The accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2012
NOTE 1. ORGANIZATION, CONSOLIDATION AND PRESENTATION OF FINANCIAL STATEMENTS
The Company was incorporated under the laws of the state of Nevada on December 20, 2007 as Real Value Estates, Inc. On July 20, 2010, the Company changed its name to Xun Energy, Inc
On February 7, 2011, the Company established two subsidiaries in the State of Kentucky.
The Company acquired three oil and gas leases in the State of Kentucky on February 28, 2011 and began production of oil on one of its leases in March 2011.
On February 6, 2012,
the Company established a subsidiary in the State of Florida.
OPERATING COMPANY
On April 18, 2011, the Company filed a Form 8-k with the SEC disclosing that the Company is no longer a shell and has completed a workover program on one of its wells.
NATURE OF BUSINESS
The Company is engaged primarily in the acquisition, work-over development, and production of oil and gas properties. Such activities are concentrated in North American onshore, primarily in the United States in the State of Kentucky, Texas and Pennsylvania.
The Company plans to acquire producing or near producing oil and gas properties that will provide cash flow and an upside for future development. We will be scouting for additional properties in and around Texas, Oklahoma, Pennsylvania, Kansas and in Canada.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
BASIS OF ACCOUNTING
FISCAL YEAR
The Companys financial statements are prepared using the accrual method of accounting. The Company has elected a May 31 fiscal year end.
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of Xun Energy, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. The consolidated financial statements are presented in accordance with the accounting principles generally accepted in the United States.
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
The Company has adopted the International Financial Reporting Standards code of accounts. However, the Companys consolidated statements are completed using USA GAAP.
EARNINGS PER SHARE
Basic earnings (loss) per share amount are computed by dividing the net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items in the Company.
CASH EQUIVALENTS
The Company considers all liquid investments with maturity of three months or less when purchased to be cash equivalents.
37
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates, and changes in these estimates are recorded when known. Significant items subject to such estimates and assumptions include the following:
|
·
estimates of proved reserves and related estimates of the present value of future net revenues;
|
·
the carrying value of oil and gas properties;
|
·
estimates of the fair value of reporting units and related assessment of goodwill for impairment;
|
·
income taxes;
|
·
asset retirement obligations;
|
·
legal and environmental risks and exposures.
|
PROPERTY AND EQUIPMENT
The Company follows the successful efforts (SE) cost method of accounting for its oil and gas properties. Accordingly, o
nly those expenses associated with successfully locating new oil and natural gas reserves are capitalized. For unsuccessful (or "dry hole") results, the associated operating costs are immediately charged against revenues for that period.
All costs incidental to the acquisition, exploration, and development of oil and gas properties, including costs of undeveloped leasehold, and leasehold equipment, are capitalized. Please refer to INTANGIBLE ASSETS - LEGAL AND CONTRACTUAL - RIGHTS in this NOTE for further detail.
Internal costs incurred that are directly identified with acquisition, exploration and development activities undertaken by the Company for its own account, and that are not related to production, general corporate overhead or similar activities, are also capitalized.
Interest costs incurred and attributable to unproved oil and gas properties under current evaluation and major development projects of oil and gas properties are also capitalized. All costs related to production activities, including workover costs incurred solely to maintain or increase levels of production from an existing completion interval, are charged to expense as incurred.
Indirect costs, such as General and Administrative costs, are allocated to capital costs at a rate of 10% of the direct costs associated with the acquisition, exploration, and development activities undertaken by the Company for its own account.
Capitalized costs are depleted by an equivalent unit-of-production cost method, converting gas to oil at the ratio of six thousand cubic feet of gas to one barrel of oil. Depletion is calculated using the capitalized costs, including estimated asset retirement costs, plus the estimated future expenditures (based on current costs) to be incurred in developing or working over an oil or gas well, proved reserves, net of estimated salvage values.
Depletion is charged for each barrel of oil equivalent until the oil or gas well is no longer deemed economical for production of oil or gas. An over recovery of depletion by the Company may result from oil and gas wells producing more oil and gas than the reserve reports estimated. The over-recovery will be charged to income on a quarterly basis after the Company reviews the over-recovery and deducts an allowance for remediation, well capping and abandonment and future maintenance or development costs.
Costs associated with unproved properties are excluded from the depletion calculation until it is determined whether or not proved reserves can be assigned to such properties. The Company assesses its unproved properties for impairment quarterly. Significant unproved properties are assessed individually.
No gain or loss is recognized upon disposal of oil and gas properties unless such disposal significantly alters the relationship between capitalized costs and proved reserves.
Depreciation and amortization of other property and equipment, including corporate and other midstream assets and leasehold improvements, are provided using the straight-line method based on estimated useful lives ranging from three to 39 years. Interest costs incurred and attributable to major midstream and corporate construction projects are also capitalized.
38
The Company recognizes liabilities for retirement obligations associated with tangible long-lived assets, such as producing well sites, when there is a legal obligation associated with the retirement of such assets and the amount can be reasonably estimated. The initial measurement of an asset retirement obligation is recorded as a liability at its fair value, with an offsetting asset retirement cost recorded as an increase to the associated property and equipment on the consolidated balance sheet. If the fair value of a recorded asset retirement obligation changes, a revision is recorded to both the asset retirement obligation and the asset retirement cost. The asset retirement cost is depreciated using a systematic and rational method similar to that used for the associated property and equipment.
OIL AND GAS EXPLORATION
The Company does not explore for oil and gas deposits. The Company may drill a new well, which is categorized as an offset well to an existing well that is producing oil or gas. The Companys current business model does not include wild cat or exploratory drilling.
OIL AND GAS DEVELOPMENT - WORKOVER PROGRAM
The Companys development - workover program consists of re-entering or completing a workover on an oil or gas well that has a historical evidence of oil or gas production or that is currently producing oil and gas
at a fractional output compared to when the oil and gas wells first came into production. Workover activities include one or more of a variety of remedial operations on a producing well or inactive well to try to increase production. All costs of a workover are capitalized and amortized (depletion) on a per-unit of barrel equivalent of production.
OIL AND GAS DEVELOPMENT - OFFSET DRILLING
The Company's development - offset drilling program consists of drilling new wells within a proven and producing property. Well locations are selected by geologists based on known and historical data from producing oil and gas wells within the property or adjoining properties.
All costs of drilling a new offset well are capitalized and amortized (depletion) on a per-unit of barrel equivalent of production.
OIL AND GAS RESERVES
The Company does not have proven reserves of oil or gas on its current oil and gas leases.
OIL AND GAS REVENUE RECOGNITION
Oil and gas sales are recognized when production is sold to a purchaser at a fixed or determinable price, delivery has occurred, title has transferred, and collectability of the revenue is probable. Delivery occurs and title is transferred when production has been delivered to a pipeline, railcar, or truck or a tanker lifting has occurred. Cash received relating to future production is deferred and recognized when all revenue recognition criteria are met. Taxes assessed by governmental authorities on oil and gas sales are included in the Cost of Goods in the accompanying consolidated statements of operations.
INTANGIBLE ASSETS - LEGAL AND CONTRACTUAL - RIGHTS
The Company capitalizes the expenses incurred for acquiring oil and gas leases. The oil and gas leases are
contracts between mineral owner, otherwise known as the lessor and the Company or working interest owner, otherwise known as the lessee in which the lessor grants the lessee the rights to explore, drill and produce oil, gas and other minerals for a specified primary term and thereafter as long as oil, gas, or other minerals are being produced in paying quantities. This lease gives the lessee a working interest. The oil and gas lease is granted in exchange for royalty payments to the lessor.
The capitalized costs include but are not limited to: the acquisition cost of the oil and gas leases, legal, travel, consultant studies, reserve reports, financing charges including an overhead allocation on closing. Many of the oil and gas leases have production covenants, which if not complied with during the term of the lease, the Company may forfeit the oil and gas lease. On a yearly basis, the oil and gas leases are reviewed for expiry and or non performance by the Company of any of the covenants in the oil and gas leases.
The detailed analysis of our Oil and Gas Rights are as follows:
|
|
|
|
| |
Schedule of Rights
|
|
|
|
|
|
|
Description of Rights
|
|
May 31, 2012
|
|
|
May 31, 2011
|
Oil and Gas Leases: Beginning of year
|
$
|
5,583
|
|
$
|
0
|
Acquisitions/Work in Progress
|
|
399,743
|
|
|
5,583
|
Subtotal {sum}
|
|
405,326
|
|
|
5,583
|
Forfeitures during the period
|
|
(5,583)
|
|
|
0
|
Impairments during the period
|
|
(399,743)
|
|
|
0
|
Oil and Gas Leases: End of year
|
$
|
0
|
|
$
|
5,583
|
39
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses are reported net of amounts reimbursed by working interest owners of the oil and gas properties operated by the Company and net of amounts capitalized pursuant to the full cost method of accounting.
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Companys financial instruments, consisting of accounts payable and accrued liabilities approximate their fair value due to the short-term maturity of such instruments. Unless otherwise noted, it is managements opinion that the Company is not exposed to significant interest, currency, or credit risks arising from these financial statements.
INCOME TAXES
Income taxes are provided in accordance with FASB ASC 740. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
RECLAMATION BONDS
Included in Other Assets as of May 31, 2012, is a Bond with the State of Kentucky for $500. The State of Kentucky requires a bond to be posted for each well should the Company fail to perform with the proper plugging and abandonment of any well. Bond deposits vary by the well depth.
