Nation Energy, Inc.
|
Condensed Consolidated
Balance Sheets
|
|
|
|
|
|
|
December 31,
|
|
March 31,
|
|
2016
|
|
2016
|
|
(Unaudited)
|
|
|
ASSETS
|
Current
assets:
|
|
|
|
Cash
|
$ 393,434
|
|
$ 1,334
|
Accounts receivable
|
39,785
|
|
-
|
Total
current assets
|
433,219
|
|
1,334
|
|
|
|
|
Non-current
assets:
|
|
|
|
Petroleum and natural gas interests, net
|
47,323,780
|
|
29,559,563
|
Total
non-current assets
|
47,323,780
|
|
29,559,563
|
|
|
|
|
Total
assets
|
$
47,756,999
|
|
$29,560,897
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
|
|
|
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Current
liabilities:
|
|
|
|
Accounts payable
|
$ 1,148,790
|
|
$ 9,710,946
|
Accounts payable and accrued expenses - related party
|
6,705,845
|
|
497,842
|
Loans payable - related party, current
|
994,585
|
|
827,698
|
Loans payable - current
|
112,206
|
|
104,247
|
Total
current liabilities
|
8,961,426
|
|
11,140,733
|
|
|
|
|
Long
term liabilites
|
|
|
|
Loans payable - related party - net of current
|
18,135,082
|
|
38,211
|
|
27,096,508
|
|
11,178,944
|
Stockholders'
(deficit)
|
|
|
|
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
|
(13,724,811)
|
|
(6,352,733)
|
Accumulated comprehensive (loss):
|
|
|
|
Foreign currency translation (loss)
|
(1,749,385)
|
|
-
|
|
19,260,491
|
|
18,381,953
|
Noncontrolling interest in consolidated subsidiary
|
1,400,000
|
|
-
|
Total
stockholders' equity
|
20,660,491
|
|
18,381,953
|
|
|
|
|
Total
liabilities and stockholders' equity
|
$
47,756,999
|
|
$29,560,897
|
|
|
|
|
The accompanying notes are an
integral part of these financial statements
|
|
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Nation Energy, Inc.
|
Condensed Consolidated
Statements of Operations and Comprehensive Loss
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For the Three Months and
Nine Months Ended December 31, 2016 and 2015
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(Unaudited)
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|
|
|
|
|
|
|
|
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For the Three Months Ended
|
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For the Nine Months Ended
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December 31,
|
|
December 31,
|
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December 31,
|
|
December 31,
|
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2016
|
|
2015
|
|
2016
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|
2015
|
|
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|
|
|
|
|
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Revenue:
|
$ -
|
|
$ -
|
|
$ -
|
|
$ -
|
Direct
expenses:
|
|
|
|
|
|
|
|
Royalties
|
-
|
|
-
|
|
-
|
|
-
|
Operating
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
Operating income
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
Consulting
|
103,089
|
|
21,970
|
|
339,009
|
|
32,970
|
Legal fees
|
127,473
|
|
158,630
|
|
360,961
|
|
478,994
|
Management fees
|
79,706
|
|
-
|
|
194,105
|
|
-
|
Accounting fees
|
17,202
|
|
13,100
|
|
78,232
|
|
24,600
|
Rent expense
|
33,629
|
|
-
|
|
91,857
|
|
-
|
Other general and administrative expenses
|
18,791
|
|
11,089
|
|
117,483
|
|
47,114
|
'Impairment of petroleum & natural gas interests
|
5,565,664
|
|
-
|
|
5,565,664
|
|
-
|
Total
Expenses
|
5,945,554
|
|
204,789
|
|
6,747,311
|
|
583,678
|
|
|
|
|
|
|
|
|
(Loss) before other income (expense)
|
(5,945,554)
|
|
(204,789)
|
|
(6,747,311)
|
|
(583,678)
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
(Loss) on extinguishment of debt
|
-
|
|
-
|
|
-
|
|
(3,350,000)
|
Interest (expense)
|
(263,782)
|
|
(17,854)
|
|
(627,638)
|
|
(84,693)
|
Foreign
exchange gain
|
1,652
|
|
-
|
|
2,870
|
|
-
|
Total
other (expense)
|
(262,130)
|
|
(17,854)
|
|
(624,768)
|
|
(3,434,693)
|
|
|
|
|
|
|
|
|
Net
(loss)
|
(6,207,684)
|
|
(222,643)
