Nation Energy, Inc.
|
Condensed Consolidated
Balance Sheets
|
|
|
|
|
|
|
September 30
|
|
March 31,
|
|
2016
|
|
2016
|
|
(Unaudited)
|
|
|
ASSETS
|
Current
assets:
|
|
|
|
Cash
|
$ 91,772
|
|
$ 1,334
|
Accounts receivable
|
$ 39,785
|
|
$ -
|
Total
current assets
|
131,557
|
|
1,334
|
|
|
|
|
Non-current
assets:
|
|
|
|
Petroleum and natural gas interests
|
55,783,639
|
|
29,559,563
|
Total
non-current assets
|
55,783,639
|
|
29,559,563
|
|
|
|
|
Total
assets
|
$
55,915,196
|
|
$29,560,897
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable
|
$ 764,855
|
|
$ 9,710,946
|
Accounts payable and accrued expenses - related party
|
6,897,898
|
|
497,842
|
Loans payable - related party, current
|
965,130
|
|
827,698
|
Loans payable - current
|
109,260
|
|
104,247
|
Total
current liabilities
|
8,737,143
|
|
11,140,733
|
|
|
|
|
Long
term liabilites
|
|
|
|
Loans payable - related party - net of current
|
18,990,646
|
|
38,211
|
|
27,727,787
|
|
11,178,944
|
Stockholders'
equity
|
|
|
|
Common stock, no par value; 5,000,000,000
|
$ 31,356,020
|
|
$ 1,356,020
|
shares authorized; 1,050,020,000 shares issued
|
|
|
|
and outstanding
|
|
|
|
Obligation to issue shares
|
-
|
|
20,000,000
|
Additional paid-in capital
|
10,218,380
|
|
10,218,380
|
Accumulated (deficit) prior to the development stage
|
(6,839,714)
|
|
(6,839,714)
|
Accumulated (deficit) during the development stage
|
(7,517,128)
|
|
(6,352,733)
|
Accumulated comprehensive (loss):
|
|
|
|
Foreign currency translation (loss)
|
(30,151)
|
|
-
|
|
27,187,407
|
|
18,381,953
|
Noncontrolling interest in consolidated subsidiary
|
1,000,000
|
|
-
|
Total
stockholders' equity
|
28,187,407
|
|
18,381,953
|
|
|
|
|
Total
liabilities and stockholders' equity
|
$
55,915,196
|
|
$29,560,897
|
|
|
|
|
The accompanying notes are an
integral part of these financial statements
|
Nation Energy, Inc.
|
Condensed Consolidated
Statements of Operations and Comprehensive Loss
|
For the Three Months and
Six Months Ended September 30, 2016 and 2015
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
For the Six Months Ended
|
|
September 30
|
|
September 30
|
|
September 30
|
|
September 30
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
Revenue:
|
$ -
|
|
$ -
|
|
$ -
|
|
$ -
|
Direct
expenses:
|
|
|
|
|
|
|
|
Royalties
|
-
|
|
-
|
|
-
|
|
-
|
Operating
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
Operating income
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
|
|
|
|
|
Consulting
|
135,185
|
|
11,000
|
|
235,920
|
|
11,000
|
Legal fees
|
165,699
|
|
295,977
|
|
233,488
|
|
320,364
|
Management fees
|
54,399
|
|
-
|
|
114,399
|
|
-
|
Accounting fees
|
19,030
|
|
5,000
|
|
61,030
|
|
11,500
|
Rent expense
|
28,228
|
|
-
|
|
58,228
|
|
-
|
Other general and administrative expenses
|
70,991
|
|
17,742
|
|
98,692
|
|
36,025
|
Total
General and administrative expenses
|
473,532
|
|
329,719
|
|
801,757
|
|
378,889
|
|
|
|
|
|
|
|
|
(Loss) before other income (expense)
|
(473,532)
|
|
(329,719)
|
|
(801,757)
|
|
(378,889)
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
(Loss) on extinguishment of debt
|
-
|
|
(3,350,000)
|
|
-
|
|
(3,350,000)
|
Interest (expense)
|
(261,084)
|
|
(18,446)
|
|
(363,856)
|
|
(66,839)
|
Foreign
exchange gain (loss)
|
(4,975)
|
|
-
|
|
1,218
|
|
-
|
Total
other income (loss)
|
(266,059)
|
|
(3,368,446)
|
|
(362,638)
|
|
(3,416,839)
|
|
|
|
|
|
|
|
|
Net
(loss)
|
(739,591)
|
|
(3,698,165)
|
|
(1,164,395)
|
|
(3,795,728)
|
|
|
|
|
|
|
|
|
Non-controlling
interest
|
|
|
|
|
|
|
|
(Income) attributable to noncontrolling interest
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
Net
(loss) attributable to Nation Energy Inc's
|
|
|
|
|
|
|
|
shareholders
|
(739,591)
|
|
(3,698,165)
|
|
(1,164,395)
|
|
(3,795,728)
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
(21,933)
|
|
54,059
|
|
(30,151)
|
|
31,999
|
|
|
|
|
|
|
|
|
Comprehensive (loss)
|
$
(761,524)
|
|
$
(3,644,106)
|
|
$
(1,194,546)
|
|
$
(3,763,729)
|
|
|
|
|
|
|
|
|
Per share information:
|
|
|
|
|
|
|
|
Weighted average number of
|
|
|
|
|
|
|
|
common shares outstanding
|
|
|
|
|
|
|
|
- basic and diluted
|
1,050,020,000
|
|
150,020,000
|
|
1,050,020,000
|
|
150,020,000
|
|
|
|
|
|
|
|
|
Net loss per common
|
|
|
|
|
|
|
|
share - basic and diluted
|
$ (0.001)
|
|
$ (0.024)
|
|
$ (0.001)
|
|
$ (0.025)
|
|
|
|
|
|
|
|
|
The accompanying notes are an
integral part of these financial statements
|
|
|
|
|
|
|
|
|
Nation Energy, Inc.
|
Condensed Consolidated Statements of Cash Flows
|
For the Six Months Ended September 30, 2016 and 2015
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
Net (loss) attributable to Nation Energy Inc's
|
|
|
|
|
shareholders
|
$ (1,164,395)
|
|
$ (3,795,728)
|
|
Adjustments to reconcile net loss to net cash
|
|
|
|
|
provided by (used in) operating activities:
|
|
|
|
|
Loss on extinguishment of debt
|
$ -
|
|
$ 3,350,000
|
|
Changes in working capital:
|
|
|
|
|
(Increase) in accounts receivable
|
(39,785)
|
|
-
|
|
Increase in accounts payable
|
92,090
|
|
292,009
|
|
Increase (decrease) in accounts payable - related party
|
150,579
|
|
(517,754)
|
|
Net cash (used in) operating activities
|
(961,511)
|
|
(671,473)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
Sale of noncontrolling interest
|
1,000,000
|
|
-
|
|
Net cash provided by investing activities
|
1,000,000
|
|
-
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
Proceeds from loan payable - related party
|
82,100
|
|
611,151
|
|
Net cash provided by financing activities
|
82,100
|
|
611,151
|
|
|
|
|
|
|
Effect of currency rate change (loss) gain
|
(30,151)
|
|
16,632
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
90,438
|
|
(43,690)
|
|
|
|
|
|
|
Beginning balance, cash
|
1,334
|
|
47,479
|
|
|
|
|
|
|
Ending balance, cash
|
$ 91,772
|
|
$ 3,789
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
Share issuance for debt settlement
|
$ -
|
|
1,340,000
|
|
Share issuance for natural gas interest
|
$ 30,000,000
|
|
-
|
|
Loan payable for natural gas interests
|
$ 18,957,322
|
|
-
|
|
Obligation to issue shares
|
$ -
|
|
20,000,000
|
|
Petroleum and natural gas interests
|
$ 26,224,076
|
|
26,894,148
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements
|
Nation Energy Inc.
Notes to Condensed Consolidated
Unaudited Interim Financial Statements
Note 1. Basis of Presentation
The
accompanying condensed consolidated unaudited interim financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States of America for interim financial information. They do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, considered necessary for a fair presentation,
have been included in the accompanying unaudited financial statements.
Operating results for the periods presented are not necessarily indicative of
the results that may be expected for the full year. For further information,
refer to the financial statements and notes thereto, included in the Company’s
Form 10-K as of and for the year ended March 31, 2016 (“The Annual Report”).
The
Company was an oil and gas exploration, development and production company with
properties located in Alberta Canada. Effective June 1, 2008, the Company sold
all of its oil and gas properties in the Smoky Hill area of Alberta and began
to review other prospects. On
October 11,
2013, we entered into a letter agreement with Paltar Petroleum Limited, an
Australian company, pursuant to which we agreed to acquire four exploration and
development permits and twenty-nine applications for exploration and
development permits in respect of prospective acreage located in northern
Australia. On March 31, 2014, we amended this letter agreement and, on
November 27, 2014, we amended and restated the letter agreement to add
additional exploration properties and provide for new closing terms. On June
13, 2015, we entered into a second amended and restated agreement, replacing in
its entirety the amended and restated agreement dated November 27, 2014. On
August 28, 2015, we entered into a third amended and restated agreement,
replacing in its entirety the second amended restated agreement dated June 13,
2015. Also on August 30, 2015, and pursuant to the terms of the third amended
and restated letter agreement (the “Agreement”), Paltar or its wholly-owned
subsidiary, Officer Petroleum Pty Ltd (“Officer”), and our wholly-owned
subsidiary, Nation Energy (Australia) Pty Ltd., entered into seven separate
earning agreements and an option agreement. Effective December 17, 2015, the
Company entered into a first amendment to the third amended and restated
agreement to extend the time allowed for certain actions contemplated in the
third amended and restated agreement and to provide further information
concerning the additional earning agreements as such term is defined in the
third amended and restated agreement. Also effective December 17, 2015, the
seven earning agreements were amended to make compatible extensions of time for
actions contemplated by the third amended and restated agreement and to extend
the deadline for cash payments under the earning agreements. Effective February
8, 2016, the Company entered into a second amendment to the third amended and
restated agreement to extend again the time allowed for certain actions
contemplated in the third amended and restated agreement.
Also effective February 8, 2016, the seven earning
agreements were amended to make compatible extensions of time for actions
contemplated by the third amended and restated agreement. Effective February
12, 2016, the Company entered into an amendment to the option agreement to
change the purchase price for the assets subject to the option. Effective May
31, 2016, the Company entered into a third amendment to the third amended and
restated agreement to revise the payment of consideration by Nation
contemplated in the third amended and restated agreement.
Also effective May 31, 2016, the seven earning
agreements were amended to make compatible changes in consideration payable by
Nation Australia and Nation contemplated by the third amended and restated
agreement, and the option agreement was terminated.
To implement any new
business plan, significant financing will be required and the Company will need
to be successful in its efforts to identify, acquire and develop a new business
venture.
On
June 19, 2015, the Company registered a wholly-owned subsidiary in Australia,
Nation Energy (Australia) PTY Ltd. (“Nation Australia”).
On
July 6, 2015, the Company registered a wholly-owned subsidiary in Delaware,
USA, Nation GP, LLC (“Nation GP”), a Delaware limited liability company.
On
July 6, 2015, the Company registered a wholly-owned subsidiary in Delaware,
USA, Nation SLP, LLC (“Nation SLP”), a Delaware limited liability company.
On
July 8, 2015, the Company formed Paltar Nation Limited Partnership (“Paltar
Nation”), a Delaware limited partnership between Nation GP, as the general
partner of the partnership and Nation SLP as the limited partner (which is
currently the sole limited partner of Paltar Nation). Nation Energy Inc. currently owns 100%
of the membership interests in Nation GP, LLC and a 75.66% membership interests
in Nation SLP, LLC. During the six-
month period ended September
30, 2016, the Company sold 50 units (equal to 1.84% ownership) at $20,000 per
unit for total gross proceeds of $1,000,000. The additional 22.5% ownership
belongs to Beetaloo Basin. Non-controlling interest in Nation SLP was
immaterial for the six-months ended September 30, 2016.
