for the year when the reported amount of the asset or liability is recovered or settled, respectively. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets to the amount that is more likely than not to be realized. For each tax position taken or expected to be taken in a tax return, the Company determine whether it is more likely than not that the position will be sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more likely than not recognition threshold is measured to determine the amount of benefit to recognize. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement.
LOSS PER SHARE
The Company computes net loss per share in accordance with SFAS No. 128, "Earnings per Share", which requires presentation of both basic and diluted loss per share ("LPS") on the face of the statement of operations. Basic LPS is computed by dividing the net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted LPS gives effect to all potentially dilutive common shares outstanding during the period, including convertible debt, stock options and warrants, using the treasury stock method. The computation of diluted LPS does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on LPS.
COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Other than reported net income (loss), comprehensive income (loss) includes foreign currency translation adjustments and unrealized gains and losses on available-for-sale investments, which are disclosed in the accompanying consolidated statements of stockholders' deficit as comprehensive income (loss).
LONG-LIVED ASSETS
In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value. At August 31, 2010, the Company took a one-time impairment charge of $40,000 (see Note 3).
ASSET RETIREMENT OBLIGATIONS
The Company accounts for asset retirement obligations in accordance with the provisions of Statement of Financial Accounting Standard (SFAS) No. 143 "Accounting for Asset Retirement Obligations". SFAS No. 143 requires the Company to record the fair value of an asset retirement obligation as a liability in the period in which it incurs an obligation associated with the retirement of tangible long-lived assets resulting from the acquisition, construction, development and/or normal use of these assets. At August 31, 2010, the Company has not recognized any amount for asset retirement obligations.
STOCK-BASED COMPENSATION
The Company has adopted the fair value recognition provisions of SFAS No. 123R, "Share Based Payments", whereby compensation expense is recognized for all share-based payments based on the fair value at monthly vesting dates, estimated in accordance with the provisions of SFAS 123R.
All transactions in which goods and services are the consideration received for the issuance of equity instruments are accounted for based on fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to Advisory Board members and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
The Company, on April 14, 2010 adopted a stock option plan, however no options have been granted as at August 31, 2010 and therefore no stock-based compensation has been recorded to date for stock options.
COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform to the current year's presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
The FASB established the FASB Accounting Standards Codification ("Codification") as the source of authoritative U.S. generally accepted accounting principles ("GAAP") recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements issued for interim and annual periods ending after September 15, 2009. The codification has changed the manner in which U.S. GAAP guidance is referenced, but did not have an impact on our consolidated financial position, results of operations or cash flows.
In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2010-06, "Fair Value Measurements and Disclosures (Topic 820) -- Improving Disclosures about Fair Value Measurements." This ASU requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in Accounting Standards Codification ("ASC") 820. ASU 2010-06 amends ASC 820 to now require: (1) a reporting entity should disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and (2) in the reconciliation for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements. In addition, ASU 2010-06 clarifies the requirements of existing disclosures. ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early application is permitted. The Company will comply with the additional disclosures required by this guidance upon its adoption in January 2010.
Also in January 2010, the FASB issued Accounting Standards Update No. 2010-03, "Extractive Activities--Oil and Gas--Oil and Gas Reserve Estimation and Disclosures." This ASU amends the "Extractive Industries--Oil and Gas" Topic of
the Codification to align the oil and gas reserve estimation and disclosure requirements in this Topic with the SEC's Release No. 33-8995, "Modernization of Oil and Gas Reporting Requirements (Final Rule)," discussed below. The amendments are effective for annual reporting periods ending on or after December 31, 2009, and the adoption of these provisions on December 31, 2009 did not have a material impact on our consolidated financial statements.
SEC'S FINAL RULE ON OIL AND GAS DISCLOSURE REQUIREMENTS
On December 31, 2008, the Securities and Exchange Commission, referred to in this report as the SEC, issued Release No. 33-8995, "Modernization of Oil and Gas Reporting Requirements (Final Rule)," which revises the disclosures required by oil and gas companies. The SEC disclosure requirements for oil and gas companies have been updated to include expanded disclosure for oil and gas activities, and certain definitions have also been changed that will impact the determination of oil and gas reserve quantities. The provisions of this final rule are effective for registration statements filed on or after January 1, 2010, and for annual reports for fiscal years ending on or after December 31, 2009.