|
|
(7,372,079)
|
|
(4,018,371)
|
|
|
|
|
|
|
|
|
less:
Non-controlling interest
|
|
|
|
|
|
|
|
(Income) attributable to noncontrolling interest
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
Net
(loss) attributable to Nation Energy Inc's
|
|
|
|
|
|
|
|
shareholders
|
(6,207,684)
|
|
(222,643)
|
|
(7,372,079)
|
|
(4,018,371)
|
|
|
|
|
|
|
|
|
Other
comprehensive (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
(1,719,234)
|
|
26,954
|
|
(1,749,385)
|
|
58,953
|
|
|
|
|
|
|
|
|
Comprehensive
loss
|
(7,926,918)
|
|
(195,689)
|
|
(9,121,464)
|
|
(3,959,418)
|
|
|
|
|
|
|
|
|
less:
comprehensive loss attributable
|
|
|
|
|
|
|
|
to the noncontrolling interest
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
Comprehensive
loss attributable to Nation
|
|
|
|
|
|
|
|
Energy Inc's shareholders
|
$
(7,926,918)
|
|
$
(195,689)
|
|
$
(9,121,464)
|
|
$
(3,959,418)
|
|
|
|
|
|
|
|
|
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
|
$ (0.008)
|
|
$ (0.001)
|
|
$ (0.009)
|
|
$ (0.026)
|
|
|
|
|
|
|
|
|
The accompanying notes are an
integral part of these financial statements
|
Nation Energy, Inc.
|
Condensed Consolidated Statements of Cash Flows
|
For the Nine Months Ended December 31, 2016 and 2015
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended
|
|
|
December 31,
|
|
December 31,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
Net (loss)
|
$ (7,372,079)
|
|
$ (4,018,371)
|
|
Adjustments to reconcile net loss to net cash
|
|
|
|
|
provided by (used in) operating activities:
|
|
|
|
|
Loss on extinguishment of debt
|
-
|
|
3,350,000
|
|
Impairment of petroleum & natural gas interests
|
5,565,664
|
|
-
|
|
Changes in working capital:
|
|
|
|
|
(Increase) in accounts receivable
|
(39,785)
|
|
-
|
|
Increase in accounts payable
|
478,974
|
|
425,141
|
|
Increase (decrease) in accounts payable - related party
|
538,688
|
|
(557,924)
|
|
Net cash (used in) operating activities
|
(828,538)
|
|
(801,154)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
Sale of noncontrolling interest
|
1,400,000
|
|
-
|
|
Net cash provided by investing activities
|
1,400,000
|
|
-
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
Proceeds from loan payable - related party
|
82,100
|
|
619,111
|
|
Proceeds from loan payable
|
-
|
|
100,000
|
|
Net cash provided by financing activities
|
82,100
|
|
719,111
|
|
|
|
|
|
|
Effect of currency rate change (loss) gain
|
(261,462)
|
|
43,586
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
392,100
|
|
(38,457)
|
|
|
|
|
|
|
Beginning balance, cash
|
1,334
|
|
47,479
|
|
|
|
|
|
|
Ending balance, cash
|
$ 393,434
|
|
$ 9,022
|
|
|
|
|
|
|
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
|
$ 18,100,584
|
|
-
|
|
Obligation to issue shares
|
$ -
|
|
20,000,000
|
|
Petroleum and natural gas interests
|
$ 23,329,881
|
|
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.
Effective December 30, 2016, exploration permit 468
was cancelled by the Western Australia government. As a result, effective
December 30, 2016 Nation Australia has terminated the related EP 468 Earning
Agreement dated May 31, 2016 with Officer, and the Company has recognized an
impairment expense of $5,565,664. The Company will continue to focus its
resources on the development of the Northern Territory Exploration permits in
the Beetaloo Basin and the Victoria River Basin.
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 74.908% membership interests in Nation SLP, LLC. During the nine month
period ended December 31, 2016, the Company sold 70 units (equal to 2.59%ownership)
at $20,000 per unit for total gross proceeds of $1,400,000. The additional
22.5% ownership belongs to Beetaloo Basin Partners I, LLC. Non-controlling
interest in Nation SLP was immaterial for the nine months ended December 31,
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 ($13,724,811).