The
Company formed Paltar Nation for the purpose of funding exploration expenditures
required to be provided by the wholly-owned subsidiary of Nation Energy Inc.,
Nation Energy (Australia) Pty Ltd., which is expected to become a wholly-owned
subsidiary of Paltar Nation, to explore and develop all or a portion of 775,292
acres of certain Australian exploration permits.
The Company is currently in the
development stage as defined by Accounting Standards Codification subtopic
915-10 “Development Stage Entities” (“ASC 915-10”). Upon the sale of all of
its oil and gas assets, the Company re-entered the exploration stage. Consequently,
its operations are subject to all the risks inherent in the establishment of a
new business enterprise. For the period from inception through June 1, 2008
(prior to the development stage), the Company accumulated a deficit of
($6,839,714). During the development stage, the Company has accumulated a
deficit of ($7,517,128).
Note
2. Reclassification of Certain Balances
Certain
immaterial balances on the condensed consolidated balance sheet for the year
ended March 31, 2016, have been reclassified, with no effect on net income (or
earnings per common share), to be consistent with classifications adopted for
the six months ended September 30, 2016.
Note
3. Recent Accounting Pronouncements
Accounting standards-setting
organizations frequently issue new or revised accounting rules. The Company
regularly reviews all new pronouncements that have been issued to determine
their impact, if any, on its financial statements.
In
May 2014, the FASB issued ASU No. 2014-09, ”Revenue from Contracts with
Customers,” which requires an entity to recognize the amount of revenue to
which it expects to be entitled for the transfer of promised goods or services
to customers. The ASU will replace most existing revenue recognition guidance
in U.S. GAAP when it becomes effective. The new standard is effective for the
Company on December 15, 2017. Early application is not permitted. The standard
permits the use of either the retrospective or cumulative effect transition
method. The Company is evaluating the effect that ASU 2014-09 will have on its
financial statements and related disclosures. The Company has not yet selected
a transition method nor has it determined the effect of the standard on its
ongoing financial reporting. In August 2015, the FASB issued ASU No. 2015-14 to
defer the effective date of ASU No. 2014-09. The amendment defers the effective
date of ASU No. 2015-14 by one year. The new standard is effective for the
Company on December 15, 2018.
In
August 2014, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update (“ASU”) No. 2014-15, “Presentation of Financial
Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about
an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU
2014-15 is intended to define management’s responsibility to evaluate whether
there is substantial doubt about an entity’s ability to continue as a going
concern and to provide related footnote disclosures. Specifically, ASU 2014-15
provides a definition of the term substantial doubt and requires an assessment
for a period of one year after the date that the financial statements are
issued (or available to be issued). It also requires certain disclosures when
substantial doubt is alleviated as a result of consideration of management’s
plans and requires an express statement and other disclosures when substantial
doubt is not alleviated. The new standard is effective for reporting periods
beginning after December 15, 2016. The Company has adopted this ASU as of the
current period.
In
January 2015, the FASB issued ASU No. 2015-01, “Income Statement –
Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement
Presentation by Eliminating the Concept of Extraordinary Items”. This ASU is
effective for annual and interim reporting periods beginning after December 15,
2015. ASU No. 2015-01 eliminates the concept of extraordinary items.
Management has adopted this accounting pronouncement.
In February 2015, the FASB issued ASU No. 2015-02,
Consolidation (Topic 810): Amendments to the Consolidation Analysis. This ASU
is effective for annual and interim reporting periods beginning after December
15, 2015. ASU No 2015-02 amends the analysis required by a reporting entity to
determine if it should consolidate certain types of legal entities. Management has
adopted this accounting pronouncement.
In November 2015, the FASB issued ASU No. 2015-17,
“Balance Sheet Classification of Deferred Taxes”. This ASU is effective for
annual periods beginning after December 15, 2016 and interim periods within
those annual periods. ASU 2015-17 amends and simplifies the presentation of
deferred income taxes to show deferred tax liabilities and
assets
as noncurrent in a classified statement of financial position. Management has
adopted this accounting pronouncement.
In April 2015,
the FASB issued ASU No. 2015-03, “Interest – Imputation of Interest (Subtopic
835-30): Simplifying the Presentation of Debt Issuance Costs”. This ASU is
effective for annual and interim periods beginning after December 15, 2015. ASU
No. 2015-03 changes the presentation of debt issuance costs in financial
statements. Management has adopted this accounting pronouncement.
In February
2016, the FASB issued ASU No. 2016-02, “Leases (Subtopic 842)”. This ASU is
effective for fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years. ASU 2016-02 establishes the principles to
report transparent and economically neutral information about the assets and
liabilities that arise from leases.
The
Company is evaluating the effect that ASU 2016-02 will have on its financial
statements and related disclosures. The Company has not yet determined the
effect of the standard on its ongoing financial reporting.
In March 2016,
the FASB issued ASU No. 2016-07, “Simplifying the Transition to the Equity
Method of Accounting”. This ASU is effective for all entities for fiscal years
beginning after December 15, 2016, including interim periods within those
fiscal years. ASU 2016-07 simplifies the equity method of accounting by
eliminating the requirement to retrospectively apply the equity method to an
investment that subsequently qualifies for such accounting as a result of an
increase in the level of ownership interest or degree of influence. Management has
adopted this accounting pronouncement.
In March 2016, the FASB
issued ASU No. 2016-08, “Principal Versus Agent Considerations (Reporting
Revenue Gross Versus Net)”. This ASU is effective
for the Company on December 15, 2018.
ASU 2016-08 clarifies certain aspects of the principal versus agent guidance.
The Company is evaluating the effect that ASU 2016-08 will have on its
financial statements and related disclosures. The Company has not yet determined
the effect of the standard on its ongoing financial reporting.
In April 2016, the FASB issued ASU No.
2016-10, “Identifying Performance Obligations and Licensing”. The amendments
affect the guidance in Accounting Standards Update No. 2014-09, “Revenue from
Contracts with Customers (Topic 606)”.
This ASU is
effective
for the Company on December 15, 2018. ASU 2016-10 clarifies
the accounting for licenses of intellectual property, as well as, the
identification of distinct performance obligations in a contract. The Company
is evaluating the effect that ASU 2016-10 will have on its financial statements
and related disclosures. The Company has not yet determined the effect of the
standard on its ongoing financial reporting.
In May 2016, the FASB issued ASU No.
2016-12, “Narrow-Scope Improvements and Practical Expedients”. The amendments
affect the guidance in Accounting Standards Update No. 2014-09, “Revenue from
Contracts with Customers (Topic 606)”.
This ASU is
effective
for the Company on December 15, 2018. ASU 2016-12 clarifies
that, for a contract to be considered complete at transition, all (or
substantially all) of the revenue must have been recognized under legacy GAAP
and it also clarifies how an entity should evaluate collectability threshold. The
Company is evaluating the effect that ASU 2016-12 will have on its financial
statements and related disclosures. The Company has not yet determined the
effect of the standard on its ongoing financial reporting.
In August 2016, the FASB issued ASU
No. 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain
Cash Receipts and Cash Payments”. This ASU is effective for public business
entities for fiscal years beginning after December 15, 2017, and interim
periods within those fiscal years. This ASU addresses eight specific cash flow
issues with the objective of reducing the existing diversity in practice. The
Company is evaluating the effect that ASU 2016-10 will have on its financial
statements and related disclosures. The Company has not yet determined the
effect of the standard on its ongoing financial reporting
Note 4. Going Concern
The accompanying financial statements
have been prepared in conformity with accounting principles generally accepted
in the United States of America, which contemplates continuation of the Company
as a going concern. The Company has incurred (losses) from inception through
June 1, 2008 of ($6,839,714) and further (losses) of ($7,517,128) during the
development stage. The Company had working capital and stockholders’ equity
(deficits) of ($8,605,586) and ($28,187,407) at September 30, 2016,
respectively, and working capital and stockholders’ equity (deficits) of ($11,139,399)
and ($18,381,953) at March 31, 2016, respectively. The Company is reliant on
raising capital to initiate its business plan. The Company’s ability to
continue as a going concern is contingent upon being able to secure financing
and attain profitable operations.
The financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification
of liabilities that may result from the possible inability of the Company to
continue as a going concern.
Note 5.
Net Income (Loss) Per Common Share
Basic earnings (loss) per common share
calculations are determined by dividing net income (loss) by the weighted
average number of shares of common stock outstanding during the year. Diluted
earnings (loss) per common share calculations are determined by dividing net
income (loss) by the weighted average number of common shares and dilutive
common share equivalents outstanding. During the periods when they are
anti-dilutive, common stock equivalents, if any, are not considered in the
computation.
Note 6. Related Party Transactions
During March 2002, the Company entered into a verbal
agreement with a related party, Caravel Management Corp. (“Caravel”), in which
Caravel will provide administrative services on a month-to-month basis. On
January 1, 2009, the Company entered into a written agreement revising the
previous verbal agreement with Caravel. The agreement provides for
administrative services, office rent and supplies for $7,865 per month.
Subsequently, effective November 1, 2010 the Company revised its agreement with
Caravel to provide administrative services for $3,500 per month. In addition to
administrative services, the agreement also provides for office rent and
supplies. Total expenses recognized under this agreement were $21,000 for the six
months ended September 30, 2016 and 2015 and $10,500 for the three months ended
September 30, 2016 and 2015.
On April 21, 2015, the Company entered
into a debt settlement and subscription agreement with an officer and director,
John Hislop, whereby the Company agreed to settle a portion of the
indebtedness, in the amount of $1,340,000, by allotting and issuing to John
Hislop 134,000,000 shares of common stock of the Company at a deemed price of
$0.01 per share. On April 24, 2015, the Company announced that it had issued
134,000,000 shares of its common stock at a deemed price of $0.01 per share to
Mr. Hislop. However, due to a technical flaw in the process of adopting the
amendment to its Articles of Incorporation (announced on February 3, 2014), the
Company was only authorized to issue 100,000,000 shares of its common stock on
April 23, 2015, and the issuance to Mr. Hislop on April 23, 2015, was therefore
void. On June 29, 2015, the Company sent to its shareholders a proxy statement
for a shareholder meeting to be held July 22, 2015, at which meeting the
Company proposed to rectify the technical flaw in its earlier effort to
increase its authorized capital. On July 28, 2015, we closed the debt
settlement agreement and reissued the 134,000,000 shares to Mr. Hislop pursuant
to the debt settlement and subscription agreement which settled a debt to Mr.
Hislop equal to $1,340,000 immediately following shareholder approval of the
increase in our authorized capital on July 23, 2015. The shares were valued at
$4,690,000 ($0.035 per share based upon market price). The Company recorded a loss
on extinguishment of debt of $3,350,000 in the year ended March 31, 2016.
On
August 4, 2015, Paltar Nation entered into a secured convertible note purchase
agreement with David N. Siegel Dynasty Trust, pursuant to which Paltar Nation issued
a secured convertible promissory note in the principal amount of $584,000 in
consideration for $584,000. The secured convertible promissory note bears
interest at the rate of 10% per annum (15% per annum on and after the maturity
date or an Event of Default (as defined below)) and matured on August 4, 2016.
The entire unpaid principal sum of the secured convertible promissory note will
become immediately due and payable upon a material breach by (a) Paltar Nation
of the note, another note or the secured convertible note purchase agreement,
or (b) Wotan Group Limited, an Australian limited company, of the pledge
agreement, described below, in each case that is not cured within 30 days of such
breach (referred to as an “Event of Default”).