NOTE 3: OTHER CURRENT ASSETS
The Other Current Assets account consists of inventory and prepaid expenses. During the year, the Company entered into a
twenty-four month agreement with Charles Morgan Securities Inc. (CMS) pursuant to which CMS will provide consulting services in connection with the Companys business affairs and assist the Company in raising capital. As one of the considerations for the services to be provided by CMS, the Company paid CMS eighteen million shares of the Company on execution of the agreement. The Company charged $900,000 as a prepaid financial services expense and is amortizing the prepaid expense over 24 months. The detailed analysis of the Other Current Assets is as follows:
|
|
|
|
| |
Schedule of Other Current Assets
|
|
|
|
|
|
|
Other Current Asset
|
|
May 31, 2012
|
|
|
May 31, 2011
|
Finished Goods Inventory
|
$
|
0
|
|
$
|
283
|
Prepaid Legal
|
$
|
8,274
|
|
$
|
0
|
Prepaid Financial Services
|
$
|
825,000
|
|
$
|
0
|
Other Current Assets, balance:
|
$
|
833,274
|
|
$
|
283
|
40
NOTE 4. ADVERTISING
The Companys policy regarding advertising is to expense advertising when incurred. The Company had not incurred any advertising expense as of May 31, 2012.
NOTE 5. GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has net losses for the period from inception (December 20, 2007) to May 31, 2012. This condition raises substantial doubt about the Companys ability to continue as a going concern. The Comnpany has negative working capital and has no cash. The Companys continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required and ultimately to attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Management is planning to raise additional funds through debt or equity offerings. There is no guarantee that the Company will be successful in these efforts. There is no guarantee that the Company will be successful generating profits from its oil and gas operations.
NOTE 6. RELATED PARTY TRANSACTIONS
The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts.
On December 20, 2007, pursuant to the terms of a subscription agreement, we sold 80,000,000 (post forward split) shares of our common stock to Ms. Marina Karpilovski, the Company's former President and a director, for cash payment to us of $1,000. We believe this issuance was deemed to be exempt under Regulation S of the Securities Act, as no advertising or general solicitation was employed in offering the securities, the offering and sale was made only to Ms. Karpilovski who is a non-U.S. citizen, and transfer was restricted by us in accordance with the requirements of the Securities Act.
On December 20, 2007 pursuant to the terms of a subscription agreement, we sold 320,000,000 (post forward split) shares of our common stock to Mr. Michael Zazkis, the Company's former Secretary, Treasurer and a director, for cash payment to us of $4,000. We believe this issuance was deemed to be exempt under Regulation S of the Securities Act, as no advertising or general solicitation was employed in offering the securities, the offering and sale was made only to Mr. Zazkis who is a non-U.S. citizen, and transfer was restricted by us in accordance with the requirements of the Securities Act.
On March 28, 2011, the Company entered into Redemption Agreement with Peter Matousek, the Companys president and director, which provides in part for the Company to redeem from Mr. Matousek 140million shares of the Companys common stock at a price of $87,500 or $0.000625 per share. On May 31, 2011, Mr. Matousek assigned the Note Payable to Comtax Services, Inc.
The The Company issued an aggregate of 142,500 shares for the period ending May 31, 2012 with an average price of $0.0518 per share to the Executive and Board pursuant to a Management and Financial Service Agreement with Mr. Peter Matousek and a Board Member Compensation Agreement with Mr. Peter Matousek, Mr. Donald Lynch, Mr. Kevin M. Grapes, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier, refer to NOTE 18: EXECUTIVE AND BOARD COMPENSATION for additional detail.
Prior to June 1, 2011, our President, CEO and Director, Jerry G. Mikolajczyk, performed services for the Company on a consulting contract through a consulting agency, Comtax Services, Inc. (Comtax). From April 1, 2010 to February 28, 2011, Comtax charged a fixed monthly fee of $2,500, a minimum of 10 hours per month for Mr. Mikolajczyk, an aggregate of $27,500 for the 11 months for Mr. Mikolajczyks services to the Company. For the period March 1, 2011 to May 31, 2011, Comtax charged the Company an aggregate of $387,275 (1,106.5 hours) for the services of Mr. Mikolajczyk. The Company is indebted to Comtax an aggregate of $805,653 as of May 31, 2012 which consists of loans payable - $286,600 (see NOTE 12), trade payables $412,115 and Long Term Note Payable Less than 3 years - $106,938 including accrued interest. Comtax acquired the Long Term Notes Payable Less than 3 years for $87,500 from our former President and CEO, Peter Matousek, (see NOTE 14), and $18,750 from two other shareholders. Comtax is the largest single creditor to the Company comprising of 50.9% of the Companys total liabilities
Mr. Mikolajczyk was an officer of Comtax until his resignation on May 31, 2011 and terminated his consulting contract with Comtax as of May 31, 2011 prior to accepting his executive and director positions with the Company.
41
NOTE 7. INCOME TAXES
The Company uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. During each fiscal year from 2008 thru 2012, the Company incurred net losses and, therefore, has no tax liability. The net deferred tax asset of approximately $595,388 (assuming a 35% effective tax rate) generated by the loss carry-forward has been fully reserved.
The Company files
income tax returns in the
United States, the states of Kentucky and Florida.
The Company did not identify any material uncertain tax positions on tax returns filed. The Company did not recognize any interest or penalties for unrecognized tax benefits.
NOTE 8. NET OPERATING LOSSES
As of May 31, 2012, the Company has a net operating loss carry-forward of approximately $1,701,109, which will expire 20 years from the date the loss was incurred. Included in the net operating loss is the forfeiture of the Kentucky oil and gas leases including an impairment charge of $399,743 incurred by the Company for failure to close on the West Crockett oil and gas leases, refer to NOTE 23: AQUISITION OF CROCKETT ENERGY CORPORATION.
NOTE 9: STOCKHOLDERS EQUITY
AUTHORIZED
The Company is authorized to issue 5,000,000,000 shares of $0.0001 par value common stock and 50,000,000 shares of preferred stock, par value $0.0001. All common stock shares have equal voting rights, are non-assessable and have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company.
On July 20, 2010, the Company filed a Certificate of Amendment to the Companys certificate of incorporation with the Nevada Secretary of State which increased the Companys authorization to issue 5,000,000,000 shares of $0.0001 par value common stock, refer to Note 16: CORPORATE ACTION
On November 30, 2011, the Board of Directors of the Company approved the allocation of 4,000,000 of the 50,000,000 authorized Preferred Shares of the Company as Series A Preferred Shares with the following rights:
|
·
Convertible to 100 common stock shares of the Company for each one Series A Preferred Share
|
·
Voting rights equal to 100 votes for each Series A Preferred Share
|
The consideration for one Series A Preferred Share is set at $0.50.
STOCK ISSUED AND OUTSTANDING
On December 20, 2007, the Company issued 400,000,000 (post forward split 80:1) common shares to its Directors for cash of $5,000.
Since inception (December 20, 2007) to August 31, 2009, the Company accepted subscriptions for 110,416,000 (post forward split 80:1) common shares from 37 investors under a private placement which closed on March 31, 2008. The private placement was not subject to any minimum investment and was priced at $0.0005 per share (post forward split). The Company accepted the subscriptions on various dates throughout the year.
The Company issued 1,259,000 common shares on November 30, 2010 for $62,950.00 for Accounts Receivable assignment, refer to NOTE 19: ACCOUNTS RECEIVABLE PURCHASE.
The Company issued 741,000 common shares on November 30, 2010 for $37,050.00 cash in a negotiated transaction with an investor to fund the ongoing operations of the Company.
42
The Company issued 10,000 common shares on February 28, 2011 for $1,100.00 pursuant to an Oil and Gas Field Operations Services agreement with the Company.
The Company redeemed on March 28, 2011, 140 million shares of the Companys common stock at a price of $87,500 or $0.000625 per share from Peter Matousek, the Companys president and director, at the time. Also on March 28, 2011, the Company redeemed 60 million shares of the Companys common stock from four shareholders. The purchase price for the 60 million totaled $37,500 or $0.000625 per share. With the redemption of the 200 million shares, the Company reduced its issued and outstanding shares to 312,501,000 shares of common stock as of March 28, 2011.
The Company authorized and approved an aggregate of 112,500 shares for the fiscal year ending May 31, 2011 with an average price of $0.1263 per share to the Executive and Board pursuant to a Management and Financial Service Agreement with Mr. Peter Matousek and a Member Compensation Agreement with Mr. Peter Matousek and Mr. Donald Lynch. During the fiscal year ending May 31, 2011, the Company issued 75,000 (average price of $0.1233 per share) of the 112,500 shares to the Executive and Board with the remaining 37,500 shares (average of $0.1323 per share) issued on June 6, 2011.
The Company issued 18 Million shares on April 12, 2012 for $900,000 pursuant to a tw
enty-four month agreement with Charles Morgan Securities Inc.
The Company authorized and approved an aggregate of 136,129 common stock shares for the period ended May 31, 2012 with an average price of $0.0333 per share to the management and the board pursuant to Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Donald Lynch, Mr. Jerry G. Mikolajczyk and Mr. Kevin M. Grapes, refer to NOTE 18: EXECUTIVE AND BOARD COMPENSATION for additional detail. The Company issued 31,129 of the 136,129 shares to the Board on June 25, 2012.
NOTE 10: RECENT ACCOUNTING PRONOUNCEMENTS
In May 2011, the FASB issued ASU 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards ("IFRSs")." Under ASU 2011-04, the guidance amends certain accounting and disclosure requirements related to fair value measurements to ensure that fair value has the same meaning in U.S. GAAP and in IFRS and that their respective fair value measurement and disclosure requirements are the same. ASU 2011-04 is effective for public entities during interim and annual periods beginning after December 15, 2011. Early adoption is not permitted. The Company does not believe that the adoption of ASU 2011-04 will have a material impact on the Company's consolidated results of operation and financial condition.
