U.S. SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] .
Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For
the quarterly period ended December 31, 2014
[ ] Transition Report under Section 13 or 15(d) of
the Exchange Act
For the Transition Period from ________to
__________
Commission File Number: 333-144504
Pacific Oil Company
(Exact Name of Registrant as Specified
in its Charter)
|
|
NEVADA |
20-4057712 |
(State of other jurisdiction of |
(I.R.S. Employer |
incorporation or organization) |
Identification Number) |
|
|
9500 W. Flamingo Rd. Suite 205 |
|
Las Vegas, NV |
89147 |
(Address of principal executive offices) |
(Zip Code) |
Registrant's Phone:
1-888-303-2272 |
|
Indicate by check mark whether the issuer (1)
filed all reports required to be filed by Section13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [ ] No [X ] .
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer [ ]
Accelerated filer [ ]
Non-accelerated filer [ ]
Smaller
reporting company [X ].
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] .
As of February 16, 2015, the issuer had 60,080,733
shares of common stock issued and outstanding.
TABLE
OF CONTENTS
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Page |
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PART I – FINANCIAL INFORMATION |
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Item 1. |
Financial Statements |
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3 |
Item 2. |
Management’s Discussion and Analysis
of Financial Condition and Results of Operation |
17 |
Item 3. |
Quantitative and Qualitative Disclosures
about Market Risk |
21 |
Item 4. |
Controls and Procedures |
21 |
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PART II – OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
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21 |
Item 1A. |
Risk Factors |
22 |
Item 2. |
Unregistered Sales of Equity Securities
and Use of Proceeds |
22 |
Item 3. |
Defaults Upon Senior Securities |
22 |
Item 4. |
Mine Safety Disclosures |
22 |
Item 5. |
Other Information |
22 |
Item 6. |
Exhibits |
22 |
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ITEM 1. FINANCIAL STATEMENTS
PACIFIC OIL COMPANY
FINANCIAL STATEMENTS
C O N T E N T S
Condensed Balance Sheets as of December
31, 2014 (unaudited) and September 30, 2014 |
4 |
Condensed Statements of Operations for the three
months ended |
|
December 31, 2014 and 2013 (restated)
(unaudited) |
5 |
Condensed Statements of Cash Flows for the three
months ended |
|
December 31, 2014 and 2013 (restated)(unaudited) |
6 |
Notes to the Condensed Financial Statements (unaudited) |
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|
7 |
PACIFIC OIL COMPANY
Condensed Balance Sheets
| |
December 31, | |
September 30, |
| |
2014 | |
2014 |
| |
(unaudited) | |
|
ASSETS | |
| | | |
| | |
CURRENT ASSETS | |
| | | |
| | |
Cash | |
$ | 1,787 | | |
$ | 87 | |
Total Current Assets | |
| 1,787 | | |
| 87 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 1,787 | | |
$ | 87 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |
| | | |
| | |
| |
| | | |
| | |
CURRENT LIABILITIES | |
| | | |
| | |
Accounts payable | |
$ | 2,149 | | |
$ | 1,702 | |
Advances payable - related party | |
| 72,671 | | |
| 66,671 | |
Note payable - related party | |
| 1,174 | | |
| 1,174 | |
| |
| | | |
| | |
Total Current Liabilities | |
| 75,993 | | |
| 69,546 | |
| |
| | | |
| | |
Total Liabilities | |
| 75,993 | | |
| 69,546 | |
| |
| | | |
| | |
STOCKHOLDERS' DEFICIT | |
| | | |
| | |
| |
| | | |
| | |
Common stock: $0.001 par value; 300,000,000 shares
authorized, 60,080,733 shares issued and outstanding, respectively | |
| 60,080 | | |
| 60,080 | |
Additional paid-in capital | |
| 600,588 | | |
| 600,588 | |
Deficit accumulated during the exploration stage | |
| (734,874 | ) | |
| (730,127 | ) |
Total Stockholders' Deficit | |
| (74,206 | ) | |
| (69,459 | ) |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | |
$ | 1,787 | | |
$ | 87 | |
The accompanying notes are an integral
part of these condensed unaudited financial statements.