David N. Siegel Dynasty Trust is a
trust controlled by David N. Siegel, Chairman of the Board and a director of
Nation Energy Inc.
As of September 30, 2016, the
principal balance of the loan was $584,000 and accrued interest payable of $72,240.
The loan was not repaid on August 4, 2016 and continues to accrue interest at a
rate of 15% per annum. The parties to the loan have agreed that all outstanding
principal and then-accrued interest shall convert into membership interests of
Nation SLP, LLC at the closing of the $5,000,000 unregistered offering
currently being conducted by Nation SLP, LLC, which is expected to close on
December 31, 2016.
Upon
a sale of Paltar Nation’s limited partnership interests (“Interests”) in a
single transaction or a series of related transactions yielding gross cash
proceeds to Paltar Nation of at least $20,000,000 (including $584,000 from the
sale of the secured convertible promissory note to David N. Siegel Dynasty
Trust) on or before the maturity date (the “Qualified Financing”), the
principal and any accrued but unpaid interest under the note will automatically
be converted into Interests. The Interests to be issued to David N. Siegel Dynasty
Trust upon conversion will be equal to the quotient obtained by dividing (i)
the entire principal amount of the note plus any accrued but unpaid interest
under the note by (ii) 80.00% of the per-Interest price of the Interests sold
to persons other than David N. Siegel Dynasty Trust and other holders of the
notes, if any, in the Qualified Financing.
In connection with the secured
convertible note purchase agreement, Paltar Nation entered into a pledge
agreement dated as of August 4, 2015 with Wotan Group Limited, pursuant to
which Wotan Group Limited pledged to David N. Siegel Dynasty Trust a continuing
first priority security interest in a number of Wotan Group Limited’s shares of
Paltar Petroleum Limited equal to five multiplied by the sum of the aggregate
outstanding principal amounts owed under the note and Paltar Nation agreed to
pay a commitment fee to Wotan Group Limited equal to $250,000 from the proceeds
of the secured convertible promissory notes upon the receipt by Paltar Nation
of proceeds from the sale of such notes equal to or greater than $2,500,000 in
the aggregate and an additional commitment fee of $250,000 upon conversion of
all of such notes.
On August 5, 2015, the Company entered
into a promissory note with an officer and director, John Hislop for C$10,000
(US$7,624). The loan bears interest calculated quarterly, not in advance, at a
rate of 15% per annum. The note is payable upon demand by Mr. Hislop, both
before and after each of maturity, default and judgement commencing effective
August 5, 2015. The principal sum and all accrued and unpaid interest will
become due and payable on August 5, 2017. As of September 30, 2016, the
principal balance of the loan was $7,624 and accrued interest payable of $1,322.
On August 25, 2015, the
Company entered into a promissory note with an officer and director, John
Hislop for $10,000. The loan bears interest calculated quarterly, not in
advance, at a rate of 15% per annum. The note is payable upon demand by Mr.
Hislop, both before and after each of maturity, default and judgement commencing
effective August 25, 2015. The principal sum and all accrued and unpaid
interest will become due and payable on August 25, 2017. As of September 30,
2016, the principal balance of the loan was $10,000 and accrued interest
payable of $1,648.
On September 10, 2015, the Company
entered into a promissory note with an officer and director, John Hislop for
C$6,000 (US$4,574). The loan bears interest calculated quarterly, not in
advance, at a rate of 15% per annum. The note is payable upon demand by Mr. Hislop,
both before and after each of maturity, default and judgement commencing
effective September 10, 2015. The principal sum and all accrued and unpaid
interest will become due and payable on September 10, 2017. As of September 30,
2016 the principal balance of the loan was $4,574 and accrued interest payable
of $726.
On September 24, 2015, the Company
entered into a promissory note with a related party, John Hislop for $5,000.
The loan bears interest calculated quarterly, not in advance, at a rate of 15%
per annum. The note is payable upon demand by Mr. Hislop, both before and after
each of maturity, default and judgement commencing effective September 24, 2015.
The principal sum and all accrued and unpaid interest will become due and
payable on September 24, 2017. As of September 30, 2016, the principal balance
of the loan was $5,000 and accrued interest payable of $762.
On October 29, 2015, the Company
entered into a promissory note with a related party, John Hislop for $7,960.
The loan bears interest calculated quarterly, not in advance, at a rate of 15%
per annum. The note is payable upon demand by Mr. Hislop, both before and after
each of maturity, default and judgement commencing effective October 29, 2015. The
principal sum and all accrued and unpaid interest will become due and payable
on October 29, 2022. As of September 30, 2016, the principal balance of the
loan was $7,960 and accrued interest payable of $1,106.
On March 31, 2016, Paltar Nation
entered into a promissory note with a director, David N. Siegel Revocable Trust
2009 for $188,483. The loan bears interest at a rate of 10% per annum from the
disbursement date of the funds. The principal sum and all accrued and unpaid
interest will become due and payable on March 31, 2017. As of
September 30, 2016
, the principal balance
of the loan was $188,483 and accrued interest payable of $11,280.
On April 8, 2016, Paltar Nation
entered into a promissory note with a director, David N. Siegel Revocable Trust
2009 for $25,000. The loan will bear interest at a rate of 10% per annum. The
principal sum and all accrued and unpaid interest will become due and payable
on April 8, 2017. As of
September 30, 2016
,
the principal balance of the loan was $25,000 and accrued interest payable of $1,215.
On May 3, 2016, Paltar Nation entered
into a promissory note with a director, David N. Siegel Revocable Trust 2009
for $34,000. The loan will bear interest at a rate of 10% per annum. The
principal sum and all accrued and unpaid interest will become due and payable on
May 3, 2017. As of
September 30, 2016
,
the principal balance of the loan was $34,000 and accrued interest payable of $1,417.
On May 31, 2016, we entered into a
promissory note with an officer and director, John Hislop for $23,100. The loan
bears interest calculated quarterly, not in advance, at a rate of 15% per annum
both before and after each of maturity, default and judgement commencing
effective May 31, 2016. The principal sum and all accrued and unpaid interest
will become due and payable on May 31, 2023. As of
September 30, 2016
, the principal balance of the loan was $23,100
and accrued interest payable of $1,158.
Effective May 31,
2016, all of the initial earning agreements between the Company’s subsidiary
Nation Energy (Australia) Pty Ltd. and Paltar Petroleum Limited (“Paltar”), and
Paltar’s subsidiary Officer Petroleum Pty Ltd., were amended and revised to
consolidate and clarify terms of consideration thereunder. Upon execution,
Nation Australia issued to Paltar a promissory note in the principal amount of $18,643,197
(
AUD$24,322,501),
with payment guaranteed by the Company. As additional consideration pursuant to
the earning agreements, on September 29, 2016 the Company issued 900,000,000 of
its common shares to Paltar at a value of US$0.03 and one-third cent per share,
subject to the same restrictions on the transfer of such shares as set forth in
the third restated letter agreement dated August 30, 2015, as subsequently
amended, between the Company and Paltar.
Our directors David Siegel and Darrel
Causbrook, and our Vice President Carmen Lotito, are shareholders in Paltar;
additionally, Carmen Lotito is Executive Vice President of Paltar and Darrel
Causbrook is a director of Paltar.
Note 7.
Subsequent Events
The Company’s majority owned subsidiary
Nation SLP, LLC is conducting an unregistered offering of its membership
interests for a maximum capital raise of $5,000,000. The offering is expected
to end in December 2016, but may be extended at the discretion of the Company.
On November 2, 2016,
the Board of Directors of Nation Energy, Inc
approved the 2016 Equity Incentive Plan and submitted the plan for approval by
majority vote of the common stock holders at the Company’s Annual Meeting of
Stockholders which was held on November 18, 2016.
The Company held
its 2016 Annual Meeting of Stockholders on November 18, 2016.
All resolutions placed
before the shareholders were voted in favor.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward
Looking Statements
This quarterly
report contains forward-looking statements. These statements relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may",
"should", "expects", "plans",
"anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the
negative of these terms or other comparable terminology.
The material
assumptions supporting these forward-looking statements include, among other
things:
·
our
ability to obtain necessary financing on acceptable terms;
·
retention
of skilled personnel;
·
the
timely receipt of required regulatory approvals;
·
continuation
of current tax and regulatory regimes;
·
current
exchange and interest rates; and
·
general
economic and financial market conditions.
Although
management considers these assumptions to be reasonable based on information
currently available to it, they may prove to be incorrect.
These statements
are only predictions and involve known and unknown risks, uncertainties and
other factors, including the risks in the section entitled "Risk
Factors" of the annual report on Form 10-K for the year ended March 31,
2016 and the risks set out below, any of which may cause our company’s or our
industry's actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking
statements. These risks include, by way of example and not in limitation:
·
our
ability to establish or find resources or reserves;
·
liabilities
inherent in natural gas and crude oil operations;
·
uncertainties
associated with estimating natural gas and crude oil resources or reserves;
·
geological,
technical, drilling and processing problems;
·
competition
for, among other things, capital, resources, undeveloped lands and skilled
personnel;
·
conflicts
of interest between Paltar Petroleum Limited and our company, including those
that arise as the result of those certain earning agreements dated effective
May 31, 2016, and those that arise as the result of our having officers and
directors in common;
·
assessments
of the acquisitions;
·
risks
related to commodity price fluctuations;
·
the
uncertainty of profitability based upon our history of losses;
·
risks
related to failure to obtain adequate financing on a timely basis and on
acceptable terms for our planned exploration and development projects;
·
risks
related to environmental regulation and liability;
·
risks
that the amounts reserved or allocated for environmental compliance,
reclamation, post-closure control measures, monitoring and on-going maintenance
may not be sufficient to cover such costs;
·
risks
related to tax assessments;
·
political
and regulatory risks associated with oil and gas exploration;
·
other
risks and uncertainties related to our prospects, properties and business
strategy; and
·
our
company is categorized as a “shell company” as that term is used in the
Securities and Exchange Commission’s rules.
This list is not
an exhaustive list of the factors that may affect any of our forward-looking
statements. These and other factors should be considered carefully and readers
should not place undue reliance on our forward-looking statements.
Forward looking statements
are made based on management’s beliefs, estimates, and opinions on the date the
statements are made. Although we believe that the expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performances or achievements. Except as required
by applicable law, including the securities laws of the United States and
Canada, we do not intend to update any of the forward-looking statements to
conform these statements to actual results.
Our financial statements are stated in United States
Dollars (US$) and are prepared in accordance with generally accepted accounting
principles (“US GAAP”).
As used in this quarterly report, the terms
"we", "us", "our", “Company”, and "Nation
Energy" mean Nation Energy Inc., unless otherwise indicated.
In this quarterly report, unless
otherwise specified, all dollar amounts are expressed in United States dollars
and all references to “common shares” refer to the common shares in our capital
stock.
Our Current Business
We currently have no business and
operate as a shell company. We are in the process of evaluating the merits of
joint venture opportunities in the resource sector. As discussed in
Plan of
Operation
, below, we identified one such opportunity in Australia, which we
have been pursuing for the last few years. Since 2013, we have focused all of
our effort on refining this opportunity in Australia and moving it forward with
the intent to eventually explore the acreage involved, which is located in
Northern and Western Australia, for oil and gas, and to exploit any resource
that we find. Also as discussed in
Plan of Operation
, below, we have
recently signed a series of earning agreements with respect to this
opportunity, and we are now considering our next steps in progressing this
opportunity. We intend to focus all of our attention and resources on this
opportunity for the near term, though we can offer no assurance that we will
have any success in our efforts to progress it or, if we do, that we will
discover any oil or gas in commercially exploitable quantities.
