ITEM 1. DESCRIPTION OF BUSINESS
ITEM 2. DESCRIPTION OF PROPERTY
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
ITEM 8. FINANCIAL STATEMENTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
ITEM 15. EXHIBITS
FORWARD LOOKING STATEMENTS
Certain information in this report including statements made in "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Description of Business" and elsewhere contain "forward-looking statements". All statements other than statements of historical fact are "forward-looking statements", including any projections of earnings, revenues or other financial items, any statements of the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as "may," "will," "expects," "plans," "anticipates," "estimates," "potential," or "continue," or the negative thereof or other comparable terminology. Although Sentry Petroleum Ltd. believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in these forward-looking statements.
Forward-looking statements include but are not limited to:
·
Sentry Petroleum’s ability to implement successfully its operating strategy as described in its business plan;
·
Future financial performance as estimated in Sentry Petroleum’s financial projections;
·
Sentry Petroleum’s forecasts of market demand; and,
·
Highly competitive market conditions.
This list of categories of forward-looking statements should not be construed as exhaustive. Sentry Petroleum will not update or revise any forward-looking statements.
Certain factors that could cause Sentry Petroleum’s forward-looking statements not to be correct and cause Sentry Petroleum’s actual results to materially vary from projections made in forward-looking statements as further described under the caption in Risk Factors contained in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of this report.
ITEM 1. BUSINESS
(a) Business Development
Sentry Petroleum Ltd. ("Sentry" or "the Company") is a Nevada company incorporated on February 23, 2006. The Company's registered office and agent for service is located at 5190 Neil Road, Suite 430, Reno Nevada 89501 and our principal corporate office is located at 999 18th Street, Suite 3000 Denver, CO 80202. We maintain an operation's office in Perth, Australia. Our operations office telephone number is 61-8-9474 1092. We are an oil and gas exploration stage company. To date we have had no revenues, have achieved losses since inception, and have been issued a going concern opinion from our auditors.
We rely upon the sale of our securities to fund operations. On November 17, 2006 we completed our initial public offering pursuant to an SB-2 registration statement declared effective by the Securities and Exchange Commission on June 19, 2006. We issued a total of 6,325,600 shares for total proceeds of $316,280. On April 20, 2007 our common stock commenced trading on the OTC Bulletin Board under the symbol SMIX. On November 1, 2007 we issued 30,000,000 shares by way of SB-2 registration statement for total proceeds of $750,000. On November 30, 2007 we completed a 2-1 stock split of our common stock, all disclosures in this 10-K reflect the effect of this stock split. On December 5, 2007 we changed our name to Sentry Petroleum Ltd and our trading symbol to SPLM.
During the year ended February 28, 2009 the Company acquired four exploration permits, ATP 862, ATP 864, ATP 865, and ATP 866, in the Adavale Basin in Queensland Australia for cash consideration of $30,000 and 7% gross overriding royalty. The Company incurred $98,351 in costs during the year relating to these four permits. The Company completed loading and quality checking the seismic data available on the four permits and commenced a detailed interpretation of the data. We will require additional funding to discharge our exploration obligations. Should we fail to raise additional funds, we will be unable to carry out our plan of operations.
ATP 862:
ATP 862 lies in Central Queensland immediately north of the Gilmore Gas field and the Kenmore Oil fields. The permit covers a gross area of approximately 1.85 million acres. Subject to a 7% Gross Overriding Royalty the Company holds a 100% working interest and is the Operator. Over one thousand eight hundred line miles of seismic have been shot over the permit area. Five leads have been identified within the application area and rail and road links traverse the permit. A gas pipeline to the Barcaldine Power Station runs to the east of the permit and from there to Gladstone, the site of British Gas' liquid natural gas (LNG) facility.
ATP 864
ATP 864 lies in Central Queensland immediately north of the Gilmore Gas field. The permit covers a gross area of approximately 1.76 million acres. Subject to a 7% Gross Overriding Royalty the Company holds a 100% working interest and. is the Operator. Over one thousand three hundred line miles of seismic have been shot over the permit area. Five leads have been identified within the application area. The permit is traversed by rail, road and pipeline infrastructure. A gas pipeline leading from the Gilmore Gas field to the Barcaldine Power Station runs to the east through the permit.
ATP 865
ATP 865 lies in Central Queensland Australia and covers an area of approximately 1.67 million acres. Subject to a 7% Gross Overriding Royalty the Company holds a 100% working interest and is the Operator. Over two thousand line miles of seismic have been shot over the permit area. Sentry has identified five promising leads within the application area and a large drill ready prospect, the Sherwood Park prospect. A gas pipeline runs north to the Gilmore Gas Field between the Gumbardo-1 and Emu Creek-1 wells in the western side of the ATP 865.
ATP 866
ATP 866 is a rectangular block and covers an area of approximately 1.5 million acres. The permit lies south east of the Gilmore Gas field and is traversed by rail and road links. Subject to a 7% Gross Overriding Royalty the Company holds a 100% working interest and is the Operator. Over 600 line miles of seismic has been shot across the permit with surface geology dominated by Quaternary residual sediments with outcrops of cretaceous siltsones. Seven leads have been identified to date.
As of February 28, 2009 and the date of this report the company does not have any proven reserves.
(b) Business of the Issuer
We are an exploration stage company engaged in the assessment, acquisition, exploration and development of oil and gas properties in Australia and other regions in Austral Asia. In an effort to evaluate exploration interests that meet our criteria, we assessed the potential of various properties in Australia and Austral Asia. The assessment includes geochemical and petrological review to determine petroleum source potential and reservoir quality, interpretation and reinterpretation of existing seismic data, as well as consideration of discoveries made by third parties on properties adjacent to, or, depending on circumstances, in the area of the properties we are assess. Geological conditions are however, unpredictable. The analysis of geochemical, petrological, seismic data, and discovery of reserves on properties adjacent to, or in the area of properties under consideration is no assurance that commercially recoverable reserves of oil and gas will be discovered on properties acquired or under consideration. See Risk Factors under this item.
We have not received any revenues from oil and gas operations. We are an exploration stage company. We have no history of earnings and there is no assurance that our business will be profitable. As at February 28, 2009 we have an accumulated deficit of $680,388 and we expect to continue incurring operating losses and accumulating deficits until such time that we achieve profitable operations.
Each of the members of our management team devote approximately 80% of their time to the company. They have not entered into any employment nor consulting agreements with us. They also devote approximately 20% of their time to other business interests. In the course of their work for our company they may choose to work on matters specific to their other business interests at a time that may not be opportune to the best interests of our company. As a result we may loose opportunities that we would have otherwise secured. In such a situation where a conflict of interest exists any decision they make which furthers the best interests of other competing businesses, may be harmful to our business.
There is no assurance that we will earn revenue, operate profitably or provide a return on investment to our security holders. Our activities since our inception have been limited and have consisted of conducting discussions with possible joint venture partners, attending regional oil and gas conferences and reviewing government tenders.
To date we have held preliminary discussions related to potential future funding. Our business plan is limited in its scope and we intend to derive all of our revenue from a discovery of commercial quantities of hydrocarbons. Specifically, discovering sufficient quantities of hydrocarbons to warrant their profitable development. We have no other business plans and if we are unsuccessful in discovering commercial quantities of hydrocarbons our business will fail.
We require significant additional funding to complete the work program we committed to when acquiring our current exploration properties. We anticipate raising additional financing through the sale of equity securities to finance these exploration obligations, although there can be no assurance that such funding will be available. In the event that future equity financing cannot be raised or negotiations for funding are not successful, our plan of operations will be significantly curtailed. There can be no assurance that we will be able to successfully raise the capital required, when required, to meet these additional costs. Additionally, there can be no assurance that if we are successful in securing funding that we will be successful in discovering commercial quantities of hydrocarbons, or that we will have access to funds to develop a successful discovery without significant dilution or cost to our stockholders.
QUEENSLAND AUSTRALIA PETROLEUM EXPLORATION PERMITS
The following is a brief outline of the requirements associated with exploration permits in Queensland Australia and some of the associated expenses incurred in securing approval from the Department of Mines and Energy on ATP permits.
In Queensland, Australia, an onshore exploration permit is a form of tenure granted by the Queensland government under the Petroleum and Gas (Production and Safety) Act. The Petroleum and Gas (Production and Safety) Act grants 2 different types of petroleum tenure, an authority to prospect (ATP) for exploration and a petroleum lease (PL) for development upon commercial discovery of oil or gas. The maximum land area for an ATP tenure is approximately 7,500 sq. km and approximately 225 sq. km for a PL. In each case the area must form a single parcel of land. For an ATP the maximum term for tenure is 12 years (including the initial term and any renewal terms). For a PL the term is 30 years although a PL may be renewed which, in aggregate with previous terms, take the total term of the PL beyond 30 years. Applications for renewal of an ATP petroleum tenure must be made within 60 business days before the end of the existing term and 80 business days before the end of the existing term for a PL.