PACIFIC OIL COMPANY
Condensed Statements of Operations (unaudited)
| |
For the Three |
| |
Months Ended |
| |
December 31, |
| |
2014 | |
2013 |
| |
| | | |
| (restated) | |
REVENUES | |
$ | — | | |
$ | — | |
| |
| | | |
| | |
OPERATING EXPENSES | |
| | | |
| | |
General and administrative | |
| 1,127 | | |
| 2,094 | |
Professional fees | |
| 3,620 | | |
| 335,280 | |
Total operating expenses | |
| 4,747 | | |
| 337,374 | |
| |
| | | |
| | |
OTHER INCOME (EXPENSE) | |
| | | |
| | |
Interest expense | |
| — | | |
| (3,866 | ) |
Change in fair value of derivative | |
| — | | |
| (252 | ) |
Gain on conversion of accounts payable | |
| — | | |
| 16,314 | |
Total other income (expense) | |
| — | | |
| 12,196 | |
| |
| | | |
| | |
NET LOSS | |
$ | (4,747 | ) | |
$ | (325,178 | ) |
| |
| | | |
| | |
BASIC AND DILUTIVE LOSS PER SHARE | |
$ | (0.00 | )* | |
$ | (0.01 | ) |
| |
| | | |
| | |
WEIGHTED AVERAGE NUMBER OF SHARES | |
| | | |
| | |
OUTSTANDING - BASIC AND DILUTIVE | |
| 60,080,733 | | |
| 54,187,927 | |
| |
| | | |
| | |
* denotes a loss of less than $(0.01) per share. | |
| | | |
| | |
The accompanying notes
are an integral part of these condensed unaudited financial statements.
PACIFIC OIL COMPANY
Condensed Statements of Cash
Flows (unaudited)
| |
For the Three Months Ended |
| |
December 31, |
| |
2014 | |
2013 |
OPERATING ACTIVITIES | |
| | | |
| (restated) | |
Net loss | |
$ | (4,747 | ) | |
$ | (325,178 | ) |
Adjustments to reconcile net loss to | |
| | | |
| | |
net cash used by operating activities: | |
| | | |
| | |
Shares for Services | |
| — | | |
| 335,280 | |
Amortization of debt discount on convertible note | |
| — | | |
| 2,212 | |
Change in fair value of derivative | |
| — | | |
| 252 | |
Gain on conversion of accounts payable | |
| — | | |
| (16,314 | ) |
Imputed interest | |
| — | | |
| 1,654 | |
Changes in operating assets and liabilities | |
| | | |
| — | |
Increase (decrease) in accounts payable | |
| 447 | | |
| 2,056 | |
Net Cash Used in Operating Activities | |
| (4,300 | ) | |
| (38 | ) |
| |
| | | |
| | |
INVESTING ACTIVITIES | |
| | | |
| | |
| |
| | | |
| | |
Net Cash Provided by (Used in) Investing Activities | |
| — | | |
| — | |
| |
| | | |
| | |
FINANCING ACTIVITIES | |
| | | |
| | |
Borrowing from related parties | |
| 6,000 | | |
| — | |
Repayment on related party debt | |
| — | | |
| — | |
Common stock issued for cash | |
| — | | |
| — | |
Contributed capital | |
| — | | |
| — | |
Net Cash Provided by Financing Activities | |
| 6,000 | | |
| — | |
| |
| | | |
| | |
NET INCREASE (DECREASE) IN CASH | |
| 1,700 | | |
| (38 | ) |
CASH AT BEGINNING OF PERIOD | |
| 87 | | |
| 820 | |
CASH AT END OF PERIOD | |
$ | 1,787 | | |
$ | 782 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURES OF | |
| | | |
| | |
CASH FLOW INFORMATION | |
| | | |
| | |
| |
| | | |
| | |
CASH PAID FOR: | |
| | | |
| | |
Interest | |
$ | — | | |
$ | — | |
Income Taxes | |
$ | — | | |
$ | — | |
| |
| | | |
| | |
Non Cash Activities | |
| | | |
| | |
Settlement of accounts payable with stock | |
$ | — | | |
$ | 205 | |
The accompanying notes are an integral
part of these condensed unaudited financial statements.
