Item 1. Business
Company Overview
We are currently engaged in the business of identifying, evaluating, and qualifying potential natural gas and oil wells; investing in interests in those wells with the goal of producing commercially marketable quantities of oil and natural gas. We have recently expanded our business model to include the exploration of mineral claims for rare earth minerals.
The Hayter Well
We presently hold a 50% working interest of the County Line Energy Corp. interest in the Hayter Well located in Alberta, Canada.
County Line Energy Corp. is the operator of the Hayter well. The Hayter well has been cased and cemented in anticipation of the completion of the drill program. County Line plans to enter the Hayter well, perforate the potential pay zones and conduct regular production testing of the zones. Should the testing confirm adequate oil reserves and potential economic flow rates, County Line is expected to install adequate pumping equipment and other surface facilities in anticipation of the projected flow rates. Currently, there are no known oil reserves on the Hayter well.
We have not incurred any development costs on the Hayter Well for the year ended November 30, 2011. We do not anticipate immediate attention to this project, as our time and effort currently is focused on our Zoro 1 Mineral Claim.
Competition
The oil and gas industry is very competitive. We compete with numerous individuals and companies, including many major oil and gas companies, which have substantially greater technical, financial and operational resources and staffs. Accordingly, there is a high degree of competition for desirable oil and gas interests, suitable properties for drilling operations and necessary drilling equipment, as well as for access to funds. We cannot predict if the necessary funds can be raised or that any projected work will be completed.
Compliance with Government Regulation
We are required to obtain licenses and permits from various governmental authorities. We anticipate that we will be able to obtain all necessary licenses and permits to carry on the activities which we intend to conduct, and that we intend to comply in all material respects with the terms of such licenses and permits.
If we proceed with the development of our current and future properties, we anticipate that we will be subject to increased governmental regulation. Matters subject to regulation include discharge permits for drilling operations, drilling and abandonment bonds, reports concerning operations, the spacing of wells, and pooling of properties and taxation. From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil and gas wells below actual production capacity in order to conserve supplies of oil and gas. The production, handling, storage, transportation and disposal of oil and gas, byproducts thereof, and other substances and materials produced or used in connection with oil and gas operations are also subject to regulation under federal, state, local and foreign laws and regulations relating primarily to the protection of human health and the environment. As we have not proceeded to the development of our properties, we have not incurred any expenditures related to complying with such laws, or for remediation of existing environmental contamination. The requirements imposed by such laws and regulations are frequently changed and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations.
Zoro 1 Mineral Claim
On July 6, 2010, we entered into an option agreement with Dalton Dupasquier, pursuant to which Mr. Dupasquier has granted to us the sole and exclusive right and option, exercisable in the manner described below, to acquire a 100% net undivided interest in the property known as the Zoro 1 mineral claim, located near the East Shore of Wekusko Lake in west-central Manitoba, Canada.
We have no rights to the Zoro 1 mineral claim unless and until we exercise the option.
We acquired the option to explore the potential for deposits of lithium on the Zoro 1 mineral claim. According to the United States Geological Survey (USGS), global end-use markets for lithium include ceramics and glass, batteries, lubricating greases, air treatment, continuous casting and primary aluminum production. Batteries, especially rechargeable batteries, are the market for lithium compounds with the largest growth potential as major automobile companies pursue the development of lithium batteries to power hybrid electric cars.
In September 2009, we received a Technical Report on the Zoro 1 mineral claim. The report was authored by Mr. Mark Fedikow, PhD., P.Eng. of Mount Morgan Resources Ltd. The objectives of the report were to summarize the geology, review the historic ore reserves, and economic potential of the spodumene-bearing dykes delineated on the property and their surrounding geological environment.
An historic reserve estimate for Lithium oxide (Li2O) has been calculated on limited drilling on a single dyke on the Zoro 1 mineral claim. Drill indicated spodumene reserves coupled with data from trenching have been calculated with a total undiluted tonnage given as 1,727,550 at 0.945% Li2O. However, the historic data upon which the resource of 1,727,550 tons grading 0.945% Li2O was based is not dispositive. When the historic work was done, there was no “Qualified Person” in place, assay labs were not ISO Certified and insufficient drilling was undertaken to define the resource. It therefore became necessary to conduct more exploration activities to support the limited historic data available.
There are seven zoned pegmatite dykes on the Zoro 1 mineral claim. An exploration team explored the main dyke, located the additional seven trenches that had historically been noted on the Zoro 1 claim and produced a geologic map of each trench. Once areas of interest were located, the crew cleaned out the trenches and used a pick and shovel method to look at rocks to find pegmatite. They then took channel samples using a rock saw on historic trenches hosting pegmatite.
While exploring the main and additional seven dykes on the project area the crew identified several additional trenches that had not been noted in previous exploration programs. These findings suggest a potential for a greater amount of resource to be spread across the property, and give further encouragement for more detailed exploration.
Altogether 170 channel samples were sent for assay at Activation Laboratories in Ancaster, Ontario. The samples were analyzed to confirm historical lithium assays, and to assess the pegmatite for rare earth elements, including gold, rubidium, niobium, tantalum, tin, tungsten, and beryllium, all of which add to the prospectivity and economic viability of the Zoro 1 property.
Analysis of the channel samples collected from historic trenches in the pegmatite target has confirmed that a significant zone of lithium mineralization is present on the Zoro 1 claim. Analytical results are summarized in Table 1, which is attached to this annual report as Exhibit 99.2.
With the current and future importance of lithium and the mineralized zone at Zoro 1, we are now preparing for the next phase of our exploration program. This phase, which will require a drill program, will assess the third dimension of the deposit and its historic resource, and determine the economic viability of mining the resource.
We plan to continue to explore the Zoro 1 mineral claim using the Exploration Recommendations outlined by Dr. Fedikow in the NI 43-101 Technical Report, which are set forth below along with a table of recommended expenditures.
Initially, the Zoro 1 pegmatites should be the focus of the following exploration approaches. These are as follows:
1. Trench rehabilitation including overburden stripping and washing.
2. Geologic mapping of individual trenches at a scale of 1:20.
3. Detailed geological mapping at a scale appropriate to document relevant features on the property. This will include the seven pegmatite dykes, trench locations, historic drill collars and geological attributes of the dykes. It is likely this mapping will be undertaken at a scale of 1:1000.
4. Trench and channel sampling should be undertaken to confirm historic assay results.
5. Re-log historic drill core as possible.
6. A grid should be re-established on the property and an attempt made to tie-in the collar locations of all previous drilling. This information would help to structure new diamond drill programs. Initially, an attempt should be made to re-construct the historic grid although it is unlikely this will be possible given the length of time that has elapsed since the grid was first cut.
7. The geochemistry of the spodumene with particular relevance to iron content should be evaluated. Albite-rich portions of the pegmatite should be assayed for tantalum, tin, and niobium values. Altered and mineralized wallrocks should be assayed for gold particularly where the mineral assemblage of pyrrhotite, chalcopyrite and arsenopyrite are observed. Any subsequent drill program should be accompanied by a multi-element geochemical approach to assaying core including assays for gold. This will be followed up with assays for specific metals that may be present in the pegmatite dykes. The new assay program should be accompanied by a quality assurance and quality control program.
8. Diamond drilling should initially target Dyke No. 1 with the aim of ascertaining the physical size and extent of this dyke. Additional drilling will be necessary in the vicinity of the six remaining known dykes as well as any additional lithium-bearing pegmatite uncovered during exploration on the remainder of the property.
Anticipated Cash Requirements
We estimate that our general operating expenses for the next twelve month period to be as follows:
To date, we have had negative cash flows from operations and we have been dependent on sales of our equity securities and debt financing to meet our cash requirements. We expect this situation to continue for the foreseeable future. We anticipate that we will have negative cash flows during the next twelve month period.
Competition
The mineral exploration industry, in general, is intensely competitive and even if commercial quantities of reserves are discovered, a ready market may not exist for the sale of the reserves.