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 nine months ended December 31, 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 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 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 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
In
October 2016, the FASB issued ASU 2016-16,
Income Taxes (Topic 740):
Intra-Entity Transfers of Assets Other Than Inventory
. ASU 2016-16 requires
an entity to recognize the income tax consequences of an intra-entity transfer
of an asset other than inventory when the transfer occurs. ASU 2016-16 is
effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2017. The adoption of this guidance is not expected
to have a material impact on the consolidated financial statements.
In
November 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows (Topic
230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force),
which provides guidance on the presentation of restricted cash or restricted
cash equivalents in the statement of cash flows.
For public companies, these amendments
are
effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2017.
The adoption of ASU 2016-18 is not expected to have a
material impact on the consolidated financial statements.
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 ($13,724,811) during the
development stage. The Company had working capital and stockholders’ equity
(deficits) of ($8,528,207) and ($20,660,491) at December 31, 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 $31,500 for the nine
months ended December 31, 2016 and 2015 and $10,500 for the three months ended December
31, 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 December 31, 2016, the principal
balance of the loan was $584,000 and accrued interest payable of $94,320. 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 by February
28, 2017.
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$7,48). 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 December 31, 2016, the
principal balance of the loan was $7,448 and accrued interest payable of $1,573.
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 December
31, 2016, the principal balance of the loan was $10,000 and accrued interest
payable of $2,026.
On September 10, 2015, the Company
entered into a promissory note with an officer and director, John Hislop for
C$6,000 (US$4,469). 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 December
31, 2016 the principal balance of the loan was $4,469 and accrued interest
payable of $878.
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 December 31, 2016, the principal balance
of the loan was $5,000 and accrued interest payable of $951.
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
December 31, 2016
, the
principal balance of the loan was $14,210 and accrued interest payable of $1,992.
The loan was not repaid on September 30, 2016 and continues to accrue interest
at a rate of 10% 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 by February 28, 2017.
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 December 31, 2016, the principal balance of the loan
was $7,960 and accrued interest payable of $1,407.
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
December 31, 2016
, the principal balance of
the loan was $188,483 and accrued interest payable of $16,096.
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
December 31, 2016
,
the principal balance of the loan was $25,000 and accrued interest payable of $1,854.
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
December 31, 2016
,
the principal balance of the loan was $34,000 and accrued interest payable of $2,286.
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
December 31, 2016
, the principal balance of the loan was $23,100
and accrued interest payable of $2,032.
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 $17,582,736
(
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 February 2017, but may be extended at the discretion of
the Company.
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 P
altar. Effective
December 30, 2016, exploration permit 468 was cancelled by the Western
Australia government. As a result, effective December 30, 2016 Nation Australia
has terminated the related EP 468 Earning Agreement dated May 31, 2016 with
Officer, and the Company has recognized an impairment expense of $5,565,664.
The Company will continue to focus its resources on the development of the
Northern Territory Exploration permits in the Beetaloo Basin and the Victoria
River Basin.
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 74.908% membership
interests in Nation SLP, LLC. During the nine month period ended December 31, 2016,
the Company sold 70 units (equal to 2.59% ownership) at $20,000 per unit for
total gross proceeds of $1,400,000. The additional 22.5% ownership belongs to
Beetaloo Basin Partners I, LLC. Non-controlling interest in Nation SLP was
immaterial for the nine months ended December 31, 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. Effective December 30, 2016, exploration permit 468 was cancelled
by the Western Australia government. As a result, effective December 30, 2016
Nation Australia has terminated the related EP 468 Earning Agreement dated May
31, 2016 with Officer, and the Company has recognized an impairment expense of
$5,565,664. The Company will continue to focus its resources on the development
of the Northern Territory Exploration permits in the Beetaloo Basin and the
Victoria River Basin. 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 $17,582,736 (
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 still
in effect 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 February 14, 2017, 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 December 31, 2016 and 2015
The following
summary of our results of operations should be read in conjunction with our
financial statements for the period ended December 31, 2016, which are included
herein.