OFF-BALANCE SHEET ARRANGEMENTS
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial position, revenues and expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The accompanying notes are an integral part of these consolidated financial statements.
[LETTERHEAD OF DALE MATHESON CARR-HILTON LABONTE LLP]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of Western Standard Energy Corp.
We have audited the accompanying balance sheets of Western Standard Energy Corp. (an exploration stage company) as of August 31, 2010 and 2009 and the related statements of operations, stockholders' deficit and cash flows for the years then ended and the period from October 16, 2003 (inception) to August 31, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material respects, the financial position of Western Standard Energy Corp. as of August 31, 2010 and 2009 and the results of its operations and its cash flows for the years then ended and the period from October 16, 2003 (inception) through August 31, 2010 in conformity with accounting principles generally accepted in the United States of America.
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 has not generated revenues since inception, has incurred losses in developing its business, and further losses are anticipated. The Company requires additional funds to meet its obligations and the costs of its operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in this regard are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ DMCL
DALE MATHESON CARR-HILTON LABONTE LLP CHARTERED ACCOUNTANTS Vancouver, Canada December 13, 2010
Western Standard Energy Corp. (An Exploration Stage Company) CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these financial statements
Western Standard Energy Corp. (An Exploration Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of these financial statements
Western Standard Energy Corp. (An Exploration Stage Company) STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these financial statements
Western Standard Energy Corp. (An Exploration Stage Company) STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE PERIOD FROM OCTOBER 16, 2003 TO AUGUST 31, 2010
The accompanying notes are an integral part of these financial statements
Western Standard Energy Corp. (An Exploration Stage Company) NOTES TO FINANCIAL STATEMENTS DEFICIENCY August 31, 2010
1. NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS
Western Standard Energy Corp. (the "Company") was incorporated on February 2, 2005 under the laws of the State of Nevada.
GOING CONCERN
These financial statements have been prepared in accordance with United States generally accepted accounting principles, on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As at August 31, 2010, the Company was in the exploration stage; has incurred a net loss of $62,801 for the year ended August 31, 2010 [2009 - $1,437,460] and at August 31, 2010 had a deficit accumulated of $4,776,139 [2009 - $4,713,338]. The Company has no revenue and has an accumulated deficit and negative working capital of $106,039 as at August 31, 2010. Further losses are anticipated in the development of its business and there can be no assurance that the Company will be able to achieve or maintain profitability. The continuing operations of the Company and the recoverability of the carrying value of its assets depends upon the ability of the Company to obtain necessary financing to fund its on-going working capital requirements and exploration activities, and upon future profitable operations. The accompanying financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty. There is no assurance that equity or debt capital will be available as necessary to meet the Company's capital requirements or, if the capital is available, that it will be on terms acceptable to the Company. The issuances of additional equity securities by the Company may result in significant dilution in the equity interests of its current shareholders. Obtaining commercial loans, assuming those loans would be available, will increase the Company's liabilities and future cash commitments. If the Company is unable to obtain financing in the amounts and on terms deemed acceptable, the business and future success may be adversely affected.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND CONSOLIDATION
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States of America and are presented in US dollars. The Company is an exploration stage company and has not realized any revenues to date.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material
differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these financial statements relate to carrying values of oil and gas leases and deferred income tax rates and timing of the reversal of income tax differences.
FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments, consisting of cash, other receivables, bank indebtedness, accounts payable, notes payable and amount due to related parties is estimated to be equal to their carrying value. It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
OIL AND GAS PROPERTIES
The Company utilizes the full cost method to account for its investment in oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including such costs as leasehold acquisition costs, capitalized interest costs relating to unproven properties, geological expenditures, tangible and intangible development costs (including direct internal costs), are capitalized into the full cost pool. When the Company commences production from established proven oil and gas reserves, capitalized costs, including estimated future costs to develop the reserves and estimated abandonment costs, will be depleted on the units-of-production method using estimates of proven reserves. Investments in unproved properties and major development projects, including capitalized interest if any, are not depleted until proven reserves associated with the projects can be determined. If the future, exploration of unproven properties are determined to be uneconomical, the amount of such properties is added to the capital costs to be depleted. As of August 31, 2010, all of the Company's oil and gas properties were unproven and excluded from depletion.