Plan of
Operation
The
following is a discussion and analysis of our plan of operation and the factors
that could affect our future financial condition. This discussion and analysis
should be read in conjunction with our unaudited financial statements and the
notes thereto included elsewhere in this quarterly report.
Following
the sale of all of our oil and gas operations effective June 1, 2008, we began
to actively seek new oil and gas opportunities. On
October 11, 2013, we entered into a letter agreement with Paltar
Petroleum Limited, an Australian company, pursuant to which we agreed to
acquire four exploration and development permits and twenty-nine applications
for exploration and development permits in respect of prospective acreage
located in northern Australia. On March 31, 2014, we amended this letter
agreement and, on November 27, 2014, we amended and restated the letter
agreement to add additional exploration properties and provide for new closing
terms. On June 13, 2015, we entered into a second amended and restated
agreement, replacing in its entirety the amended and restated agreement dated
November 27, 2014. On August 28, 2015, we entered into a third amended and restated
agreement, replacing in its entirety the second amended restated agreement
dated June 13, 2015. Also on August 30, 2015, and pursuant to the terms of the
third amended and restated letter agreement (the “Agreement”), Paltar or its
wholly-owned subsidiary, Officer Petroleum Pty Ltd (“Officer”), and our
wholly-owned subsidiary, Nation Energy (Australia) Pty Ltd., entered into seven
separate earning agreements and an option agreement. Effective December 17,
2015, the Company entered into a first amendment to the third amended and
restated agreement to extend the time allowed for certain actions contemplated
in the third amended and restated agreement and to provide further information
concerning the additional earning agreements as such term is defined in the
third amended and restated agreement. Also effective December 17, 2015, the
seven earning agreements were amended to make compatible extensions of time for
actions contemplated by the third amended and restated agreement and to extend
the deadline for cash payments under the earning agreements. Effective February
8, 2016, the Company entered into a second amendment to the third amended and
restated agreement to extend again the time allowed for certain actions
contemplated in the third amended and restated agreement.
Also effective February 8, 2016, the seven earning
agreements were amended to make compatible extensions of time for actions
contemplated by the third amended and restated agreement. Effective February
12, 2016, the Company entered into an amendment to the option agreement to
change the purchase price for the assets subject to the option. Effective May
31, 2016, the Company entered into a third amendment to the third amended and
restated agreement to revise the payment of consideration by Nation
contemplated in the third amended and restated agreement.
Also effective May 31, 2016, the seven earning
agreements were amended to make compatible changes in consideration payable by
Nation Australia and Nation contemplated by the third amended and restated
agreement, and the option agreement was terminated. On August 16, 2016, but
effective as of May 31, 2016, the Company entered into a fourth amendment to
the third amended and restated agreement to clarify the per share consideration
price contemplated in the agreement. Upon execution, Nation Australia issued to
Paltar a promissory note in the principal amount of $18,643,197 (
AUD$24,322,501),
with payment guaranteed by the Company.
As
additional consideration pursuant to the earning agreements, on September 29,
2016 the Company issued 900,000,000 of its common shares to Paltar at a value
of US$0.03 and one-third cent per share, subject to the same restrictions on
the transfer of such shares as set forth in the third restated letter agreement
dated August 30, 2015, as subsequently amended, between the Company and Paltar.
Upon the issuance of 900,000,000 shares to Paltar on
September 29, 2016, it acquired control of the Company as it now holds 85.7% of
the issued and outstanding voting common stock of the Company.
On
June 19, 2015, we registered a wholly-owned subsidiary in Australia, Nation
Energy (Australia) PTY Ltd. (“Nation Australia”).
On
July 6, 2015, we registered a wholly-owned subsidiary in Delaware, USA, Nation
GP, LLC (“Nation GP”), a Delaware limited liability company.
On
July 6, 2015, we registered a wholly-owned subsidiary in Delaware, USA, Nation
SLP, LLC (“Nation SLP”), a Delaware limited liability company.
On
July 8, 2015, we formed Paltar Nation Limited Partnership (“Paltar Nation”), a
Delaware limited partnership between Nation GP, as the general partner of the
partnership and Nation SL as the limited partner.
Paltar
Nation is a Delaware limited partnership with Nation GP, LLC, a Delaware
limited liability company, as the general partner, and Nation SLP, LLC, a
Delaware limited liability company, as a limited partner (which is currently a
sole limited partner of Paltar Nation). Nation Energy Inc. currently owns 100%
of the membership interests in Nation GP, LLC and a 75.66% membership interests
in Nation SLP, LLC. During the six-month period ended September 30, 2016, the
Company sold 50 units (equal to 1.84% ownership) at $20,000 per unit for total
gross proceeds of $1,000,000. The additional 22.5% ownership belongs to
Beetaloo Basin. Non-controlling interest in Nation SLP was immaterial for the six-months
ended September 30, 2016.
Nation Energy Inc. formed Paltar
Nation for the purpose of funding exploration expenditures required to be
provided by the wholly-owned subsidiary of Nation Energy Inc., Nation Energy
(Australia) Pty Ltd., which is expected to become a wholly-owned subsidiary of
Paltar Nation, to explore and develop all or a portion of 775,292 acres of
certain Australian exploration permits.
Pursuant to the first amendment of the third amended and restated
agreement, Paltar farmed out three specific graticular blocks in each of the
six petroleum exploration permits identified in the Agreement and it caused
Officer Petroleum Pty Ltd., a wholly-owned Australian subsidiary of Paltar, to
farm out forty blocks in Exploration Permit 468 (“EP 468”). In addition, Paltar
agreed to enter into additional earning agreements with Nation Australia on
December 31, 2015 (or such other date as the parties mutually agree), in which
it will farm out to Nation Australia six additional graticular blocks selected
by Nation in EP136, three additional blocks in each of EP143 and EP231, eight
additional blocks in EP234 and seven additional blocks in EP237 in exchange for
the consideration specified in each additional earning agreement.
Each of the seven initial earning agreements, all of which
are dated August 30, 2015, (six of which are further amended by the Master
Amendment to Six Earning Agreements dated December 28, 2015 but effective as of
December 17, 2015 and by the Second Master Amendment to Six Earning Agreements
dated February 9, 2016 but effective as of February 8, 2016, and one of which
is amended by the First Amendment to EP 468 Earning Agreement dated December
28, 2015 but effective as of December 17, 2015 and by the Second Amendment to
EP 468 Earning Agreement dated February 9, 2016 but effective as of February 8,
2016) granted certain rights and imposed certain obligations on Nation
Australia in respect of the blocks of land described. In the aggregate, these
blocks of land comprise 1,003,400 acres of the 8,936,800 acres covered by the
seven Exploration Permits. Each of the seven initial earning agreements
follows one of two negotiated templates (depending on whether the underlying
interest in the Exploration Permit is 100% owned by Paltar), with variations in
the applicable standard form driven by the specific circumstances affecting
each Exploration Permit. Each initial earning agreement contains general terms
and conditions, a description of the area covered a list of the encumbrances
affecting the area, an amount of money to be paid by Nation Australia on or
before March 31, 2016 (since amended to a later date), and a commitment to pay
100% of the costs under applicable work programs and budgets. Paltar will act
as the operator subject to overall supervision by an Operating Committee
comprised of one representative from each of Paltar and Nation Australia. With
respect to the initial earning agreements covering the Exploration Permits for
which Paltar does not own a 100% interest, ownership of the Exploration Permits
remains with Paltar during the term of the initial earning agreements, but if
Paltar discovers a commercially exploitable accumulation of petroleum on any
affected block it must transfer any production license granted in respect of
that discovery to Nation Australia, insofar as it covers blocks subject to the
earning agreement. In connection with such transfer, Paltar is permitted to
retain for itself an overriding royalty equal to the difference between 25% and
all existing royalty burdens applicable to the production license. With respect
to the initial earning agreements covering the Exploration Permits for which
Paltar owns a 100% interest, upon Nation Australia spending at least the
Earning Amount specified therein in expenditure before the end of the Earning
Period also specified therein, Nation Australia will acquire a beneficial
interest of 25% in the underlying Exploration Permit and any production license
granted in connection therewith. If a 25% interest in a production license is
acquired by Nation Australia pursuant to these earning agreements, Nation
Australia may, at its option for a period of ninety days thereafter, acquire
the remaining 75% interest held by Paltar in exchange for the grant of an
overriding royalty equal to the difference between 25% and all existing royalty
burdens applicable to the production license.
Effective May 31, 2016, all of the initial earning
agreements were amended and revised to consolidate and clarify terms of
consideration thereunder (the “May 31, 2016 Earning Agreements”). Upon
execution, Nation Australia issued to Paltar a promissory note in the principal
amount of $18,643,197 (
AUD$24,322,501),
with payment guaranteed by Nation. As additional consideration pursuant to the
earning agreements, on September 29, 2016 the Company issued 900,000,000 of its
common shares to Paltar at a value of US$0.03 and one-third cent per share,
subject to the same restrictions on the transfer of such shares as set forth in
the third restated letter agreement dated August 30, 2015, as subsequently
amended, between the Company and Paltar. The May 31, 2016 Earning Agreements
have the same terms as stated above in the initial earning agreements regarding
work programs, overriding royalty, and the option to acquire more interest.
In addition to the seven initial earning agreements, the
parties entered into an option agreement dated August 30, 2015, pursuant to
which Paltar granted to Nation an option to purchase, exercisable until August
30, 2016, interests in Exploration Permits EP136, EP143, EP231, EP232, EP 234
and EP237, all related business, financial, technical, geophysical, geological,
geochemical and environmental information and data that Paltar has the legal
right to convey, certain Applications for exploration permits, and all of the
issued and outstanding shares of Officer (collectively, the “Assets”) for a
purchase price of AUD$10,000,000 (approximately US$7,223,844). The option
agreement was amended effective February 12, 2016, to change the purchase price
to 300,000,000 shares of common stock of the Company. Upon the execution of the
May 31, 2016 Earning Agreements, the option agreement was terminated and
released by Nation.
As share consideration pursuant to the
earning agreements, on September 29, 2016 the Company issued 900,000,000 of its
common shares to Paltar at a value of US$0.03 and one-third cent per share,
as consideration for the other transactions
described in the third amended and restated agreement. All of Nation Energy’s
common shares to be issued pursuant to the third amended and restated agreement
are to be held in escrow for at least three years. The escrow agent is to be a
newly-formed Delaware limited liability company with a board of four managers.
David Siegel, and John Hislop are each currently a director of the Company;
each have certain rights to appoint managers to the escrow agent’s board of
managers, as more specifically set forth in the third amended and restated
agreement. Marc Bruner also has rights to appoint managers to the escrow
agent’s board of managers, as more specifically set forth in the third amended
and restated agreement. Each of Messrs. Siegel and Bruner currently own Paltar
equity, while Mr. Hislop has the right to acquire Paltar equity. A fourth
director of the Company, who has yet to be identified and appointed and who
will not own any Paltar equity, is to serve as the fourth manager of the escrow
agent’s board of managers. Each of the four managers will hold one vote and
Mr. Bruner, or the manager elected by the board of managers in the event Mr.
Bruner no longer serves on the board of managers, will hold a tie-breaking vote
in the event of deadlock.
The Agreement also provides that Paltar, which will be the
operator under the earning agreements, will have the right of first offer to
provide goods, services and work to the blocks subject to the earning
agreements on terms that are competitive with and comparable to those
customarily available in the open market from arms-length third parties.
On September 15, 2015, Mr. Hislop resigned from the
offices of President and Chief Executive Officer of our Company, and he also
resigned the position of Chairman of our Board of Directors. Mr. Hislop
remains a member of our Board of Directors and our Chief Financial Officer.
Also on September 15, 2015, our Board of Directors appointed David N. Siegel as
its Chairman and it appointed Marc A. Bruner, one of our Directors, to the
office of President and Chief Executive Officer of our Company.