Most companies operating in this industry are more established and have greater resources to engage in the production of mineral claims. Our resources at the present time are limited. We may exhaust all of our resources and be unable to complete full exploration of our claim. There is also significant competition to retain qualified personnel to assist in conducting mineral exploration activities. If a commercially viable deposit is found to exist and we are unable to retain additional qualified personnel, we may be unable to enter into production and achieve profitable operations. These factors set forth above could inhibit our ability to compete with other companies in the industry and enter into production of the mineral claim if a commercial viable deposit is found to exist.
Numerous factors beyond our control may affect the marketability of any substances discovered. These factors include market fluctuations, the proximity and capacity of natural resource markets and processing equipment, government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in not receiving an adequate return on invested capital.
Compliance with Government Regulation
We are required to obtain licenses and permits from various governmental authorities. These permits or licenses may include water and surface use permits, occupation permits, fire permits, and timber permits. Prior to being issued the various permits or licenses, the applicant must file a detailed work plan with the applicable government agency. Permits are issued on the basis of the work plan submitted and approved by the governing agency. Additional work on a given mineral property or a significant change in the nature of the work to be completed would require an amendment to the original permit or license.
As part of the permit or licensing requirements, the applicant may be required to post an environmental reclamation bond in respect to the work to be carried out on the mineral property. The amount of such bond is determined by the amount and nature of the work proposed by the applicant. The amount of a bond may also be increased with increased levels of development on the property.
We anticipate that we will be able to obtain all necessary licenses and permits to carry on the activities which we intend to conduct, and that we intend to comply in all material respects with the terms of such licenses and permits.
On January 18, 2012, we received a call from the Natural Resource Officer in Snow Lake and were informed that our drill permit has been approved. We believe this is excellent news as we are able to continue with the next phase of our work program.
Employees
Currently our only employee is Tim DeHerrera. We do not expect any material changes in the number of employees over the next twelve month period. We anticipate that we will be conducting most of our business through agreements with consultants and third parties.
Subsidiaries
We have two wholly owned subsidiaries, FRC Exploration Ltd. (a British Columbia Corporation) and Nuance Exploration Ltd. (a British Columbia Corporation).
Item 1A.
Item 1A. Risk Factors.
A smaller reporting company is not required to provide the information required by this Item.
Item 1B.
Item 1B. Unresolved Staff Comments
A smaller reporting company is not required to provide the information required by this Item.
Item 2.
Item 2. Properties
Executive Offices
Our executive offices are located at 1400 16th Street, Suite 400, Denver, CO	 80202. We lease our head office in Denver Colorado at a rate of $119.00 month. Our head office is a business center. Our current premises are adequate for our current operations and we do not anticipate that we will require additional premises in the foreseeable future.
The Hayter Well
Purchase of Interest in the Hayter Well
On August 1, 2006, County Line Energy Corp. (“County Line”) signed a participation agreement with Black Creek Resources Ltd. (“BCR”) in which County Line acquired the right to become the operator and drill the Hayter well (10D Hayter 10-8-40-1 W4M) located in Alberta, Canada. In order to exercise that interest and acquire the rights to drill the Hayter well, County Line agreed to pay 100% of all costs associated with the seismic option agreement and pay 100% of the funds required to purchase rights to any existing seismic on the property which may be for sale and or shoot additional 2D and 3D on the property as required, pursuant to standard industry costs and practices.
Pursuant to a Participation Agreement dated December 21, 2006 between Black Creek Resources Ltd (“BCR”) and Nuance Exploration Ltd. (“NEL”), a wholly owned subsidiary of the Company, we acquired a 100% ownership in the interpretation of 3D seismic data covering four sections of certain land located in the province of Alberta, Canada by paying $82,650 for the purpose of acquiring and interpreting the seismic data. On October 15, 2007, prior to the evaluation of the 3D seismic data, County Line sold to BCR its 100% interest in the subject property and received as consideration a non-interest bearing promissory note for $111,144 (CDN$110,000) to be repaid by November 30, 2007.
On November 30, 2007, County Line did not repay the amounts owing pursuant to the promissory note and NEL and County Line entered into a Participation Agreement whereby NEL accepted a 20% interest of the Grantor’s working interest in the County Line 10D Hayter 10-8-40-1 W4M well as full and final settlement of the promissory note. Pursuant to the terms of the Participation agreement NEL agreed to assume 20% of all revenues, costs and expenses associated with the project.
During our first fiscal quarter of 2009 we advanced $23,938 (CDN$29,000) to County Line Energy Corp for costs and expenses associated with the Hayter Well as an unsecured loan. On October 16, 2009 we entered into an amendment to our participation agreement with County Line pursuant to which we acquired an additional 30% working interest in the Hayter Well in consideration of a release by Force from all amounts owed by County Line to Force. Following our entry into the amended participation agreement we now hold a 50% working interest in the County Line Energy Corp. interest in the Hayter Well.
We have not incurred any development costs on the Hayter Well for the year ended November 30, 2011.
Location of Hayter Well
Force Energy Corp. has a 50% working interest of the County Line Energy Corp. interest in the Hayter Well (10D Hayter 10-8-40-1 W4M) located in Alberta, Canada. The well was spudded in January 2007 and drilled to a total depth. The well logs revealed a gas zone of 4 to 5 meters of thickness in a shallow zone and a heavy oil pay zone of 2 meters of thickness in the target Dina Sand zone.
County Line completed a $650,000 3D seismic program covering nine sections of land in pursuit of a potential multi well heavy oil drilling opportunity. The geological model was based on interpretation from a previous well, which produced 16,000 barrels of heavy oil. The seismic program was designed to determine whether the structure found in this well existed to a larger extent on the subject property. The 3D seismic revealed an extremely large anomaly with similar characteristics. The nature of this large anomaly suggested that a multi well drilling opportunity might exist.
County Line Energy Corp. is the operator of the Hayter well. The Hayter well has been cased and cemented in anticipation of the completion of the drill program. County Line plans to enter the Hayter well, perforate the potential pay zone(s) and conduct regular production testing of the zone(s). Should the testing confirm adequate oil reserves and potential economic flow rates, County Line is expected to install adequate pumping equipment and other surface facilities in anticipation of the projected flow rates. Currently, there are no known oil reserves on the Hayter well.
Oil and Gas Properties and Wells
On March 9, 2009, Force received a report on reserves data for the Hayter Well prepared by its independent engineers, Chapman Petroleum Engineering Ltd.
The following table sets forth the number of wells in which the Company held a working interest as at November 30, 2009:
The Company has not since the beginning of its most recently completed fiscal year, filed any annual estimates of proved oil and gas reserves with any federal agencies. As at November 30, 2011, the 50% working interest of the Hayter Well was recorded at $135,427.
Zoro 1 Mineral Claim
Property Description and Access
The Zoro 1 property is located near the east shore of Wekusko Lake (Figure 4.1) in west-central Manitoba, approximately 25 km east of the mining community of Snow Lake, 249 km southeast of Thompson and 571 km north-northeast of Winnipeg. Provincial Road 393 occurs 23 km to the northwest. The pegmatite dykes are located northwest of the northwest corner of a small pot hole Lake east of the east shore of Wekusko Lake. The small historic gold mining community of Herb Lake is located about 10 km southwest of the property.
Access to the property is by boat from Bartlett’s Landing accessed from Provincial Road 392 and then by All Terrain Vehicle to the property along a trail and/or by helicopter from Snow Lake, Manitoba. The nearest road link is a seasonal road on the east side of Wekusko Lake that accesses the village of Herb Lake Landing and Provincial Highway 392 to the south. A rail link is located at Wekusko siding approximately 20 km south of Herb Lake Landing.
The property is located within NTS map sheet 63J/13SE (latitude: 54⁰51.27’ and longitude: 99⁰38.46’; Township 68N; Range 15WPM).
The Zoro 1 property is covered by one claim, the Zoro 1 (P1993F). The property is 52 hectares in area and was recorded March 14, 1994, under the name of Dalton Bruce Dupasquier. The claim is in good standing.