The capitalized costs included in the full cost pool are subject to a "ceiling test", which limits such costs to the aggregate of the estimated present value, using a 10% discount rate, of the future net revenues from the proven reserves, based on current economic and operating conditions plus the lower of cost and estimated net realizable value of unproven properties.
Sales of proven and unproven properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proven reserves of oil and gas, in which case the gain or loss is recognized in the statement of operations.
FOREIGN CURRENCY TRANSLATION
Foreign denominated monetary assets and liabilities are translated into their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the period. Related translation adjustments are reported as a separate component of stockholders' equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations.
INCOME TAXES
Deferred income taxes are provided for tax effects of temporary differences between the tax basis of asset and liabilities and their reported amounts in the financial statements. The Company uses the liability method to account for income taxes, which requires deferred taxes to be recorded at the statutory rate expected to being in effect when the taxes are paid. Valuation allowances are provided for a deferred tax asset when it is more likely than not that such asset will not be realized.
Management evaluates tax positions taken or expected to be taken in a tax return. The evaluation of a tax position includes a determination of whether a tax position should be recognized in the financial statements and such a position should only be recognized if the Company determines that it is more likely than not that the tax position will be sustained upon examination by the tax authorities, based upon the technical merits of the position. For those tax positions that should be recognized, the measurement of a tax position is determined as being the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.
LOSS PER SHARE
Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. Because the Company does not have any potentially dilutive securities, diluted loss per share is equal to basic loss per share.
LONG-LIVED ASSETS
The carrying value of long-lived assets are reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the fair value is less than the carrying amount of an asset.
ASSET RETIREMENT OBLIGATIONS
The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs an obligation associated with the retirement of tangible long-lived assets resulting from the acquisition, construction, development and/or normal use of these assets. At August 31, 2010, the Company has not recognized any amount for asset retirement obligations.
COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform to the current year's presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
Recent pronouncements with future effective dates are either not applicable or are not expected to be significant to the financial statements of the Company.
3. OIL AND GAS PROPERTIES
The Company's unproven oil and gas properties are as follows:
(A) STARBUCK EAST SHALLOW GAS PROSPECTS - VALLEY COUNTY, MONTANA
The Company paid a total of $960,551 in acquisition and exploration costs for the Starbuck East Shallow Gas Prospects in Valley County, Montana. Since the Company was unable to reach an agreement with Coastal Petroleum Company ("CPC") to modify the terms of the farmout agreement, the Company decided not to drill a second test well and therefore considered its interest in the Starbuck East Shallow Gas Prospects permanently impaired. As a result the Company took a one-time impairment charge of $960,551.
(B) LODGEPOLE REEF-BAKKEN OIL AND GAS PROSPECTS - STARK AND SLOPE COUNTIES, NORTH DAKOTA
During the year ended August 31, 2010, the Company sold its interests in the prospect areas as follows:
(i) On September 18, 2009, the Company sold eleven gas leases with a cost of $10,000 for proceeds of $13,500 plus a 4.5% overriding royalty on future production, if any.
(ii) On November 23, 2009, the Company sold five leases with a cost of $22,691 for proceeds of $25,000 plus a 3% overriding royalty on future productions, if any.
(iii)On December 17, 2009, the Company entered into an agreement with a former director to assign all the remaining leases with a cost of $120,000 in forgiveness of $213,542 in debt owing to the former director (see Note 4).
(C) BAKKEN OIL-SHALE PROSPECTS - STARK COUNTY, NORTH DAKOTA
On July 31, 2007, the Company exercised its option on one of four Bakken Reef lease prospects in Stark County and paid $40,000. This lease is paid-up for three years and the Company is entitled to a 100% working interest subject to a 5% landowner royalties and a 20% back-in working interest after royalty payout.
The lease expired on July 31, 2010, therefore the full amount totaling $40,000 was written off.
4. RELATED PARTY TRANSACTIONS
At August 31, 2010, the Company owed $Nil (August 31, 2009 - $191,713) to related parties.