On June 24, 2016, Mr. Bruner resigned as a member of the
Company’s Board of Directors, President and Chief Executive Officer, effective
as of March 15, 2016, Also on June 24, 2016, effective as of March 15, 2016,
Mr. Hislop resumed the duties of President and Chief Executive Officer on an
interim basis.
We currently have no business and operate as a shell
company. In addition to our efforts to complete the transactions contemplated
in the third amended and restated agreement with Paltar Petroleum, we continue
to evaluate the
merits of other opportunities in the resource sector.
Cash Requirements During the Next
Twelve Months
Over the next
twelve months, we intend to use funds to evaluate new business acquisitions, as
follows:
Estimated Funding Required
During the Next Twelve Months
Planned Work Permit Expenditures
|
$30,000,000
|
|
|
General and Administrative
|
2,000,000
|
|
|
Professional Fees
|
1,500,000
|
|
|
|
|
|
Total
|
$33,500,000
|
|
|
|
|
We have suffered recurring losses from operations. The
continuation of our company as a going concern is dependent upon our company
attaining and maintaining profitable operations and raising additional capital
as needed. Management's plan in this regard is to raise additional capital
through a debt or an equity offering. The financial statements do not include
any adjustment relating to the recovery and classification of recorded asset
amounts or the amount and classification of liabilities that might be necessary
should our company discontinue operations.
Due to the uncertainty of our ability to meet our current
operating expenses noted above, in their report on the annual financial
statements for the year ended March 31, 2016, our independent auditors included
an explanatory paragraph regarding concerns about our ability to continue as a
going concern. Our financial statements contain additional note disclosures
describing the circumstances that lead to this disclosure by our independent
auditors.
The continuation of our business is dependent upon obtaining
further financing, a successful program of exploration, and, finally achieving
a profitable level of operations. The issuance of additional equity securities
by us could result in a
significant dilution in the
equity interests of our current stockholders. Obtaining commercial loans,
assuming those loans would be available, will increase our liabilities and
future cash commitments.
There are no assurances that we will be able to obtain
further funds required for our continued operations. We are pursuing various
financing alternatives to meet our immediate and long-term financial
requirements. There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to obtain the additional
financing on a timely basis, we will be unable to conduct our operations as
planned, and we will not be able to meet our other obligations as they become
due. In such event, we will be forced to scale down or perhaps even cease our
operations.
Disclosure
of Outstanding Share Data
As of November 21, 2016 we had 1,050,020,000 shares of
common stock issued and outstanding. We do not have any warrants, options or
shares of any other class issued and outstanding as of the date of this quarterly
report.
RESULTS OF OPERATIONS – Three Months
Ended September 30, 2016 and 2015
The following
summary of our results of operations should be read in conjunction with our
financial statements for the period ended September 30, 2016, which are
included herein.
Our
operating results for the three months ended September 30, 2016, for the three
months ended September 30, 2015 and the changes between those periods for the
respective items are summarized as follows:
|
Three Months Ended
September 30, 2016
|
Three Months Ended September
30, 2015
|
Difference
Increase/(Decrease) %
|
General and administrative
|
$473,532
|
$329,719
|
44%
|
Interest expense
|
$261,084
|
$18,446
|
1,315%
|
Foreign Exchange Gain (Loss)
|
($4,975)
|
$-
|
(100%)
|
Net (loss)
|
($739,591)
|
($3,698,165)
|
(80%)
|
We generated a net (loss) of ($739,591)
for the three months ended September 30, 2016 compared to a net (loss) of ($3,698,165)
for the three months ended September 30, 2015. This decreased loss is
primarily due to the loss on extinguishment of debt due to a settlement
agreement with John Hislop in the three months ended September 30, 2015. Net
(loss) per common share for the three months ended September 30, 2016 was ($0.001)
compared to ($0.024) per common share for the three months ended September 30,
2015. General and administrative expenses increased to $475,532 during the three
months ended September 30, 2016 from $329,719 during the three months ended September
30, 2015. This increase is primarily due to increased consulting fees of
$135,185 during the three months ended September 30, 2016 compared to $11,000
during the three months ended September 30, 2015 and management fees of $54,399
and rent of $28,228 in the three months ended September 30, 2016 compared to
$nil management fees and $nil rent in 2015.
Interest expense for the three
months ended September 30, 2016 totaled $261,084 compared to $18,446 for the three
months ended September 30, 2015. The increase was primarily due to the new
promissory note issued to Paltar Petroleum Limited in May 2016 described above
under the heading “Plan of Operation”.
We reported a foreign currency
translation gain of $4,975 for the three months ended September 30, 2016
compared to a $nil for the three months ended September 30, 2015. This is due
to transaction gains resulting from loans denominated in CAD. There were no
transaction gains during the three months ended September 30, 2015.
The
major components of our general and administrative expenses for the period are
outlined in the table below:
|
Three Months Ended September
30, 2016
|
Three Months Ended September
30, 2015
|
Difference
Increase/(Decrease) %
|
Administration fees
|
$10,500
|
$10,500
|
0%
|
Office & Management Information
Services
|
$59,907
|
$779
|
7,590%
|
Management Fees
|
$54,399
|
$0
|
100%
|
Consulting
|
$135,185
|
$11,000
|
1,129%
|
Legal fees
|
$165,699
|
$295,977
|
(44%)
|
Rent
|
$28,228
|
$0
|
100%
|
Transfer Agent & Filing Fees
|
$584
|
$6,464
|
(91%)
|
Accounting
|
$19,030
|
$5,000
|
281%
|
Total Expenses
|
$473,532
|
$329,719
|
44%
|
General and administrative expenses increased
to $473,532 in the three month period ended September 30, 2016 from $329,719 in
the three month period ended September 30, 2015. General expenses include
administration fees which remained the same as the comparative three month
period. Office expenses and Management Information System fees increased to $59,907
in the three month period ended September 30, 2016 from $779. This increase is
primarily due to travel and entertainment expenses of $51,845 in the three
month period ended September 30, 2016 compared to $nil in 2015 and insurance
expense for the oilfield operations in Australia of $6,412 in the three month
period ended September 30, 2016 compared to $nil in the same period of 2015. Management
fees were $54,399 in the three month period ended September 30, 2016 compared
to $nil in 2015. This is due to a Management Services Agreement between the
Company and Carmen J. Lotito. Legal fees decreased to $165,699 in the three
month period ended September 30, 2015 from $295,977 during the prior fiscal
year due to reduced legal fees relating to the Paltar Agreement and subsequent
amendments. Rent was $28,228 for the Denver office in the three month period
ended September 30, 2016 compared to $nil in 2015. Filing fees and transfer
agent fees decreased to $584 in the three month period ended September 30, 2016
compared to $6,464 in the three month period ended September 30, 2015. Accounting
fees increased to $19,030 from $5,000 in the comparative three month period.
The increase is primarily due to accounting fees incurred as a result of the
Paltar transaction.
RESULTS OF OPERATIONS – Six Months
Ended September 30, 2016 and 2015
The following
summary of our results of operations should be read in conjunction with our
financial statements for the period ended September 30, 2016, which are
included herein.
Our operating results for the six months ended September
30, 2016, for the six months ended September 30, 2015 and the changes between
those periods for the respective items are summarized as follows:
|
Six Months Ended
September 30, 2016
|
Six Months Ended September
30, 2015
|
Difference
Increase/(Decrease) %
|
General and administrative
|
$801,757
|
$378,889
|
112%
|
Interest expense
|
$363,856
|
$66,839
|
444%
|
Foreign Exchange Gain
|
$1,218
|
$0
|
100%
|
Net (loss)
|
($1,164,395)
|
($3,795,728)
|
(69%)
|
We generated a net (loss) of
($1,164,395) for the six months ended September 30, 2016 compared to a net
(loss) of ($3,795,728) for the six months ended September 30, 2015. This
decreased loss is primarily due to the loss on extinguishment of debt due to a
settlement agreement with John Hislop in the six months ended September 30,
2015. Net (loss) per common share for the six months ended September 30, 2016
was ($0.001) compared to ($0.025) per common share for the six months ended
September 30, 2015. General and administrative expenses increased to $801,757 during
the six months ended September 30, 2016 from $378,889 during the six months
ended September 30, 2015. This increase is primarily due to increased
consulting fees of $235,920 during the six months ended September 30, 2016
compared to $11,000 during the six months ended September 30, 2015 and
management fees of $114,399 and rent of $58,228 in the six months ended
September 30, 2016 compared to $nil management fees and $nil rent in 2015.
Interest expense for the six months
ended September 30, 2016 totaled $363,856 compared to $66,839 for the six
months ended September 30, 2015. The increase was primarily due to the new
promissory note issued to Paltar Petroleum Limited in May 2016 described above
under the heading “Plan of Operation”.
We reported a foreign currency
translation gain of $1,218 for the six months ended September 30, 2016 compared
to a $nil for the six months ended September 30, 2015. This is due to
transaction gains resulting from loans denominated in CAD. There were no
transaction gains during the six months ended September 30, 2015.
The
major components of our general and administrative expenses for the period are
outlined in the table below:
|
Six Months Ended September
30, 2016
|
Six Months Ended September
30, 2015
|
Difference
Increase/(Decrease) %
|
Administration fees
|
$21,000
|
$21,000
|
0%
|
Office & Management Information
Services
|
$66,717
|
$1,017
|
6,461%
|
Management Fees
|
$114,399
|
$0
|
100%
|
Consulting
|
$235,920
|
$11,000
|
2,045%
|
Legal fees
|
$233,488
|
$320,364
|
(27%)
|
Rent
|
$58,228
|
$0
|
100%
|
Transfer Agent & Filing Fees
|
$10,974
|
$14,009
|
(22%)
|
Accounting
|
$61,030
|
$11,500
|
431%
|
Total Expenses
|
801,756
|
$378,889
|
112%
|
General and administrative expenses increased
to $801,756 in the six month period ended September 30, 2016 from $378,889 in
the six month period ended September 30, 2015. General expenses include
administration fees which remained the same as the comparative three month
period. Office expenses and Management Information System fees increased to $66,717
in the three month period ended September 30, 2016 from $1,017. This increase
is primarily due to travel and entertainment expenses of $57,419 in the six
month period ended September 30, 2016 compared to $nil in 2015 and insurance
expense for the oilfield operations in Australia of $6,412 in the six month
period ended September 30, 2016 compared to $nil in the same period of 2015. Management
fees were $114,399 in the six month period ended September 30, 2016 compared to
$nil in 2015. This is due to a Management Services Agreement between the
Company and Carmen J. Lotito. Legal fees decreased to $233,488 in the six month
period ended September 30, 2015 from $320,364 during the prior fiscal year due
to reduced legal fees relating to the Paltar Agreement and subsequent
amendments. Rent was $58,228 for the Denver office in the six month period
ended September 30, 2016 compared to $nil in 2015. Filing fees and transfer
agent fees decreased to $10,974 in the six month period ended September 30,
2016 compared to $14,009 in the six month period ended September 30, 2015. Accounting
fees increased to $61,030 from $11,500 in the comparative three month period.
The increase is primarily due to accounting fees incurred as a result of the
Paltar transaction.