Our
operating results for the three months ended December 31, 2016, for the three
months ended December 31, 2015 and the changes between those periods for the
respective items are summarized as follows:
|
Three Months Ended December
31, 2016
|
Three Months Ended December
31, 2015
|
Difference
Increase/(Decrease) %
|
General and administrative
|
$379,890
|
$204,789
|
86%
|
Interest expense
|
$263,782
|
$17,854
|
1,377%
|
Foreign Exchange Gain (Loss)
|
$1,652
|
$-
|
100%
|
Impairment of petroleum and natural
gas interests
|
$5,565,664
|
$-
|
100%
|
Net (loss)
|
($6,207,684)
|
($222,643)
|
2,688%
|
We generated a net (loss) of ($6,207,684)
for the three months ended December 31, 2016 compared to a net (loss) of ($222,643)
for the three months ended December 31, 2015. This increased loss is
primarily due to the impairment of EP 468 which was cancelled effective
December 30, 2016. Net (loss) per common share for the three months ended December
31, 2016 was ($0.008) compared to ($0.001) per common share for the three
months ended December 31, 2015. General and administrative expenses increased
to $379,890 during the three months ended December 31, 2016 from $204,789
during the three months ended December 31, 2015. This increase is primarily due
to increased consulting fees of $103,089 during the three months ended December
31, 2016 compared to $21,970 during the three months ended December 31, 2015 and
management fees of $79,706 and rent of $33,629 in the three months ended December
31, 2016 compared to $nil management fees and $nil rent in 2015.
Interest expense for the three months
ended December 31, 2016 totaled $263,782 compared to $17,854 for the three
months ended December 31, 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 $1,652 for the three months ended December 31, 2016
compared to $nil for the three months ended December 31, 2015. This is due to
transaction gains resulting from loans denominated in CAD. There were no
transaction gains during the three months ended December 31, 2015.
The
major components of our general and administrative expenses for the period are
outlined in the table below:
|
Three Months Ended December
31, 2016
|
Three Months Ended December
31, 2015
|
Difference
Increase/(Decrease) %
|
Administration fees
|
$10,500
|
$10,500
|
0%
|
Office & Management Information
Services
|
$5,844
|
$587
|
895%
|
Management Fees
|
$79,706
|
$0
|
100%
|
Consulting
|
$103,089
|
$21,970
|
369%
|
Legal fees
|
$127,473
|
$158,631
|
(20%)
|
Rent
|
$33,629
|
$0
|
100%
|
Transfer Agent & Filing Fees
|
$2,540
|
$0
|
100%
|
Accounting
|
$17,202
|
$13,100
|
31%
|
Total Expenses
|
$379,890
|
$204,789
|
86
%
|
General and administrative expenses increased
to $379,980 in the three month period ended December 31, 2016 from $204,789 in
the three month period ended December 31, 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 $5,844
in the three month period ended December 31, 2016 from $587. This increase is
primarily due to travel and entertainment expenses incurred in the three month
period ended December 31, 2016 compared to $nil in 2015 Management fees were $79,706
in the three month period ended December 31, 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 $127,473 in the three month period ended December
31, 2015 from $158,631 during the prior fiscal year due to reduced legal fees
relating to the Paltar Agreement and subsequent amendments. Rent was $33,629
for the Denver office in the three month period ended December 31, 2016
compared to $nil in 2015. Filing fees and transfer agent fees increased to $2,540
in the three month period ended December 31, 2016 compared to $nil in the three
month period ended December 31, 2015. Accounting fees increased to $17,202 from
$13,100 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 – Nine Months
Ended December 31, 2016 and 2015
The following
summary of our results of operations should be read in conjunction with our
financial statements for the period ended December 31, 2016, which are included
herein.
Our
operating results for the nine months ended December 31, 2016, for the nine
months ended December 31, 2015 and the changes between those periods for the
respective items are summarized as follows:
|
Nine Months Ended December
31, 2016
|
Nine Months Ended December
31, 2015
|
Difference
Increase/(Decrease) %
|
General and administrative
|
$1,181,647
|
$583,678
|
102%
|
Interest expense
|
$627,638
|
$84,693
|
641%
|
Foreign Exchange Gain
|
$2,870
|
$-
|
100%
|
Impairment of petroleum and natural
gas interests
|
$5,565,664
|
$-
|
100%
|
Net (loss)
|
($7,372,079)
|
($4,018,371)
|
83%
|
We generated a net (loss) of ($7,372,079)
for the nine months ended December 31, 2016 compared to a net (loss) of ($4,018,371)
for the nine months ended December 31, 2015. This increased loss is
primarily due to the impairment of EP 468 which was cancelled effective
December 30, 2016. Net (loss) per common share for the nine months ended December
31, 2016 was ($0.009) compared to ($0.026) per common share for the nine months
ended December 31, 2015. General and administrative expenses increased to $1,181,647
during the nine months ended December 31, 2016 from $583,678 during the nine
months ended December 31, 2015. This increase is primarily due to increased
consulting fees of $339,009 during the nine months ended December 31, 2016
compared to $32,970 during the nine months ended December 31, 2015 and
management fees of $194,105 and rent of $91,857 in the nine months ended December
31, 2016 compared to $nil management fees and $nil rent in 2015.