On December 17, 2009, the Company entered into an assignment and purchase agreement with a former director to assign oil and gas properties in return for forgiveness of outstanding debt totaling $213,542, resulting in a gain of $93,542. Also, the Company sold its subsidiary, Western Standard Energy Limited to the former director for proceeds of $2 resulting in a loss of $2,607. Both the gain on the sale of unproved oil and gas interests and the loss on the sale of the Company's subsidiary were recorded in additional paid in capital as it resulted from transactions with a related party.
On December 17, 2009, a former director of the Company forgave $24,000 due by the Company, which was also recorded in additional paid in capital as it resulted from a transaction with a related party.
All related party transactions are measured at the exchange amount, which is the consideration established and agreed to by the related parties.
5. NOTE PAYABLE
On December 22, 2009, the Company entered into a loan agreement with an individual and a corporation whereby the Company agreed to issue notes payable in exchange for proceeds of $60,000. The note bears interest at 11% per annum, secured by the assets of the Company and is payable on demand. At August 31, 2010, the Company owed $60,000 (2009 - $Nil) on the note and $5,896 (2009 - $Nil) in accrued interest. In addition, the note holders paid expenses on behalf of the Company totaling $32,277 (2009 - $Nil) which is included in accounts payable and accrued liabilities.
6. COMMON STOCK
At August 31, 2010, the authorized common stock of the Company was 200,000,000 voting shares with $0.001 par value, of which 192,136 were issued and outstanding.
(i) Effective February 3, 2010, the Company effected a one thousand to one (1000:1) reverse stock split of shares of common stock. As a result, the Company's authorized capital decreased from 2,812,500,000 shares of common stock to 2,812,500 shares of common stock and its issued and outstanding shares of common stock decreased from 92,136,022 shares of common stock to 92,136 shares of common stock.
(ii) On February 16, 2010, the Company issued 100,000 shares of its common stock at a price per share of $0.00125 pursuant to a private placement.
(iii)On April 14, 2010, the Company's shareholders approved an increase at its authorized share capital from 2,812,500 shares of common stock to 200,000,000 shares of common stock.
On April 14, 2010, the Company's shareholders approved a resolution to adopt the 2010 Equity Compensation Plan and authorize the Company's directors to grant up to 5,000,000 stock options pursuant to the terms and conditions of the stock option plan. As at August 31, 2010 no options were granted.
All share and par share information in these financial statements has been re-stated for all periods presented to reflect the above changes.
OBLIGATION TO ISSUE SHARES
During the year ended August 31, 2010, the Company reached an agreement to settle its obligation to issue shares to former advisors and a consultant in the amount of $108,067 in exchange for payment of $3,075 cash, resulting in a gain on settlement of $104,992.
SHARE PURCHASE WARRANTS
As at August 31, 2010 all share purchase warrants outstanding at August 31, 2009 have been cancelled.
7. INCOME TAXES
As of August 31, 2010, the Company had accumulated non-capital loss carry-forwards of approximately $4,002,800 these losses are available to reduce taxable income in future taxation years and begin to expire in 2024 after a carry-forward period of 20 years. The Company is required to compute the deferred tax benefits from non-capital loss carry-forwards. However, due to the uncertainty of realization of these loss carry-forwards, a full valuation allowance has been provided against this deferred tax asset.
At August 31, 2010 and 2009, the components of the deferred tax asset, the statutory tax rate, the effective tax rate and the elected amount of the valuation allowance are shown below:
August 31, August 31, 2010 2009 ------------ ------------
Non-capital tax loss carry forwards $ 4,002,800 $ 3,940,000 Statutory tax rate 35% 35% Effective tax rate -- -- Deferred tax asset 1,400,980 1,379,000 Less: valuation allowance (1,400,980) (1,379,000) ------------ ------------ NET DEFERRED TAX ASSET $ -- $ -- ============ ============
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL MATTERS
None
ITEM 9A(T).
ITEM 9A(T). CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act, our management, with the participation of our principal executive and principal financial officer, evaluated our company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our company's reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company's reports filed under the Exchange Act is accumulated and communicated to our principal executive and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Based on its evaluation, our management concluded that as of the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were not effective.
These deficiencies were as follows:
(1) lack of an outside director on our board of directors and accordingly lack of a functioning independent audit committee; (2) inadequate internal controls over purchase of goods and services and related disbursements primarily due to the inadequate segregation of duties inherent in a small company with a small staff; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines; and, (4) non-existence of either a written code of ethics or a whistle-blower policy.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Our Company's management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) for our company. Our Company's internal control over financial reporting is designed to provide reasonable assurance, not absolute assurance, regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our company's assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that our Company's receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.