A work program with total commitment of approximately $13 million over the next three years and has been approved by the state government for ATP 862, 864, 865 and 866. Initial work programs have a maximum term of 4 years and set out the description of the geological model for which we based our work program, our assessment of the potential of discovery and the rationale for the proposed exploration activities. To extend our interest beyond the initial 4-year grant we will be required to submit a new application to the Minister at least 20, but not more than 60, business days before the end of the existing work program. If a later work program is not submitted before the end of the existing work program and we fail to comply with a notice requiring submission of a later work program our ATPs will be cancelled.
If we make a commercial discovery we can make an application for the grant of a PL. The initial term of ATP will continue until a decision is made on the PL application, even if the term of the ATP would otherwise have expired. Under the Petroleum and Gas (Production and Safety) Act, the holder of an ATP has a right of entitlement to the grant of a PL but must satisfy the Minister that the prescribed requirements have been complied with. Specifically; the Minister approving the applicant's proposed initial development plan and the Minister being satisfied that the applicant has sufficient financial and technical resources to carry out the proposed petroleum production or storage activities.
Royalties
If we are successful in discovering commercial quantities of oil or gas, secure sufficient funds to develop the discovery and are granted a petroleum license we will be required to pay a royalty at a rate of 10% of the wellhead value of the petroleum sold less allowable expenses. The wellhead value is the sum that could reasonably be expected to be realized on a commercial basis, or the fair market.
Allowable expenses include;
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Charges paid or payable by us to a third party for transportation to the point of sale.
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Processing plant tolls or other charges paid or payable by us to a third party for processing the petroleum before it is sold.
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Depreciation of capital expenditure by us on a petroleum facility or pipeline used for processing the petroleum or transporting it from the wellhead to the point of its sale, allocated over 10 years or a shorter period if the Minister so decides.
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An operating cost incurred, or to be incurred, by us that directly relates to treating, processing or refining the petroleum before it is sold or transporting the petroleum to the point of its sale.
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Repairs and maintenance of, and insurance costs for, petroleum facilities and pipelines used to process the petroleum or transport it from the wellhead to the point of its sale.
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Petroleum tenure rents and Petroleum storage costs.
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Other expenses incurred, or to be incurred, by us in relation to the operation of the site at which the petroleum was produced that is approved by the Minister.
Accounting profits for purpose of calculating royalties are defined as the excess of net sales revenues over the total of allowable deductions. Allowable deductions are the sum of the foregoing expenses incurred in the current year less any capital proceeds received during the year.
The obligation to determine royalties payable may require additional accounting staff and expenses. Presently, we cannot ascertain the extent of these expenses but anticipate additional costs to collect and maintain sufficient records and to calculate the royalties payable on a quarterly and annual basis.
ENVIRONMENTAL REGULATION IN AUSTRALIA
A complex legislative framework governs environmental regulation for petroleum activities in Australia. The administering authority imposes standard codes of environmental compliance. These codes are used to regulate certain petroleum activities like exploration and development. The environmental assessment process for an ATP is based on whether we are able to comply with the relevant code of environmental compliance and operate within the criteria for exploration. The codes were developed to provide a simplified approval process for ATP activities and include such requirements as how to operate projects in compliance with standard environmental conditions, references to best practice environmental management and advisory notes that provide technical guidelines.
The criteria for an ATP activity are whether potential harm to the environment by the proposed work program can be managed through compliance with the standard environmental codes of environmental compliance. We have received the required environmental authority to complete our proposed work program on the four permits.
PRINCIPAL PETROLEUM PROPERTIES
The following is a summary of the interests held by the Company. The Company’s properties are located in the onshore Adavale Basin in Queensland Australia and are exploration permits. All of the Company’s interests in the Adavale Basin cover approximately 6.9 million net acres. The Adavale Basin is a lightly explored area with previous commercial production. The Adavale Basin system is divided structurally into two main regions by the Canaway Ridge. On the eastern side of this structural divide, the basinal system embraces a main depression and a number of isolated synclinal troughs on its southeastern margin which together constitute the Adavale Basin. West of the ridge, it encompasses the Warrabin and the Barrolka Troughs. Together, during the Devonian, these present day structural remnants were part of a considerably larger basin that had developed on the cratonised Thomson Fold Belt of eastern Australia. All of the Company’s properties are located east of the Canaway Ridge. Apart from our interests in the following hydrocarbon exploration properties, we hold only minor office assets for the purpose of operating our business.
The following figure shows the locations of the Company’s permits held at February 28, 2009:
The following table summarizes the Company’s permits held at February 28, 2009:
Property
Location
Working Interest
Gross Acres
Net Acres
ATP 862
Adavale Basin
100%
1.85 million
1.85 million
ATP 864
Adavale Basin
100%
1.76 million
1.76 million
ATP 865
Adavale Basin
100%
1.67 million
1.67 million
ATP 866
Adavale Basin
100%
1.5 million
1.5 million
For further detail on each property, and work done during the year, please refer above to Item 1.A - “Business Development” and to the Company’s audited consolidated financial statements (Item 3). For details of planned work to be done on each property before February 28, 2010 and for the estimated cost thereof see below Item 5.B - “Liquidity and Capital Resources” below.
ITEM 1A.
ITEM 1A. RISK FACTORS
Our common shares must be considered a speculative investment. Readers should carefully consider the risks described below before deciding whether to invest in shares of our common stock. If we do not successfully address the risks described below, there could be a material adverse effect on our business, financial condition or results of operations, and the trading price of our common stock may decline and investors may lose all or part of their investment. We cannot assure any investor that we will successfully address these risks.
The purchase of the common shares involves a number of significant risk factors. Purchasers of common shares should consider the following.
Risks associated with our business
We were incorporated on February 23, 2006 and have a limited history of operations making it difficult to evaluate our current value and chance of success. We have not had success in discovering commercial quantities of hydrocarbons and there is no guarantee that our acquired properties contain commercial quantities of hydrocarbons or that we will be able to raise the appropriate funds to develop the properties. Our limited history makes it difficult to evaluate the current value of our shares and our chances of success leading to volatility in the value of your investment.
The global recession could have a material adverse impact on our financial results. The United States and other world economies are in a recession which could last well beyond 2009. The recession has led to less demand and lower pricing for crude oil and natural gas, as demonstrated by the decline in commodity prices which occurred during the later part of 2008 and into 2009. Our future access to capital and the availability of future financing could be limited due to tightening credit markets that could affect our ability to fund our capital projects.
Oil and gas exploration is very competitive and we will not be able to effectively compete with other companies in procuring services required to complete our plan of operations. We are in competition with other companies with greater financial resources and expertise in bidding for and procuring equipment necessary to explore for, develop and produce hydrocarbons and in obtaining the services of personnel in the exploration for, and development and production of, hydrocarbons. Our inability to compete raises the risk that we will be unable to carry out our plan of operations.
We have limited financial resources and will have to raise additional funds to expand our business. To date we have held preliminary discussions related to potential future funding but there can be no certainty that market conditions will enable us to raise the funds required. Failure to raise additional funds may result in the failure of our business. As of February 28, 2009, we had $462,509 in working capital. During the past 12 months we acquired interests in four ATP properties with expenditures to date totalling $95,405 in purchase, crosschecking and interpreting the seismic mapping data. Our anticipated expenditures for the next 12 months are approximately $350,000. We presently have sufficient capital to satisfy the planned expenditures for this period, however we have no revenues and will rely principally on the issuance of common shares to raise funds to finance the planned expenditures beyond this period. There is no assurance that market conditions will enable us to raise funds when required, and any additional equity financing will likely be dilutive to existing shareholders. Should we fail to raise additional funds, we will be unable to carry out our plan of operations for subsequent fiscal years. (See ITEM 1 (b) - Business of the Issuer)
We have acquired interests in four Authority to Prospect (ATP) properties, however, we may be unable to meet the terms and conditions of the permit. Failure to meet the prescribed terms and conditions may result in the loss or abandonment of the permit resulting in the inability to carry out our plan of operations. In all cases, the terms and conditions of any future potential permit or license granting us, directly or indirectly, the right to explore for and develop hydrocarbons prescribes a work program and the date or dates before which such work program must be satisfied. Varying circumstances, including our financial resources, availability of required equipment, and other matters, may result in the failure to satisfy the terms and conditions of a permit or license and result in the complete loss of the interest in the permit or license.
Based upon our financial position our auditor has expressed substantial doubt about our ability to continue as a going concern. We will be unable to continue as a going concern if we are unable to earn sufficient revenues from operations or to raise additional capital through debt or equity financings to meet our future capital obligations. As of February 28, 2009 we have working capital of $462,509 sufficient to finance our plan of operations for the next 12 months, but not for possible commitments beyond that period. If we do not raise the capital required to carry out our plan of operations, we may be unable to continue as a going concern.
There is no assurance that we will discover hydrocarbons on any of our oil and gas interests. Failure to discover hydrocarbons will make it difficult for us to remain as a going concern. There are no known hydrocarbon reserves on any of our oil and gas interests and there is no assurance that we will discover commercial quantities of hydrocarbons. In addition, even if hydrocarbons are discovered, the costs of development may render any deposit found uneconomic. If we do not find hydrocarbon reserves or are unable to develop reserves, either because we do not have sufficient capital or the costs of extraction are uneconomical, we will have to cease operations and investors who have purchased shares may lose their investment.