Liquidity and
Financial Condition
Working Capital
|
September 30, 2016
|
March 31, 2016
|
Current Assets
|
$131,557
|
$1,334
|
Current Liabilities
|
$8,737,143
|
$11,140,733
|
Working Capital (Deficiency)
|
($8,605,586)
|
($11,139,399)
|
Cash
Flows
|
Six Months Ended September
30, 2016
|
Six Months Ended September
30, 2015
|
Cash flows (used in) Operating
Activities
|
($961,511)
|
($671,473)
|
Cash flows provided by Investing
Activities
|
$1,000,000
|
$Nil
|
Cash flows provided by Financing
Activities
|
$82,100
|
$611,151
|
Effect of exchange rate changes on
cash
|
($30,151)
|
$16,632
|
Net increase (decrease) in cash
|
$90,438
|
($43,690)
|
Operating Activities
Net cash (used in) operating
activities was ($961,511) for the six months ended September 30, 2016 compared
with net cash (used in) operating activities of ($671,473) for the same period
in 2015. The increase in cash (used in) operating activities is attributed to the
decreased net loss for the six months ending September 30, 2016. Net loss was
higher in the six months ended September 30, 2015 primarily due to the loss on
extinguishment of debt of $3,350,000 (described below) in the six months ended September
30, 2015 compared to $nil in 2016.
Investing Activities
Net cash provided by investing activities
was $1,000,000 for the six months ended September 30, 2016 and $nil for the six
months ended September 30, 2015. The $1,000,000 was received from membership
purchase agreements in the subsidiary, Nation SLP, LLC.
Financing Activities
Net cash provided by financing
activities was $82,100 in the six month period ended September 30, 2016
compared to $611,151 in the six month period ended September 30, 2015. This decrease
in financing activities is due to the five new loans entered into during the six
months ended September 30, 2015 totalling $611,151 compared to three loans
totalling $82,100 during the six months ended September 30, 2016..
Loans Payable
On April 21, 2015, we entered into a
debt settlement and subscription agreement with our chief financial officer and
director, John Hislop whereby we agreed to settle a portion of the
indebtedness, in the amount of $1,340,000, by allotting and issuing to John
Hislop 134,000,000 shares of our common stock at a deemed price of $0.01 per
share. On April 24, 2015, we announced that we had issued 134,000,000 shares
of our common stock at a deemed price of $0.01 per share to Mr. Hislop.
However, due to a technical flaw in the process of adopting the amendment to our
Articles of Incorporation (announced on February 3, 2014), we were only
authorized to issue 100,000,000 shares of our common stock on April 23, 2015,
and the issuance to Mr. Hislop on April 23, 2015, was therefore void. On June
29, 2015, we sent to our shareholders a proxy statement for a shareholder
meeting to be held July 22, 2015, at which meeting we proposed to rectify the
technical flaw in our earlier effort to increase our authorized capital. On
July 28, 2015, we closed the debt settlement agreement and reissued the
134,000,000 shares to Mr. Hislop pursuant to the debt settlement and
subscription agreement which settled a debt to Mr. Hislop equal to $1,340,000 immediately
following shareholder approval of the increase in our authorized capital on
July 23, 2015. The shares were valued at $4,690,000 ($0.035 per share based
upon market price). The Company recorded a loss on extinguishment of debt of $3,350,000
during the year-ended March 31, 2016.
As
of August 4, 2015, Paltar Nation Limited Partnership (“Paltar Nation”) entered
into a secured convertible note purchase agreement with David N. Siegel Dynasty
Trust dated November 16, 2015 (the “2015 Secured Note Purchase Agreement”),
pursuant to which Paltar Nation issued a secured convertible promissory note in
the principal amount of $584,000 in consideration for $584,000. The secured
convertible promissory note bears interest at the rate of 10% per annum (15%
per annum on and after the maturity date or an Event of Default (as defined
below)) and matures on August 4, 2016. The entire unpaid principal sum of the
secured convertible promissory note will become immediately due and payable
upon a material breach by (a) Paltar Nation of the note, another note or the 2015
Secured Note Purchase Agreement, or (b) Wotan Group Limited, an Australian
limited company, of the Wotan Pledge, described below, in each case that is not
cured within 30 days of such breach (referred to as an “Event of Default”).
The 2015 Secured Note Purchase
Agreement also contemplates sales of additional secured convertible promissory
notes up to an aggregate maximum of $5,000,000 (including the initial $584,000
sale to David N. Siegel Dynasty Trust dated November 16, 2015). The secured
convertible promissory note issued to Michael B. Cox, described below, has been
issued pursuant to the 2015 Secured Note Purchase Agreement.
Upon
a sale of Paltar Nation’s limited partnership interests (“Interests”) in a
single transaction or a series of related transactions yielding gross cash
proceeds to Paltar Nation of at least $20,000,000 (including $584,000 from the
sale of the secured convertible promissory note to David N. Siegel Dynasty
Trust dated November 16, 2015 and including $100,000 from the sale of the
secured convertible promissory note to Michael B. Cox) on or before the
maturity dates of the notes (the “Qualified Financing”), the principal and any
accrued but unpaid interest under the notes will automatically be converted
into Interests. The Interests to be issued to David N. Siegel Dynasty Trust dated
November 16, 2015 upon conversion will be equal to the quotient obtained by
dividing (i) the entire principal amount of the note plus any accrued but
unpaid interest under the note by (ii) 80.00% of the per-Interest price of the
Interests sold to persons other than David N. Siegel Dynasty Trust dated
November 16, 2015 and other holders of the notes, if any, in the Qualified
Financing.
In
connection with the secured convertible note purchase agreement, Paltar Nation
entered into a pledge agreement dated as of August 4, 2015 with Wotan Group
Limited (the “Wotan Pledge”), pursuant to which Wotan Group Limited pledged to each
of David N. Siegel Dynasty Trust dated November 16, 2015 and any future secured
noteholders pursuant to the 2015 Secured Note Purchase Agreement (of which
Michael B. Cox is one) a continuing first priority security interest in a
number of Wotan Group Limited’s shares of Paltar Petroleum Limited equal to
five multiplied by the sum of the aggregate outstanding principal amounts owed
under each noteholder’s respective note and Paltar Nation agreed to pay a
commitment fee to Wotan Group Limited equal to $250,000 from the proceeds of
the secured convertible promissory notes upon the receipt by Paltar Nation of
proceeds from the sale of such notes equal to or greater than $2,500,000 in the
aggregate and an additional commitment fee of $250,000 upon conversion of all
of such notes.
As of
September 30, 2016
, the principal balance of the loan was
$584,000 and accrued interest payable of $72,240. The loan was not repaid on
August 4, 2016 and continues to accrue interest at a rate of 15% per annum. The
parties to the loan have agreed that all outstanding principal and then-accrued
interest shall convert into membership interests of Nation SLP, LLC at the
closing of the $5,000,000 unregistered offering currently being conducted by
Nation SLP, LLC, which is expected to close on December 31, 2016.
On August 5, 2015, we entered into a
promissory note with an officer and director, John Hislop for C$10,000 (US$7,624).
The loan bears interest calculated quarterly, not in advance, at a rate of 15%
per annum. The note is payable upon demand by Mr. Hislop, both before and after
each of maturity, default and judgement commencing effective August 5, 2015. The
principal sum and all accrued and unpaid interest will become due and payable
on August 5, 2017. As of
September 30, 2016
,
the principal balance of the loan was $7,624 and accrued interest payable of $1,322.
On August 25, 2015, we entered into a
promissory note with an officer and director, John Hislop for $10,000. The loan
bears interest calculated quarterly, not in advance, at a rate of 15% per
annum. The note is payable upon demand by Mr. Hislop, both before and after
each of maturity, default and judgement commencing effective August 25, 2015. The
principal sum and all accrued and unpaid interest will become due and payable
on August 25, 2017. As of
September 30, 2016
,
the principal balance of the loan was $10,000 and accrued interest payable of $1,648.
On September 10, 2015, we entered into
a promissory note with an officer and director, John Hislop for C$6,000 (US$4,645).
The loan bears interest calculated quarterly, not in advance, at a rate of 15%
per annum. The note is payable upon demand by Mr. Hislop, both before and after
each of maturity, default and judgement commencing effective September 10,
2015. The principal sum and all accrued and unpaid interest will become due and
payable on September 10, 2017. As of
June
30, 2016
, the principal balance of the loan was $4,645 and accrued
interest payable of $561.
On September 24, 2015, we entered into
a promissory note with an officer and director, John Hislop for $5,000. The
loan bears interest calculated quarterly, not in advance, at a rate of 15% per
annum. The note is payable upon demand by Mr. Hislop, both before and after
each of maturity, default and judgement commencing effective September 24,
2015. The principal sum and all accrued and unpaid interest will become due and
payable on September 24, 2017. As of
September
30, 2016
, the principal balance of the loan was $5,000 and accrued
interest payable of $762.
On September 30, 2015, Paltar Nation
entered into a promissory note with a director, David N. Siegel Dynasty Trust dated
November 16, 2015 for $14,210. The loan bears interest at a rate of 10% per
annum from the disbursement date of the funds. The principal sum and all
accrued and unpaid interest will become due and
payable
on September 30, 2016. As of
September 30,
2016
, the principal balance of the loan was $14,210 and accrued interest
payable of $1,629.
On October 29, 2015, the Company
entered into a promissory note with a related party, John Hislop for $7,960.
The loan bears interest calculated quarterly, not in advance, at a rate of 15%
per annum. The note is payable upon demand by Mr. Hislop, both before and after
each of maturity, default and judgement commencing effective October 29, 2015. The
principal sum and all accrued and unpaid interest will become due and payable
on October 29, 2022. As of September 30, 2016, the principal balance of the
loan was $7,960 and accrued interest payable of $1,106.
On
November 27, 2015, pursuant to the 2015 Secured Note Purchase Agreement, Paltar
Nation issued a secured convertible promissory note to Michael B. Cox in the
principal amount of $100,000 in consideration for $100,000. The secured
convertible promissory note bears interest at the rate of 10% per annum (15%
per annum on and after the maturity date or an Event of Default) and matures on
November 30, 2016. The entire unpaid principal sum of the secured convertible
promissory note will become immediately due and payable upon an Event of
Default. The Interests to be issued to Michael B. Cox upon conversion will be
equal to the quotient obtained by dividing (i) the entire principal amount of
the note plus any accrued but unpaid interest under the note by (ii) 80.00% of
the per-Interest price of the Interests sold to persons other than Michael B.
Cox and other holders of the notes, if any, in the Qualified Financing. The
note is secured by the Wotan Pledge.
As of September 30, 2016, the
principal balance of the loan was $100,000 and accrued interest payable of $9,260.
On March 31, 2016, Paltar Nation
entered into a promissory note with a director, David N. Siegel Revocable Trust
2009 for $188,483. The loan bears interest at a rate of 10% per annum from the
disbursement date of the funds. The principal sum and all accrued and unpaid
interest will become due and payable on March 31, 2017. As of
September 30, 2016
, the principal balance
of the loan was $188,483 and accrued interest payable of $11,280.
On April 8, 2016, Paltar Nation
entered into a promissory note with a director, David N. Siegel Revocable Trust
2009 for $25,000. The loan will bear interest at a rate of 10% per annum. The
principal sum and all accrued and unpaid interest will become due and payable
on April 8, 2017. As of
September 30, 2016
,
the principal balance of the loan was $25,000 and accrued interest payable of $1,215.
On May 3, 2016, Paltar Nation entered
into a promissory note with a director, David N. Siegel Revocable Trust 2009
for $34,000. The loan will bear interest at a rate of 10% per annum. The
principal sum and all accrued and unpaid interest will become due and payable
on May 3, 2017. As of
June 30, 2016
,
the principal balance of the loan was $34,000 and accrued interest payable of $1,417.
On May 31, 2016, we entered into a
promissory note with an officer and director, John Hislop for $23,100. The loan
bears interest calculated quarterly, not in advance, at a rate of 15% per annum
both before and after each of maturity, default and judgement commencing
effective May 31, 2016. The principal sum and all accrued and unpaid interest
will become due and payable on May 31, 2023. As of
September 30, 2016
, the principal balance of the loan was $23,100
and accrued interest payable of $1,158.