PACIFIC OIL COMPANY
NOTES TO CONDENSED UNAUDITED FINANCIAL
STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2014 AND 2013
NOTE 1 - ORGANIZATION AND BUSINESS OPERATIONS
Pacific Oil Company (the “Company”)
was originally incorporated in Nevada on December 5, 2005 (“inception’) as Kat Racing, Inc. On January 4, 2013, the
Articles of Incorporation of the Company were amended to change the name of the Company to Prairie West Oil & Gas, Ltd. On
July 26, 2013, the Company’s Articles of Incorporation were amended to change the name of the registrant to Pacific Oil
Company.
From the Company’s inception
until the Company’s transition into the oil and natural gas business in early 2013, Kat Racing’s business plan was
to design, manufacture, market, sell and distribute custom off-road racing and recreational vehicles and provide marketing and
lead services. Kat Racing never generated any revenue from this proposed business plan.
As the market for high end off road
vehicles suffered due to the downturn in the economy, Kat Racing sought to arrange the purchase of certain oil and gas properties
which were owned by Prairie West Oil and Gas Ltd., a Canadian company through a share exchange. Pursuant to this transaction,
the Company changed its name from Kat Racing to Prairie West Oil and Gas Ltd. This transaction was never completed. When it was
determined the acquisition would not be completed, the Company did not want to continue with the Prairie West name and changed
its name to Pacific Oil Company.
On October 1, 2013, the Company issued
a newly appointed officer and director 38,100,000 shares of common stock of the Company to retain his services to attempt to secure
certain assets the Company needs to launch its oil and gas operations.
NOTE 2 - GOING CONCERN
The Company's financial statements
are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet
established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern,
has incurred losses of $734,874 since inception (December 5, 2005) through December 31, 2014 and had a working capital and shareholder
deficit of $74,206 at December 31, 2014 . Accordingly, there is substantial doubt about the Company’s ability to continue
as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital
to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced
to cease operations.
In order to continue as a going concern,
the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the
Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and
seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in
accomplishing any of its plans.
The ability of the Company to continue as a going concern
is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure
other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.
PACIFIC OIL COMPANY
NOTES TO CONDENSED UNAUDITED FINANCIAL
STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER
31, 2014 AND 2013
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The accompanying financial statements
have been prepared by the Company without audit in accordance with SEC rules for quarterly reports on form 10-Q. In the opinion
of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows at December 31, 2014, and for all periods presented herein, have been made.
Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States
of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's September 30, 2014 audited financial statements. The results
of operations for the periods ended December 31, 2014 and 2013 are not necessarily indicative of the operating results for the
full years.
Cash and cash equivalents
For purposes of the statement of cash flows, the Company
considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Development Stage Company
The Company is in the development
stage as defined under the then current Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 915-205 “Development-Stage Entities,” and among the additional disclosures
required as a development stage company are that our financial statements were identified as those of a development stage
company, and that the statements of operations, movement in stockholders’ equity (deficit) and cash flows disclosed
activity since the date of our inception (December 5, 2005) as a development stage company. Effective June 10, 2014 FASB
changed its regulations with respect to Development Stage Entities and these additional disclosures are no longer required
for annual reporting periods beginning after December 15, 2014 with the option for entities to early adopt these new
provisions. The Company has elected to early adopt these provisions and consequently these additional disclosures are not
included in these financial statements.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company
regularly evaluates estimates and assumptions related to the deferred income tax asset valuation allowances. The Company bases
its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the
Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between
the estimates and the actual results, future results of operations will be affected.