Our Management, including our principal executive officer and principal financial officer, conducted an evaluation of the design and operation of our internal control over financial reporting as of August 31, 2010 based on the criteria set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States. Our management has concluded that, as of August 31, 2010, our internal control over financial reporting is effective. Our management reviewed the results of their assessment with our Board of Directors.
This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our company's registered public accounting firm pursuant to temporary rules of the SEC that permit our company to provide only management's report in this Annual Report on Form 10-K.
INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS
Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in our internal controls over financial reporting that occurred during the year ended August 31, 2010 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
CERTIFICATES
Certificates with respect to disclosure controls and procedures and internal control over financial reporting under Rules 13a-14(a) or 15d-14(a) of the Exchange Act are attached to this Annual Report on Form 10-K.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
Effective December 21, 2009, Dan Bauer resigned as our President, Chief Executive Officer, Chief Financial Officer, Secretary and Director. As a result of the resignation, we appointed Peter Jenks as our new President, Chief Executive Officer, Chief Financial Officer, Secretary and to the board of directors. The resignation and appointment is effective December 17, 2009. Peter Jenks is now our sole officer and director.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
As at the date of this report, our directors and executive officers, their ages, positions held, and duration of such, are as follows:
All directors of our Company hold office until the next annual meeting of the Shareholders or until their successors have been elected and qualified. The executive officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors, executive officers and the executive officers of our operating subsidiaries, as well as the positions held, age and duration of appointment for such persons are as follows:
DIRECTORS AND OFFICERS
FAMILY RELATIONSHIPS
There are no family relationships between any director, executive officer, or person nominated or chosen by us to become a director or executive officer.
BUSINESS EXPERIENCE
The following is a brief account of the education and business experience of our directors and executive officers during at least the past five years, indicating their business experience, principal occupations during the period, and the names and principal businesses of the organizations by which they were employed.
Peter Jenks, Director, President and Chief Executive Officer
Mr. Jenks has been our President and CEO since December 17, 2009. Mr. Jenks has over 20 years experience in the golf course and ski hill resort industry and is currently engaged with the City of Estevan, Saskatchewan
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:
1. any Federal bankruptcy or state insolvency petition filed by or against any business or property of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; 2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); 3. being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
4. being the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity; 5. being found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; or 6 being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file.
Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that all filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with, with the exception of the following:
Number of Transactions Not Number of Late Reported on a Failure to File Name Reports Timely Basis Requested Forms ---- ------- ------------ --------------- Nil Nil Nil Nil
CODE OF ETHICS
We have not yet adopted a Code of Ethics but intend to do so in the near future.
CORPORATE GOVERNANCE
Peter Jenks is our sole director and officer. He is not independent as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. We do not have a standing Nominating, Compensation or Audit Committee.
NOMINATING COMMITTEE
We do not have standing nominating or compensation committees, or committees performing similar functions. Our board of directors believe that it is not necessary to have a standing compensation committee at this time because the functions of such committee are adequately performed by our board of directors.
Our board of directors also is of the view that it is appropriate for us not to have a standing nominating committee because our board of directors has performed and will perform adequately the functions of a nominating committee. Our board of directors has not adopted a charter for the nomination committee. There has not been any defined policy or procedure requirements for stockholders to submit recommendations or nomination for directors. Our board of directors
does not believe that a defined policy with regard to the consideration of candidates recommended by stockholders is necessary at this time because we believe that, given the early stages of our development, a specific nominating policy would be premature and of little assistance until our business operations are at a more advanced level. There are no specific, minimum qualifications that our board of directors believes must be met by a candidate recommended by our board of directors. The process of identifying and evaluating nominees for director typically begins with our board of directors soliciting professional firms with whom we have an existing business relationship, such as law firms, accounting firms or financial advisory firms, for suitable candidates to serve as directors. It is followed by our board of directors' review of the candidates' resumes and interview of candidates. Based on the information gathered, our board of directors then makes a decision on whether to recommend the candidates as nominees for director. We do not pay any fee to any third party or parties to identify or evaluate or assist in identifying or evaluating potential nominee.