Interest expense for the nine months
ended December 31, 2016 totaled $627,638 compared to $84,693 for the nine
months ended December 31, 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 $2,870 for the nine months ended December 31, 2016 compared
to $nil for the nine months ended December 31, 2015. This is due to
transaction gains resulting from loans denominated in CAD. There were no
transaction gains during the nine months ended December 31, 2015.
The
major components of our general and administrative expenses for the period are
outlined in the table below:
|
Nine Months Ended December
31, 2016
|
Nine Months Ended December
31, 2015
|
Difference
Increase/(Decrease) %
|
Administration fees
|
$31,500
|
$31,500
|
0%
|
Office & Management Information
Services
|
$72,468
|
$1,604
|
4,418%
|
Management Fees
|
$194,105
|
$0
|
100%
|
Consulting
|
$339,009
|
$32,970
|
928%
|
Legal fees
|
$360,961
|
$478,994
|
(25%)
|
Rent
|
$91,857
|
$0
|
100%
|
Transfer Agent & Filing Fees
|
$13,514
|
$14,009
|
(4%)
|
Accounting
|
$78,232
|
$24,600
|
218%
|
Total Expenses
|
$1,181,647
|
$583,678
|
102%
|
General and administrative expenses increased
to $1,181,647 in the nine month period ended December 31, 2016 from $583,678 in
the nine month period ended December 31, 2015. General expenses include
administration fees which remained the same as the comparative nine month
period. Office expenses and Management Information System fees increased to $72,468
in the nine month period ended December 31, 2016 from $1,604. This increase is
primarily due to travel and entertainment expenses of $57,378 in the nine month
period ended December 31, 2016 compared to $nil in 2015 and insurance expense
for the oilfield operations in Australia of $6,404 in the nine month period
ended December 31, 2016 compared to $nil in the same period of 2015. Management
fees were $194,105 in the nine month period ended December 31, 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 $360,961 in the nine
month period ended December 31, 2015 from $478,994 during the prior fiscal year
due to reduced legal fees relating to the Paltar Agreement and subsequent
amendments. Rent was $91,857 for the Denver office in the nine month period
ended December 31, 2016 compared to $nil in 2015. Filing fees and transfer
agent fees decreased to $13,514 in the nine month period ended December 31,
2016 compared to $14,009 in the nine month period ended December 31, 2015. Accounting
fees increased to $78,232 from $24,600 in the comparative nine month period.
The increase is primarily due to accounting fees incurred as a result of the
Paltar transaction.
Liquidity and
Financial Condition
Working Capital
|
December 31, 2016
|
March 31, 2016
|
Current Assets
|
$433,219
|
$1,334
|
Current Liabilities
|
$8,961,426
|
$11,140,733
|
Working Capital (Deficiency)
|
($8,528,207)
|
($11,139,399)
|
Cash Flows
|
Nine Months Ended December
31, 2016
|
Nine Months Ended December
31, 2015
|
Cash flows (used in) Operating
Activities
|
($828,538)
|
($801,154)
|
Cash flows provided by Investing
Activities
|
$1,400,000
|
$Nil
|
Cash flows provided by Financing
Activities
|
$82,100
|
$719,111
|
Effect of exchange rate changes on
cash
|
($261,462)
|
$43,586
|
Net increase (decrease) in cash
|
$392,100
|
($38,457)
|
Operating Activities
Net cash (used in) operating
activities was ($828,538) for the nine months ended December 31, 2016 compared
with net cash (used in) operating activities of ($801,154) for the same period
in 2015. The increase in cash (used in) operating activities is attributed to the
increased net loss for the nine months ending December 31, 2016. Net loss was
higher in the nine months ended December 31, 2016 primarily due to the
impairment of EP 468 which was cancelled effective December 30, 2016
Investing Activities
Net cash provided by investing activities
was $1,400,000 for the nine months ended December 31, 2016 and $nil for the nine
months ended December 31, 2015. The $1,400,000 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 nine month period ended December 31, 2016
compared to $719,111 in the nine month period ended December 31, 2015. This decrease
in financing activities is due to the six new loans entered into during the nine
months ended December 31, 2015 totalling $719,111 compared to three loans
totalling $82,100 during the nine months ended December 31, 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
December 31, 2016
, the principal balance of the loan was $584,000
and accrued interest payable of $93,420. 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 by February 28, 2017.