In June 2011, the FASB issued ASU No. 2011-05, "Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income," ("ASU 2011-05") which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders' equity. Instead, comprehensive income must be reported in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 will be effective for public companies during the interim and annual periods beginning after Dec. 15, 2011 with early adoption permitted. The Company does not believe that the adoption of ASU 2011-05 will have a material impact on the Company's consolidated results of operation and financial condition.
There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries. None of the updates are expected to a have a material impact on the Company's financial position, results of operations or cash flows.
NOTE 11: CHANGE OF CONTROL
On February 9, 2010 certain shareholders sold and transferred an aggregate of 400,000,000 (post forward split) shares of Common Stock representing approximately 78.37% of the issued and outstanding shares of the Company to certain buyers (Buyers), at $0.000625 per share, post forward split, for an aggregate purchase price of $250,000 (the Purchase Price). Such transaction is hereinafter referred to as the Takeover or the Transaction.
43
The table below represents the ownership and percentage of control by each of the new shareholders:
Schedule of Ownership and Percentage of Control
|
|
| |
Name of
Beneficial Owner
|
Class of Voting Stock
|
Number of Shares (Post Forward Split) of Voting Stock Beneficially Owned
|
Percentage of Class [1]
|
Donald Lynch
|
Common Stock
|
80,000,000
|
15.67%
|
Peter Matousek
|
Common Stock
|
320,000,000
|
62.69%
|
All Officers & Directors As a Group (2 Persons)
|
Common Stock
|
400,000,000
|
78.37% [1]
|
[1] Note 1 - Based on 510,416,000 (post forward split) shares of Common Stock issued and outstanding.
|
In connection with the Takeover, there was a change in the majority of the Companys Board of Directors. Upon the consummation of the Takeover, Marina Karpilovski President and Director, and Michael Zazkis, Secretary, Treasurer & Director resigned and Mr. Donald Lynch was appointed as Director and Executive Officer of the Company and Mr. Mr. Peter Matousek was appointed as Director and Executive Officer of the Company.
On May 31, 2011, Mr. Jerry G. Mikolajczyk, the Company's President, CEO and Director, acquired 180,000,000 common stock shares of the Company from Mr. Peter Matousek, former President, CEO and Director of the Company. The acquisition by Mr. Mikolajczyk gave him control of 57.6% of the issued and outstanding shares of the Company. Subsequent to May 31, 2011, Mr. Mikolajczyk acquired additional shares directly and indirectly in the Company. As of Mr. Mikolajczyks last Form 4 filed with the SEC on February 3, 2012, he is beneficial owner of 190,515
,
521or 61%, of the issued and outstanding shares of the Company.
NOTE 12: LOAN PAYABLE
The Company had a loan in the amount of $60,000, which consisted of two unsecured Promissory Notes, which accrued interest at 8 per cent per annum with Global Power and Water Industries, Inc. (GPWI). On November 30, 2010, the Company acquired from a third party shareholder the Accounts Receivable of $147,965, discounted, from GPWI, the Promissory Notes holder. The Company offset the Promissory Notes against the Accounts Receivable purchased, pursuant to a successful civil action by the seller of the Accounts Receivable. Refer to NOTE 19: ACCOUNTS RECEIVABLE PURCHASE for additional detail.
The Company has non-interest bearing loans in the amount of $286,000 with Comtax. The loans from Comtax have been provided to the Company as working capital. Comtax is a shareholder of the Company with a stock position of 4.75% in the Company.
The Company has two Promissory Notes, one for $100,000 and the second for $30,000, with Altmann Revocable Living Trust, Rlt. (ALRT), totaling $130,000 due on or before December 31, 2012 with interest calculated at 8% per annum. The Company entered into a Purchase Agreement with ALRT on February 13, 2012 for the acquisition of 100% of ALRT's interest in Crockett Energy Corporation (CEC), refer to NOTE 23, AQUISITION OF CROCKETT ENERGY CORPORATION, which resulted in a negotiated assumption by the Company of the loans that CEC had with ALRT in the amount of $30,000. ALRT also loaned the Company 100,000 on February 14, 2012. We accrued $3,049 of interest on the Promissory Notes as of May 31, 2012.
The Company issued two Promissory Notes, one for $100,000 and the second for $30,000, with Altmann Revocable Living Trust, Rlt. (ALRT), totaling $130,000 due on or before December 31, 2012 with interest calculated at 8% per annum. The Company entered into a Purchase Agreement with ALRT on February 13, 2012 for the acquisition of 100% of ALRT's interest in Crockett Energy Corporation (CEC), refer to NOTE 23, AQUISITION OF CROCKETT ENERGY CORPORATION, which resulted in a negotiated assumption by the Company of the loans that CEC had with ALRT in the amount of $30,000. ALRT also loaned the Company 100,000 on February 14, 2012.
NOTE 13: LOAN PAYABLE RELATED PARTY
The Company had a non-interest bearing loan in the amount of $25,000 from Jerry G. Mikolajczyk, the Company's President, CEO, and Director on May 31, 2011. The loan was due on July 10, 2011, but was extended to July 29, 2011. The $25,000 was provided to the Company on May 10, 2011, and deposited into an Escrow Account for the purpose of facilitating an Offer to Purchase dated May 10, 2011 with Lea Kennedy d/b/a LuxemBarings. The $25,000 was returned to the Company from the Escrow Agent on July 27, 2011 and paid back to Mr. Mikolajczyk on July 29, 2011.
NOTE 14: LONG TERM LIABILITIES NOTES 3 YEARS AND LESS
On March 28, 2011, the Company entered into a Redemption Agreement with Peter Matousek, the Companys President and Director, which provides in part for the Company to redeem from Mr. Matousek a total of 140 million shares of the Companys common stock at a price of $87,500, or $0.000625 per share. On May 31, 2011, Mr. Matousek assigned his Note Payable issued under the Redemption Agreement to Comtax.
44
Also on March 28, 2011, the Company entered into similar redemption agreements with four other shareholders, which in total provide for the redemption of 60 million shares of the Companys common stock at a purchase price $37,500, or $0.000625 per share.
The terms of the stock redemption agreement is a non-callable 3-year note. The principal will accrue interest at the rate of 0.55% (IRS Short Term AFR April 2011) per annum, until the maturity date of March 31, 2014
NOTE 15: LONG TERM LIABILITIES NOTES 3 YEARS AND LESS RELATED PARTY
Our President, CEO and Director, Mr. Jerry G. Mikolajczyk, acquired a Note Payable by the Company from one of the shareholders of the Company on July 15, 2011. The principal, $9,375, will accrue interest at the rate of 0.55% (IRS Short Term AFR April 2011) per annum, until the maturity date of March 31, 2014.
NOTE 16: CORPORATE ACTION
A Certificate of Amendment to the Certificate of Incorporation was authorized by the Companys Board of Directors on May 15, 2010 and approved by the written consent of the holders of a majority of the Companys shareholders owning a majority of the outstanding issued and outstanding voting shares. The Certificate of Amendment provided for the Company to:
·
Change its name from Real Value Estates, Inc. to Xun Energy, Inc.;
·
Increase the number of authorized shares of its common stock from 100 million shares $0.0001 par value to 5 billion shares of common stock, $0.0001 par value; and
·
An 80:1 forward split of the Companys issued and outstanding common stock.
On July 20, 2010, the Company filed a Certificate of Amendment to the Companys certificate of incorporation with the Nevada Secretary of State to effect the name change to Xun Energy, Inc. and to increase the authorized common stock to 5 billion shares of common stock, $0.0001 par value.
On August 3, 2010, the corporate action became effective whereby the 6,380,200 issued and authorized shares of common stock were forward split resulting in 510,416,000 issued and outstanding shares of common stock.
NOTE 17: COMMITMENTS
The Company entered in a Management and Financial Service Agreement with Mr. Wayne St. Cyr as the Executive Vice President, Marketing and Strategic Development on December 21, 2010 for a ten day period ending December 31, 2010 which was extended for a 12 month term to December 31, 2011, whereby the Executive Vice President, Marketing and Strategic Development is paid $10,000 per month. The Company has not renewed the contract with Mr. Ct. Cyr and has retained Mr. St. Cyr on a month to month basis. In addition to his duties as Executive Vice President, Marketing and Strategic Development, Mr. St. Cyr is the Corporate Secretary for the Company. Mr. St Cyr is paid $10,000 per month.
On May 31, 2011, the Board of Directors of the Company appointed Jerry G. Mikolajczyk as a director of the Company for a 3 month period ending August 31, 2011 whereby Mr. Mikolajczyk will be paid 5,000 shares per month in stock of the Company. The stock will be valued based on the average of the 5 trading day close price prior to each month end. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000
.
The Company entered into a Management and Financial Service Agreement for Mr. Jerry G. Mikolajczyk for a 12 month period commencing on June 1, 2011 and ending May 31, 2012. Mr. Mikolajczyk is hired through a service company, and will be paid $120,000 in cash payments for the services of Mr. Mikolajczyk. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Company has not renewed the contract with Mr. Mikolajczyk. Mr. Mikolajczyk continues to work for the Company on a month-to-month basis and is paid $10,000 per month.
The Company entered into a Management and Financial Service Agreement with Mr. Peter Matousek for a 12 month period commencing June 1, 2011 and ending May 31, 2012 whereby Mr. Matousek will be paid $90,000 in cash payments. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Company has not renewed the contract with Mr. Matousek. Mr. Matousek continues to work for the Company on a month-to-month basis and is paid $7,500 per month.