History of the Zoro 1 mineral claim
The pegmatite dykes are located on the north side of a small lake between Roberts Lake and the south end of Crowduck Bay. Early in 1953, Cs No. 3-10, 12 (P 26973-80, 82), S.R. No. 1-6 (P 7877-82) and Linda 1 (P 26983) were staked by Mrs. Johanna Stoltz, Eric Stoltz, Carl Stoltz and Edwin Stoltz, and Key No. 1-4, 8-14 (P 27159-62, 27226-27, 27164-68) were staked by John Tikkanen, Hjalmar Peterson, and Loren Fredeen. These were cancelled the following year.
Lit Nos. 11-5 (P 31758-62) was staked by J.J. Johnson in 1954. In 1955 Lit Nos. 6-1l8 (P 35014-26) were added by J.A. Syme. All the Lit claims were assigned to Green Bay Uranium Limited in 1956 which changed its name to Green Bay Mining & Exploration Ltd. Early in 1956, before drilling commenced, samples containing more than 2% Li2O and containing no contaminating accessory lithium minerals and no high iron content were reported. A shipment of 136 kg (300 lbs.) of spodumene was sent to Ottawa for testing in 1956. This sample assayed 1.19% Li2O, with minor NbO5. Ore dressing tests concluded that good liberation and separation could not be effected.
Over 6096 m (20 000 ft.) of diamond drilling was done on Lit No. 1-4, with at least 3048 m (10 000 ft.) of this on the main dyke. Results of the drilling on dykes 1, 3, 5 and 7 were reported to be "promising". Assays of 2.42% to 7.28% Li2O were reported from Dyke 5. Dyke 5 was apparently 305 m long x 12 m wide (1000 x 40 ft.); Dyke No. 7, over 457 m x 24 m (1500 x 80 ft.). Several of the holes went deeper than 305 m (1000 ft.). Drilling on Lit 10, 16 and 17 amounted to 1950 m (6399 ft.). Gold was also found on the property, with a 3.3 kg (7.25 lb.) sample across 3.4 m (11 ft.) yielding $5.95 gold at $35.00 equating to approximately 0.17 ounces per ton gold.
Lithium tonnage estimates vary. An unsubstantiated visual estimate in September 1956 suggested up to 9-11 million tonnes (10-12 million tons) of Li2O occur on the entire group. In mid-March the main dyke was estimated to contain 18 million tonnes (2 million tons) grading 1.4% Li2O to a depth of 305 m (1000 ft.) in the main dyke. A reserve estimate of 1 815 000 tonnes grading 1.4% Li2O was 15 reported by Bannatyne (1985). In 1957, the estimate was revised to 1.72 million tonnes averaging 1.3% Li2O or 2.72 million tonnes (3.0 million tons) at l.0% Li2O in the main dyke (Mulligan, 1957a, 1957b). By March 1958, 12 different tonnage estimates had been made. Also by that time, a permanent camp and a 4-mile road into the property had been built. Plans for a heavy media separation plant on the property were being prepared by the Lummus Co. of New York together with Knowles Associates and the Colorado School of Mines.
No further work on the property is known since 1957. The claims were assigned to J.A. Syme in 1963. The Zoro 1 claim is currently listed under the name of Dalton Bruce Dupasquier.
Reserve Estimate
An historic reserve estimate for Li2O has been calculated on limited drilling on a single dyke on the Zoro 1 mineral claim. Drill indicated spodumene reserves coupled with data from trenching have been calculated with a total undiluted tonnage given as 1,727,550 at 0.945% Li2O.
The Zoro 1 mineral claim hosts multiple rare metal spodumene pegmatite dykes. The main mass of spodumene-bearing zones exposed in seven main trenches has not been fully delineated and a recommended exploration program will assess the geological characteristics of the dykes on the property. Trench rehabilitation, new sampling from the trenches and diamond drilling and a thorough assay/analytical approach accompanied by a quality assurance and quality control program is recommended. Rare and precious metal contents in the pegmatite, not considered in the historic exploration and development program, can also be assessed in this manner.
Item 3.
Item 3. Legal Proceedings
We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
Item 4.
Item 4. Mine Safety Disclosures
N/A
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is currently quoted on the OTC Bulletin Board (“OTCBB”), which is sponsored by FINRA. The OTCBB is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current "bids" and "asks", as well as volume information. Our shares are quoted on the OTCBB under the symbol “FORC.”
The following table sets forth the range of high and low bid quotations for our common stock for each of the periods indicated as reported by the OTCBB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
Holders of Our Common Stock
As of January 24, 2012, we had 54,937,267 shares of our common stock issued and outstanding, held by twenty eight (28) shareholders of record.
Dividends
There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:
1. we would not be able to pay our debts as they become due in the usual course of business, or;
2. our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.
Recent Sales of Unregistered Securities
The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933 during the reporting period.
On December 1, 2010, we issued 200,000 common shares for aggregate proceeds of $50,000.
On June 3, 2011 we issued 1,000,000 shares of common stock pursuant to the Zoro 1 mineral property agreement.
On June 7, 2011 and July 18, 2011, we issued 1,000,000 and 1,500,000 shares of common stock to our President pursuant to a new management contract.
The above issuances were made pursuant to Regulation S of the 1933 Act. Each purchaser represented to us that the purchaser was a Non-US Person as defined in Regulation S. We did not engage in a distribution of this offering in the United States. Each purchaser represented their intention to acquire the securities for investment only and not with a view toward distribution. All purchasers were given adequate access to sufficient information about us to make an informed investment decision. None of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved. The selling stockholders named in this prospectus include all of the purchasers who purchased shares pursuant to this Regulation S offering.
Securities Authorized for Issuance under Equity Compensation Plans
We do not have any equity compensation plans.
Item 6.
Item 6. Selected Financial Data
A smaller reporting company is not required to provide the information required by this Item.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Results of Operations
The following summary of our results of operations should be read in conjunction with our audited financial statements for the year ended November 30, 2010 which are included herein.
We have not earned any revenues since our inception. We will not be able to earn revenue unless we are able to locate oil and gas potential on our well or exploit minerals on our mineral claim. There is no assurance that we will be able to accomplish our business.
Our operating results for the years ended November 30, 2011 and 2010 are summarized as follows:
Revenues
We have not earned any revenues to date, and do not anticipate earning revenues until such time as we are able to locate oil and gas potential on our well or exploit minerals on our mineral claim. All of our oil and gas prospects are undeveloped. We anticipate that we will have to address the cash shortfall through additional equity financings in the future. We can offer no assurance, however, that such financings will be available on terms acceptable to our company. We also intend to generate additional funds in the future through increased output following our company’s plan to increase the number of wells on our producing properties.
Expenses
Our expenses for the years ended November 30, 2011 and 2010 are outlined in the table below:
Our expenses decreased by approximately half in fiscal year 2011 as compared to fiscal year 2010. The decrease in our expenses for the year ended November 30, 2011 was due mainly to decreased Management Fees and Write-off costs associated with writing off oil and gas properties.
Liquidity And Capital Resources
We anticipate that we will incur approximately $873,160 for operating expenses, including, legal, accounting and audit expenses associated with our reporting requirements as a public company under the Exchange Act during the next twelve months.
Cash Used In Operating Activities
We used cash in operating activities in the amount of $184,623 during the year ended November 30, 2011. Our net loss of $509,720 for the year ended November 30, 2011 was the primary reason for our negative operating cash flow.
Cash from Financing Activities
We generated $201,875 in cash from financing activities during the year ended November 30, 2011. Most of our cash from financing activities, $170,000, resulted from cash received from convertible notes that we issued during the year. These convertible notes are unsecured, bear interest at 8% per annum, and are convertible into shares of our common stock at roughly 50% of the market price of our common stock.
We will depend almost exclusively on outside capital to pay for the continued exploration and development of our properties. Such outside capital may include the sale of additional stock and/or commercial borrowing. Capital may not continue to be available if necessary to meet these continuing development costs or, if the capital is available, that it will be on terms acceptable to us. The issuance of additional equity securities by us would 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.