Geological conditions are variable and unpredictable and heighten exploration risk. Oil and gas exploration and development involves a high degree of risk and few properties that are explored are ultimately developed into producing properties. Even if production is commenced from a well, the production will inevitably decline and may be affected or terminated by changes in geological conditions that cannot be foreseen or remedied. A change in geological conditions may render a discovery uneconomic.
The marketing and sale of petroleum products is subject to government regulation that may impair our ability to sell hydrocarbons or limit the prices available. Changes to government regulation or laws in the jurisdictions in which we may be operating might result in a discovery becoming uneconomical leading to financial losses. Even if we make discoveries in commercial quantities, development of a discovery may take a number of years and financial conditions at that time cannot be determined. The availability of products sold, or to be sold, may be restricted or rendered unavailable due to factors beyond our control, such as change in laws in the jurisdictions in which we may be operating, changes in the source of supply in foreign countries and prohibition on use due to testing and licensing requirements.
The price for oil and gas is volatile and determined by factors beyond our control. Failure to accurately forecast prices may result in financial losses. Prices for oil and gas may fluctuate widely from time to time depending on international demand, production and other factors that cannot be foreseen. A decline in price may render a discovery uneconomic resulting in unforeseen
losses. If a discovery becomes uneconomical due to declining prices, funds spent to develop the discovery might not be recoverable leading to financial losses.
We are subject to local laws and regulations that are subject to change, including tax and land title claims. Any material change could have an adverse effect on our business and our ability to operate. There is no assurance that governmental regulation will not vary, including regulations relating to prices, royalties, allowable production, environmental matters, import and export of hydrocarbons and protection of water resources and agricultural lands. We will be subject to numerous governmental regulations that relate directly and indirectly to our operations including but not limited to title, production, marketing and sale of hydrocarbons, taxation, and environmental matters. There is no assurance that the laws relating to the ownership of petroleum interests and the operation of our business in the jurisdiction in which we operate will not change in a manner that may materially and adversely affect our business.
We are subject to work program commitments, failure to complete on these commitments may result in exploration permits being surrendered. In all cases, the terms and conditions of the permit or licence granting us, or the party from which we acquired, the right to explore for, and develop, hydrocarbons, prescribe a work program and the date or dates before which such work program must be done. Varying circumstances, including the financial resources available to us, equipment availability, reliance on third party operators of permits and licenses, and other circumstances beyond our control or influence may result in the failure to satisfy the terms and conditions of a permit or license and result in the complete loss of the interest in the permit or license without compensation. Such terms and conditions may be renegotiated with applicable regulatory authorities, but there is no assurance that if a term or condition of a license or permit that is required to be satisfied has not been met, that such term or condition will be successfully renegotiated with the applicable authority.
We may participate in permits or licenses with industry partners with access to greater resources to meet their joint venture capital commitments. If we are unable to meet our commitments, the other joint venture participants may assume some or all of our deficiency and thereby assume a portion of our interest in any production from the joint venture area. Property interests may be subject to joint venture and other like agreements, which can give rise to interpretive disputes with other parties who are financially interested in the property. If a participant in a joint venture, which participant has fewer resources than the Company, is unable to meet its commitments, it may delay or veto exploration or development plans which it cannot afford. This may delay the Company's desired exploration and development program and lead to the Company and other participants assuming all or some of the share of the non-committing entity's interest, and therefore meeting a pro-rata share of its required contributions, as well as receiving a pro-rata share of its revenue.
We presently do not carry liability or title insurance and do not plan to secure any in the future. The lack of insurance makes us vulnerable to excessive potential claims and loss of title. We do not maintain insurance against public liability, environmental risks or title. The possibility exists that title to future prospective properties may be lost due to an omission in the claim of title and any claims against us may result in liabilities we will not be able to afford resulting in the failure of the business and the complete loss of your investment.
Our business will be subject to laws that control the discharge of materials into the environment and we may be liable for damages and the costs of removing hydrocarbon spills for which we are held responsible. The laws relating to the protection of the environment have become more stringent and may expose us to liability for the conduct of, or conditions caused by others or for our actions that were in compliance with all applicable laws at the time such acts were performed. The application of these requirements or the adoption of new requirements could have a material adverse effect on our business.
We will conduct a portion of our business in foreign currencies, the value of which fluctuates against the U.S. currency. An appreciation in any of these foreign currencies against the US dollar may have adverse effects on our business. We hold cash reserves in US dollars and in Canadian Dollars but will begin incurring a significant proportion of our expenses in other foreign currencies. An increase in value of any of these foreign currencies versus the US dollar would have a detrimental effect, as expenses incurred would, in turn, increase in US dollars. While certain fluctuation can be expected to continue there can be no assurance that the exchange rate will stabilize at current rates.
We have no history of earnings and there is no assurance that if we do, that dividends will be declared. We have no history of earnings and there is no assurance that our business will be profitable and, even if profitable, there is no assurance the board of directors will declare dividends on common shares.
Broker-dealers may be discouraged from effecting transactions in our shares of Common Stock because they are considered penny stocks and are subject to the penny stock rules. The Securities and Exchange Commission (the "SEC") has adopted rules that regulate broker-dealer practices in connection with transactions in "penny stocks." Penny stocks generally are equity securities with a price of less than $5.00 per share. 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 prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with
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. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from such rules, the broker-dealer must make a special written determination that a penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements often have the effect of reducing the level of trading activity in any secondary market for a stock that becomes subject to the penny stock rules. Our common stock is currently subject to the penny stock rules, and accordingly, investors may find it difficult to sell their shares, if at all.
Employees and Consultants. We are an exploration stage company and we do not have any employees.
Research and Development. During the past 12 months we acquired interests in four ATP properties with expenditures to date totalling $95,405 in purchase, crosschecking and interpreting the seismic mapping data.
Patents, Licenses, Trademarks, Franchises, Concessions, or Royalty Agreements. The Company acquired interests in four permits (ATP862, 864, 865 and 866) in Queensland, Australia for cash consideration of $30,000 and 7% gross overriding royalty. If we are successful in discovering commercial quantities of oil or gas, secure sufficient funds to develop the discovery and are granted a petroleum license we will be required to pay a royalty at a rate of 10% of the wellhead value of the petroleum sold less allowable expenses. The wellhead value is the sum that could reasonably be expected to be realized on a commercial basis, or the fair market.
(c) Reports to security holders
This 10K is filed voluntarily and we intend to continue filing periodic reports even if our obligations are suspended under the Exchange Act as far as it is required under the Exchange Act. You may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding us at the SEC website (http://www.sec.gov).
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY
We presently do not own any interest in any property. The property listed is leased on a month to month basis from HQ Global for a nominal fee. The Company maintains an executive corporate office at 999 18th Street, Suite 3000, Denver CO, 80202 and an operations office at 38, Milson Street, South Perth, Western Australia, 6151, Australia.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings to which we are subject to or which are anticipated or threatened.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Registrant's shareholders in the fourth quarter of the Registrant's fiscal year.
PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market information
Our shares trade on the OTC Bulletin Board under the symbol SPLM. The shares commenced trading on April 20, 2007. The high and low quarterly closing sales prices for the common stock for 2008 and 2009 were as follows:
(1) OTCBB quotations may reflect interdealer prices, without retail markup, markdown or commission and may not necessarily reflect actual transactions.
(2) All market prices subsequent to November 30, 2007 reflect trading after the 2:1 forward stock split.
(3) All quotations are from the website located at www.quotemedia.com.
At May 14, 2009, there were 46,325,600 common shares issued and outstanding.
(b) Holders
At May 14, 2009, there were 68 holder of record plus common shares held by brokerage clearing houses, depositories or otherwise in unregistered form.
(c) Dividends
We have not declared any cash dividends nor are any intended to be declared. We are not subject to any legal restrictions respecting the payment of dividends, except that they may not be paid to render us insolvent. Dividend policy will be based on our cash resources and needs and it is anticipated that all available cash will be needed for property acquisition, exploration and development for the foreseeable future.
(d) Securities authorized for issuance under equity compensation plans
On February 28, 2009 management options were awarded to our Board of Directors and management team. The fair value of each option grant, as opposed to its exercise price, is estimated on the date of grant using the Black-Scholes option-pricing model. Management option expense is recorded in General and Administrative in the accompanying consolidated statements of income, and was $61,022 for the year ending February 28, 2009.
Plan category
Number of securities to be issued upon exercise of outstanding options, warrants and right
Weighted-average exercise price of outstanding options, warrants and rights
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(a)
(b)
(c)
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
925,000
1.04
Total
925,000
1.04
These options were awarded in an effort to compensate and incentivize our Board of Directors and Management team. The options expire five years from that date and vest over 36 months with 1/3 vesting at the end of each 12 month period. The exercise price for the options was set at the closing market price on the date the options were awarded. These options have not been approved by shareholders; however the Company plans to table the options for shareholder approval on the next annual general meeting.
Recent sales of Unregistered Securities and Use of Proceeds
Our company was incorporated on February 23rd, 2006. Since inception we have issued the following unregistered securities at the following prices. There were no underwriters engaged and no underwriting discounts or commissions paid. All issues were made pursuant to exemptions from registration contained in Regulation S of the 1933 Securities Act.