45
NOTE 18: EXECUTIVE AND BOARD COMPENSATION
MANAGEMENT AND FINANCIAL SERVICE AGREEMENTS
On September 1, 2010, the Company entered into a Management and Financial Service Agreement with Mr. Peter Matousek for a 12 month period ending August 31, 2011 whereby Mr. Matousek will be paid $30,000 in cash payments and 2,500 shares per month in stock of the Company. The stock will be valued based on the average of the 5 trading day close price prior to each month end. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Management and Financial Service Agreement with Mr. Peter Matousek terminated on May 31, 2011 upon his resignation as the President and CEO of the Company.
On September 1, 2010, the Company entered into a Board Member Compensation Agreement with Mr. Donald Lynch for a 12 month period ending August 31, 2011 whereby Mr. Lynch will be paid 5,000 shares per month in stock of the Company. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000.
On May 31, 2011, the Board of Directors of the Company appointed Jerry G. Mikolajczyk as a director of the Company for a 3 month period ending August 31, 2011 whereby Mr. Mikolajczyk will be paid 5,000 shares per month in stock of the Company. The stock will be valued based on the average of the 5 trading day close price prior to each month end. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000
.
On August 31, 2011, directors Peter Matousek, Donald Lynch and Jerry G. Mikolajczyk termed out.
On September 1, 2011, the Company entered into Board Member Compensation Agreement with Kevin M. Grapes as a director of the Company for a term of one (1) year ending August 31, 2012. Mr. Grapes will receive 5,000 shares per month of the Companys common stock in consideration for them serving on the Companys Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3
rd
party or travel expenses.
On September 1, 2011, the Company entered into Board Member Compensation Agreement with Jerry G. Mikolajczyk as a director of the Company for a term of one (1) year ending August 31, 2012. Mr. Mikolajczyk will receive 5,000 shares per month of the Companys common stock in consideration for them serving on the Companys Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3
rd
party or travel expenses.
On May 21, 2012, Mr. Kevin M. Grapes resigned as a Board member.
On May 22, 2012, Company entered into a Board Member Compensation Agreement with Dr. William D. Spier as a director of the Company for a term of one (1) year ending May 31, 2013. Dr. Spier will receive 5,000 shares per month of the Companys common stock in consideration for them serving on the Companys Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3
rd
party or travel expenses. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million.
On May 25, 2012, Company entered into a Board Member Compensation Agreement with Mr. Peter Matousek as a director of the Company for a term of one (1) year ending May 31, 2013. Mr. Matousek will receive 5,000shares per month of the Companys common stock in consideration for them serving on the Companys Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3
rd
party or travel expenses. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million.
The Company authorized and approved an aggregate of 136,129 shares for the period ended May 31, 2012 with an average price of $0.0333 per share to the Board pursuant to a Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Kevin M. Grapes, Mr. Peter Matousek and Dr. William D. Spier. The Company issued 105,000 of the 136,129 shares to the Board as of May 31, 2012.
The table below represents the shares issued or reserved to the Board with the 5-Day Average Share Closing Price:
|
|
|
|
|
|
| |
Schedule of Executive and Board Stock Compensation
|
|
Month
|
Executive Shares
|
Board Shares
|
Total Shares
|
5 Day Average Share Closing Price
|
Amount
|
June
|
0
|
15,000
|
15,000
|
$0.0500
|
$750.00
|
July
|
0
|
15,000
|
15,000
|
$0.0181
|
$271.50
|
August
|
0
|
15,000
|
15,000
|
$0.0127
|
$190.50
|
Quarter Total
|
0
|
45,000
|
45,000
|
$0.02693
|
$1,212.00
|
September
|
0
|
10,000
|
10,000
|
$0.0098
|
$98.00
|
October
|
0
|
10,000
|
10,000
|
$0.0050
|
$50.00
|
November
|
0
|
10,000
|
10,000
|
$0.0020
|
$20.00
|
Quarter Total
|
0
|
30,000
|
30,000
|
$0.0056
|
$168.00
|
December
|
0
|
10,000
|
10,000
|
$0.0055
|
$55.00
|
January
|
0
|
10,000
|
10,000
|
$0.0113
|
$113.00
|
February
|
0
|
10,000
|
10,000
|
$0.0879
|
$879.00
|
Quarter Total
|
0
|
30,000
|
30,000
|
$0.0349
|
$1,047.00
|
March
|
0
|
10,000
|
10,000
|
$0.0732
|
$732.00
|
April
|
0
|
10,000
|
10,000
|
$0.0800
|
$800.00
|
May
|
0
|
11,129
|
11,129
|
$0.0516
|
574.35
|
Quarter Total
|
0
|
31,129
|
31,129
|
$0.0677
|
$2,106.35
|
|
|
|
|
|
|
Year Total
|
0
|
136,129
|
136,129
|
$0.0333
|
$4,533.35
|
46
NOTE 19: ACCOUNTS RECEIVABLE PURCHASE
The Company, on November 30, 2010, entered into an Accounts Receivable Assignment (the Assignment) with Comtax Services Inc. (Comtax) whereby Comtax assigned to the Company $147,965 in accounts receivable due Comtax from Global Power and Water Industries, Inc. (Global) in consideration for 1,259,000 common shares of the Company at a share price of $.05 for a total of 62,950.00. The $62,950 to Comtax represents the monies owed by the Company to Global in the form of Promissory Notes and interest due in March 2011 and April 2011 discussed in Note 12.
Since entering the Assignment, Comtax has filed a civil action on December 16, 2010, Case Number 05-2010-CA-064575, with the County of Brevard, in the State of Florida, seeking judgment against Global for $147,965.00 plus interest, costs and other relief this court deems just and proper. On January 22, 2011, Comtax was awarded a Clerk of Courts default judgment, Brevard County, Florida. On April, 12, 2011, Judge Tanya B. Rainwater of the Circuit Court of the 18
th
Judicial Circuit, Brevard County, Florida, granted final judgment in favor of Comtax in the amount of $151,269.41 against Global.
The Company used the Comtax Accounts Receivable of $62,950 from Global and offset it against the Promissory Notes and interest payable by the Company to Global of $62,950, netting each other out and providing a cash flow saving of $62,950 to the Company. The remaining balance of the judgment, $88,319.41 is uncollectible and was charged against Paid In Capital.
NOTE 20: TERMINATED LETTER OF INTENT
On December 9, 2010 the Company executed a Letter of Intent with Global Energy Acquisitions, LLC (GEA) which provided in part for the Company to acquire from GEA a 51% gross royalty interest in up to 500 producing oil wells in Kentucky. Closing of the transaction was subject to completion by each party of their own due diligence and the negotiation and execution of a definitive agreement.
After further review, GEA elected to terminate the Letter of Intent and neither party will be under any contractual obligation to the other with respect to closing the transaction. However, the Company remains subject to certain provisions of the Letter of Intent following its termination including, but not limited to the binding conditions of the Letter of Intent until January 31, 2012.
NOTE 21: OFFER TO PURCHASE LITIGATION
On May 10, 2011, the Company accepted an Offer to Purchase from Lea Kennedy d/b/a LuxemBarings (Purchaser) to purchase $10 million of the Companys common stock based on the average of 5 consecutive trading days close prior to date of closing. The Offer to Purchase was scheduled to close on or before June 24, 2011. The Purchaser failed to complete the transaction, after mutually agreed extensions of the closing date. The Company has retained legal counsel to take legal action against the Purchaser for failing to complete the purchase transaction and for damages to the Company as a result of the failure to complete the transaction. The Company has recognized losses, at cost, in the financial statements for the period ended May 31, 2012.
NOTE 22: EXECUTIVE AND BOARD CHANGES
On May 31, 2011, the Board of Directors of the Company appointed Jerry G. Mikolajczyk as a director of the Company for a 3 month period ending August 31, 2011 whereby Mr. Mikolajczyk will be paid 5,000 shares per month in stock of the Company. The stock will be valued based on the average of the 5 trading day close price prior to each month end. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000.
On May 31, 2011, Mr. Matousek, our President and CEO, advised that the roles and responsibilities are increasing for the Company and that Mr. Jerry G. Mikolajczyk, while as consultant to the Company, has been instrumental in developing and building the Company to its current status including funding and operations. Mr. Matousek advised that it is in the best interests for the Company and the Shareholders that Mr. Mikolajczyk have authority to continue developing the Company and have authority to make decisions at an Executive Level of the Company. Subsequently, Mr. Matousek resigned as President, CEO and CFO and the Company appointed Jerry G. Mikolajczyk as Interim President, CEO and CFO until a permanent President and CEO is recruited and a permanent CFO is recruited. The Company entered into a Management and Financial Service Agreement for Mr. Jerry G. Mikolajczyk for a 12-month period commencing on June 1, 2011 and ending May 31, 2012. Mr. Mikolajczyk is hired through a service company, and will be paid $120,000 in cash payments for the services of Mr. Mikolajczyk. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Company has not renewed the contract with Mr. Mikolajczyk. Mr. Mikolajczyk continues to work for the Company on a month-to-month basis and is paid $10,000 per month.
47
The Company also appointed Mr. Peter Matousek as the Companys Vice-President of Investor Relations. The Company entered into a Management and Financial Service Agreement with Mr. Peter Matousek for a 12-month period commencing June 1, 2011 and ending May 31, 2012 whereby Mr. Matousek will be paid $90,000 in cash payments. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million. The Company has not renewed the contract with Mr. Matousek. Mr. Matousek continues to work for the Company on a month-to-month basis and is paid $7,500 per month.
On August 31, 2011, directors Peter Matousek, Donald Lynch and Jerry G. Mikolajczyk termed out. On September 1, 2011, the Company obtained the written consent of the stockholders holding a majority, 86.51%, of the outstanding voting rights of the Company (the "Consent"). The Consent approved the election of Kevin M. Grapes and Jerry G. Mikolajczyk as directors of the Company for a term of one (1) year ending August 31, 2012.