If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be unable to continue our business and as a result may be required to scale back or cease operations for our business, the result of which would be that our stockholders would lose some or all of their investment.
Off Balance Sheet Arrangements
As of November 30, 2011, there were no off balance sheet arrangements.
Going Concern
At November 30, 2011, we have a working capital deficit of $299,854. We have yet to achieve profitable operations, have accumulated losses of $2,899,464 since our inception and expect to incur further losses in the development of our business, all of which casts substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that we will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available or on acceptable terms, if at all.
Critical Accounting Policies
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and are stated in US dollars. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates, which may have been made using careful judgment. Actual results may vary from these estimates. The financial statements have, in management’s opinion, been properly prepared within the framework of the significant accounting policies summarized below:
Development Stage Activities
The Company is a development exploration stage company. All losses accumulated since inception have been considered as part of the Company’s development stage activities. The Company is subject to several categories of risk associated with its development stage activities. Natural gas and oil exploration and production is a speculative business, and involves a high degree of risk. Among the factors that have a direct bearing on the Company’s prospects are uncertainties inherent in estimating natural gas and oil reserves, future hydrocarbon production, and cash flows, particularly with respect to wells that have not been fully tested and with wells having limited production histories; access to additional capital; changes in the price of natural gas and oil; availability and cost of services and equipment; and the presence of competitors with greater financial resources and capacity.
Principles of Consolidation
These consolidated financial statements include the accounts of the Force Energy Corp and its wholly-owned subsidiaries, FRC Exploration Ltd. (a BC Corporation) (“FRC”) and Nuance Exploration Ltd. (a BC Corporation) (“NEL”). All significant inter-company balances and transactions have been eliminated.
Foreign Currency Translation
The Company’s functional currency is the Canadian dollar as substantially all of the Company’s operations are in Canada. The Company uses the United States dollar as its reporting currency for consistency with registrants of the Securities and Exchange Commission (“SEC”).
Assets and liabilities denominated in a foreign currency are translated at the exchange rate in effect at the balance sheet date and share capital accounts are translated at historical rates. Income statement accounts are translated at the average rates of exchange prevailing during the period. Translation adjustments from the use of different exchange rates from period to period are included in the Accumulated Other Comprehensive Income account in Stockholder’s Equity, if applicable. Transactions undertaken in currencies other than the functional currency of the entity are translated using the exchange rate in effect as of the transaction date. Any exchange gains and losses are included in the Statement of Operations and Comprehensive Loss.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided on the straight-line method over the estimated useful lives of the assets, which are generally 2 to 5 years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense).
Oil and Gas Properties
The Company follows the full cost method of accounting for oil and gas operations whereby all costs of exploring for and developing oil and gas reserves are initially capitalized on a country-by-country (cost centre) basis. Such costs include land acquisition costs, geological and geophysical expenses, carrying charges on non-producing properties, costs of drilling and overhead charges directly related to acquisition and exploration activities.
Costs capitalized, together with the costs of production equipment, are depleted and amortized on the unit-of-production method based on the estimated gross proved reserves. Petroleum products and reserves are converted to a common unit of measure, using 6 MCF of natural gas to one barrel of oil.
Costs of acquiring and evaluating unproved properties are initially excluded from depletion calculations. These unevaluated properties are assessed periodically to ascertain whether impairment has occurred. When proved reserves are assigned or the property is considered to be impaired, the cost of the property or the amount of the impairment is added to costs subject to depletion calculations.
If capitalized costs, less related accumulated amortization and deferred income taxes, exceed the “full cost ceiling” the excess is expensed in the period such excess occurs. The “full cost ceiling” is determined based on the present value of estimated future net revenues attributed to proved reserves, using current prices less estimated future expenditures plus the lower of cost and fair value of unproved properties within the cost centre.
Proceeds from a sale of petroleum and natural gas properties are applied against capitalized costs, with no gain or loss recognized, unless such a sale would alter the relationship between capitalized costs and proved reserves of oil and gas attributable to a cost centre.
Impairment of Long-lived Assets
The carrying value of intangible assets and other long-lived assets are reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value. Impairment on the properties with unproved reserves is evaluated by considering criteria such as future drilling plans for the properties, the results of geographic and geologic data related to the unproved properties and the remaining term of the property leases.
Asset Retirement Obligations
Asset retirement obligations (“ARO”) associated with the retirement of a tangible long-lived asset, including natural gas and oil properties, are recognized as liabilities in the period in which it is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated assets. The cost of tangible long-lived assets, including the initially recognized ARO, is depleted, such that the cost of the ARO is recognized over the useful life of the assets. The ARO is recorded at fair value, and accretion expense is recognized over time as the discounted fair value is accreted to the expected settlement value. The fair value of the ARO is measured using expected future cash flow, discounted at the Company’s credit-adjusted risk-free interest rate.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry-forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.
Basic Loss per Share
Basic loss per share is computed using the weighted average number of shares outstanding during the period. Diluted earnings per share are computed similar to basic income per share except that the denominator is increased to include the number of common stock equivalents. Common stock equivalents represent the dilutive effect of the assumed exercise of any outstanding stock equivalents, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation date. There are no common stock equivalents outstanding and, thus, diluted and basic loss per share are the same.
Comprehensive Income
The Company is required to report comprehensive income, which includes net loss as well as changes in equity from non-owner sources.
Recently Issued Accounting Pronouncements
On December 1, 2009 the Company adopted the guidance in Accounting Standards Codification (“ASC”) 805, “Business Combinations”. ASC 805 establishes principles and requirements for how the acquirer in a business combination (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquired business; (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The adoption of this statement had no effect on the Company’s reported financial position or results of operations.
On December 1, 2009, the Company adopted the newly ratified guidance which is part of ASC 815-40, “Contracts in Entity’s Own Equity”. ASC 815-40 provides guidance for determining whether an equity-linked financial instrument (or embedded feature) is indexed to an entity’s own stock. The adoption of this statement had no effect on the Company’s reported financial position or results of operations.
On December 1, 2009, the Company became subject to revised reporting requirements relating to oil and natural gas reserves that a company holds, which were prescribed by the SEC. Included in the new rule entitled -Modernization of Oil and Gas Reporting Requirements”, are the following changes: 1) permitting use of new technologies to determine proved reserves, if those technologies have been demonstrated empirically to lead to reliable conclusions about reserve volumes; 2) enabling companies to additionally disclose their probable and possible reserves to investors, in addition to their proved reserves; 3) allowing previously excluded resources, such as oil sands, to be classified as oil and natural gas reserves rather than mining reserves; 4) requiring companies to report the independence and qualifications of a preparer or auditor, based on current Society of Petroleum Engineers criteria; 5) requiring the filing of reports for companies that rely on a third party to prepare reserve estimates or conduct a reserve audit; and 6) requiring companies to report oil and natural gas reserves using an average price based upon the prior 12-month period, rather than year-end prices. The new reporting requirements are applicable to registration statements filed on or after January 1, 2010, and for annual reports on Form 10K for fiscal years ending on or after December 31, 2009. As at August 31, 2010, the Company has no proved or probable reserves and is therefore not subject to the reporting requirement. The adoption of these reporting requirements will result in increased disclosures to the financial statements once the Company has proved and probable reserves.
On December 1, 2009 Accounting Standards Update (ASU) No. 2010-03 - “Oil and Gas Reserve Estimation and Disclosures.” became effective for the Company. The guidance requires additional disclosures to be made relating to current oil and gas reserve estimation. The adoption of these reporting requirements will result in increased disclosures to the financial statements once the Company has proved and probable reserves.
In April 2010, the FASB issued ASU No. 2010-17, "Revenue Recognition - Milestone Method (Topic 605): Milestone Method of Revenue Recognition" (codified within ASC 605 - Revenue Recognition). ASU 2010-17 provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. ASU 2010-17 is effective for interim and annual periods beginning after June 15, 2010. The adoption of this statement had no effect on the Company’s reported financial position or results of operations.