On August 5, 2015, we entered into a
promissory note with an officer and director, John Hislop for C$10,000 (US$7,448).
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
December 31, 2016
,
the principal balance of the loan was $7,448 and accrued interest payable of $1,573.
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
December 31, 2016
,
the principal balance of the loan was $10,000 and accrued interest payable of $2,026.
On September 10, 2015, we entered into
a promissory note with an officer and director, John Hislop for C$6,000 (US$4,469).
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
December
31, 2016
, the principal balance of the loan was $4,469 and accrued
interest payable of $878.
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
December
31, 2016
, the principal balance of the loan was $5,000 and accrued
interest payable of $951.
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
December 31,
2016
, the principal balance of the loan was $14,210 and accrued interest
payable of $1992. The loan was not repaid on September 30, 2016 and continues
to accrue interest at a rate of 10% 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 by February 28, 2017.
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 December 31, 2016, the principal balance of the loan
was $7,960 and accrued interest payable of $1,407.
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 December 31, 2016, the principal
balance of the loan was $100,000 and accrued interest payable of $12,206. The loan
was not repaid on November 30, 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 by February
28, 2017.
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
December 31, 2016
, the principal balance of
the loan was $188,483 and accrued interest payable of $16,096.
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
December 31, 2016
,
the principal balance of the loan was $25,000 and accrued interest payable of $1,854.
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
December 31, 2016
, the
principal balance of the loan was $34,000 and accrued interest payable of $2,286.
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
December 31, 2016
, the principal balance of the loan was $23,100
and accrued interest payable of $2,032.
On May 31, 2016, Nation Australia
entered into a promissory note with Paltar Petroleum Limited for AUD$24,322,501
(US$17,582,736). 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
December 31, 2016
, the
principal balance of the loan was $17,582,736 and accrued interest payable was
$517,848.
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 nine months ended December 31, 2016 totaled ($828,538) versus
cash (used in) operating activities of ($801,154) in the nine months ended December
31, 2015. Cash balances were $393,434 and $1,334 as of December 31, 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 December 31, 2016, we had cash of $393,434.
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 nine months ended
December 31, 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 nine months
ended December 31, 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 December 31, 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
None
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 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).
10.2 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).
10.3 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).
10.4 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).
10.5 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).
10.6 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).
10.7 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).
10.8 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).
10.9 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).
10.10 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).
10.11 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).
10.12
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).
10.13 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).
10.14 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).
10.15 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).
10.16 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).
10.17 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).
10.18 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).
10.19 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).
10.20 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).
10.21 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).
10.22 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).
10.23 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).
10.24 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).
10.25 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).
10.26 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).
10.27 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).
10.28 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).
10.29 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).
10.30 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).
10.31 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).
10.32 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).
10.33 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).
10.34 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).
10.35 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).
10.36 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).
10.37 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).
10.38 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).
10.39 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).
10.40 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).
10.41 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).
10.42 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).
10.43 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).
10.44 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).
10.45 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).
10.46 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).
10.47 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.INS*
XBRL INSTANCE DOCUMENT
101.SCH* XBRL
TAXONOMY EXTENSION SCHEMA
101.CAL* XBRL
TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF* XBRL
TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB* XBRL
TAXONOMY EXTENSION LABEL LINKBASE
101.PRE* XBRL
TAXONOMY EXTENSION PRESENTATION LINKBASE
*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:
February 14, 2017
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:
February 14, 2017
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 December
31, 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:
February
14, 2017
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)