On May 21, 2012, Mr. Kevin M. Grapes resigned as a Board member.
On May 22, 2012, Company entered into a Board Member Compensation Agreement with Dr. William D. Spier as a director of the Company for a term of one (1) year ending May 31, 2013. Each Board member will receive 5,000 shares per month of the Companys common stock in consideration for them serving on the Companys Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3
rd
party or travel expenses. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million.
On May 25, 2012, Company entered into a Board Member Compensation Agreement with Mr. Peter Matousek as a director of the Company for a term of one (1) year ending May 31, 2013. Each Board member will receive 5,000 shares per month of the Companys common stock in consideration for them serving on the Companys Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3
rd
party or travel expenses. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million.
NOTE 23: AQUISITION OF CROCKETT ENERGY CORPORATION
On February 13, 2012, the Company entered into an agreement, Bill of Sale - ALRT, which provides in part, for the Company to acquire from Altmann Revocable Living Trust, RLT (ALRT) 100% of all of its rights, title and interest in Common Voting Shares of Crockett Energy Corporation (CEC) for 45 million Units of the Company. The Purchase Price is $2.25 million.
A unit is defined as one (1) common voting share and one (1) warrant to purchase a common share of the Company. The Company's warrants in this transaction shall entitle Altmann Revocable Living Trust, RLT the right to acquire one (1) common voting share of the Company at the following exercise prices based on the following time periods:
|
·
Exercise price of $ .50 per share prior to Nov 30, 2012;
|
·
Exercise price of $1.00 per share prior to May 31, 2013;
|
·
Exercise price of $2.00 per share prior to May 31, 2014;
|
·
Exercise price of $2.00 per share prior to May 31, 2014;
|
·
Exercise price of $3.00 per share prior to May 31, 2015;
|
·
Exercise price of $4.00 per share prior to May 31, 2016.
|
On February 14, 2012, the Company entered into an agreement, Bill of Sale - Mikolajczyk, which provides in part, for the Company to acquire from Jerry G. Mikolajczyk, our President, CEO and Director, 100% of all of his rights, title and interest in Common Voting Shares of Crockett Energy Corporation (CEC) for $1.00.
48
Closing of the transaction is subject to the satisfaction of conditions precedent including but not limited to CEC acquiring the producing West Crockett Oil and Gas leases based in Crockett County, Texas with a total acreage of 2,320.5 acres, more or less, with 100% Working Interest, 75% Net Revenue Interest and CEC, as a minimum, securing financing of $5 million to complete a 10 well drilling and development program on the West Crockett Oil and Gas Leases.
CEC, incorporated in Wyoming on November 14, 2011, is in the business of exploring, developing, operating, and investing in, acquiring, selling, managing and drilling oil and gas properties. CEC has limited assets, which includes a Purchase and Sales Agreement (PSA), entered into on January 31, 2012, between CEC (Buyer) and Edwin S. Nichols, Thad Purcell, Barry L. Benton, Vesta, LP, Sean Sassin, Renee Sassin, James C. Gibson, and Susan G. Godwin (collectively Seller) and Edwin S. Nichols Exploration, Inc. ("Operator"), which provides in part, for the Company to acquire Sellers rights, title and interests in and to the oil, gas and mineral leases covering the James T Padgitt Lease, (Texas RRC lease # 332) containing 596 acres of land, more or less; the Clara Couch H Lease, (Texas RRC lease # 326) containing 80 acres of land, more or less; the Clara Couch B Lease, (Texas RRC # 325) containing 542 acres of land, more or less; Jeff Owens Fee Lease, (Texas RRC # 331) containing 462.5 acres of land, more or less; the J. W. Owens D Lease, (Texas RRC lease # 330) containing 160 acres of land, more or less and the J. W. Owens Lease, (Texas RRC lease # 329) containing 480 acres of land, more or less, all lands being located in Crockett County, Texas, without limitation, interests in oil, gas and/or mineral leases covering any part of the lands, production payments, and net profits interests in any part of the lands or leases
,
and other leasehold interests in oil, gas and other minerals in any part of the lands, SAVE AND EXEPT that it is the intent of the Seller to assign 100% Working Interest, being 75% Net Revenue Interest to the Buyer in and to each of the above leases and that the Seller shall retain as an Overriding Royalty Interest unto himself, free and clear of all costs of any nature except that the Seller shall be responsible for paying its proportionate share of Ad Valorem and Severance Tax, the difference between the currently outstanding Royalty and Overriding Royalty Interest and 25%. The PSA required the Buyer to provide a non refundable deposit of $250,000 in addition to the $25,000 paid by the Buyer to the Seller as the initial deposit required by the Letter Of Intent between the Buyer and Seller. The Buyer has fulfilled its obligation in providing the non-refundable deposit, which will be applied to the purchase price of $17 million on closing originally scheduled for on or before April 30, 2012.
On March 13, 2012, CEC assignment of 100% of the Purchase and Sale Agreement (PSA), dated January 31, 2012, between Crockett Energy Corporation ("CEC" or "Buyer") and Edwin S. Nichols, Thad Purcell, Barry L. Benton, Vesta, LP, a Texas limited partnership, Sean Sassin, Renee Sassin, James C. Gibson, and Susan G. Godwin (collectively the "Seller") to Xun Oil Corporation (Xun Oil), a Florida corporation, or its assigns. Xun Oil Corporation agreed to assume all obligations of the PSA.
On April 30, 2012, Xun Oil and the Seller entered into an amendment to the PSA to extend the closing date to on or before June 29, 2012. As consideration for the extension of the Closing, Xun Oil agrees to (i) release immediately the $250,000 earnest money held in escrow to the Seller which will be credited to the purchase price, or should the transaction fail to close, the Seller will retain the $250,000 earnest money and (ii) pay interest at the rate of 6% per annum on $16,750,000, which represents the difference between the $17,000,000 purchase price and $250,000 earnest money, during the period May 1, 2012 to closing or June 29, 2012, which occurs first. The payment of interest shall be made as follows:
| |
a.
|
On or before May 14, 2012, the sum of $85,356.00, representing the interest due for the entire month of May;
|
b.
|
If closing does not occur on or before June 1, 2012, on or before June 1, 2012, the sum of $19,273.97, representing the interest due for June 1-7, 2012;
|
c.
|
If closing does not occur before June 8, 2012, on or before June 8, 2012, the sum of $19,273.97, representing the interest due for June 8-14, 2012;
|
d.
|
If closing does not occur before June 15, 2012, on or before June 15, 2012, the sum of $19,273.97, representing the interest due for June 15-21, 2012; and
|
e.
|
If closing does not occur before June 22, 2012, on or before June 22, 2012, the sum of $19,273.97, representing the interest due for June 22-29, 2012.
|
On May 22, 2012, Xun Oil and the Seller entered into an amendment to the PSA to extend the interest due date from May 14, 2012 to May 29, 2012.
On May 29, 2012, Xun Oil did not make the interest payment as required under the PSA dated January 31, 2012, as amended. The PSA, by its terms, automatically terminated.
With the PSA automatically terminated, the Bill of Sale - ALRT between ALRT and the Company dated February 13, 2012, by its terms, automatically terminated and the Bill of Sale - Mikolajczyk between Jerry G. Mikolajczyk and the Company dated February 14, 2012, by its terms, automatically terminated.
49
NOTE 24: COMMERCIAL LOAN OFFER
On February 20, 2012, Xun Oil Corporation, a wholly owned subsidiary of the Company, entered into an agreement, Commercial Loan Offer, which provides in part, for the Company to receive from PRIVATE COLLATERAL LENDERS CORP. (PCLC) $33 million in financing for the acquisition of the West Crockett Oil and Gas Leases (West Crockett) and the future development of West Crockett.
The commercial loan terms are:
|
·
Principal Amount: $33 million United States Dollars (USD).
|
·
$20,000,000 Senior Debt. + $13,000,000 Subordinate for future development.
|
·
Interest Rate on Senior Debt: 6 %
|
·
Interest Rate on Subordinate: 6 %
|
·
Payment Amount: $1,200,000 (Interest Reserve).
|
·
Payment Frequency: Prepaid for One (1) Full Year
|
·
Date of First Regular Payment: One (1) Year from Closing.
|
·
Final Interest Adjustment Date: April 30, 2012.
|
·
Term Last Payment Date: 12 Months from First Draw.
|
·
Term in Months: 12 (automatically renewable - same interest)
|
·
Amortization in Months: 300
|
·
Origination Fee: 3 % of the Gross Financing payable at draw down. This amount shall be deducted from Gross Proceeds at Times of Disbursal.
|
Closing of the transaction is subject to the satisfaction of conditions precedent including but not limited to: Property and public liability insurance including all risk insurance (with extended coverage endorsement) on the Borrowers real and personal property as required including lands, buildings, equipment and inventory in amounts and from an insurer acceptable to PCLC showing PCLC as low payee or mortgagee by way of standard mortgage endorsement, a refundable by guarantee Commercial Loan Underwriting Fee to PCLC of $360,000 CDN, confirmation that all Federal Revenue Agency accounts of the corporation are current, evidence that all business taxes are paid to date, and documentation to include, but not limited to the following:
|
·
Professional Evaluation showing full debt-service capacity of wells. (Security).
|
·
Résumé of Evaluator of Crockett (Texas) oilfields Property.
|
·
Stock Ownership Documentation.
|
·
Assignment Letter from the Owner of said properties.
|
·
Development Plan. (Business Plan)
|
·
Résumés of Principals
|
·
Final Approval by PCLCs lawyer and underwriter of all Documents presented to PCLC by Borrower.
|
With the PSA between Xun Oil and the Sellers in NOTE 23: AQUISITION OF CROCKETT ENERGY CORPORATION automatically terminated, the Commercial Loan Offer, by its terms, is automatically terminated. The Company advanced US$38,884.25 to PCLC as of May 31, 2012 of which US$8,274 remains in escrow with PCLC's attorney.