We completed a private placement of 5,000,000 pre-split shares of our common stock at a price of $0.02 per share to our executive officer on March 8, 2006. The total cash amount we received from this offering was $100,000. We completed the private placement pursuant to Regulation S of the Securities Act. The executive officer represented to us that he was a non-US person as defined in Regulation S. We did not engage in a distribution of this private placement in the United States. He represented his intention to acquire the securities for investment only and not with a view toward distribution. We requested our stock transfer agent to affix appropriate legends to the stock certificate issued in accordance with Regulation S and the transfer agent affixed the appropriate legends. The executive officer had adequate access to sufficient information about us to make an informed investment decision. None of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved. No registration rights were granted.
Penny Stock
The Securities Exchange Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the Commission, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of the Securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and; (f) contains such other information and is in such form, including language, type, size and format, as the Commission shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statements showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those 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 acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for stock that is subject to these penny stock rules. Therefore, because our common stock is subject to the penny stock rules, stockholders may have difficulty selling those securities.
Our securities consist of common stock with a par value of $0.0001 per share. Our authorized capital is 100,000,000 common shares of which 46,325,600 common shares are issued and outstanding as of May 14, 2009. All of our common stock, issued and unissued, is of the same class and ranks equally as to dividends, voting powers and participation in our assets on a winding-up or dissolution. No common shares have been issued subject to call or assessment. Each common share is entitled to one vote with respect to the election of directors and other matters. The shares of common stock do not have cumulative voting rights.
Therefore, the holders of a majority of shares voting for the election of directors can elect all the directors then standing for election, if they chose to do so, and in such event the holders of the remaining shares will not be able to elect any directors. Our management currently beneficially owns 22% of the outstanding shares of the company's common stock and is in a position to influence all matters subject to stockholder vote. See "Security Ownership of Certain Beneficial Owners and Management."
The common shares have no preemptive or conversion rights, and no provisions for redemption, purchase for cancellation, surrender of sinking fund or purchase fund.
Neither our Articles of Incorporation nor our Bylaws contain specific provisions that would delay, defer or prevent a change in control. However, approximately 53,674,400 common stock shares are authorized but unissued as of May 14, 2009. All of such authorized but unissued shares will be available for future issuance by the Board of Directors without additional shareholder approval. These additional shares may be used for a variety of purposes, including future offerings to raise additional capital or to facilitate acquisitions. One of the effects of the existence of unissued and unreserved common stock may be to enable the Board of Directors to issue shares to persons friendly to current management, which could render more difficult or discourage an attempt to obtain control of Sentry Petroleum by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of management. Such additional shares also could be used to dilute the stock ownership of persons seeking to obtain control of Sentry Petroleum.
Preferred Stock
Our articles of incorporation do not authorize any shares of preferred stock.
Share Purchase Warrants
We have not issued and do not have outstanding any warrants to purchase shares of our common stock.
Options
As of February 28, 2009 925,000 management options were outstanding, none of which were available for exercise.
Convertible Securities
We have not issued and do not have outstanding any securities convertible into shares of our common stock or any rights convertible or exchangeable into shares of our common stock.
Nevada Anti-Takeover Laws
Nevada Revised Statutes sections 78.378 to 78.379 provide state regulation over the acquisition of a controlling interest in certain Nevada corporations unless the articles of incorporation or bylaws of the corporation provide that the provisions of these sections do not apply. Our articles of incorporation and bylaws do not state that these provisions do not apply. The statute creates a number of restrictions on the ability of a person or entity to acquire control of a Nevada company by setting down certain rules of conduct and voting restrictions in any acquisition attempt, among other things. The statute is limited to corporations that are organized in the state of Nevada and that have 200 or more stockholders, at least 100 of whom are stockholders of record and residents of the State of Nevada; and does business in the State of Nevada directly or through an affiliated corporation. Because of these conditions, the statute currently does not apply to our company.
Use of Proceeds from Registered Securities
On April 7, 2006, the Company filed an SB-2 Registration Statement (“SB-2”) with the United States Securities and Exchange Commission to offer a minimum of 2,500,000 pre-split common shares to a maximum of 5,000,000 pre-split common shares of the Company at $0.10 per common share for minimum proceeds of $250,000 and maximum proceeds of $500,000. The SB-2 was declared effective on June 19, 2006, and on November 17, 2006, the Company issued 3,162,800 pre-split common shares for cash proceeds of $316,280.
On June 26, 2007, the Company filed an SB-2 Registration Statement (“SB-2”) with the United States Securities and Exchange Commission to offer up to a maximum of 15,000,000 pre-split common shares of the Company at $0.05 per common share for maximum proceeds of $750,000. The SB-2 was declared effective on July 11, 2007, and on November 1, 2007, the Company issued 15,000,000 pre-split common shares for cash proceeds of $750,000.
The use of proceeds through February 28, 2009 are as follows:
Audit
$26,344
Legal
17,714
Website development
21,696
Working capital
255,350
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not required as the Company is a small business issuer, in accordance with Section 12(b)-2 of the Act.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(a) Plan of operation
Our plan of operations for the next 12 months is to continue our work obligations on ATP 862, 864, 865, and 866 in the Adavale basin in Queensland Australia and to continue our assessment of various onshore exploration permits in Australia and Asia.
We have been in operation only since February 23, 2006 and have experienced losses since that time. As of February 28, 2009, we have $469,380 in working capital. During the preceding year we completed a financing of $750,000 and issued 15,000,000 pre split common shares pursuant to our SB-2 registration statement declared effective on July 11 2007. We have sufficient funds to carry out a limited plan of operations for the next twelve months, however we do not have sufficient funds to complete the four year obligation on ATP 862, 864, 865, and 866. We will therefore require additional funds. We rely principally on the issuance of common shares by private placements to raise funds to finance our business. There is no assurance that market conditions will continue to permit us to
raise funds when required. If possible, we will issue more common shares at prices we determine, possibly resulting in dilution of the value of common shares. During the year the Company appointed a Chief Financial Officer, an Exploration Manager and a Chief Geophysicist. These appointments will provide the necessary expertise in continuing detailed seismic analysis on our exploration permits.
We are an exploration stage company with limited operations and have not yet received revenues from operations, generated profitability or experienced positive cash flow from operations. During the next 12 months we will continue the analysis of seismic data initiated by consultants previously contracted. Our CEO, VP of Exploration, and Chief Geophysicist have extensive experience in the oil and gas industry with specific industry experience in exploration in Australia and Asia.
With the company’s successful securing of exploration interests ATP 862, 864, 865, and 866 we are obliged to complete proposed work programs to maintain our interests in good standing. As of February 28, 2009 our committed expenditures over the next three years total $13.3 million. We do not have sufficient capital to satisfy the potential future exploration expenditures and we will rely principally on the issuance of Common Stock to raise funds to finance the expenditures that we expect to incur to pursue exploration interests. Failure to raise additional funds will result in the failure to meet our obligations and the relinquishment of our interest in our acquired permits. We have relied principally on the issuance of Common Stock in private placements to raise funds to support our business but there can be no assurance that we will be successful in raising additional funds through the issuance of additional equity.
We do not expect any significant purchases of plant and equipment or any increase in the number of employees in the near future.
Liquidity and Capital Resources
During the twelve months ended February 29, 2008 total cash of $750,000 was raised through a private placement.
At February 28, 2009, our current assets total $473,787 compared to $972,886 at the beginning of the fiscal year. Our current assets for both periods consisted entirely of cash. During the year ended February 28, 2009, the Company acquired 100% working interest in four properties, ATP 862, ATP 864, ATP 865 and ATP 866 in Queensland Australia for cash consideration of $30,000 and 7% gross overriding royalty. We have sufficient funds for our expected work program during the next 12 months. Our work programs have been approved by the state government for the next three years. We will require additional funding to discharge our exploration obligations. Should we fail to raise additional funds, we will be unable to carry out our plan of operations. We rely upon the sale of our securities to fund operations.
Our current liabilities at February 28, 2009 were $11,278 (2008: $7,506). Cash on hand is currently our only source of liquidity. We do not have any lending arrangements in place with banking or financial institutions and we do not anticipate that we will be able to secure these funding arrangements in the near future.
Off-balance sheet arrangements
We do not have any off-balance sheet arrangements.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required as the Company is a small business issuer, in accordance with Section 12(b)-2 of the Act.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS
K. R. MARGETSON LTD.
CHARTERED ACCOUNTANT
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders of
Sentry Petroleum Ltd
(formerly Summit Exploration Inc.)
We have audited the accompanying consolidated balance sheets of Sentry Petroleum Ltd. (An Exploration Stage Company) as of February 28, 2009 and 2008, and the related consolidated statements of operations, stockholders' equity and cash flows for the years ended February 28, 2009 and 2008 and for the period from date of inception, (February 23, 2006) to February 28, 2009. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the period from date of inception (February 23, 2006) to February 28, 2007. That period was audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to that period, is based solely on the report of other auditors.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 28, 2009 and 2008 and the results of its operations and its cash flows for the years ended February 28, 2009 and 2008 and period from date of inception (February 23, 2006) to February 28, 2009 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company is an exploration stage company and has incurred operating losses, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to their planned financing and other matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
North Vancouver, Canada
“K R. MARGETSON LTD.”