In March 2010, the FASB issued ASU No. 2010-11, "Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives" (codified within ASC 815 - Derivatives and Hedging). ASU 2010-11 improves disclosures originally required under SFAS No. 161. ASU 2010-11 is effective for interim and annual periods beginning after June 15, 2010. The adoption of this statement had no effect on the Company’s reported financial position or results of operations.
In May 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-19 (ASU 2010-19), Foreign Currency (Topic 830): Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The amendments in this Update are effective as of the announcement date of March 18, 2010. The Company does not expect the provisions of ASU 2010-19 to have any effect on the Company’s reported financial position or results of operations.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information required by this Item.
Item 8.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements Required by Article 8 of Regulation S-X:
Audited Financial Statements:
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To: The Board of Directors and Shareholders
Force Energy Corporation
Denver, Colorado
I have audited the accompanying balance sheet of Force Energy Corporation as of November 30, 2011 and 2010 and the related statements of operations, of shareholders’ equity and of cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, based on my audit, the financial statements referred to above present fairly, in all material respects, the financial position of Force Energy Corporation as of November 30, 2011 and 2010 and the results of its operations and its cash flows for the years then ended in conformity with United States generally accepted accounting principles.
The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company as at November 30, 2011 had not established an ongoing source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. These factors raise substantial doubt concerning the Company’s ability to continue as a going concern. Its ability to continue as a going concern is dependent on the successful stimulation of sales in order to fund operating losses and become profitable. If the Company is unable to make it profitable, the Company could be forced to cease development of operations. Management cannot provide any assurances that the Company will be successful in its operation. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern
The Company has determined that it is not required to have, nor was I engaged to perform, an audit of the effectiveness of its documented internal controls over financial reporting.
/s/ John Kinross-Kennedy
John Kinross-Kennedy
Certified Public Accountant
Irvine, California
February 20, 2012
FORCE ENERGY CORP.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
November 30, 2011 and 2010
(Stated in US Dollars)
Nature of Operations and Ability to Continue as a Going Concern - Note 1
See accompanying notes to the Financial Statements
FORCE ENERGY CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
for the years ended November 30, 2011 and 2010 and
for the period from November 1, 2006 (Date of Inception)
to November 30, 2011
(Stated in US Dollars)
See accompanying notes to the Financial Statements
FORCE ENERGY CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended November 30, 2011 and 2010 and
for the period from November 1, 2006 (Date of Inception)
to November 30, 2011
(Stated in US Dollars)
Supplemental Cash Flow Information - Note 16
See accompanying notes to the Financial Statements
FORCE ENERGY CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
for the period from November 1, 2006 (Date of Inception) to November 30, 2011
(Stated in US Dollars)
(cont’d)
See accompanying notes to the Financial Statements
FORCE ENERGY CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
for the period from November 1, 2006 (Date of Inception) to November 30, 2011
(Stated in US Dollars)
See accompanying notes to the Financial Statements
FORCE ENERGY CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2011,
(Stated in US Dollars)
Note 1	Nature of Operations and Ability to Continue as a Going Concern
The Company was incorporated in the state of Nevada, United States of America on November 1, 2006. The Company was formed for the purpose of acquiring exploration and development stage natural resource properties. The Company’s year-end is November 30.
Effective December 28, 2006, the Board of Directors authorized a 3 for 1 forward stock split on the common shares. The authorized number of common shares increased from 90,000,000 to 270,000,000 common shares with a par value of $0.001. All references in the accompanying financial statements to the number of common shares have been restated to reflect the forward stock split.
On February 12, 2008, the Company acquired 100% of the common shares of Force Energy Corp. an inactive company incorporated in Nevada on July 19, 2005, for $100, to effect a name change of the Company. On February 12, 2008, the Company and Force Energy Corp filed articles of merger with the Secretary of State of Nevada to effectuate a merger between the two companies. The surviving entity of the merger was the Company. Immediately thereafter the Company changed its name to Force Energy Corp.
These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next twelve months. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At November 30. 2011, the Company has a working capital deficit of $299,854. The Company has yet to achieve profitable operations, has accumulated losses of $2,899,464 since its inception and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available or on acceptable terms, if at all.
Note 2	Summary of Significant Accounting Policies
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and are stated in US dollars. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates, which may have been made using careful judgment. Actual results may vary from these estimates.
The financial statements have, in management’s opinion, been properly prepared within the framework of the significant accounting policies summarized below:
Note 2	Summary of Significant Accounting Policies
Development Stage Activities
The Company is a development exploration stage company. All losses accumulated since inception have been considered as part of the Company’s development stage activities.
The Company is subject to several categories of risk associated with its development stage activities. Mineral exploration and natural gas and oil exploration and production is a speculative business, and involves a high degree of risk. Many factors have a direct bearing on the Company’s prospects and there are inherent uncertainties in these activites. Mineral exploration is dependent upon finding an ore body that is economic to develop. Uncertainties that exist with nNatural gas exploration include estimating natural gas and oil reserves, future hydrocarbon production, and cash flows, particularly with respect to wells that have not been fully tested and with wells having limited production histories; access to additional capital; changes in the price of natural gas and oil; availability and cost of services and equipment; and the presence of competitors with greater financial resources and capacity.
Principles of Consolidation
These consolidated financial statements include the accounts of the Force Energy Corp and its wholly-owned subsidiaries, FRC Exploration Ltd. (a BC Corporation) (“FRC”) and Nuance Exploration Ltd. (a BC Corporation) (“NEL”). All significant inter-company balances and transactions have been eliminated.
Foreign Currency Translation
The Company’s functional currency is the Canadian dollar as substantially all of the Company’s operations are in Canada. The Company uses the United States dollar as its reporting currency for consistency with registrants of the Securities and Exchange Commission (“SEC”).
Assets and liabilities denominated in a foreign currency are translated at the exchange rate in effect at the balance sheet date and share capital accounts are translated at historical rates. Income statement accounts are translated at the average rates of exchange prevailing during the period. Translation adjustments from the use of different exchange rates from period to period are included in the Accumulated Other Comprehensive Income account in Stockholder’s Equity, if applicable. Transactions undertaken in currencies other than the functional currency of the entity are translated using the exchange rate in effect as of the transaction date. Any exchange gains and losses are included in the Statement of Operations and Comprehensive Loss.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided on the straight-line method over the estimated useful lives of the assets, which are generally 2 to 5 years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense).
Note 2	Summary of Significant Accounting Policies - (cont’d)
Oil and Gas Properties
The Company follows the full cost method of accounting for oil and gas operations whereby all costs of exploring for and developing oil and gas reserves are initially capitalized on a country-by-country (cost centre) basis. Such costs include land acquisition costs, geological and geophysical expenses, carrying charges on non-producing properties, costs of drilling and overhead charges directly related to acquisition and exploration activities.
Costs capitalized, together with the costs of production equipment, are depleted and amortized on the unit-of-production method based on the estimated gross proved reserves. Petroleum products and reserves are converted to a common unit of measure, using 6 MCF of natural gas to one barrel of oil.
Costs of acquiring and evaluating unproved properties are initially excluded from depletion calculations. These unevaluated properties are assessed periodically to ascertain whether impairment has occurred. When proved reserves are assigned or the property is considered to be impaired, the cost of the property or the amount of the impairment is added to costs subject to depletion calculations.
If capitalized costs, less related accumulated amortization and deferred income taxes, exceed the “full cost ceiling” the excess is expensed in the period such excess occurs. The “full cost ceiling” is determined based on the present value of estimated future net revenues attributed to proved reserves, using current prices less estimated future expenditures plus the lower of cost and fair value of unproved properties within the cost centre.
Proceeds from a sale of petroleum and natural gas properties are applied against capitalized costs, with no gain or loss recognized, unless such a sale would alter the relationship between capitalized costs and proved reserves of oil and gas attributable to a cost centre.