On May 31, 2016, Nation Australia
entered into a promissory note with Paltar Petroleum Limited for AUD$24,322,501
(US$18,643,197). Interest shall accrue from the date of this promissory note on
the unpaid principal amount hereunder at a rate equal to 5.00% per annum;
provided, that on and after the maturity date of May 31, 2019 or an event of
default, interest shall accrue from and after such date on the unpaid principal
and all accrued but unpaid interest of this note at a rate equal to 10.00% per
annum. As of
September 30, 2016
, the
principal balance of the loan was $18,643,197 and accrued interest payable was
$314,125.
Going Concern
The unaudited financial statements
accompanying this report have been prepared on a going concern basis, which
implies that our company will continue to realize its assets and discharge its
liabilities and commitments in the normal course of business. Our company has
incurred losses since inception in excess of $14 million and has only generated
modest profitable operations when we commenced gas production in fiscal 2006.
We have relied solely on shareholder advances to participate and continue
operations.
Our company’s ability to continue as
a going concern is contingent upon being able to secure financing and attain
profitable operations. Our company is currently evaluating business
opportunities and will require financing for acquisition of any new business venture.
Net
cash (used in) operating activities in the six months ended September 30, 2016
totaled ($961,511) versus cash (used in) operating activities of ($671,473) in
the six months ended September 30, 2015. Cash balances were $91,772 and $1,334
as of September 30, 2016 and March 31, 2016, respectively. Our c
ompany’s ability to
continue as a going concern is contingent upon being able to secure financing
and attain profitable operations.
We have a limited operating history. We can only
estimate the future needs for capital based on the current status of our
operations, our current plans and current economic condition. Due to the
uncertainties regarding our future activities, we are unable to predict
precisely what amount will be used for any particular purpose.
Future
Financings
As
of September 30, 2016, we had cash of $91,772.
We currently do not have sufficient funds to acquire and develop any opportunities,
including the opportunity presented by the third
amended and restated agreement with Paltar Petroleum
. Paltar Nation was formed for the purpose of
funding exploration expenditures required to be provided by the wholly-owned
subsidiary of Nation Energy Inc., Nation Energy (Australia) Pty Ltd., which is
expected to become a wholly-owned subsidiary of Paltar Nation, to explore and
develop all or a portion of 775,292 acres of certain Australian exploration
permits. We also anticipate continuing to rely on shareholder loans or equity
sales of our common stock in order to fund our business operations. Issuances
of additional shares will result in dilution to our existing stockholders.
There is no assurance that we will achieve any additional sales of our equity
or arrange for more debt or other financing to fund any future activities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Not Applicable.
ITEM
4. CONTROLS AND PROCEDURES
As required by
Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive
officer and our principal financial officer evaluated our company’s disclosure
controls and procedures (as define in Rules 13a-15(e) of the Securities
Exchange Act of 1934) as of the end of the period covered by this report. Based
on this evaluation, our principal executive officer and our principal financial
officer concluded that as of the end of the period covered by this report,
these disclosure controls and procedures were not effective. Disclosure
controls and procedures are controls and procedures designed to ensure that the
information required to be disclosed by our company in reports it files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the rules and
forms of the Securities Exchange Commission and to ensure that such information
is accumulated and communicated to our company’s management, including our
principal executive officer and our principal financial officer, to allow
timely decisions regarding required disclosure. The conclusion that our
disclosure controls and procedures were not effective was due to the presence
of the following material weaknesses in internal control over financial
reporting which are indicative of many small companies with small staff:
1.
Insufficient
segregation of duties in our finance and accounting functions due to limited
personnel. During the six months ended
September 30,
2016
, we had limited staff that performed nearly all aspects of our
financial reporting process, including, but not limited to, access to the
underlying accounting records and systems, the ability to post and record
journal entries and responsibility for the preparation of the financial
statement. This creates certain incompatible duties and lack of review over the
financial reporting process that would likely result in a failure to detect
errors in spreadsheets, calculations, or assumptions used to compile the
financial statements and related disclosures as filed with the SEC. These
control deficiencies could result in a material misstatement of our interim or
annual financial statements that would not be prevented or detected; and
2.
Lack
of proper recording and analysis of accounting matters. During the six months
ended September 30, 2016, we identified certain amounts between subsidiaries that
were not recorded correctly on an entity level. These transactions have been
reclassed in order to accurately account for transactions in the appropriate
entity. The lack of review of financial transactions could result in a failure
to detect errors or assumptions used to compile the financial statements and
related disclosures as filed with the SEC. These control deficiencies could
result in a material misstatement of our interim or annual financial statements
that would not be prevented or detected.
We intend to take
appropriate and reasonable steps to make the necessary improvements to
remediate these deficiencies. We intend to consider the results of our
remediation efforts and related testing as part of our year-end assessment of
the effectiveness of our internal control over financial reporting.
In addition, subject
to receipt of additional financing, we intend to undertake the below
remediation measures to address the material weaknesses described in this
report. Such remediation activities include the following:
1.
We intend to continue to
update the documentation of our corporate governance and internal control
processes, including formal risk assessment of our financial reporting
processes.
2.
We intend to evaluate
transactions quarterly to ensure accurate accounting at the entity level.
It should be
noted that a control system, no matter how well conceived or operated, can
provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system must reflect
the fact that there are resource constraints, and the benefits of controls must
be considered relative to their costs. Because of the inherent limitations in
all control systems, no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within our company have
been detected. These inherent limitations include the realities that judgments
in decision making can be faulty, and that breakdowns can occur because of
simple error or mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people, or by
management override of the controls. The design of any system of internal
control is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Over time
controls may become inadequate because of changes in conditions, or the degree
of compliance with the policies or procedures may deteriorate. Because of the
inherent limitations in a cost-effective control system, misstatements due to
error or fraud may occur and not be detected.
There were no
changes in our internal control over financial reporting during the fiscal
quarter ended September 30, 2016 that have materially affected or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART II
-
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no
material, existing or pending legal proceedings against our Company, nor are we
involved as a plaintiff in any material proceeding or pending litigation. There
are no proceedings in which any of our director and officer or affiliates, or
any registered or beneficial stockholder is an adverse party or has a material
interest adverse to our interest.
ITEM 1A. RISK
FACTORS
Not applicable.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM
5. OTHER INFORMATION
On April 8, 2016, Paltar Nation
entered into a promissory note with a director, David N. Siegel Revocable Trust
2009 for $25,000. The loan will bear interest at a rate of 10% per annum. The
principal sum and all accrued and unpaid interest will become due and payable
on April 8, 2017. As of
September 30, 2016
,
the principal balance of the loan was $25,000 and accrued interest payable of $1,215.
On May 3, 2016, Paltar Nation entered
into a promissory note with a director, David N. Siegel Revocable Trust 2009
for $34,000. The loan will bear interest at a rate of 10% per annum. The
principal sum and all accrued and unpaid interest will become due and payable
on May 3, 2017. As of
September 30, 2016
,
the principal balance of the loan was $34,000 and accrued interest payable of $1,416.
On May 31, 2016, we entered into a
promissory note with an officer and director, John Hislop for $23,100. The loan
bears interest calculated quarterly, not in advance, at a rate of 15% per annum
both before and after each of maturity, default and judgement commencing
effective May 31, 2016. The principal sum and all accrued and unpaid interest
will become due and payable on May 31, 2023. As of
September 30, 2016
, the principal balance of the loan was $23,100
and accrued interest payable of $1,158.
The Company’s majority owned
subsidiary Nation SLP, LLC is conducting an unregistered offering of its
membership interests for a maximum capital raise of $5,000,000. The offering
is expected to end in December 2016, but may be extended at the discretion of
the Company. The proceeds from the offering will be used for working capital
purposes.
ITEM 6. EXHIBITS
Exhibits
Required by Item 601 of Regulation S-K
Exhibit
Number and Description
(3) Articles of Incorporation/Bylaws
3.1 Certificate
of Merger (Delaware) effective June 12, 2003 (incorporated by reference from
our Quarterly Report on Form 10-QSB filed with the Securities and Exchange
Commission on August 19, 2003)
3.2 Certificate
of Merger (Wyoming) effective June 13, 2003 (incorporated by reference from our
Quarterly Report on Form 10-QSB filed with the Securities and Exchange
Commission on August 19, 2003)
3.3 Amended
& Restated Bylaws (Wyoming) (incorporated by reference from our Quarterly
Report on Form 10-QSB filed with the Securities and Exchange Commission on
November 14, 2003)
3.4 Certificate
of Incorporation (incorporated by reference from our Annual Report on Form 10K
filed with the Securities and Exchange Commission on August 13, 2010)
3.5 Amended and
Restated Articles of Incorporation filed with the Secretary of State of the
State of Wyoming on August 3, 2015 (incorporated by reference from our Current
Report on Form 8-K filed with the Securities and Exchange Commission on August
12, 2015).
(10) Material
Contracts
10.1 1999 Stock Option
Plan (incorporated by reference from our Registration Statement on Form 10-SB
filed with the Securities and Exchange Commission on March 31, 2000).
10.2 Demand Promissory
Note issued to Caravel Management Corp. and John Hislop, dated March 31, 2006
(incorporated by reference from our Annual Report on Form 10-K filed with the
Securities and Exchange Commission on August 13, 2010).
10.3 Management
Services Agreement dated November 1, 2010 between Nation Energy Inc. and
Caravel Management Corp. (incorporated by reference from our Annual Report on
Form 10-K filed with the Securities and Exchange Commission on December 2,
2010).
10.4 Promissory Note
issued to John Hislop, dated July 18, 2014 (incorporated by reference from our Annual
Report on Form 10-K filed with the Securities and Exchange Commission on June
4, 2015).
10.5 Promissory Note
issued to John Hislop, dated September 2, 2014 (incorporated by reference from
our Annual Report on Form 10-K filed with the Securities and Exchange
Commission on June 4, 2015).
10.6 Amended and
Restated Agreement with Paltar Petroleum Limited (incorporated by reference
from our Current Report on Form 8-K filed with the Securities and Exchange
Commission on December 1, 2014).
10.7 Debt Settlement
Agreement with John Hislop dated April 21, 2015 (incorporated by reference from
our Current Report on Form 8-K filed with the Securities and Exchange
Commission on April 24, 2015).
10.8 Promissory Note
issued to John Hislop, dated January 29, 2015 (incorporated by reference from
our Annual Report on Form 10-K filed with the Securities and Exchange
Commission on June 4, 2015).
10.9 Second Amended
and Restated Agreement with Paltar Petroleum Limited dated June 13, 2015
(incorporated by reference from our Current Report on Form 8-K filed with the
Securities and Exchange Commission on June 18, 2015).
10.10 Third Amended and
Restated Agreement with Paltar Petroleum Limited dated August 30, 2015
(incorporated by reference from our Current Report on Form 8-K filed with the
Securities and Exchange Commission on September 3, 2015).
10.11 Option Agreement
dated August 30, 2015 Agreement with Paltar Petroleum Limited (ACN 149 987 459)
dated August 30, 2015 (incorporated by reference from our Current Report on
Form 8-K filed with the Securities and Exchange Commission on September 3, 2015).
10.12 EP
136 Earning Agreement dated August 30, 2015 between Nation Energy (Australia)
Pty Ltd. (ACN 606 533 046) and Paltar Petroleum Limited (ACN 149 987 459) (incorporated
by reference from our Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 3, 2015).
10.13 EP 143 Earning
Agreement dated August 30, 2015 between Nation Energy (Australia) Pty Ltd. (ACN
606 533 046) and Paltar Petroleum Limited (ACN 149 987 459) (incorporated by
reference from our Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 3, 2015).