A shareholder who wishes to recommend nominees to our board of directors may do so in writing to our President, Peter Jenks, at the address appearing on the first page of this annual report.
AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT
We do not have a standing audit committee at the present time. Our board of directors has determined that we do not have a board member that qualifies as an "audit committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K, nor do we have a board member that qualifies as "independent" as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.
We believe that an audit committee, including at least one independent director, is an important part of the normal process of oversight in the establishment and monitoring of required internal controls over financial reporting. However, we believe this would be too costly and burdensome and is not completely warranted in our circumstances given the early stage of our development; the fact we have not generated any revenues from operations to date; and funding resources are limited. In the meantime, we believe our board of directors is capable of analyzing and evaluating our financial statements and understanding internal controls and procedures over financial reporting.
OTHER COMMITTEES
All proceedings of our board of directors for the year ended August 31, 2010 were conducted by resolutions consented to in writing by our directors and filed with the minutes of the proceedings of the board of directors. Our company currently does not have nominating, compensation or audit committees or committees performing similar functions nor does our company have a written nominating, compensation or audit committee charter. Our board of directors believes it is not necessary to have such committees for the reasons indicated above.
Our Company does not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for directors. Our directors believe that, given the stage of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. Our company does not currently have any specific or minimum criteria for the election of nominees to the Board of Directors and we do not have any specific process or procedure for evaluating such nominees. Our board of directors will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment.
A shareholder who wishes to communicate with our board of directors may do so by directing a written request addressed to our President, Peter Jenks, at the address appearing on the first page of this annual report.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The particulars of compensation paid to the following persons:
(a) our principal executive officer; (b) each of our two most highly compensated executive officers who were serving as executive officers at the end of the years ended August 31, 2010 and 2009; and
(c) up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the most recently completed financial year,
who we will collectively refer to as the named executive officers, for our year ended August 31, 2010, are set out in the following summary compensation table:
- ---------- 1. No longer an officer or director of the Company.
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive stock options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors from time to time. We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control.
EMPLOYMENT CONTRACTS
We are not party to any employment contracts with our directors and officers.
DIRECTOR COMPENSATION POLICY
Directors of our Company may be paid for their expenses incurred in attending each meeting of the directors. In addition to expenses, directors may be paid a sum for attending each meeting of the directors or may receive a stated salary as director. No payment precludes any director from serving our company in any other capacity and being compensated for such service. During the year ended August 31, 2010, we did not pay any compensation or grant any stock options to our directors.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
As at August 31, 2010, we had not adopted any equity compensation plan and no stock, options, or other equity securities were awarded to our executive officers except as listed below.
OPTION EXERCISES AND STOCK VESTED TABLE.
None of our directors, officers or employees has exercised their stock options.
OPTION EXERCISES AND STOCK VESTED
OPTION AWARDS STOCK AWARDS ------------------------------ ---------------------------- Number of Number of Shares Value Shares Value Acquired On Realized On Acquired On Realized On Name Exercise(#) Exercise($) Vesting(#) Vesting($) ---- ----------- ----------- ---------- ---------- Peter Jenks Nil Nil Nil Nil
RE-PRICING OF OPTIONS/SARS
None.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
We have not adopted a stock option plan and have not granted any stock options.
EQUITY COMPENSATION PLAN INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
- ---------- 2. Percentage of ownership is based on 192,136 common shares issued and outstanding as of November 30, 2010.
In the following tables, we have determined the number and percentage of shares beneficially owned in accordance with Rule 13d-3 of the Exchange Act based on information provided to us by our controlling shareholder, executive officers and directors, and this information does not necessarily indicate beneficial ownership for any other purpose. In determining the number of shares of our common stock beneficially owned by a person and the percentage ownership of that person, we include any shares as to which the person has sole or shared voting power or investment power, as well as any shares subject to warrants or options held by that person that are currently exercisable or exercisable within 60 days.
CHANGES IN CONTROL
None.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
TRANSACTIONS WITH RELATED PERSONS
None of the following parties has, since our date of incorporation, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us, other than as noted in this section:
(i) Any of our directors or officers; (ii) Any person proposed as a nominee for election as a director; (iii)Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock; (iv) Any of our promoters; and (v) Any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the foregoing persons.
PENSION, RETIREMENT OR SIMILAR BENEFIT PLANS
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.