NOTE 25: TERMINATED ASSIGNMENT OF DRILLING PERMIT
On March 5, 2012, the Company terminated the assignment of its Kentucky drilling permit for XUN002 whereby the Company assigned its Kentucky drilling permit, on January 20, 2012 for XUN002 on the forfeited Tillett Lease to Cook Oil Company, LLC. (COCL) in consideration of an override royalty of 2.5% of the value of all oil produced and removed under the permit and the net proceeds received by COCL from the sale of all gas and casing head gasoline produced and sold under the Permit.
NOTE 26: SUBSEQUENT EVENTS
On August 31, 2012 the Company entered into an Oil and Gas Well Location Agreement with Vencedor Energy Partners (Assignor). The agreement allows the Company to drill 30 offset oil and gas wells on 3 producing oil and gas leases in Venango County, Pennsylvania.
50
The Company paid $585,000.00 00 in the form of 11,700,000 shares of common stock (Shares) of the Company for the rights.
The Company will have 100% working interest in the wells and Net Revenue Interest as follows:
| |
Lease Name
|
Net Revenue Interest Breakdown
|
Rice
|
Master Lease Lessor - 12.5% Royalty, Master Lease Lessee 2.5% Override royalty interest, Assignor - 2.5% Override royalty interest; and the Company - 82.5% royalty interest;
|
|
|
Lalley
|
Master Lease Lessor - 12.5% Royalty, Master Lease Lessee 2.5% Override royalty interest, Assignor - 2.5% Override royalty interest; and the Company - 82.5% royalty interest; and
|
|
|
Corse
|
Master Lease Lessor - 15.0% Royalty, Master Lease Lessee 2.5% Override royalty interest, Assignor - 2.5% Override royalty interest; and the Company - 80.0% royalty interest.
|
The Agreement allows the Company to have the exclusive right to explore, operate, produce all naturally-occurring oil, gas, casing-head gas or gasoline, gas condensate and/or all other liquid or gaseous hydrocarbons and other marketable or non-marketable substances produced (Oil and Gas) from Oil and Gas deposits contained within and under the well location and any and all other rights and privileges necessary, incident to, or convenient for the economical operation of the well location and other lands for the production of Oil and Gas to the Company. A well location is defined as a circle having a radius of l50 feet with the well, to a depth as allowed in the Master Lease, at the center thereof.
The Company owns the rights and may select up to 30 well locations from the following:
|
| |
Lease Name
|
Locations
|
Rights
|
Rice
|
Up to 10
|
One well per location, to a depth from the surface through the Speechley sands which depth is approximately 2,200 feet on the Premises alone for producing oil and gas by any means, and all rights necessary convenient and incident thereto, granted pursuant to the Master Rice Lease.
|
|
|
|
Lalley
|
Up to 8
|
One well per location, to a depth from the surface through the Speechley sands which depth is approximately 2,200 feet on the Premises alone for producing oil and gas by any means, and all rights necessary convenient and incident thereto, granted pursuant to the Master Lalley Lease.
|
|
|
|
Corse
|
Up to 15
|
One well per location, to a depth from the surface through the Speechley sands which depth is approximately 2,000 feet on the Premises alone for producing oil and gas by any means, and all rights necessary convenient and incident thereto, granted pursuant to the Master Corse Lease.
|
If Company does not begin or provide proof of funds or funding for the first well on or before 90 days and does not begin or provide proof of funds or funding for 3 more wells on or before 150 days of the execution of this Agreement, then the Company will have forfeited its rights and the Agreement shall terminate and unwind and the Assignor agrees to return the Shares (11,700,000) to the Company.
After completing 8 wells and if Company does not complete any of the remaining 22 well drilling provision set forth in the Agreement within the 2 years from the date of the execution of the Agreement, then the Company will forfeit its rights to the well locations not completed. The Company will retain its rights for the well locations completed and will retain an Override Royalty of Seven and one half per cent (7.5%) on the well locations forfeited.
The Company has 2 years from the date of execution of the Agreement to complete the drilling of the 30 well locations and has the option to acquire an additional 15 well locations for the same terms and conditions of the Agreement after the first 30 wells locations have been completed.
The Company will provide funding in groups of 4 to 6 wells to optimize economies of scale, with the exception of the first 4 wells which can be funded on an individual basis.
51
The Company agreed to have Assignor the designated Operator of the Oil and Gas Well Locations which includes all the responsibilities as a designated operator in the State of Pennsylvania which includes the duties of managing and supervising the drilling and completions of the Oil and Gas Locations.
THE COMPANY WILL NEED TO RAISE FUNDS TO DRILL THE OIL AND GAS WELLS AND THERE IS NO GUARANTEE THAT THE COMPANY WILL BE SUCCESSFUL IN RAISING THE FUNDS NECESSARY TO COMPLETE 1 OR ANY OF THE 30 OFFSET OIL AND GAS WELLS.
On August 31, 2012, Xun Energy, Inc. (the Company) entered into a twenty-four month Financing Facilities Consulting Agreement (the Agreement) with Prodigy Asset Management, LLC (PAM) pursuant to which PAM will provide consulting services in connection with the Companys business affairs and assist the Company in raising capital. In consideration of the services to be provided by PAM, the Company will pay PAM (i) a prepaid retainer fee of $1 million in the form of 20 million common shares of the Company within 14 days of execution of the Agreement, (ii) a fee of $4,800.00 within 30 days of execution of the Agreement and (iii) a facilitators fee of 5% of the gross amount of an equity investment, 3% of the gross amount of a sub-debt credit facility and 2% of the gross amount of a senior credit facility within five days of funding.
On August 31, 2012, Jerry G. Mikolajczyk was re-appointed as a director by the Board of Directors of Xun Energy, Inc. (the Company) for another one-year term ending August 31, 2013. Mr. Mikolajczyk has been a director of the Company since May 31, 2011 and is also our President, CEO and CFO. In consideration for Mr. Mikolajczyks service as director, the Company will issue 5,000 shares per month of the Companys stock, which will be valued based on the average of the five trading day close price prior to each month end. In addition, the Company will reimburse Mr. Mikolajczyk for the preapproved cost of airfare, travel expenses and disbursements made on behalf of the Company.
On September 4, 2012, Xun Energy, Inc. (the Company) signed a twelve month Financial Consulting Services Agreement (the Agreement) with Vaquero Private Capital, Inc. (VPC) effective as of June 1, 2012, pursuant to which VPC will provide consulting services in connection with the Companys business affairs and assist the Company in raising capital. In consideration of the services to be provided by VPC, the Company will pay VPC (i) a prepaid fee of $810,000 in the form of 16.2 million common shares of the Company upon execution of the Agreement and (ii) a success fee not to exceed 5% of any financing acceptable in whole or in part by the Company due upon closing of a loan/investment.
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
On March 11, 2009, we dismissed the auditing firm of Moore & Associates, Chartered Independent Registered Public Accounting Firm (Moore and Associates) and approved the engagement of Weinberg & Associates LLC, Certified Public Accountants. During the fiscal year ended May 31, 2008 and the subsequent interim periods until the change, there were no disagreements with Moore & Associates, 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 Moore & Associates, would have caused them to make reference in connection with their report to the subject matter of the disagreement, and Moore & Associates, Chartered has not advised the Company of any reportable events.
Item 9A.
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, to allow timely decisions regarding required disclosure. Our chief executive officer and chief financial officer have reviewed the effectiveness of our disclosure controls and procedures as of May 31, 2012 and, based on their evaluation, and, have concluded that the disclosure controls and procedures were effective.
52
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the year ended May 31, 2012 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Managements Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our principal executive and principal financial officer, we assessed, as of May 31, 2012, the effectiveness of our internal control over financial reporting. This assessment was based on criteria established in the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment using those criteria, management concluded that our internal control over financial reporting as of May 31, 2012, was effective.
Internal control over financial reporting is defined as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
|
·
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
·
provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with U.S. generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and
·
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
|
|
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.
This Annual Report on Form 10-K does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this Annual Report on Form 10-K.
Evaluation of Changes in Internal Controls over Financial Reporting
There was no change in the internal control over financial reporting that occurred during the fiscal quarter ended May 31, 2012, that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
Item 9B.
Other Information.
None.
53
PART III
Item 10.
Directors, Executive Officers and Corporate Governance.
The following information sets forth the names of our officers and directors, their present positions, and some brief information about their background as of the date of this filing:
|
| |
Name:
|
Position:
|
Held Since:
|
Jerry G. Mikolajczyk
|
President/Chief Financial Officer/Director
|
June 2011
|
Wayne St. Cyr
|
Executive Vice President, Marketing and Strategic Development
|
January 2011
|
Peter Matousek
|
Vice President Investor Relations/Director
|
June 2011
|
William D. Spier
|
Director
|
May 2012
|
Peter Matousek
|
Director
|
May 2012
|
Mr. Jerry G. Mikolajczyk
Mr. Jerry G. Mikolajczyk was a key consultant to the Company who identified the opportunities available to us in Kentucky, helped negotiate our contracts, and assisted the Company with its financial reporting over the two years including SEC filings and our financial statements. Mr. Mikolajczyk consulted to the Company from March 2010 to May 31, 2011. On May 31, 2011, the Board of Directors appointed Mr. Mikolajczyk as our President, CEO, CFO, and a director of the Company.
Mr. Mikolajczyk has had an extensive career in the oil and gas, construction, and mining industries. Mr. Mikolajczyk has worked for Fortune 500 companies such as BP Resources (British Petroleum), SCI Group of Companies, Husky Oil, Syncrude, Bechtel, Guy F. Atkinson and INCO. He has worked as a heavy equipment operator on surface and open pit mining operations.