PACIFIC OIL COMPANY
NOTES TO CONDENSED UNAUDITED FINANCIAL
STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER
31, 2014 AND 2013
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Derivative Liability
The Company evaluates its convertible
instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify
as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting
treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In
the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations
as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the
conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity
that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument
on the reclassification date. We analyzed the derivative financial instruments (the Convertible Note), in accordance with ASC
815. The objective is to provide guidance for determining whether an equity-linked financial instrument is indexed to an entity’s
own stock. This determination is needed for a scope exception which would enable a derivative instrument to be accounted for under
the accrual method. The classification of a non-derivative instrument that falls within the scope of ASC 815-40-05 “Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on
whether the instrument is indexed to an entity’s own stock. A non-derivative instrument that is not indexed to an entity’s
own stock cannot be classified as equity and must be accounted for as a liability. There is a two-step approach in determining
whether an instrument or embedded feature is indexed to an entity’s own stock. First, the instrument's contingent exercise
provisions, if any, must be evaluated, followed by an evaluation of the instrument's settlement provisions. The Company utilized
multinomial lattice models that value the derivative liability within the notes based on a probability weighted discounted cash
flow model. The Company utilized the fair value standard set forth by the Financial Accounting Standards Board, defined as the
amount at which the assets (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between
willing parties, that is, other than in a forced or liquidation sale.
Fair Value Measurements
The Company adopted ASC No. 820-10
(ASC 820-10), Fair Value Measurements. ASC 820-10 relates to financial assets and financial liabilities.
ASC 820-10 defines fair value, establishes
a framework for measuring fair value in accounting principles generally accepted in the United States of America (GAAP), and expands
disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require
or permit fair value measurements and are to be applied prospectively with limited exceptions.
ASC 820-10 defines fair value as the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. This standard is now the single source in GAAP for the definition of fair value, except for the fair
value of leased property. ASC 820-10 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions
developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions,
about market participant assumptions that are developed based on the best information available in the circumstances (unobservable
inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices
in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The
three levels of the fair value hierarchy under ASC 820-10 are described below:
| | Level
1. Observable inputs such as quoted prices in active markets; |
| | Level
2. Inputs, other than the quoted prices in active markets, that are observable either
directly or indirectly; and |
| | Level
3. Unobservable inputs in which there is little or no market data, which require the
reporting entity to develop its own assumptions. |
PACIFIC OIL COMPANY
NOTES TO CONDENSED UNAUDITED
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2014
AND 2013
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value Measurements (Continued)
The carrying value of cash, accounts payable, accounts payable
– related party and note payable related party approximates their fair value due to the short-term maturity of these financial
instruments.
Income Taxes
Potential benefits of income tax losses are
not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740 “Accounting for
Income Taxes” as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating
losses carried forward. The potential benefits of net operating losses have not been recognized in this financial statement because
the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
Basic and Diluted Loss per Share
The Company computes loss per share
in accordance with ASC-260, “Earnings per Share” which requires presentation of both basic and diluted earnings per
share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available to common shareholders
by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive
potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect
is anti-dilutive.
The Company has previously had potentially
dilutive debt instruments outstanding in the form of convertible notes payable – related party. However, as the Company
has incurred losses since Inception, these potentially dilutive shares of common stock have been excluded from the calculation
of loss per share as their effect would have been anti-dilutive. Consequently basic and diluted loss per share were identical
for the three months ended December 31, 2014 and 2013.
No potentially dilutive debt or equity
instruments were issued or outstanding during the three months ended December 31, 2014.
Advertising
The Company follows the policy of charging the costs of advertising
to expenses incurred. The Company incurred $0 in advertising costs during the three month periods ended December 31, 2014 and
2013.
Stock-based Compensation
The Company records stock based compensation
in accordance with the guidance in ASC Topic 718 (Accounting for Share Based Payments) which requires the Company to recognize
expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation
transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method.
The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
PACIFIC OIL COMPANY
NOTES TO CONDENSED UNAUDITED
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2014 AND 2013
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
The Company will recognize revenue
in accordance with Accounting Standards Codification No. 605, Revenue Recognition (“ASC-605”). ASC-605 requires that
four basic criteria must be met before revenue can be recognized:: (1) persuasive evidence of an arrangement exists; (2) delivery
has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of
criteria (3) and (4) are based on management’s judgment regarding the fixed nature of the selling prices of the products
delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances,
and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which
the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine
that the product has been delivered or no refund will be required
Correction of an error in previously
issued financial statements
The Company follows guidance under
ASC 250-10-45-23 for reporting any error in the financial statements of a prior period discovered after the financial statements
are issued or are available to be issued. The current comparative statements as presented reflect the retroactive application
of any error corrections. Certain of the balances reported in the unaudited condensed interim financial statements for the three
months ended December 31, 2013 reported on Form 10-Q, have been retroactively adjusted to reflect the adjustments made as a result
of the audit of the financial statements for the year ended September 30, 2014. The details are summarized in Note 7 below.