May 4, 2009
Chartered Accountant
331 EAST 5TH STREET
TELEPHONE: 604-929-2891NE: 604-885-2810
NORTH VANCOUVER, BC V7L 1M1
FACSIMILE: 1-877-874-9583
CANADA
E-MAIL: keith@krmargetson.com
Sentry Petroleum Ltd.
(formerly Summit Explorations Inc.)
(An Exploration Stage Company)
February 28, 2009
Index
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders’ Equity
Notes to the Consolidated Financial Statements
Sentry Petroleum Ltd.
(formerly Summit Explorations Inc.)
(An Exploration Stage Company)
Consolidated Balance Sheet
(The Accompanying Notes are an Integral Party of These Financial Statements)
Sentry Petroleum Ltd.
(formerly Summit Exploration Inc.)
(An Exploration Stage Company)
Consolidated Statements of Operations
(The Accompanying Notes are an Integral Party of These Financial Statements)
Sentry Petroleum Ltd.
(formerly Summit Explorations Inc.)
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
(The Accompanying Notes are an Integral Party of These Financial Statements)
Sentry Petroleum Ltd.
(formerly Summit Explorations Inc.)
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Equity
(The Accompanying Notes are an Integral Party of These Financial Statements)
Sentry Petroleum Ltd,
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
February 28, 2009
1.
Nature of Operations and Continuance of Business
Sentry Petroleum Ltd. (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” incorporated under the laws of the State of Nevada on February 23, 2006 as Summit Exploration Inc. On December 3rd, 2007 the Company changed its name from Summit Exploration Inc. to Sentry Petroleum Ltd. The Company is engaged in the acquisition, exploration, and development of oil and gas properties.
The Company has no revenues and has not generated any cash flows from operations to fund its acquisition, exploration and development activities. The Company intends to rely upon the issuance of equity securities to finance its oil and gas property acquisitions and exploration and development on acquired properties, however there can be no assurance it will be successful in raising the funds necessary, or that a self-supporting level of operations will ever be achieved. The likely outcome of these future events is indeterminable. As at February 28, 2009, the Company has accumulated losses since inception of $680,388. These factors raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of the assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
On April 7, 2006, the Company filed an SB-2 Registration Statement (“SB-2”) with the United States Securities and Exchange Commission to offer a minimum of 2,500,000 common shares to a maximum of 5,000,000 common shares of the Company at $0.10 per common share for minimum proceeds of $250,000 and maximum proceeds of $500,000. The SB-2 was declared effective on June 19, 2006, and on November 17, 2006, the Company issued 3,162,800 common shares for cash proceeds of $316,280.
On June 26, 2007, the Company filed an SB-2 Registration Statement (“SB-2”) with the United States Securities and Exchange Commission to offer up to a maximum of 15,000,000 common shares of the Company at $0.05 per common share for maximum proceeds of $750,000. The SB-2 was declared effective on July 11, 2007, and on November 1, 2007, the Company issued 15,000,000 common shares for cash proceeds of $750,000.
Effective November 26, 2007, the Company authorized a 2 to 1 share split, the effect of which has been retroactively applied.
On April 15, 2008, the Company incorporated a subsidiary company, Sentry Petroleum (Australia) Pty. Ltd. in order to conduct the exporation activites in Australia.
2.
Summary of Significant Accounting Policies
a.
Basis of Presentation
These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. The Company’s fiscal year-end is February 28.
b.
Use of Estimates
The preparation of financial statements in conformity with U.S. 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. Actual results could differ from those estimates. The Company regularly evaluates estimates and assumptions related to donated services and deferred income tax asset valuation allowances. 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.
Sentry Petroleum Ltd,
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
February 28, 2009
2.
Summary of Significant Accounting Policies (continued)
c.
Comprehensive Loss
In accordance with SFAS 130, "Reporting Comprehensive Income" ("SFAS 130"), comprehensive income consists of net income and other gains and losses affecting stockholder's equity that are excluded from net income, such as unrealized gains and losses on investments available for sale, foreign currency translation gains and losses and minimum pension liability. For the year ending February 28, 2009, the Company’s other comprehensive loss represented foreign currency translation adjustments.
d.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. As at February 28, 2009, the Company has $27,328 ($771,145 in 2008) in cash equivalents. As at February 28, 2009 $84,326 was deposited in accounts that were federally insured ($303,294 in 2008).
e.
Oil and Gas Property
The Company follows the full cost method of accounting for oil and gas operations whereby all costs associated with the acquisition, exploration and development of oil and gas properties will be capitalized in cost centers on a country-by-country basis. These capitalized amounts include the costs of unproved properties, internal costs directly related to acquisitions, development and exploration activities, asset retirement costs and capitalized interest. They include geological and geophysical studies, and costs of drilling both productive and non-productive wells.
Amortization will be calculated for producing properties by using the unit-of-production method based on proved reserves before royalties, as determined by management of the Company or independent consultants. Unproved reserves are exempt from amortization and are subject to annual assessment as noted below. Sales of oil and gas properties will be accounted for as adjustments of capitalized costs, without any gain or loss recognized, unless such adjustments significantly alter the relationship between capitalized costs and proved reserves of oil and gas attributable to a cost center. Costs of abandoned oil and gas properties will be accounted for as adjustments of capitalized cost and written off to expense.
A ceiling test will be applied to each cost center by comparing the net capitalized costs to the present value of the estimated future net revenue from production of proved reserves, based on commodity prices in effect as at the Company’s year-end and based on current operating costs, discounted by 10%, less the effects of future costs to develop and produce the proved reserves, , plus the lower of costs or estimated fair value of unproved properties net of impairment, and less the effects of income taxes. Any excess capitalized costs are written off to operations.
Unproved properties will be assessed for impairment on an annual basis by applying factors that rely on historical experience. In general, the Company may write-off any unproved property under one or more of the following conditions:
i)
there are no firm plans for further drilling on the unproved property;
ii)
negative results were obtained from studies of unproved property;
ii)
negative results were obtained from studies conducted in the vicinity of the unproved property; or
iv)
the remaining term of the unproved property does not allow sufficient time for further studies or drilling.
f.
Asset Retirement Obligations
The Company will recognize a liability for future asset retirement obligations associated with oil and gas properties. The estimated fair value of the asset retirement obligation will be based on current cost escalated at an inflation rate and discounted at a credit adjusted risk-free rate. This liability will be capitalized as part of the cost of the related asset and amortized over its useful life. The liability will accrete until the Company settles the obligation. As of February 28, 2009, the Company did not have any asset retirement obligations.
Sentry Petroleum Ltd,
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
February 28, 2009
2.
Summary of Significant Accounting Policies (continued)
g
Fair Value Measurements
Effective January 1, 2008, the Company adopted SFAS No. 157, 'Fair Value Measurements,' for all financial instruments and non-financial instruments accounted for at fair value on a recurring basis. SFAS 157 establishes a single definition of fair value and a framework for measuring fair value, sets out a fair value hierarchy to be used to classify the source of information used in fair value measurement and expands disclosures about fair value measurements required under other accounting pronouncements. It does not change existing guidance as to whether or not an instrument is carried at fair value.
SFAS 157 established market and observable inputs as the preferred source of values, followed by assumptions based on hypothetical transaction in the absence of market inputs.
The valuation techniques required by SFAS 157 are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs create the following fair value hierarchy:
Level 1 - Quoted prices in active markets for identical asset or liabilities.
Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
In October 2008, the FASB issued FASB Staff Position No. FAS 157-3, “Determining the Fair Value of a Financial Asset in a Market That Is Not Active” (FSP 157-3), which clarifies the application of SFAS 157 when the market for a financial asset is inactive. Specifically, FSP 157-3 clarifies how (1) management’s internal assumptions should be considered in measuring fair value when observable data are not present, (2) observable market information from an inactive market should be taken into account, and (3) the use of broker quotes or pricing services should be considered in assessing the relevance of observable and unobservable data to measure fair value. The guidance in FSP 157-3 became effective immediately.
h.
Financial Instruments and Risk
Financial instruments, which include cash, accounts payable, accrued liabilities and amounts due to a related party were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. The Company’s wholly owned subsidiary’s operations are in Australia, which may result in exposure to market risks from changes in currency rates. The Company does not use derivative instruments to reduce its exposure to foreign currency risk.
i.
Foreign Currency Translation
The Company's functional currency is US dollars. Foreign currency balances are translated into US dollars as follows:
Monetary assets and liabilities are translated at the period-end exchange rate. Non-monetary assets are translated at the rate of exchange in effect at their acquisition, unless such assets are carried at market or nominal value, in which case they are translated at the period-end exchange rate. Revenue and expense items are translated at the average exchange rate for the period. Foreign exchange gains and losses arising are included in the determination of net income for the respective periods.
Sentry Petroleum Ltd,
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
February 28, 2009
2.
Summary of Significant Accounting Policies (continued)
i.