Impairment of Long-lived Assets
The carrying value of intangible assets and other long-lived assets are reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value. Impairment on the properties with unproved reserves is evaluated by considering criteria such as future drilling plans for the properties, the results of geographic and geologic data related to the unproved properties and the remaining term of the property leases.
Asset Retirement Obligations
Asset retirement obligations (“ARO”) associated with the retirement of a tangible long-lived asset, including natural gas and oil properties, are recognized as liabilities in the period in which it is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated assets. The cost of tangible long-lived assets, including the initially recognized ARO, is depleted, such that the cost of the ARO is recognized over the useful life of the assets. The ARO is recorded at fair value, and accretion expense is recognized over time as the discounted fair value is accreted to the expected settlement value.
Note 2	Summary of Significant Accounting Policies - (cont’d)
Asset Retirement Obligations - (cont’d)
The fair value of the ARO is measured using expected future cash flow, discounted at the Company’s credit-adjusted risk-free interest rate.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry-forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.
Basic Loss per Share
Basic loss per share is computed using the weighted average number of shares outstanding during the period. Diluted earnings per share are computed similar to basic income per share except that the denominator is increased to include the number of common stock equivalents. Common stock equivalents represent the dilutive effect of the assumed exercise of any outstanding stock equivalents, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation date. There are no common stock equivalents outstanding and, thus, diluted and basic loss per share are the same.
Comprehensive Income
The Company is required to report comprehensive income, which includes net loss as well as changes in equity from non-owner sources.
Note 3Newly Issued Accounting Pronouncements
The Company has reviewed issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position.
Note 4Newly Adopted Accounting Policy
Mineral Properties
On June 1, 2011, the Company changed its accounting policy with respect to accounting for its mineral properties as follows:
The Company is primarily engaged in the acquisition, exploration and development of mineral properties.
Note 4Newly Adopted Accounting Policy- (cont’d)
Mineral Properties- (cont’d)
Mineral property acquisition costs are capitalized in accordance with FASB ASC 930-805, “Extractive Activities-Mining,” when management has determined that probable future benefits consisting of a contribution to future cash inflows have been identified and adequate financial resources are available or are expected to be available as required to meet the terms of property acquisition and budgeted exploration and development expenditures. Mineral property acquisition costs are expensed as incurred if the criteria for capitalization are not met. In the event that mineral property acquisition costs are paid with Company shares, those shares are recorded at the estimated fair value at the time the shares are due in accordance with the terms of the property agreements.
Mineral property exploration costs are expensed as incurred.
When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves and pre-feasibility, the costs incurred to develop such property are capitalized.
Estimated future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis.
Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards. Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.
To date the Company has not established any proven or probable reserves on its mineral properties.
Note 5Financial Instruments
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs is expanded. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels and which is determined by the lowest level input that is significant to the fair value measurement in its entirety.
Note 5Financial Instruments - (cont’d)
These levels are:
Level 1- inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2 - inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3-inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
The carrying value of the Company’s financial assets and liabilities consisting of cash, accounts payable and accrued liabilities, advances payable, convertible note payable and due to related parties in management’s opinion, approximate their fair value due to the short maturity of such instruments. In management’s opinion, the fair value of notes payable is approximate to carrying value as the interest rates and other features of these instruments approximate those obtainable for similar instruments in the current market. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments.
Note 6	Property and Equipment
Property and equipment consists of the following:
Note 7	Oil and Gas Properties
a)	Hayter Prospect, Alberta, Canada
By a participation agreement dated December 21, 2006, Nuance Exploration Ltd. (“NEL”), a wholly owned subsidiary of the Company acquired a 100% ownership in the interpretation of 3D seismic data covering four sections of certain land, known as the Hayter Prospect, located in the province of Alberta, Canada by paying $82,650 (CDN$95,000) in costs of acquiring and interpreting the seismic data.
On October 15, 2007, prior to the evaluation of the 3D seismic data, NEL sold to the original grantor (the Grantor) its 100% interest in the subject property and received as consideration a non-interest bearing promissory note for $111,144 (CDN$110,000) to be repaid by November 30, 2007.
On November 30, 2007, the Grantor did not pay the promissory note and NEL and the Grantor entered into a Participation Agreement whereby NEL accepted a 20% interest of the Grantor’s working interest in the County Line 10D Hayter 10-8-40-1 W4M well as full and final settlement of the promissory note totalling $95,702 after considering the effects of the foreign exchange on the note.
On October 16, 2009, the Company entered into an amendment to its Participation Agreement pursuant to which it acquired an additional 30% working interest in the Hayter Well in consideration of a release by Force from an amount of $23,938 owed by the Grantor to the Company. The Company holds a 50% working interest of the Grantor’s interest in the Hayter Well.
Note 7	Oil and Gas Properties - (cont’d)
a)	Hayter Prospect, Alberta, Canada - (cont’d)
The addendum was subsequently amended by the parties on February 1, 2010 to replace the reference to the Company in the agreement with Nuance Exploration Ltd., the Company’s wholly owned subsidiary.
During the year ended November 30, 2011 the Company incurred $nil (November 30, 2010 - $265) of development costs.
As at November 30, 2011, the 50% working interest of the Hayter Well was recorded at $135,427 (November 30, 2010:- $135,427). The company also recorded $13,524 (November 30, 2010 - $12,828) as an asset retirement obligation (Note 12).
b)	Diamond Springs Prospect, Wyoming
By a letter agreement dated March 11, 2008, the Company agreed to purchase a 5% working interest in the Diamond Springs Prospect (the “Prospect”) and acquire an option to purchase an additional 20% working interest in the Prospect.
As consideration, the Company issued a $50,000 Promissory Note without interest due on or before April 30, 2008 (settled April 16, 2008), and agreed to pay $300,000 within 90 days of the execution of an acquisition agreement (see agreement related to Diamond Springs Prospect below), at which time the Company would earn a 75% net revenue interest in the initial well. The Company is responsible for 100% of the costs of the drilling and testing of the initial well on the Prospect.
Upon drilling of the initial well, the Company would issue to the vendor 250,000 common shares of the Company as payment in full for a 5% working interest in all subsequent wells drilled on the Prospect. These shares were not issued and the commitment to issue these shares was superseded in June, 2009 as described below. The Vendor granted the Company the option to purchase up to an additional 20% working interest in all subsequent wells drilled on the Prospect for $100,000 per 1% of working interest. This option expired unexercised on December 15, 2008.
In December 2008, the Company advanced an additional $175,000, pursuant to the loan agreement dated March 11, 2009, to the vendor of the Diamond Springs Prospect with the intention that this loan, together with the original payment of $50,000, are to be included as part of the purchase price included in a definitive agreement in respect to the acquisition by the Company of a working interest in the Prospect.
In June 2009, the parties entered into the assignment agreement, which replaced and superseded all prior agreements between the parties. The Company received a 50% interest in the Diamond Springs Prospect for $225,000. In connection with the assignment agreement the Company agreed to sign a release in favour of the assignor, releasing them from all further obligations under the loan agreement and the letter agreement.
On September 16, 2009, the Company acquired a further 25% interest in the Diamond Springs Prospect for consideration consisting of 450,000 common shares with a fair value of $144,000.
During the year ended November 30, 2009, $20,000 in development costs relating to Diamond Springs Prospect were written off.
Note 7Oil and Gas Properties - (cont’d)
b)	Diamond Springs Prospect, Wyoming - (cont’d)
During the year ended November 30, 2010, the Company incurred $29,039 of exploration expenditures on the Diamond Springs Prospect. Following a review exploration results the Company abandoned its interest in the prospect during the year ended November 30, 2010 and wrote off $29,039 of exploration expenditures and $369,000 of acquisition costs.