Recent Accounting Pronouncements
The Company does not believe that other
than disclosed above, recently issued, but not yet adopted, accounting pronouncements will have a material impact on its financial
position, results of operations or cash flows.
NOTE 4 - RELATED PARTY TRANSACTIONS
In support of the Company’s efforts
and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations
or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment
for continued support by shareholders. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances
are considered temporary in nature and have not been formalized by a promissory note.
The Company had received $72,671 and
$66,671 as of December 31, 2014 and September 30, 2014, respectively, as advances from related parties to fund ongoing operations.
In addition, as of December 31, 2014, a related party note payable balance was $1,174. All of the related party accounts and note
payable are non-interest bearing, unsecured and due upon demand.
PACIFIC OIL COMPANY
NOTES TO CONDENSED UNAUDITED
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
DECEMBER 31, 2014 AND 2013
NOTE 5 – CONVERTIBLE NOTES PAYABLE – RELATED
PARTY AND DERIVATIVE LIABILITIES
On July 1, 2013, the Company issued
convertible notes payable to a related party in the amount of $77,824 that provided for the issuance of convertible notes with
variable conversion provisions. The conversion terms of the convertible notes were variable based on certain factors, such as
the future price of the Company’s common stock. Therefore, the number of shares of common stock issuable upon conversion
of the promissory note was indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the
Company’s authorized share limit, the equity environment is tainted and all additional convertible debentures and warrants
are included in the value of the derivative. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion
option and warrants and shares to be issued were recorded as derivative liabilities on the issuance date.
The fair values of the Company’s
derivative liabilities were estimated at the issuance date and were revalued at each subsequent reporting date, using a lattice
model. The Company recorded a discount on the convertible note payable, related party of $57,618, leaving a net balance of $20,206,
and current derivative liabilities of $173,856 at September 30, 2013. The change in fair value of the derivative liabilities resulted
in a gain of $2,380 for the three months ended December 31, 2013, which has been reported as gain from changes in fair value of
derivative liabilities in other income (expense) in the statements of operations.
On October 4, 2013, the Company issued
29,100,002 shares of its common stock to the note holders to satisfy $76,650 of the total outstanding convertible notes payable
of $77,824. Effective January 1, 2014, the Company, with the consent of the holder of the remaining note convertible – related
party totaling $1,174, amended the terms of the note payable to remove the conversion feature. The remaining $2,632 balance of
the derivative liability relating to the note payable was credited to gain from changes in fair value of derivative liabilities
in other income on removal of the conversion feature from the note payable – related party.
The following is a summary of changes
in the fair market value of the derivative liability during the three months ended December 31, 2013:
Balance,
September 30, 2013 |
$ |
173,856 |
Debt Conversion |
|
(171,476) |
Change in fair
market value of derivative liabilities due to the mark to market adjustment |
|
252 |
Cancellation
of the conversion feature |
|
(2,632) |
Balance at
December 31, 2013 |
$ |
− |
NOTE 6 – COMMON STOCK
On April 25, 2013 the board of director
authorized a reverse stock split of 1 for 100. All share amounts have been adjusted for retroactively. In connection with the
change in control, it was determined that the authorized capital of the Company consists of 300 million shares of $0.001 par value
common stock and no shares of preferred stock. The disclosures on the balance sheet have been corrected accordingly.
On October 1, 2013 the Company issued
38,100,000 shares to a newly appointed officer and director which resulted in a change in control of the Company. The shares were
valued at $335,280 or $0.0088 per share, and this expense has been recognized as stock based compensation in our statement of
operations. The value of these shares was determined by a valuation expert.
PACIFIC OIL COMPANY
NOTES TO CONDENSED UNAUDITED
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
DECEMBER 31, 2014 AND 2013
On October 4, 2013, the Company issued
21,900,002 shares of its common stock to satisfy an outstanding convertible note payable and its bifurcated derivative liability.