Foreign Currency Translation (continued)
The functional currency of the wholly owned subsidiary is Australian dollars. The assets and liabilities arising from these operations are translated at current exchange rates and related revenues and expenses at the exchange rates in effect at the time the revenue or expense is incurred. Resulting translation adjustments, if material, are accumulated as a separate component of accumulated other comprehensive income in the statement of stockholders' deficit while foreign currency transaction gains and losses are included in operations.
j
Basic and Diluted Net Income (Loss) per Share
Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share on the potential exercise of the equity-based financial instruments is not presented where anti-dilutive.
k
Income Taxes
The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. In estimating future tax consequences, all expected future events other than enactment of changes in the tax laws or rates are considered.
Due to the uncertainty regarding the Company's future profitability, the future tax benefits of its losses have been fully allowed for and no net tax benefit has been recorded in the financial statements during the periods presented.
l
Stock-based Compensation
On the Company’s inception of February 23, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123R “Share Based Payments, under which the Company records stock-based compensation expense for warrants and stock options granted to employees, directors and officers using the fair value method. Under this method, stock-based compensation is recorded over the vesting period of the warrant and option based on the fair value of the warrant and option as the grant date. The fair value of each warrant and option granted is estimated using the Black-Scholes option pricing model that takes into account on the grant date, the exercise price, expected life of the warrant and/or option, the price of the underlying security, the expected volatility, expected dividends on the underlying security, and the risk-free interest rate. Transactions in which goods or services are received from non-employees in exchange for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.
Stock based compensation is recorded with a corresponding increase to additional paid-in capital. Consideration received on the exercise of warrants and options, together with the amount previously credited to additional-paid in capital, is recognized as an increase in common stock.
m
Equipment
Equipment is initially recorded at cost and amortized to operations over its estimated useful life at the following amortization rates and methods:
Computer equipment and software
55% straight line per annum
Furniture and fixtures
20% straight line per annum
Equipment is written down to its net realizable value if it is determined that its carrying value exceeds the estimated future benefits to the Company.
n
Revenue Recognition
The Company recognizes revenue when a contract is in place, minerals are delivered to the purchaser and collectability is reasonably assured.
Sentry Petroleum Ltd,
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
February 28, 2009
2.
Summary of Significant Accounting Policies (continued)
o
Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiary, Sentry Petroleum (Australia) Pty. Ltd. All significant inter-company balances and transactions have been eliminated.
p
Recent Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard ("SFAS") No. 141(R), "Business Combinations". SFAS 141(R) establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, an any noncontrolling interest in the acquiree, recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended December 31, 2009. The Company is currently evaluating the impact of SFAS 141(R) on its consolidated financial statements but does not expect it to have a material effect.
In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard ("SFAS") No. 160, "Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51". SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended December 31, 2009. The Company is currently evaluating the impact of SFAS 160 on its consolidated financial statements but does not expect it to have a material effect.
In March 2008, the FASB issued SFAS No. 161 “Disclosure About Derivative Instruments and Hedging Activities-an amendment to FASB Statement 133” (SFAS 161). SFAS 161 requires enhanced disclosures about derivatives and hedging activities and the reasons for using them. SFAS 161 is effective for fiscal years beginning after November 15, 2008. The Company is currently reviewing the provisions of SFAS 161 on its financial statements but does not expect it to have a material effect.
In May 2008, the FASB issued SFAS 162, “The hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the frame work for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles. This statement shall be effective 60 days after the SEC’s approval of the Public Company Accounting Oversight Board amendment to AU Section 411, “the Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” The Company is currently reviewing the provisions of SFAS 162 on its financial statements but does not expect it to have a material effect.
In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts - and interpretation of FASB Statement No. 60” (“SFAS 163”. SFAS 163 interprets Statement 60 and amends existing accounting pronouncements to clarify their application to the financial guarantee insurance contracts included within the scope of that statement. SFAS 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years. The Company is currently reviewing the provisions of SFAS 163 on its financial statements but does not expect it to have a material effect.
3.
Unproved properties
The Company’s oil and gas properties are located in Australia and its interests in these properties are maintained pursuant to the terms of Authority to Prospect (“ATP”) granted by the Department of Mines and Energy in Queensland. The Petroleum and Gas (Production and Safety) Act 2004 provides the framework for accessing land to explore and develop petroleum and coal seam gas resources in Queensland. The granting process involves a commitment to a work program that must be carried out within specific time periods. See Note 9 Commitments.
Sentry Petroleum Ltd,
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
February 28, 2009
3.
Unproved properties (continued)
During the year ended February 28, 2009, the Company acquired 100% working interest in the following tenures in Queensland Australia for cash consideration revealed below: ATP 862, ATP 864, ATP 865 and ATP 866. A 7% gross overriding royalty was given to the original tenure holder.
Acquisition
Exploration
Total
Costs
Costs
Costs
$
$
$
ATP 862
7,590
1,939
9,529
ATP 864
7,590
-
7,590
ATP 865
5,510
68,132
73,642
ATP 866
7,590
-
7,590
28,280
70,071
98,351
4.
Equipment
5.
Related Party Transactions/Balances
During the year ended February 28, 2009 the Company paid $8,730 to the president of the Company for re-imbursement for expenses and $15,000 to the former president of the Company for consulting services and $4,907 as re-imbursement for expenses. During the year ended February 28, 2008 the Company paid $10,000 to the president of the Company for consulting services and $4,168 as re-imbursement for expenses. The Company owed $50,000 for consulting services provided by the President of the Company which was forgiven and recorded as donated capital.
As of February 28, 2008 the Company owes $1,025 ($1,521 in 2008) to Aide-de-Camp Services, a company wholly owned by the Secretary of the Company for accounting and secretarial services. Included in operating expenses for these costs are accounting expenses of $5,150 in 2009 ($6,030 in 2008).
6.
Accrued Liabilities
As at February 28, 2009, there are no accrued liabilities. Accrued liabilities of $1,409 as at February, 2008 represent professional fees.
Sentry Petroleum Ltd,
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
February 28, 2009
7.
Common stock
On February 23, 2006, the Company issued 2 common shares to the President of the Company of cash proceeds of $1.
On March 8, 2006, the Company issued 10,000,000 common shares at $.01 per common share to the President of the Company for cash proceeds of $100,000. In addition, the Company cancelled the 2 common shares issued to the President of the Company.
On November 17, 2006, the Company issued 6,325,600 common shares at $.05 per common share for cash proceeds of $316,280.
On November 2, 2007, the Company issued 30,000,000 common shares at $.025 per common share for cash proceeds of $750,000
Effective November 26, 2007, the Company authorized a 2 for 1 share split. These financial statements give retroactive application to this event.
On December 3, 2007, the Company increased its authorized share capital to 100,000,000, common shares of $.0001 par value.
8.
Stock options and warrants
On February 28, 2009 management options were awarded to our Board of Directors and management team. The following stock options were outstanding as of that date.
Exercise
Currently
Fair
Expiry
Number
price
Exercisable
Value
Date
925,000
$ 1.04
-
$ 61,022
February 2014
The fair value for stock options expensed was estimated using the Black-Scholes option pricing model assuming no expected dividends and the following weighted average assumptions:
Expected volatility - 114.98%
Risk-free interest rate - 2.07%
Expected life of options - 3 years
Fair value - $.725 - $.852
During the year ended February 28, 2009, the Company recognized $61,022 in stock-based compensation expense. Stock option compensation will have to be approved by shareholders before taking effect.
As at February 28, 2009, there were $664,117 of unrecognized compensation costs related to non-vested stock options.
There were no warrants outstanding.
9.
Commitments
Under the oil and gas tenures described in Note 3 and in the assignment agreements with the original grantor, the Company is committed to the following work programs in order to maintain its interest in those tenures.
Tenure
Commitment
Commitment
in US $
Period
Remaining
ATP 862
3,744,000
3 years
ATP 864
3,574,400
3 years
ATP 865
2,745,600
3 years
ATP 866
3,225,600
3 years
Sentry Petroleum Ltd,
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
February 28, 2009
10.
Income Tax
The reconciliation of income taxes attributable to continuing operations computed at the statutory rates to income tax expense is as follows:
Loss per financial statements
$ (433,459)
$ (181,641)
Statutory rates
30% - 35%
35%
Tax at statutory rates
150,988
63,574
Non deductible permanent differences
(21,358)
(17,500)
Loss carried forward unused
(129,630)
(46,074)
Tax recovery per financial statements
$ -
$ -
The Company has accumulated non-capital loss for tax purposes of approximately $587,000. Under normal circumstances the losses may be carried forward to reduce taxable income in future years and, unless utilized, expire as follows:
Year of expiry
$
65,288
131,641
375,549
No expiry
14,467
As at February 28, 2009 the tax effects of the temporary timing differences that give rise to significant components of the future income tax asset computed as current rates are noted below. A valuation allowance has been recorded as management believes it is more likely than not that the future tax assets will not be realized.
Tax attributes
Non-capital loss carry-forwards
586,945
196,926
Effective tax rates
30% - 35%
35%
Deferred income tax asset
197,031
68,925
Valuation allowance
(197,031)
(68,925)
Deferred tax asset
$ -
$ -
The change in the valuation allowance for the year ended February 28, 2009 was $128,106 ($46,074 in 2008).
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On November 2, 2007, we engaged K.R. Margetson Ltd. an incorporated professional, as our principal independent accountant with the approval of our company's board of directors. Accordingly, we dismissed Manning Elliott, Chartered Accountants ("Manning Elliott") as our independent registered public accounting firm.