We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
AUDIT FEES
For the years ended August 31, 2010 and 2009, the aggregate fees billed by Dale Matheson Carr-Hilton Labonte LLP for professional services rendered for the quarterly reviews and annual audit of our consolidated financial statements included in our quarterly reports on Form 10-Q and our annual report on Form 10-K were:
Year Ended Year Ended August 31, 2010 August 31, 2009 --------------- --------------- Audit Fees and Audit Related Fees $20,000 Income Tax Fees $ -- All Other Fees $ 9,500 TOTAL
POLICY ON PRE-APPROVAL BY AUDIT COMMITTEE OF SERVICES PERFORMED BY INDEPENDENT AUDITORS
We do not use Dale Matheson for financial information system design and implementation. These services, which include designing or implementing a system that aggregates source data underlying the financial statements or generates information that is significant to our financial statements, are provided internally or by other service providers. We do not engage Dale Matheson to provide compliance outsourcing services.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before Dale Matheson is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
* approved by our audit committee (which consists of our entire board of directors); or * entered into pursuant to pre-approval policies and procedures established by the board of directors, provided the policies and procedures are detailed as to the particular service, the board of directors is informed of each service, and such policies and procedures do not include delegation of the board of directors' responsibilities to management.
The board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.
The board of directors has considered the nature and amount of fees billed by Dale Matheson and believes that the provision of services for activities unrelated to the audit is compatible with maintaining Dale Matheson's independence.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibits required by Item 601 of Regulation S-K:
Exhibit No. Description - ------- -----------
(3) ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Articles of Incorporation (attached as an exhibit to our Registration Statement on Form SB-2, filed on November 2, 2005)
3.2 Bylaws (attached as an exhibit to our Registration Statement on Form SB-2, filed on November 2, 2005)
3.3 Articles of Merger (attached as an exhibit to our current report on Form 8-K filed on June 28, 2006)
3.4 Certificate of Change (attached as an exhibit to our current report on Form 8-K filed on June 28, 2006)
3.5 Certificate of Change (attached as an exhibit to our current report on Form 8-K filed on July 7, 2007)
3.6 Articles of Merger (attached as an exhibit to our current report on Form 8-K filed on July 7, 2007)
3.7 Articles of Merger (attached as an exhibit to our annual report on Form 10-KSB filed on December 14, 2007)
(4) INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
4.1 Specimen ordinary share certificate (attached as an exhibit to our Registration Statement on Form SB-2, filed on November 2, 2005)
(10) MATERIAL CONTRACTS
10.1 Form of Subscription Agreement (attached as an exhibit to our current report on Form 8-K filed on September 26, 2006)
10.2 Promissory Note (attached as an exhibit to our current report on Form 8-K filed on October 3, 2006)
10.3 Lease Agreement (attached as an exhibit to our current report on Form 8-K filed on November 29, 2006)
10.4 Form of Subscription Agreement (attached as an exhibit to our current report on Form 8-K filed on November 29, 2006)
10.5 Share Exchange Agreement (attached as an exhibit to our current report on Form 8-K filed on November 29, 2006)
10.6 Share Issuance Agreement with Global (attached as an exhibit to our current report on Form 8- K filed on May 15, 2007)
10.7 Letter of Intent (attached as an exhibit to our current report on Form 8-K filed on May 17, 2007)
10.8 Private Placement Subscription Agreement (attached as an exhibit to our current report on Form 8-K filed on May 23, 2007)
10.9 Office Lease and Services Agreement (attached as an exhibit to our quarterly report on Form 10- QSB filed on July 16, 2007)
10.10 Assignment Agreement between Power Energy Enterprises SA and Lusora Healthcare Systems Inc. (attached as an exhibit to our current report on Form 8-K filed on September 4, 2007)
10.11 Farmout Agreement between Coastal Petroleum Company and Lusora Healthcare Systems Inc. (attached as an exhibit to our current report on Form 8-K filed on September 4, 2007)