The outstanding convertible note payable relieved was $76,650, less unamortized discount of $57,618, along with its bifurcated
derivative liability of $171,476. The shares were valued at $192,720, or $0.0088 per share. These shares were valued by a valuation
expert as there had been no active market trading of the Company’s stock at the date of the conversion. The following table
summarizes allocation of the common shares issued in this transaction:
Derivative
liability |
$ |
171,476 |
Convertible
notes payable |
|
76,650 |
Unamortized
discount on convertible notes payable |
|
(57,618) |
Interest expense
to October 4, 2013 |
|
2,212 |
Value of shares issued to settle liabilities |
$ |
192,720 |
On December 31, 2013, the Company issued
23,241 shares of its common stock in settlement of accounts payable, relating to services provided to the Company in the amount
of $16,519. The Company valued the shares at $0.0088 as determined by the valuation expert, or $205. The Company recognized a
gain on the conversion of $16,314.
NOTE 7 –CORRECTION OF ERRORS
IN PREVIOUSLY ISSUED FINANCIAL STATEMENTS
The Company follows guidance under
ASC 250-10-45-23 for reporting any error in the financial statements of a prior period discovered after the financial statements
are issued or are available to be issued. The current comparative statements as presented reflect the retroactive application
of any error corrections. Certain of the balances reported in the unaudited condensed interim financial statements for the three
months ended December 31, 2013 reported on Form 10-Q, have been retroactively adjusted to reflect the adjustments made as a result
of the audit of the financial statements for the year ended September 30, 2014. All of the adjustments are noncash transactions.
The transactions are described in the Notes 5 and 6 above and are summarized below:
| |
Three months ended |
| |
December 31, 2013 |
| |
As reported | |
Changes | |
Revised |
Statement of Operations: | |
| | | |
| | | |
| | |
Compensation expense | |
$ | 99,686 | | |
$ | 235,594 | | |
$ | 335,280 | |
Gain on conversion of accounts payable | |
| — | | |
| (16,314 | ) | |
| (16,314 | ) |
Loss on debt conversion | |
| 193,258 | | |
| (193,258 | ) | |
| — | |
Interest expense | |
| 59,273 | | |
| (55,407 | ) | |
| 3,866 | |
Net loss | |
| (354,562 | ) | |
| 29,384 | | |
| (325,178 | ) |
Settlement of accounts payable with stock | |
| — | | |
| (205 | ) | |
| (205 | ) |
Cash Flow from Operating Activities | |
| (38 | ) | |
| — | | |
| (38 | ) |
NOTE 7 – SUBSEQUENT EVENTS
There are no events subsequent to period
ended December 31, 2014 through the date these financial statements are available to be issued on February 16, 2015 that would
warrant further disclosures.
ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Form 10-Q includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included or incorporated by reference
in this Form 10-Q which address activities, events or developments which the Company expects or anticipates will or may occur
in the future, including such things as future capital expenditures (including the amount and nature thereof); finding suitable
merger or acquisition candidates; expansion and growth of the Company's business and operations; and other such matters are forward-looking
statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and
its perception of historical trends, current conditions and expected future developments, as well as other factors it believes
are appropriate under the circumstances. However, whether actual results or developments will conform with the Company's expectations
and predictions is subject to a number of risks and uncertainties, including general economic, market and business conditions;
the business opportunities (or lack thereof) that may be presented to and pursued by the Company; changes in laws or regulation;
and other factors, most of which are beyond the control of the Company.
These forward-looking statements
can be identified by the use of predictive, future-tense or forward-looking terminology, such as "believes," "anticipates,"
"expects," "estimates," "plans," "may," "will," or similar terms. These statements
appear in a number of places in this Filing and include statements regarding the intent, belief or current expectations of the
Company, and its directors or its officers with respect to, among other things: (i) trends affecting the Company's financial condition
or results of operations for its limited history; (ii) the Company's business and growth strategies; and, (iii) the Company's
financing plans. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and
involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking
statements as a result of various factors. Such factors that could adversely affect actual results and performance include, but
are not limited to, the Company's limited operating history, potential fluctuations in quarterly operating results and expenses,
government regulation, technological change and competition.