The reports of Manning Elliott on the financial statements of the Company as of and for the years ended February 28, 2006 and 2007 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles except that Manning Elliott's report contained an explanatory paragraph expressing substantial doubt about the Registrant's ability to continue as a going concern.
During the years ended February 28, 2006 and 2007 and through the date of dismissal, there were no disagreements with Manning Elliott on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Manning Elliott, would have caused Manning Elliott to make reference to the subject matter of the disagreement in its reports on the Company's financial statements for such periods.
During the most recent two fiscal years and the portion of time preceding the decision to engage K.R. Margetson Ltd. neither the Registrant nor anyone engaged on its behalf has consulted with K.R. Margetson Ltd. regarding (i) either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Registrant's financial statements; or (ii) any matter that was either the subject of a disagreement or a "reportable event" (as defined in Item 304(a)(1)(iv) of Regulation S-B).
There have not been any disagreements with the auditor on any audit or accounting issues.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain "disclosure controls and procedures," as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the "Evaluation"), under the supervision and with the participation of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures ("Disclosure Controls") as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls were effective as of the end of the period covered by this report.
Changes in Internal Controls
We have also evaluated our internal controls for financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation.
Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
CEO and CFO Certifications
Appearing immediately following the Signatures section of this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company's internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Our 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 the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, 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.
Our management assessed the effectiveness of our internal control over financial reporting as of February 28, 2009. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment, we believe that, as of February 28, 2009, the Company's internal control over financial reporting was effective based on those criteria.
This annual 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 registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
(a) Directors and executive officers
Directors are elected for a term of one year at the company's annual meeting of shareholders and until his or her successor is elected and qualified. Our officers are elected by the board of directors to a term of one (1) year and serve until his or her successor is duly elected
and qualified, or until he or she is removed from office. The board of directors has no nominating, auditing or compensation committees. The name, age and position of the Company's director and executive officers are as follows:
Name
Age
Position
Raj Rajeswaran
President, Chief Executive Officer and Executive Director
Alan Hart
Vice President of Exploration and Executive Director
Arne Raabe
Chief Financial Officer and Director
John Kaldi
Director
Heather Grant
Secretary
Work Experience of officers and directors and Term of Office
Mr. Alan Hart is our founder and former Chief Executive Officer, Treasurer, and Chief Financial Officer and has been a director of the board of directors since our inception on February 23, 2006. Mr Hart currently assumes the position of Vice-President of Exploration and Executive Director. Mr. Hart obtained his Master's Degree in Geology from the University of Texas at Arlington in 1979 and has worked in various capacities within the oil and gas industry since his graduation. He has worked both domestically and internationally with such firms as Hunt Oil, Atlantic Richfield and Arco in North and West Africa, Central America, Southeast Asia, Australia and New Zealand. In 1996 he established Golden Downs Consulting to assist petroleum companies developing exploration properties in the Australasian region. From May 2001 to June 2002, Mr. Hart was managing Director of Golden Downs Consulting providing project management services to companies operating in Austral Asia. These projects included completion of a two-year basin and hydrocarbon system analysis of the Northern Taranaki Basin, New Zealand, for Houston based EEX Corporation. From July 2002 until his resignation in June 2005 Mr. Hart was the Chief Executive Officer, President and a Director of TAG Oil Ltd (OTCBB: TAGOF) (TSX:TAO), a Canadian incorporated company operating in New Zealand. In this capacity he reviewed farmin opportunities worldwide and attended all operating and technical committee meetings associated with these permits and reviewed the geological and economic parameters of each well. In June 2005 he resigned as officer and director of TAG Oil and resumed his post as managing Director of Golden Downs Consulting. In July 2005 he provide consulting services to L&M Mining, a privately held New Zealand based gold and coal mining company to expand their activities into the petroleum sector. Under Mr. Hart's direction, L&M Mining successfully applied for and were awarded three exploration permits on the South Island, New Zealand. Mr. Hart was responsible for overseeing the permit application process, work obligation program, initial fieldwork, and seismic requisition planning. In October 2005, Mr. Hart was contracted by SCA, a Houston based geological consulting firm, to complete a project in Mumbai, India for Reliance Industries. The project included a sequence stratigraphic study over two of Reliance's offshore permits and provided the company with three previously unknown prospects. In early 2006, Mr. Hart acted as an expert witness in a High Court case involving Crown Minerals, New Zealand and Bounty Oil & Gas NL. His three week testimony concluded in late April 2006. Mr. Hart is currently managing Director of Golden Downs Consulting in addition to his position with Sentry Petroleum. Mr. Hart is a member of the American Association of Petroleum Geologists, Geological Association of America, the Indonesian Petroleum Association and a published author, most recently his article in the Oil and Gas Journal on exploration opportunities in Austral Asia.
Dr. Raj Rajeswaran has been a Director of Sentry Petroleum Ltd. since March 4, 2008 and was appointed President on May 28th, 2008. Dr. Rajeswaran was awarded a Ph.D. in Petroleum Engineering from Heriot-Watt University in Edinburgh Scotland and a Masters in Business Administration from Hull University in the United Kingdom. Since September 2004 Dr. Rajeswaran has been employed by Bank of Scotland International as their Technical Director for Australia and Asia, Corporate Project Finance Division. Since April 2003 Dr. Rajeswaran has also been employed by Curtin University of Technology in Perth, Australia as a Professor of Petroleum Engineering and Director of Postgraduate Studies and Industry Training. Dr. Rajeswaran was solely responsible for establishing the Master of Petroleum Well Engineering. From June 1999 to April 2003 Dr. Rajeswaran held the position of Professor and Head of Department of Petroleum Engineering and Director of West Australian Petroleum Research Centre. He set up the department of petroleum engineering and introduced the master's program in petroleum engineering. In 2001, the newly created professional doctorate program commenced. Dr. Rajeswaran is not a director of any other reporting companies.
Dr. John Kaldi has been a Director of Sentry Petroleum Ltd since April 23, 2008. Dr. Kaldi obtained his Ph.D. in geology from Cambridge University, England, and has 28 years experience in the petroleum industry with such organizations as Shell, Arco and Vico. Dr. Kaldi has also served as Director of the Australian National Centre for Petroleum Geology and Geophysics, as Head of the Australian School of Petroleum, University of Adelaide and is currently Chief Scientist of the Australian Cooperative Research Centre for Greenhouse Gas Technologies and holder of the Australian Chair of Geosequestration. Since July of 2005, Dr. Kaldi has held the position of Director or research, Storage and Education and Training Programs, Australian Cooperative Research Centre for Greenhouse Gas Technologies (CO2CRC). Responsibilities include supervision of 25+ researchers in multi-disciplinary, multi-institutional, multi-locational research program to determine feasibility and potential sites for geosequestration of CO2. From 2003 - 2005 Dr Kaldi was Head of School, Australian School of Petroleum (ASP), University of Adelaide. Responsibilities include management of largest University petroleum research organisation in Australia, comprising 35 full-time staff and 150+ students in the fields of Petroleum Geoscience, Engineering and Management; with annual budget of over $6.5 million. Prior to 2003 he was Director, National Centre for Petroleum Geology & Geophysics (NCPGG), University of Adelaide. 1995-1997 he held the position of Chief Development Geologist
ARCO Bali North, Jakarta, Indonesia. Between 1991-1995 he worked as Geological specialist for ARCO Indonesia and from 1987 to 1991 he was senior reservoir geologist with ARCO Oil and Gas Co., Plano, Texas, working on various teams responsible for production of fields in Alaska, North Sea, and Indonesia. Dr. Kaldi is not a director of any other reporting companies.
Arne Raabe was appointed Chief Financial Officer on February 26, 2009 and has been a member of the Board of Dirctors since December 29, 2008. He holds a B.A. in Finance and a Masters in Economics. Mr. Raabe brings a wealth of experience in corporate finance and SEC compliance to Sentry Petroleum and his key competencies lie in his understanding of the complex environment in which international oil companies operate. In December of 2004 he held the position of interim Director for American Media Systems Co. assisting in the start up of the company. Mr. Raabe resigned as a director for American Media Systems Co. on December 31, 2004 and consented to act as director and officer of Raphael Industries Ltd., a company in the database management industry, in October of 2005. On December 5th, 2005 he was appointed director and Officer and on June 29, 2006 he consented to act as interim President of Gondwana Energy Ltd. On October 22, 2006 Mr. Raabe resigned from his positions with Gondwana Energy Ltd.
Heather Grant has been the Corporate Secretary since May 31, 2007. In 1995 Ms Grant founded Aide-de-Camp Services. Since then she has been President of the company providing specialized services to businesses in the areas of program development and account services specializing in regulatory procedures and compliance with federal agencies. Clients include financial planners, a medical device manufacturer, merchandise importers, and transportation operators.
(b) Significant Employees
We have no significant employees other than our executive management team.
(c) Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by the Company to become directors or executive officers.