After completing his Business Administration diploma, Mr. Mikolajczyk went on to obtain his professional designation as a Certified General Accountant (CGA) and Certified Internal Auditor (CIA). As a professional accountant and auditor, he has been involved with planning, designing, and testing operations to ensure that the operations are efficient and effective.
In 2008, Mr. Mikolajczyk was awarded CFO of the Year for the application of his knowledge and expertise in a turnaround assignment for the Santa Clara Valley Transportation Authority (VTA), a $3.3 Billion asset transportation authority in Silicon Valley (San Jose, California).
Mr. Mikolajczyk has an aggregate of 41 years of experience, which include:
|
·
Twenty-two (22) years of C-Level experience.
|
·
Ten (10) years in the Oil and Gas Industry evaluating and analyzing systems and operations to improve effectiveness, increase profits, and streamline operations without compromising controls.
|
·
Eighteen (18) years in the Mining Industry with operational experience in tar sands, copper, gold, limestone and precious stones. Mines were both open pit and deep rock (shaft) as well as alluvial and placer mining operations.
|
·
Twenty Seven (27) years of experience in the Construction Industry ranging in Oil and Gas, Mining, Transportation and Housing sectors. Specialty is Project Control and Reporting.
|
Mr. Mikolajczyk, through consulting agencies, has provided various consulting services to clients, which included, but not limited to:
|
·
Global Power and Water Industries, Inc.
|
·
VTA (Santa Clara Valley Transportation Authority)
|
·
MineCore International, Inc.
|
·
Platinum Works, Inc.
|
·
Blue Green Corp
|
·
J.M.E.L. International, Inc.
|
·
Nova Petrochemicals
|
·
BP Resources
|
54
Mr. Mikolajczyk is an acknowledged speaker and presenter. He has moderated various panels on P3s (Private Public Partnerships) projects such as the Confederation Bridge, the longest bridge in North America, joining Prince Edward Island and New Brunswick in Canada, which Mr. Mikolajczyk was involved in the bidding, award and financing of the project. Mr. Mikolajczyk also presented a paper to the 1990 Western Regional Conference of the Institute of Internal Auditors entitled: "Is Your Project Control Out of Control?" and a paper in 1991 to the Institute of Internal Auditors, Calgary Chapter, entitled: "Operational Audit of the Procurement Function".
Mr. Wayne St. Cyr.
Mr. Wayne St. Cyr is our Executive Vice President, Marketing and Strategic Development and our Corporate Secretary.
Mr. St. Cyr comes to us leaving a distinguished 10 year career with RBS Group (Royal Bank of Scotland) which includes a six-time recipient of the President's Award for exceeding company objectives. During his tenure at RBS/Citizens Financial Group, he was responsible for developing the key alliances with Citizens Bank.
Mr. St. Cyrs education includes an Associates degree in Business Administration and a Bachelor of Science degree in Marketing.
Mr. Peter Matousek.
Mr. Matousek is the Vice President of Investor Relations. He served as the Companys President and CEO from February 2010 to May 2011 and as a director from February 2010 to August 2011 before his term expired.
Mr. Matousek is an international consultant and entrepreneur with a European background. He attended University of Maryland University College and Warner Pacific College, where he earned degrees in Associates of Arts and Bachelors of Business Administration.
Mr. Matousek is member of the United States Navy and a Veteran of Foreign War and recently served in Operation Iraqi Freedom. He received the Army Achievement Medal, Navy Achievement Medal and Honorable Discharge.
Mr. Matousek has worked extensively with the public markets for companies throughout the United States and Canada in the financial and natural resource sector, including oil & gas and precious metal mining. He has represented numerous companies in the capacity of Investor & Public Relations. He speaks German, Czech, English and Russian.
Mr. William D Spier, PhD
Dr. Spier has been an advisor in economics and business development to private equity funds in the U.S. and Europe for the past six years. Prior to that, he was a business growth consultant to major proprietary and public institutions of higher education with 5-1 year appointments.
Dr. Spier was Senior Vice President for Whitman Medical and Executive Director for Ultrasound Technical Services, a reporting issuer, for 13 years during which he was responsible for the founding and growth of the pioneering institute for medical ultrasound training which expanded to 15 major markets in the U.S. For two years, Dr. Spier was affiliated with Diamond Turk & Company, a specialist firm on the American Stock Exchange.
From 1969 to 1981, Dr. Spier held various positions with the New York Board of Education and was a graduate instructor at Washington University, St. Louis and Assistant Professor of Sociology at St. Louis University. Dr. Spier was a member of the United States Teacher Corps.
Dr. Spier received his Bachelor of Arts degree from Hobart College, his Masters degree from the Washington University, St. Louis and his Doctorate in Sociology with concentration in political economy from Washington University, St. Louis.
Dr. Spier has an extensive history of publications and has authored more than fifty business plans for both start-ups and mature companies. He is a member of economic, education and medical societies and participates on the board of public companies. He is often a visiting instructor at NYC and metropolitan-area institutions of higher education for graduate level teaching.
55
Penalties or Sanctions
To the best of our knowledge, none of our directors, officers or stockholders holding a sufficient number of securities to affect materially the control of the Company, has been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority or been subject to any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor making an investment decision.
Personal Bankruptcies
To the best of our knowledge, none of our directors, officers or stockholders holding a sufficient number of securities to affect materially the control of the Company, nor any personal holding company of any such person has, within the last ten years become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or been subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of that person.
Compensation of Directors
Our directors do not receive cash compensation for their services as directors. However, each director receives 5,000 shares of common stock per month and will have their out of pocket expenses such as travel for Board meetings reimbursed by the Company.
Terms of Office
Our directors are appointed for one-year terms to hold office or until the next annual general meeting of the holders of our common stock or until removed from office in accordance with our by-laws.
Family Relationships
There are no family relationships among our directors and/or officers.
Section 16(a) Beneficial Ownership Reporting Compliance
For companies registered pursuant to section 12(g) of the Exchange Act, Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than ten percent of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. To our knowledge, for the fiscal year ended May 31, 2012, based solely on a review of the copies of reports furnished to us and written representations that no other reports were required, Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with on a timely basis for the period which this report relates.
Corporate Governance
We do not have an independent Board of Directors. We do an audit committee. We do not have a compensation committee or nominating committee. As our operations expand, we hope to name additional members to our Board of Directors. We do not have sufficient funds to secure officer and directors insurance and we do not believe that we will be able to retain an independent Board of Directors in the immediate future.
We have not yet adopted a Code of Ethics.
56
Item 11. Executive Compensation.
Mr. Jerry G. Mikolajczyk was appointed our acting president, chief executive officer and chief financial officer on May 31, 2011 effective June 1, 2011. His employment contract terminated on May 31, 2012. The Company has not renewed the contract with Mr. Mikolajczyk and has retained Mr. Mikolajczyk on a month to month basis. The Company pays Mr. Mikolajczyk $10,000 per month.
Mr. Wayne St. Cyr was appointed our Executive Vice President, Marketing and Strategic Development on January 1, 2011. His employment contract terminated on December 31, 2011. The Company has not renewed the contract with Mr. Ct. Cyr and has retained Mr. St. Cyr on a month to month basis. The Company pays Mr. Wayne St. Cyr $10,000 per month.
Mr. Peter Matousek was appointed our Vice President Investor Relations on May 31, 2011. His employment contract terminated May 31, 2012. The Company has not renewed the contract with Mr. Matousek and has retained Mr. Matousek on a month to month basis. The Company pays Mr. Peter Matousek $7,500 per month.
The following table discloses compensation paid during the fiscal years ended May 31, 2012 and 2011 to the Companys Officers and the most highly compensated executive officer whose total compensation exceeded $100,000 for the fiscal year ended May 31, 2012 (Collectively, the Named Executive Officers). No restricted stock awards, long-term incentive plan payouts or other types of compensation, other than the compensation identified in the table below, were paid to the Named Executive Officers during these fiscal years.
|
|
|
|
|
| |
Name and Principal Position
|
Year
Ended
May 31
|
Salary*4
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Total
($)
|
Jerry G. Mikolajczyk, President/CEO/CFO
|
2012
|
$120,000
|
-0-
|
-0-
|
-0-
|
$120,000
|
Wayne St. Cyr, Executive Vice President
|
2012
|
$120,000
|
-0-
|
-0-
|
-0-
|
$120,000
|
Peter Matousek, VP-Investor Relations*1
|
2012
|
$90,000
|
-0-
|
-0-
|
-0-
|
$90,000
|
|
|
|
|
|
| |
Name and Principal Position
|
Year
Ended
May 31
|
Salary*4
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Total
($)
|
Jerry G. Mikolajczyk, President/CEO/CFO
|
2011
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
Jerry G. Mikolajczyk, Consultant*2
|
2011
|
$409,775
|
-0-
|
-0-
|
-0-
|
$409,775
|
Wayne St. Cyr, Executive Vice President
|
2011
|
$50,000
|
-0-
|
-0-
|
-0-
|
$50,000
|
Peter Matousek, VP-Investor Relations*1
|
2011
|
$27,500
|
-0-
|
-0-
|
-0-
|
$27,500
|
Dennis T. Kushner, President/CEO/CFO*3
|
2010
|
$9,250
|
-0-
|
-0-
|
-0-
|
$9,250
|
|
*1 - Former President/CEO during 2011
|
*2 - Gross paid to agency, Comtax Services, Inc. which Mr. Mikolajczyk was an officer of until May 31, 2011
|
*3 - Former President/CEO during 2010 and a portion of 2011
*4 - Does not include stock compensation as Board members, refer to Item 5.E of this Form 10-K
|
Stock Options Granted/Exercised in Last Year
The Company has never issued any stock options.