10.12 Private Placement Subscription Agreement (attached as an exhibit to our current report on Form 8-K filed on October 16, 2007)
10.13 Warrant Certificate (attached as an exhibit to our current report on Form 8-K filed on October 16, 2007)
10.14 Private Placement Subscription Agreement (attached as an exhibit to our current report on Form 8-K filed on November 11, 2007)
10.15 Warrant Certificate (attached as an exhibit to our current report on Form 8-K filed on November 11, 2007)
10.16 Memorandum of Understanding with Coastal Petroleum, dated November 29, 2007, signed December 4 (attached as an exhibit to our current report on Form 8-K filed on December 11, 2007)
10.17 Letter from Western Standard Energy Corp. to Coastal Petroleum Company, dated November 28, 2007 (attached as an exhibit to our current report on Form 8-K filed on December 11, 2007)
10.18 Assignment Agreement between Coastal Petroleum Company and Western Standard Energy Corp., dated November 7, 2007 (attached as an exhibit to our current report on Form 8-K filed on December 11, 2007)
10.19 Farmout Agreement between Oil For America and Western Standard Energy Corp., dated November 9, 2007 (attached as an exhibit to our current report on Form 8-K filed on December 11, 2007)
10.20 Assignment Agreement between Oil For America and Western Standard Energy Corp., dated November 7, 2007 (attached as an exhibit to our current report on Form 8-K filed on December 11, 2007)
10.21 Farmout Agreement between Coastal Petroleum Company and Western Standard Energy Corp., dated December 11, 2007 (attached as an exhibit to our annual report on Form 10-KSB filed on December 14, 2007)
10.22 Assignment Agreement between Coastal Petroleum Company and Western Standard Energy Corp., dated December 12, 2007 (attached as an exhibit to our annual report on Form 10-KSB filed on December 14, 2007)
10.23 Form of Subscription Agreement dated December 24, 2007
10.24 Memorandum of Understanding dated January 24, 2008 between Western Standard Energy Corp. and F Cross Resources, LLC (attached as an exhibit to our quarterly report on Form 10-QSB filed on February 4, 2008)
10.25 Memorandum of Intent with Oil For America dated April 17, 2008 (attached as an exhibit to our current report on Form 8-K filed on April 21, 2008)
10.26 Share Issuance Agreement dated May 6, 2008 with Infinity Energy Investments Limited (attached as an exhibit to our current report on Form 8-K filed on May 8, 2008)
10.27 Memorandum of Intent dated May 6, 2008 with Oil for America (attached as an exhibit to our quarterly report on Form 10-QSB filed on July 15, 2008)
10.28 Letter of Intent with East Dickinson Oil and Gas Co. dated October 31, 2008 (attached as an exhibit to our current report on Form 8-K filed on November 10, 2008)
10.29 Assignment Agreement with East Dickinson Oil and Gas Co., dated November 3, 2008 (attached as an exhibit to our annual report on Form 10-K filed on December 15, 2008)
10.30 Assignment Agreement with Stark County Oil & Gas Co., dated November 3, 2008 (attached as an exhibit to our annual report on Form 10-K filed on December 15, 2008)
10.31 Assignment Agreement with East Dickinson Oil & Gas Co., dated September 18, 2009 (attached as an exhibit to our annual report on Form 10-K filed on December 14, 2009)
10.32 Assignment Agreement with Oil For America LLC., dated November 15, 2009 (attached as an exhibit to our annual report on Form 10-K filed on December 14, 2009)
10.33 Loan Agreement dated December 22, 2009 (attached as an exhibit to our current report on Form 8-K filed on December 29, 2009)
(21) LIST OF SUBSIDIARIES
21.1 Western Standard Energy Limited, incorporated in the UK
(31) SECTION 302 CERTIFICATION
31.1 Certification Statement pursuant to Section 302 of the Sarbanes- Oxley Act of 2002
(32) SECTION 906 CERTIFICATION
32.1 Certification Statement pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002
99.1 Great Northern Gas Company - Starbuck East Prospect Valley Co., Montana Geological Report dated February 2, 2005 (attached as an exhibit to our current report on Form 8-K filed on May 15, 2008)
99.2 Letter from Richard Robertson dated September 25, 2007 verifying the contents of the February 2, 2005 Geological Report (attached as an exhibit to our current report on Form 8-K filed on May 15, 2008)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
WESTERN STANDARD ENERGY CORP.
By: /s/ Peter Jenks -------------------------------------------------------- Peter Jenks President, CEO, CFO, Secretary, Treasurer and Director Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer
Dated: December 13, 2010