(d) Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past five years, none of the following occurred with respect to a present or former director, executive officer, or employee of the Company: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy 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 or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities 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 SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities and Exchange Act of 1934 requires officers, directors and persons who own more than ten percent of a registered class of a company's equity securities to file initial reports of beneficial ownership and to report changes in ownership of those securities with the Securities and Exchange Commission. They are also required to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on review of the copies of Forms 3, 4 and 5 furnished to the Company we have determined the following:
Based solely on our review of these reports or written representations from certain reporting persons, the Registrant believes that during the fiscal year ended February 28, 2009 and during the current fiscal year, all filing requirements applicable to our officers, directors, greater-than-ten-percent beneficial owners and other persons subject to Section 16(a) of the Exchange Act were met.
(e) Audit committee financial expert
The Issuer has determined that it does not have an audit committee financial expert serving on its audit committee. The Issuer has been unable to nominate an individual with the required expertise to stand for election to the Issuer's Board of Directors.
(f) Audit Committee and Charter
We have an audit committee and audit committee charter. Our audit committee is comprised of all of our directors. A copy of our audit committee charter is filed as an exhibit to Form 10-KSB for the year ending February 28, 2007. Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous
submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee.
Code of Ethics
We have adopted a corporate code of ethics that applies to our chief executive officer and our chief financial officer. A copy of the code of ethics is filed as an exhibit to Form 10-KSB for the year ending February 28, 2007. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.
Upon written request at our corporate executive office we will deliver to any person free of charge a copy of such code of ethics.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
Name
Year
Salary
($)
Bonus
($)
Stock awards
($)
Option awards
($)
Non-equity
incentive plan
compensation
($)
Nonqualified deferred
compensation earnings
($)
All other
compensation
($)
Total
($)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Raj Rajeswaran -President, CEO & Executive Director
$0
$0
$0
$0
$0
$0
$24,503
$0
$0
$0
$0
$0
$0
$0
$24,503
$
Alan Hart - Vice President of Exploration & Executive Director
$15,000
$10,000
$0
$0
$0
$0
$9,801
$0
$0
$0
$0
$0
$0
$0
$24,801
$10,000
Arne Raabe - Chief Financial Officer & Director
$0
$0
$0
$0
$0
$0
$9,801
$0
$0
$0
$0
$0
$0
$0
$9,801
$0
Sandy Belford - Chief Geophysicist
$0
$0
$0
$0
$0
$0
$6,534
$0
$0
$0
$0
$0
$0
$0
$6,534
$0
Mike Middleton - Exploration Manager
$0
$0
$0
$0
$0
$0
$6,534
$0
$0
$0
$0
$0
$0
$0
$6,534
$0
Heather Grant - Secretary
$5,150
$6,030
$0
$0
$0
$0
$1,634
$0
$0
$0
$0
$0
$0
$0
$6,784
$6,030
Iynky Maheswaran -
Former Chief Financial Officer & Director (1)
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Roger Davidson
Former Vice President of Corporate Affairs and Director (2)
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
(1)
Mr. Maheswaran resigned as Chief Financial Officer and as a director of the Company effective February 26, 2009 and was replaced by Mr. Raabe as Chief Financial Officer of the Company.
(2)
Mr. Davidson resigned as Vice President of Corporate Affairs and Director on December 29, 2008.
Outstanding Equity Awards at Fiscal Year-End
Option/SAR Grants
On February 28, 2009 management options were awarded to our Board of Directors and management team. The fair value of each option grant, as opposed to its exercise price, is estimated on the date of grant using the Black-Scholes option-pricing model. Management option expense is recorded in General and Administrative in the accompanying consolidated statements of income, and was $61,022 for the year ending February 28, 2009.
Aggregate Option Exercises in the Last Fiscal Year and Fiscal Year-End Option Values
No stock options were exercised by any named executive officer during the 2009 or 2008 fiscal years and there are no stock options available for exercise at February 28, 2009 or at the date of this report.
Long-Term Incentive Plan Awards
We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance to occur over a period longer than one fiscal year, whether such performance is measured by reference to our financial performance, our stock price, or any other measure.
Compensation of directors.
Our Directors do not and will not receive a salary or fees for serving as a director, nor do they receive any compensation for attending meetings of the Board of Directors or serving on committees of the Board of Directors. They are not entitled to reimbursement of expenses incurred in attending meetings. There are no compensation arrangements for employment, termination of employment or change-in-control between the named Executive Officers and the company.
Name
Fees earned or paid in cash
($)
Stock awards
($)
Option awards
($)
Non-equity
incentive plan
compensation
($)
Nonqualified deferred
compensation earnings
($)
All other
compensation
($)
Total
($)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
John Kaldi
$0
$0
$1,634
$0
$0
$0
$1,634
Indemnification
Pursuant to the articles of incorporation and bylaws of the corporation, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. In certain cases, we may advance expenses incurred in defending any such proceeding. To the extent that the officer or director is successful on the merits in any such proceeding as to which such person is to be indemnified, we must indemnify him against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the state of Nevada.
Regarding indemnification for liabilities arising under the Securities Act of 1933 which may be permitted to directors or officers pursuant to the foregoing provisions, we are informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy, as expressed in the Act and is, therefore unenforceable.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
(a) Security ownership of certain beneficial owners and management
We are not directly or indirectly owned or controlled by a corporation or foreign government. As of May 14, 2009, we had an authorized share capital of 100,000,000 common shares with a par value of $0.0001 per share of which 46,325,600 shares are issued and outstanding.
The following table sets forth, as of May 14, 2009, the beneficial shareholdings of persons or entities holding five per cent or more of our common stock, each director individually, each named executive officer and all of our directors and officers as a group. Each person has sole voting and investment power with respect to the shares of Common Stock shown, and all ownership is of record and beneficial.
Title of class
(1)
Name and address
of beneficial owner
(2)
Amount and
nature of beneficial owner
(3)
Percent of class
(4)
Common
Heather Grant 1)
999 18th Street Suite 3000 Denver CO 80202
10,000,000
21.6%
Common
Alan Hart
999 18th Street Suite 3000 Denver CO 80202
Common
John Kaldi
999 18th Street Suite 3000 Denver CO 80202
Common
Arne Raabe 2)
999 18th Street Suite 3000 Denver CO 80202
24,600
Common
Raj Rajeswaran
999 18th Street Suite 3000 Denver CO 80202
Common
All Officers and Directors as a Group(two persons)
10,024,600
21.6%
1)
Shares owned through SPM Group Limited. There is an understanding between SPM Group Limited, Heather Grant and the board of directors that current directors and officers may participate in the ownership of SPM Group Limited.
2)
Shares owned through Aggregated Global Resources, a company wholly owned by the Company’s CFO.
As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have "beneficial ownership" of any security that such person has the right to acquire within 60 days after such date.
There are no limitations on future issuance of our common stock to management, promoters or their affiliates or associates. We may issue stock to these individuals for services rendered in lieu of cash payments. An issuance of stock will dilute your ownership in our company and might result in a reduction of your share value. We currently have no plans for the issuance of shares to management or promoters or their affiliates or associates for services rendered.
(c) Changes in Control of the Registrant
To the knowledge of management there are no present arrangements or pledges of our securities that may result in a change of control of our Company.
See Item 13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Related Parties
Our directors and officers nor any person who beneficially owns, directly or indirectly, shares carrying more than five percent of our outstanding shares, has any material interest, direct or indirect, in any transaction exceeding $60,000 during the last two years or in any proposed transaction which, in either case, has or will materially affect us, or any subsidiaries.
Transactions with Promoter
In addition to his position in our management, Mr. Hart is also our only promoter.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The aggregate fees billed by our auditors for professional services rendered in connection with a review of the financial statements included in our registration statement on Form SB-2 and the audit of our annual financial statements for the fiscal years ending February 28, 2009 and year ending February 29, 2008 were $9,897 and $11,997 respectively.
Audit-Related Fees
Our auditors did not bill any additional fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements.
Tax Fees
The aggregate fees billed by our auditors for professional services for tax compliance, tax advice, and tax planning were $0 and $0 for the fiscal years ended February 28, 2009 and February 29, 2008.
All Other Fees
The aggregate fees billed by our auditors for all other non-audit services, such as attending meetings and other miscellaneous financial consulting, for the fiscal years ended February 28, 2009 and February 29, 2008.
ITEM 15.
ITEM 15. EXHIBITS.
Exhibit Number
Description
3.1
Articles of Incorporation (1)
3.2
By-Laws (1)
4.1
Specimen Stock Certificate (1)
5.1
Opinion on legality (1)
10.1
Purchase agreement for ATP865
10.2
Purchase agreement for ATP862, ATP864, ATP866
14.1
Code of ethics (2)
21.1
Subsidiaries of Registrant
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
32.1
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
32.2
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
99.1
Audit committee charter (2)
(1) These documents have been filed with previous SB-2 on April 7, 2006 and have been included by reference.
(2) These documents have been filed with Form 10KSB for the year ending February 28, 2007 and have been included by reference.
(3) This document has been filed with Form 8-K/A on November 20, 2007 and have been included by reference.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Sentry Petroleum Ltd.
(Registrant)
Date:
May 26 , 2009
By:
RAJ RAJESWARAN
_____________________________________________________
President and Chief Executive Officer
Date:
May 26, 2009
By:
ARNE RAABE
_____________________________________________________
Chief Financial Officer