Note 8	Mineral Property
On July 6, 2010, the Company entered into a Property Option Agreement (amended May 11, 2011) to acquire an option to purchase a 100% interest in the property known as the Zoro 1 property, a mineral property comprising 52 hectares (approximately 128.50 acres) in the Snow Lake region of Manitoba Canada. In order to exercise the option, the Company must pay cash or issue stock to the Optionor by the following dates:
i)$59,600 (Cdn$62,000) on signing the agreement (paid)
ii)$102,900 (Cdn$100,000) or issue 1,000,000 shares of common stock on or before June, 15, 2011. (1,000,000 shares issued with a fair value of $80,000)
iii)$204,460 (Cdn$200,000) or issue a specified number of common shares still to be determined by the parties on or before June, 15, 2012
iv)$408,920 (Cdn$400,000) or issue a specified number of common shares still to be determined by the parties on or before June, 15, 2013.
During the year ended November 30, 2011, the Company incurred $55,611 (2010 - $nil) of exploration expenditures on the property.
Note 9	Advances Payable
On February 1, 2011, the Company received a cash advance of $30,000. The advance is unsecured, non-interest bearing and has no fixed repayment terms.
On March 21, 2011, the Company received a cash advance of $20,000. The advance is unsecured, non-interest bearing and has no fixed repayment terms.
Note 10	Related Party Transactions
Amounts due to related parties comprise:
All amounts due to related parties are unsecured, non-interest bearing and have no specific terms for repayment.
On July 23, 2010, the Company entered into an employment contract with a director which expires July 22, 2011. Pursuant to the contract the Director will receive $5,000 per month remuneration. On December 31, 2010 the Director resigned and the employment contract was terminated.
Note 10	Related Party Transactions - (cont’d)
On August 4, 2010, the Company entered into a share for debt settlement agreement with the Company’s former President whereby 643,267 common shares having a fair value of $0.25 each were issued to settle in full management fees of $154,600 rent expense of $1,000 and other expenses owing of $5,216, an aggregate amount of $160,817.
On July 23, 2010, the Company entered into an employment contract with the Company President which expires July 22, 2011. Pursuant to the contract the President received 2,500,000 common shares having a fair value of $550,000. Should the contract be terminated prior to completion the President will return 100,000 shares to treasury for each unfulfilled month of the contract. The President will also receive $2,500 per month for months 1-3; $4,000 per month for months 4-6 and $5,000 per month for months 7-12 of the contract.
The fair value of 1,300,000 shares issued which were earned immediately have been expensed as stock based compensation of $286,000. The fair value of the remaining 1,200,000 shares issued which are to be earned over the term of the contract will be charged to operations over the life of the employment contract. This portion of the stock award is accounted for as deferred compensation whereby the fair value of the award is recorded as a component of stockholders’ equity until earned. Pursuant to this stock award the Company recorded management fees of $170,200 (year ended November 30, 2011 - $93,800).
On July 18, 2011, the Company entered into a new employment contract with the Company President which expires July 18, 2013. Pursuant to the contract the President received 2,500,000 common shares having a fair value of $125,000. The President will receive $7,500 per month for months 13-24 of the contract. Unless the contract is terminated by either party giving 45 days written notice the contact will automatically renew. Should the contract be renewed then the President will receive 2,500,000 shares of common stock and an annual increase of $2,500 per month upon each renewal. If the Company does not have sufficient cash resources to settle the cash element of the contract, then at the request of the President any accrued unpaid fees may be converted into common stock at $0.025 per share.
The fair value of the 2,500,000 shares issued which are to be earned over the term of the contract will be charged to operations over the life of the employment contract. This portion of the stock award is accounted for as deferred compensation whereby the fair value of the award is recorded as a component of stockholders’ equity until earned. Pursuant to this stock award the Company recorded management fees of $45,400 (year ended November 30, 2010 - $nil).
During the years ended November 30, 2011 and 2010, the Company charged or accrued the following amounts:
Note 10	Related Party Transactions - (cont’d)
Note 11	Convertible Notes Payable
As at November 30, 2011 and 2010 convertible notes payable are recorded net of unamortized debt and accrued interest discount of $120,666 and $nil respectively.
Promissory Note #1
On May 11, 2011, the Company received $100,000 cash and the Company issued a convertible promissory note in the amount of $100,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on May 10, 2013. During the year ended November 30, 2011, the Company accrued $4,450 interest expense.
The note may be converted at the option of the holder into Common stock of the Company. The conversion price is defined as “the lesser 50% discount to the average bid price for the shares as quoted on the OTCBB where the shares are traded for the three consecutive business days prior to the date of conversion”.
Promissory Note #2
On August 18, 2011, the Company received $37,500 cash and the Company issued a convertible promissory note in the amount of $37,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on May 22, 2012. During the year ended December 30, 2011, the Company accrued $845 interest expense.
Note 11	Convertible Notes Payable - (cont’d)
Promissory Note #2 - (cont’d)
The note may be converted at the option of the holder into Common stock of the Company. The conversion price is 55% of the market price, where market price defined as “the average of the lowest three of the last ten closing trading prices on the OTCBB immediately prior to conversion date”.
Promissory Note #3
On September 28, 2011, the Company received $32,500 cash and the Company issued a convertible promissory note in the amount of $32,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on July 3, 2012. During the year ended November 30, 2011, the Company accrued $455 interest expense.
The note may be converted at the option of the holder into Common stock of the Company. The conversion price is 55% of the market price, where market price defined as “the average of the lowest three of the last ten closing trading prices on the OTCBB immediately prior to conversion date”.
Note 12	Asset Retirement Obligation
Total future asset retirement obligations were estimated by management based on the Company’s net ownership interest, estimated costs to reclaim and abandon the wells and the estimated timing of the costs to be incurred in future periods. The Company has estimated the net present value of its total assets retirement obligations at November 30, 2011 to be $13,524 based on a total undiscounted liability of $16,954 (Cdn$17,500) in the Hayter Prospect, Alberta, Canada. These payments are expected to be made over the next seven years, with the majority of the cost incurred between 2016 and 2019.
The Company’s credit adjusted risk free rate of 15% and an inflation rate of 8% were used to calculate the present value of the asset retirement obligation.
Note 13	Capital Stock
On December 1, 2010, the Company issued 200,000 common shares for aggregate proceeds of $50,000.
On June 3, 2011 the Company issued 1,000,000 shares of common stock pursuant to the Zoro 1 mineral property agreement, with a fair value of $80,000.
Note 13	Capital Stock - (cont’d)
On June 7, 2011 and July 18, 2011, the Company issued 1,000,000 and 1,500,000 shares of common stock to the President pursuant to the new management contract. (Note 10). The shares issued had a fair value of $125,000.
The company has Common Stock at $0.001 par value with 270,000,000 shares authorized and 54,937,267 shares issued and outstanding and the company has Preferred Stock at $0.001 par value with 10,000,000 shares authorized and none outstanding.
Note 14Income Taxes
At November 30, 2011, the Company has accumulated net operating losses in the United States of America totalling approximately $2,974,000 which are available to reduce taxable income in future taxation years. The carryforwards will begin expiring in 2026 unless utilized in earlier years. At November 30, 2011 the Company has accumulated Canadian oil and gas resource property expenditures aggregating approximately $144,000 (CDN$148,638) which may be used to reduce taxable income in future taxation years.
The tax effects of the temporary differences that give rise to the Company's estimated deferred tax assets and liabilities are as follows:
The provision for income taxes differ from the amount established using the statutory income tax rate as follows:
The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and this causes a change in management’s judgment about the recoverability of deferred tax assets, the impact of the change on the valuation allowance is reflected in current income. As management of the Company does not currently believe that it is more-likely-than-not that the Company will receive the benefit of this asset, a valuation allowance equal to the deferred tax asset has been established at both November 30, 2011 and November 30, 2010.
Note 14Income Taxes - (cont’d)
Uncertain Tax Positions
The Company files income tax returns in the U.S. federal jurisdiction, various state and foreign jurisdictions. The Company’s tax returns are subject to tax examinations by U.S. federal and state tax authorities, or examinations by foreign tax authorities until respective statute of limitation. It is subject to tax examinations by tax authorities for all taxation years commencing on or after 2006.