10.14 EP 231 Earning
Agreement dated August 30, 2015 between Nation Energy (Australia) Pty Ltd. (ACN
606 533 046) and Paltar Petroleum Limited (ACN 149 987 459) (incorporated by
reference from our Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 3, 2015).
10.15 EP 232 Earning
Agreement dated August 30, 2015 between Nation Energy (Australia) Pty Ltd. (ACN
606 533 046) and Paltar Petroleum Limited (ACN 149 987 459) (incorporated by
reference from our Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 3, 2015).
10.16 EP 234 Earning
Agreement dated August 30, 2015 between Nation Energy (Australia) Pty Ltd. (ACN
606 533 046) and Paltar Petroleum Limited (ACN 149 987 459) (incorporated by
reference from our Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 3, 2015).
10.17 EP 237 Earning
Agreement dated August 30, 2015 between Nation Energy (Australia) Pty Ltd. (ACN
606 533 046) and Paltar Petroleum Limited (ACN 149 987 459) (incorporated by
reference from our Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 3, 2015).
10.18 EP 468 Earning
Agreement dated August 30, 2015 between Nation Energy (Australia) Pty Ltd. (ACN
606 533 046) and Officer Petroleum Pty Ltd. (ACN 142 330 738) (incorporated by
reference from our Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 3, 2015).
10.19 Secured
Convertible Promissory Note issued to David N. Siegel Family Trust 2015 dated August
4, 2015 (incorporated by reference from our Current Report on Form 8-K filed
with the Securities and Exchange Commission on November 10, 2015).
10.20 Promissory Note
issued to John Hislop, dated August 5, 2015 (incorporated by reference from our
Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission
on November 13, 2015).
10.21 Promissory Note
issued to John Hislop, dated August 25, 2015 (incorporated by reference from
our Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on November 13, 2015).
10.22 Promissory Note
issued to John Hislop, dated September 10, 2015 (incorporated by reference from
our Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on November 13, 2015).
10.23 Promissory Note
issued to John Hislop, dated September 24, 2015 (incorporated by reference from
our Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on November 13, 2015).
10.24 First Amendment to
Third Amended and Restated Agreement with Paltar Petroleum Limited (ACN 149 987
459) effective December 17, 2015 (incorporated by reference from our Current
Report on Form 8-K filed with the Securities and Exchange Commission on January
28, 2016).
10.25 Master Amendment to
Six Earning Agreements dated effective December 17, 2015 between Paltar
Petroleum Limited (ACN 149 987 459) and Nation Energy (Australia) Pty Ltd. (ACN
606 533 046) (incorporated by reference from our Current Report on Form 8-K
filed with the Securities and Exchange Commission on January 28, 2016).
10.26 First Amendment to
EP 468 Earning Agreement dated effective December 17, 2015 between Officer
Petroleum Pty Ltd (ACN 142 330 738) and Nation Energy (Australia) Pty Ltd. (ACN
606 533 046) (incorporated by reference from our Current Report on Form 8-K
filed with the Securities and Exchange Commission on January 28, 2016).
10.27 Second
Amendment to Third Amended and Restated Agreement with Paltar Petroleum Limited
(ACN 149 987 459) effective February 8, 2016 (incorporated by reference from
our Current Report on Form 8-K filed with the Securities and Exchange
Commission on February 16, 2016).
10.28 Second Master
Amendment to Six Earning Agreements dated effective February 8, 2016 between
Paltar Petroleum Limited (ACN 149 987 459) and Nation Energy (Australia) Pty
Ltd. (ACN 606 533 046) (incorporated by reference from our Current Report on
Form 8-K filed with the Securities and Exchange Commission on February 16, 2016).
10.29 Second Amendment
to EP 468 Earning Agreement dated effective February 8, 2016 between Officer
Petroleum Pty Ltd (ACN 142 330 738) and Nation Energy (Australia) Pty Ltd. (ACN
606 533 046) (incorporated by reference from our Current Report on Form 8-K
filed with the Securities and Exchange Commission on February 16, 2016).
10.30 Amendment to
Option Agreement with Paltar Petroleum Limited (ACN 149 987 459) effective
February 12, 2016 (incorporated by reference from our Current Report on Form
8-K filed with the Securities and Exchange Commission on February 16, 2016).
10.31 Promissory Note
issued to John Hislop, dated October 29, 2015 (incorporated by reference from
our Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on February 16, 2016).
10.32 Promissory Note
issued to Michael B. Cox, dated November 27, 2015 (incorporated by reference
from our Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on February 16, 2016).
10.33 Promissory Note
issued to David
N. Siegel Dynasty Trust dated November 16, 2015, dated September 30, 2015. (incorporated
by reference from our Annual Report on Form 10-K filed with the Securities and
Exchange Commission on June 30, 2016).
10.34 Promissory Note
issued to David N. Siegel Revocable Trust 2009, dated March 31, 2016. (incorporated
by reference from our Annual Report on Form 10-K filed with the Securities and
Exchange Commission on June 30, 2016).
10.35 Promissory Note
issued to David N. Siegel Revocable Trust 2009, dated April 8, 2016. (incorporated
by reference from our Annual Report on Form 10-K filed with the Securities and
Exchange Commission on June 30, 2016).
10.36 Promissory Note
issued to David N. Siegel Revocable Trust 2009, dated May 3, 2016. (incorporated
by reference from our Annual Report on Form 10-K filed with the Securities and
Exchange Commission on June 30, 2016).
10.37 Promissory Note
issued to John Hislop, dated May 31, 2016. (incorporated by reference from our Annual
Report on Form 10-K filed with the Securities and Exchange Commission on June
30, 2016).
10.38 EP 136 Final Earning
Agreement dated May 31, 2016 between Nation Energy (Australia) Pty Ltd. (ACN
606 533 046) and Paltar Petroleum Limited (ACN 149 987 459). (incorporated by
reference from our Annual Report on Form 10-K filed with the Securities and
Exchange Commission on June 30, 2016).
10.39 EP 143 Final Earning
Agreement dated May 31, 2016 between Nation Energy (Australia) Pty Ltd. (ACN
606 533 046) and Paltar Petroleum Limited (ACN 149 987 459). (incorporated by
reference from our Annual Report on Form 10-K filed with the Securities and
Exchange Commission on June 30, 2016).
10.40 EP 231 Final Earning
Agreement dated May 31, 2016 between Nation Energy (Australia) Pty Ltd. (ACN
606 533 046) and Paltar Petroleum Limited (ACN 149 987 459). (incorporated by
reference from our Annual Report on Form 10-K filed with the Securities and
Exchange Commission on June 30, 2016).
10.41 EP 232 Final Earning
Agreement dated May 31, 2016 between Nation Energy (Australia) Pty Ltd. (ACN
606 533 046) and Paltar Petroleum Limited (ACN 149 987 459). (incorporated by
reference from our Annual Report on Form 10-K filed with the Securities and
Exchange Commission on June 30, 2016).
10.42 EP 234 Final Earning
Agreement dated May 31, 2016 between Nation Energy (Australia) Pty Ltd. (ACN
606 533 046) and Paltar Petroleum Limited (ACN 149 987 459). (incorporated by
reference from our Annual Report on Form 10-K filed with the Securities and
Exchange Commission on June 30, 2016).
10.43 EP
237 Final Earning Agreement dated May 31, 2016 between Nation Energy
(Australia) Pty Ltd. (ACN 606 533 046) and Paltar Petroleum Limited (ACN 149
987 459). (incorporated by reference from our Annual Report on Form 10-K filed
with the Securities and Exchange Commission on June 30, 2016).
10.44 EP 468 Final Earning
Agreement dated effective May 31, 2016 between Officer Petroleum Pty Ltd (ACN
142 330 738) and Nation Energy (Australia) Pty Ltd. (ACN 606 533 046). (incorporated
by reference from our Annual Report on Form 10-K filed with the Securities and
Exchange Commission on June 30, 2016).
10.45 Third Amendment to
Third Amended and Restated Agreement with Paltar Petroleum Limited (ACN 149 987
459), effective May 31, 2016. (incorporated by reference from our Annual Report
on Form 10-K filed with the Securities and Exchange Commission on June 30, 2016).
10.46 Promissory Note
issued from Nation Australia to Paltar Petroleum dated May 31, 2016. (incorporated
by reference from our Annual Report on Form 10-K filed with the Securities and
Exchange Commission on June 30, 2016).
10.47 Management
Services Agreement dated June 25, 2016, but effective July 22, 2015, between
Nation Energy (Australia) Pty Ltd. and Carmen J. Lotito. (incorporated by
reference from our Annual Report on Form 10-K filed with the Securities and
Exchange Commission on June 30, 2016).
10.48 Fourth Amendment
to Third Amended and Restated Agreement with Paltar Petroleum Limited (ACN 149
987 459), effective May 31, 2016 (incorporated by reference from our Quarterly Report
on Form 10-Q filed with the Securities and Exchange Commission on November 21,
2016).
(14) Code
of Ethics
14.1 Code
of Business Conduct and Ethics (incorporated by reference from our Annual
Report on Form 10-KSB filed with the Securities and Exchange Commission on July
15, 2004).
(31)
Section 302 Certifications
31.1* Section
302 Certification of Principal Executive Officer under Sarbanes-Oxley Act of
2002
31.2* Section
302 Certification of Principal Financial Officer under Sarbanes-Oxley Act of
2002
(32)
Section 906 Certifications
32.1* Section
906 Certification of Principal Executive Officer under Sarbanes-Oxley Act of
2002
32.2* Section
906 Certification of Principal Financial Officer under Sarbanes-Oxley Act of
2002
(99) Additional
Exhibits
99.1 Audit
Committee Charter (incorporated by reference from our Annual Report on Form 10K
filed with the Securities and Exchange Commission on February 9, 2011)
(101) XBRL-Related
Documents
101.1* Temporary
Hardship Exemption
*Filed herewith
SIGNATURES
Pursuant to the requirements of Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
NATION ENERGY INC.
By:
/s/ John R. Hislop
John
Hislop
President, Chief Executive Officer, Chief Financial Officer and Director
(Principal Executive Officer, Principal Financial Officer and Principal
Accounting Officer)
Date:
November 21, 2016
EXHIBIT 31.1
EXHIBIT
31.2
CERTIFICATION
PURSUANT TO RULE 13a-14(a) OR 15d-14(a) UNDER THE SECURITIES EXHANGE ACT
OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John R. Hislop, certify that:
1)
I have
reviewed this Quarterly Report on Form 10-Q of Nation Energy Inc.;
2)
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;
3)
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 registrant as of, and
for, the periods presented in this report;
4)
The
registrant’s other certifying officer and I are 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 the Exchange Act Rule 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a)
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 registrant, 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;
(b)
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;
(c)
Evaluated the effectiveness
of the registrant’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
(d)
Disclosed in this report
any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5)
The
registrant’s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent function):
(a)
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 registrant’s ability to record, process, summarize and report
financial information; and
(b)
Any fraud, whether or not
material, that involves management or other employees who have a significant
role in the registrant’s internal controls over financial reporting.
Date:
November 21, 2016
By:
/s/ John R. Hislop
John
Hislop
President, Chief Executive Officer, Chief Financial Officer and Director
(Principal Executive Officer, Principal Financial Officer and Principal
Accounting Officer)
EXHIBIT
32.1
EXHIBIT
32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, John R. Hislop, hereby certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(a)
the Quarterly
Report on Form 10-Q of Nation Energy Inc. for the quarterly period ended September
30, 2016 (“the Report”) fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(b)
the information contained
in the Report fairly presents, in all material respects, the financial
condition and results of operations of
Nation Energy
Inc.
Dated:
November
21, 2016
By:
/s/ John R. Hislop
John
Hislop
President, Chief Executive Officer, Chief Financial Officer and Director
(Principal Executive Officer, Principal Financial Officer and Principal
Accounting Officer)