57
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The following table sets forth certain information as of May 31, 2012 respect to the beneficial ownership of the Company's Common Stock by: (i) all persons known by the Company to be beneficial owners of more than 5% of the Company's Common Stock, (ii) each current officer and director and Named Executive Officer, and (iii) by all executive officers and directors as a group.
|
| |
Name
|
No. of Shares of Common Stock (1)
|
Percent of Class (2)
|
|
|
|
Jerry G. Mikolajczyk
|
190,560,521
|
57.6378%
|
Kevin M. Grapes*3
|
22,030,000
|
6.6628%
|
Peter Matousek
|
82,500
|
0.0249%
|
William D. Spier
|
-0-
|
-0-%
|
(All officers and directors
|
190,643,021
|
57.6582%
|
as a group (3) member)
|
|
|
(1)
Represents the number of issued and outstanding shares of common stock beneficially owned by the shareholder.
(2)
Based on 330,643,500 issued and outstanding shares of common stock.
(3)
Resigned from the Board on May 21, 2012.
Item 13. Certain Relationships and Related Transactions and Director Independence.
Except as described below, none of the following persons has any direct or indirect material interest in any transaction to which we are a party during the past two years, or in any proposed transaction to which the Company is proposed to be a party:
A.
any director or officer;
B.
any proposed nominee for election as a director;
C.
any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our common stock; or
D.
any relative or spouse of any of the foregoing persons, or any relative of such spouse, who has the same house as such person or who is a director or officer of any parent or subsidiary.
Potential Conflict of Interest
Prior to June 1, 2011, our President, CEO and Director, Jerry G. Mikolajczyk, performed services for the Company on a consulting contract through a consulting agency, Comtax Services, Inc. (Comtax). From April 1, 2010 to February 28, 2011, Comtax charged a fixed monthly fee of $2,500, a minimum of 10 hours per month for Mr. Mikolajczyk, an aggregate of $27,500 for the 11 months for Mr. Mikolajczyks services to the Company. For the period March 1, 2011 to May 31, 2011, Comtax charged the Company an aggregate of $387,275 (1,106.5 hours) for the services of Mr. Mikolajczyk. The Company is indebted to Comtax an aggregate of $805,653 as of May 31, 2012 which consists of loans payable - $286,600, trade payables $412,115 and Long Term Note Payable Less than 3 years - $106,938 including accrued interest. Comtax acquired the Long Term Notes Payable Less than 3 years for $87,500 from our former President and CEO, Peter Matousek, and $18,750 from two other shareholders. Comtax is the largest single creditor to the Company comprising of 50.9% of the Companys total liabilities.
Mr. Mikolajczyk was an officer of Comtax until his resignation on May 31, 2011 and terminated his consulting contract with Comtax as of May 31, 2011 prior to accepting his executive and director positions with the Company.
Item 14. Principal Accounting Fees and Services.
AUDIT FEES. The aggregate fees for professional services rendered was $5,500 and $8,597 for the audit of our annual financial statements for the fiscal years ended May 31, 2012 and 2011 respectively, and $6,000 and $6,000 for the reviews of the financial statements included in our Forms 10-Q for the fiscal years ended May 31, 2012 and 2011 respectively.
AUDIT-RELATED FEES. The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of our financial statements and not reported under the caption "Audit Fee." There were no such fees billed for the fiscal year ended May 31, 2012 and 2011.
TAX FEES. Tax fees for each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning services was $1,500 for the fiscal year ending May 31, 2012 and $500 for the fiscal year ending May 31, 2011.
ALL OTHER FEES. Other than the services described above, there were no other services provided by our principal accountants for the fiscal years ended May 31, 2012 and 2011.
58
We did not have an audit committee as of May 31, 2012. Therefore, our entire Board of Directors (the Board") serves in the capacity of the audit committee. In discharging its oversight responsibility as to the audit process, our Board obtained from the independent auditors a formal written statement describing all relationships between the auditors and us that might bear on the auditors' independence as required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees."
Our Board discussed with the auditors any relationships that may impact their objectivity and independence, including fees for non-audit services, and satisfied itself as to the auditors' independence. The Board also discussed with management and the independent auditors the quality and adequacy of its internal controls. The Board reviewed with the independent auditors their management letter on internal controls.
Our Board discussed and reviewed with the independent auditors all matters required to be discussed by auditing standards generally accepted in the United States of America, including those described in Statement on Auditing Standards No. 61, as amended, "Communication with Audit Committees". Our entire Board, acting in the capacity of the audit committee reviewed the audited financial statements of the Company as of and for the year ended May 31, 2012 and 2011 with the independent auditors. Management has the responsibility for the preparation of the Company's financial statements and the independent auditors have the responsibility for the examination of those statements. Based on the above-mentioned review and discussions with the independent auditors our Board of Directors approved the Company's audited consolidated financial statements and recommended that they be included in its Annual Report on Form 10-K for the year ended May 31, 2012, for filing with the Securities and Exchange Commission.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)
The following report and financial statements are filed together with this Annual Report:
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
BALANCE SHEETS AT MAY 31, 2012 AND 2011
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED MAY 31, 2012 AND 2011 AND CUMULATIVE FROM INCEPTION (DECEMBER 20, 2007).
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MAY 31, 2012 AND 2011 AND CUMULATIVE FROM INCEPTION (DECEMBER 20, 2007).
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
NOTES TO FINANCIAL STATEMENTS
(b)
Index to Exhibits
59
|
|
|
|
| |
ITEM 15. EXHIBITS
|
INCORPORATED BY REFERENCE
|
|
|
Exhibit Number
|
Exhibit Description
|
Form
|
Exhibit
|
Filing Date
|
File/
Furnished Herewith
|
Corporate Governance and Management
|
5.01
|
Board Member Agreement between Xun Energy, Inc. and Peter Matousek
|
8-K
|
10.1
|
9/7/11
|
|
5.02
|
Board Member Agreement between Xun Energy, Inc. and Donald Lynch
|
8-K
|
10.2
|
9/7/11
|
|
5.03
|
Board Member Agreement between Xun Energy, Inc. and Kevin Grapes
|
8-K
|
10.1
|
9/8/11
|
|
5.04
|
Board Member Agreement between Xun Energy, Inc. and Jerry G. Mikolajczyk
|
8-K
|
10.2
|
9/8/11
|
|
5.05
|
Resignation Letter from Kevin Grapes
|
8-K
|
17.1
|
5/24/12
|
|
5.06
|
Board Member Agreement between Xun Energy, Inc. and William D. Spier
|
8-K
|
10.1
|
5/24/12
|
|
5.07
|
Board Member Agreement between Xun Energy, Inc. and Peter Matousek
|
8-K
|
10.1
|
5/25/12
|
|
|
|
|
|
|
|
Other Events
|
8.01
|
Series A Deferred Shares Allocation
|
8-K
|
N/A
|
12/13/11
|
|
|
|
|
|
|
|
Material Contracts
|
10.1
|
Acquisition of Oil and Gas lease
|
8-K
|
10.1
|
7/13/1
|
|
10.2
|
Assignment Of Oil And Gas Permit
|
8-K
|
10.1
|
1/24/12
|
|
10.3
|
Bill of Sale - ALRT
|
8-K
|
10.1
|
02/15/12
|
|
10.4
|
Bill of Sale - Jerry G. Mikolajczyk
|
8-K
|
10.2
|
02/15/12
|
|
10.5
|
Commercial Loan Offer
|
8-K
|
10.1
|
02/21/12
|
|
10.6
|
Investment Banking and Advisory Agreement
|
8-K
|
10.1
|
04/18/12
|
|
10.7
|
Purchase and Sale Agreement between Crockett Energy Corporation and Edwin S. Nichols, Thad Purcell, Barry L. Benton, Vesta, LP, Sean Sassin, Renee Sassin, James C. Gibson, and Susan G. Godwin and Edwin S. Nichols Exploration, Inc.
|
8-K
|
10.1
|
5/1/12
|
|
10.8
|
Third Amendment to Purchase and Sale Agreement between Xun Oil Corporation and Edwin S. Nichols, Thad Purcell, Barry L. Benton, Vesta, LP, Sean Sassin, Renee Sassin, James C. Gibson, and Susan G. Godwin and Edwin S. Nichols Exploration, Inc.
|
8-K
|
10.2
|
5/1/12
|
|
10.9
|
Amendment to Purchase and Sale Agreement dated May 22, 2012 between Xun Oil Corporation and Edwin S. Nichols, Thad Purcell, Barry L. Benton, Vesta, LP, Sean Sassin, Renee Sassin, James C. Gibson, and Susan G. Godwin and Edwin S. Nichols Exploration, Inc.
|
8-K
|
10.1
|
5/24/12
|
|
10.10
|
Termination of Purchase and Sale Agreement dated January 31, 2012, as amended
|
8-K
|
N/A
|
6/5/12
|
|
|
|
|
|
|
|
Rule 13a14(a)/15d-14(a) Certifications
|
31.1
|
Certificate of the Chief Executive Officer pursuant Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
X
|
31.2
|
Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
X
|
32.1
|
Certificate of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
X
|
32.2
|
Certificate of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
X
|
60
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.
Xun Energy, Inc.
Date: September 6, 2013
By: /s/ Jerry G. Mikolajczyk
Jerry G. Mikolajczyk
President, CEO, CFO
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Jerry G. Mikolajczyk
Jerry G. Mikolajczyk, Director
September 6, 2013
BY: /s/ Peter Matousek
September 6, 2013
Peter Matousek, Director
BY: /s/ William D. Spier
September 6, 2013
William D. Spier, Director
61