Consequently, all of the
forward-looking statements made in this Form 10-QSB are qualified by these cautionary statements and there can be no assurance
that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they
will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations
to update any such forward-looking statements.
The Company has a limited
operating history upon which an evaluation of the Company, its current business and its prospects can be based. The Company's
prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies
in their early stages of development. Such risks include inadequate funding the company's inability to anticipate and adapt to
a developing market, the failure of the company's infrastructure, changes in laws that adversely affect the company's business,
the ability of the Company to manage its operations, including the amount and timing of capital expenditures and other costs relating
to the expansion of the company's operations, the introduction and development of different or more extensive communities by direct
and indirect competitors of the Company, including those with greater financial, technical and marketing resources, the inability
of the Company to attract, retain and motivate qualified personnel and general economic conditions.
The Company expects that
its operating expenses will increase significantly, especially as it implements its business plan. To the extent that increases
in its operating expenses precede or are not followed by commensurate increases in revenues, or that the Company is unable to
adjust operating expense levels accordingly, the Company's business, results of operations and financial condition would be materially
and adversely affected. There can be no assurances that the Company can achieve or sustain profitability or that the Company's
operating losses will not increase in the future.
GENERAL DESCRIPTION OF BUSINESS
The Company was originally incorporated
in Nevada on December 5, 2005 as Kat Racing, Inc. On January 4, 2013, the Company changed its name to Prairie West Oil &
Gas, Ltd and subsequently on July 26, 2013 to Pacific Oil Company.
From the Company’s inception
until the Company’s transition into the oil and natural gas business in early 2013, Kat Racing’s business plan was
to design, manufacture, market, sell and distribute custom off-road racing and recreational vehicles and provide marketing and
lead services. Kat Racing never generated any revenue from this proposed business plan.
As the market for high end off road
vehicles suffered due to the downturn in the economy, Kat Racing sought to arrange the purchase of certain oil and gas properties
which were owned by Prairie West Oil and Gas Ltd., a Canadian company through a share exchange.
Pursuant to this transaction, the Company
changed its name from Kat Racing to Prairie West Oil and Gas Ltd. This transaction was never completed. When it was determined
the acquisition would not be completed, the Company did not want to continue with the Prairie West name and changed its name to
Pacific Oil Company.
On October 1, 2013, the Company issued
a newly appointed officer and director 38,100,000 shares of common stock of the Company to retain his services to attempt to secure
certain assets the Company needs to launch its oil and gas operations.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2014 COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 2013
The Company has achieved
no revenue or profits to date and the Company anticipates that it will continue to incur net losses for the foreseeable future.
The Company incurred a net
loss of $4,747 for the three months ended December 31, 2014, compared with a net loss of $325,178 for the three months ended December
31, 2013. The year to year variance was largely due to professional fees of $335,280 related to stock based compensation.
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2014 the Company’s
current assets, comprising solely of cash, were $1,787 compared to $87 in current assets, also solely cash, at September 30, 2014.
As at December 31, 2014, the Company’s current liabilities were $75,993 compared to $69,546 at September 30, 2014.
Stockholder’s deficit was $74,206
as of December 31, 2014 compared to stockholders’ deficit of $69,459 as of September 30, 2014.
The Company's financial statements
are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet
established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern,
has incurred losses of $734,874 since inception (December 5, 2005) through December 31, 2014 and had a working capital and shareholder
deficit of $74,206 at December 31, 2014. Accordingly, there is substantial doubt about the Company’s ability to continue
as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital
to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced
to cease operations.
In order to continue as a going concern,
the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the
Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and
seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in
accomplishing any of its plans.
The ability of the Company to continue
as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and
eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include
any adjustments that might be necessary if the Company is unable to continue as a going concern.
Cash Flows from Operating Activities
For the three month period ended December
31, 2014, net cash flows used in operating activities was $4,300 compared to $38 used in operating activities in the three months
ended December 31, 2013. During the three months ended December 31, 2014 the Company incurred a loss of $4,747 which was
partially offset for cash flow purposes by a $447 increase in the balance of its accounts payable. By comparison during the three
months ended December 31, 2013 the Company incurred a loss of $325,178 was partially offset for cash flow purposes by $335,280
in non-cash expenses related to stock based compensation.
Cash Flows from Investing Activities
We neither used, nor provided cash
flow from investing activities during the three month period ended December 31, 2014 or 2013.
Cash Flows from Financing Activities
During the three months ended December
31, 2014 the Company received $6,000 in borrowings from related parties as compared to $0 in borrowings from related parties during
the three months ended December 31, 2013. The decrease in funding between the two periods reflects the decrease in the amount
of funds used in operating activities between the two periods.
CRITICAL ACCOUNTING POLICIES
In Financial Reporting release
No. 60, "CAUTIONARY ADVICE REGARDING DISCLOSURE ABOUT CRITICAL ACCOUNTING POLICIES" ("FRR 60"), the Securities
and Exchange Commission suggested that companies provide additional disclosure and commentary on their most critical accounting
policies. In FRR 60, the SEC defined the most critical accounting policies as the ones that are most important to the portrayal
of a company's financial condition and operating results, and require management to make its most difficult and subjective judgments,
often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our most critical
accounting policies include: non-cash compensation valuation that affects the total expenses reported in the current period and
the valuation of shares. The methods, estimates and judgments we use in applying these most critical accounting policies have
a significant impact on the results we report in our financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
As a "smaller reporting
company" as defined by Item 10 of Regulation S-K, the Company is not required to provide information required
by this Item.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and
procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange
Act of 1934 , as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities
and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including
our president (also our principal executive officer) and our secretary, treasurer and chief financial officer (also our principal
financial and accounting officer) to allow for timely decisions regarding required disclosure.
As of December 31, 2014 we
carried out an evaluation, under the supervision and with the participation of our president (also our principal executive officer
and our chief financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures.
Based on the foregoing, our President and Chief Financial Officer concluded that our disclosure controls and procedures were not
effective in providing reasonable assurance in the reliability of our corporate reporting as of the end of the period covered
by this Quarterly Report due to certain deficiencies that existed in the design or operation of our internal controls over financial
reporting and that may be considered to be material weaknesses.
CHANGES IN INTERNAL CONTROLS.
There was no change in our
internal controls or in other factors that could affect these controls during our last fiscal quarter that has materially affected,
or is reasonably likely to materially affect our internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company was not subject
to any legal proceedings during the three months ended December 31, 2014 or 2013 and, to the best of its knowledge; no legal proceedings
are pending or threatened.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS
There were no sales of unregistered equity securities
during the three months ended December 31, 2014 or 2013.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no senior securities issued or outstanding
during the three months ended December 31, 2014 or 2013.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable to our Company.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following documents are included
or incorporated by reference as exhibits to this report.
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. Date: February
16, 2015
Pacific Oil Company
Registrant
By: /s/ Anthony Sarvucci
Anthony Sarvucci
Chief Executive Officer and Chief Financial
Officer
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002
I, Anthony Sarvucci of Pacific Oil Company (the
“Company”), certify that:
- I have reviewed this 10-Q
of the Company;
- Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
- Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
- Together with the Company’s
principal executive officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the Company and have:
- Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
- Designed such internal
control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
- Evaluated the effectiveness
of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
- Disclosed in this report
any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter
(the Company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting; and
- The Company’s other
certifying officers and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to
the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):
- All significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the Company's ability to record, process, summarize and report financial information; and
- Any fraud, whether or
not material, that involves management or other employees who have a significant role in the Company's internal control over financial
reporting.
Date: February 16, 2015
/s/ Anthony Sarvucci
Anthony Sarvucci
Chief Executive Officer and Chief Financial
Officer
CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002
I, Anthony Sarvucci, Chief Executive Officer and Chief Financial
Officer, of Pacific Oil Company (the “Company”) certify that:
- I have reviewed the quarterly report
on Form 10-Q of the Company;
- Based on my knowledge, this annual
report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report; and
- Based on my knowledge, the financial
statements, and other financial information included in this annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the Company as of, and for, the period presented in this report.
Date: February 16, 2015
/s/ Anthony Sarvucci
Anthony
Sarvucci
Chief Executive
Officer and Chief
Financial Officer
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