Provision has not been made for U.S. or additional foreign taxes on undistributed earnings of foreign subsidiaries. Such earnings have been and will continue to be reinvested but could become subject to additional tax if they were remitted as dividends, or were loaned to the Company affiliate. It is not practicable to determine the amount of additional tax, if any, that might be payable on the undistributed foreign earnings.
Interest and penalties on tax deficiencies recognized in accordance with ASC accounting standards are classified as income taxes in accordance with ASC Topic 740-10-50-19.
Note 15.Subsequent Events
Subsequent to November 30, 2011 have been evaluated through February 22, 2012, the date these statements were available to be issued. On January 4, 2012 the Company received $35,000 cash and the Company issued a convertible promissory note in the amount of $37,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on October 6, 2012.
Note 16Supplemental Disclosure with Respect to Cash Flows
During the year ended November 30, 2011, the following non-cash investing and financing activities occurred:
i)2,500,000 common shares were issued with a fair value of $125,000 pursuant to an employment contract.
ii)1,000,000 common shares were issued with a fair value of $80,000 pursuant to a mineral property option agreement.
During the year ended November 30, 2010, the following non-cash investing and financing activities occurred:
i)2,500,000 common shares were issued with a fair value of $550,000 pursuant to an employment contract.
ii)643,267 common shares were issued pursuant to a debt settlement agreement, in settlement of amounts owing to the Company’s former president in the amount of $160,817.
Item 9.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
No events occurred requiring disclosure under Item 307 and 308 of Regulation S-K during the fiscal year ending November 30, 2011.
Item 9A(T).
Item 9A(T). Controls and Procedures
Disclosure Controls and Procedures
As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act, our principal executive officer and principal financial officer evaluated our company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this annual report on Form 10-K. Based on this evaluation, our sole chief executive officer and principal financial officer concluded that as of November 30, 2011, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and include controls and procedures designed to ensure that such information is accumulated and communicated to our company’s management, including our company’s principal executive officer and 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 material weaknesses in internal control over financial reporting as identified below under the heading “Management’s Report on Internal Control Over Financial Reporting.” Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated. Our company intends to remediate the material weaknesses as set out below.
Management’s Report on Internal Control Over Financial Reporting
Our company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) for our company. Our company’s internal control over financial reporting is designed to provide reasonable assurance, not absolute assurance, regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that our company’s receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.
Our Management, including our principal executive officer and principal financial officer, conducted an evaluation of the design and operation of our internal control over financial reporting as of November 30, 2011 based on the criteria set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, our management concluded our internal control over financial reporting was not effective as at November 30, 2011 due to the following material weaknesses which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both United States generally accepted accounting principles and Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.
Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending November 30, 2012, subject to obtaining additional financing: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out above are largely dependent upon our company securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely effected in a material manner.
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our internal control over financial reporting was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, 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.
Changes in Internal Control Over Financial Reporting.
There were no changes in the Company’s internal control over financial reporting during the quarter ended November 30, 2011 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B.
Item 9B. Other Information
None
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
The following table contains information with respect to our current executive officers and directors:
Effective July 21, 2010, Tim DeHerrara was appointed as president, CEO, CFO and director of our company. Mr. DeHerrera currently serves as a director of the publicly held corporation Grid Petroleum Corp. He was President of Bonfire Productions Inc. from September 2009 until May 2010. During some of the same period he was President and Chairman of the Intervision Network Corporation from January 2008 until January 2010. Intervision Network was a technology business in IPTV broadcasting and related live Internet-based multimedia transmission technologies including a global content delivery network. Prior to that, from January 2005, he was President and Chairman of Future Quest Incorporated, a publicly traded oil and gas exploration company. From May 2006 until December 2007 he was also President of Atlantis Technology Group a technology based company. Additionally, during the past several years he has been a consultant to several other companies.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past ten years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Committees of the Board
Our company currently does not have nominating, compensation or audit committees or committees performing similar functions nor does our company have a written nominating, compensation or audit committee charter. Our directors believe that it is not necessary to have such committees, at this time, because the functions of such committees can be adequately performed by the board of directors.
Our company does not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for directors. The board of directors believes that, given the stage of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. Our company does not currently have any specific or minimum criteria for the election of nominees to the board of directors and we do not have any specific process or procedure for evaluating such nominees. The board of directors will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment.
A shareholder who wishes to communicate with our board of directors may do so by directing a written request addressed to our CEO and director, Tim DeHerrera, at the address appearing on the first page of this annual report.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent beneficial shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To the best of our knowledge based solely on a review of Forms 3, 4, and 5 (and any amendments thereof) received by us during or with respect to the year ended December 31, 2009, the following persons have failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act during fiscal year ended November 30, 2011:
Code of Ethics
We adopted a Code of Ethics applicable to all of our directors, officers, employees and consultants, which is a “code of ethics” as defined by applicable rules of the SEC. Our Code of Ethics was attached as an exhibit to our annual report filed on Form 10-K on March 15, 2009. If we make any amendments to our Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of our Code of Ethics to our chief executive officer, chief financial officer, or certain other finance executives, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies in a Current Report on Form 8-K filed with the SEC.
Item 11.
Item 11. Executive Compensation
The table below summarizes all compensation awarded to, earned by, or paid to our officers for all services rendered in all capacities to us for our fiscal years ended November 30, 2010 and 2011.
Narrative Disclosure to Summary Compensation Table
Tim DeHerrara
On August 10, 2010, we entered into a written Employment Agreement (the “Agreement”) with Tim DeHerrera (“DeHerrera”). Pursuant to the terms and conditions of the Agreement:
For a 12-month period commencing as of July 23, 2010, DeHerrera will serve as our President and Chief Executive Officer and as a member of the Board of Directors.
During his tenure with us, DeHerrera responsibilities will include the following:
Development of Management Strategy and Corporate Vision
Review and Development of Business Strategies
Organizational and Personnel Development
General Review and Development of Corporate Material
Corporate and Client Restructuring
Review and assisting in preparation of corporate filings
DeHerrera will earn an annual salary of $99,500 payable as follows:
$2500 per month for the first three months of employment; $4000 per month for months 4-6 of employment; and $5000 per month for the final six months of the employment term. If we do not possess the capital to make cash payments to DeHerrera, then the monies owed him shall accrue as insider debt, which DeHerrera will have the option to convert into shares of our common stock at $.10 per share; and
2,500,000 shares of our stock which was payable upon execution of the Agreement. If the Agreement is terminated by either DeHerrera or us, then DeHerrera shall owe to us an amount of shares equal to 100,000 shares multiplied by the number of months he failed to work for us during that time period from July 23, 2010 to July 22, 2011.
The Agreement may be terminated on 30 days notice by either us or DeHerrera.
On July 18, 2011, we entered into a new employment contract with DeHerrera as President, which expires July 18, 2013. Pursuant to the contract, DeHerrera received 2,500,000 common shares having a fair value of $125,000. DeHerrera will receive $7,500 per month for months 13-24 of the contract. Unless the contract is terminated by either party giving 45 days written notice the contact will automatically renew. Should the contract be renewed then DeHerrera will receive 2,500,000 shares of common stock and an annual increase of $2,500 per month upon each renewal. If the Company does not have sufficient cash resources to settle the cash element of the contract, then at the request of DeHerrera any accrued unpaid fees may be converted into common stock at $0.025 per share.
Michael Mathot
On July 23, 2010, we entered into a written Employment Agreement with Michael Mathot. Pursuant to the terms and conditions of the Employment Agreement:
Mr. Mathot will serve as the Commodity-Industry Analyst to the Board of Advisors for a 12-month period commencing on July 23, 2010.
Mr. Mathot will earn an annual salary of $60,000.
On December 31, 2010, Mr. Mathot announced his resignation from the board of directors and all positions as an officer of our company. There were no known disagreements with Mr. Mathot about his departure from our company.
On December 31, 2010, in connection with the departure of Mr. Mathot as our officer and director, we entered into a Separation Agreement with Mr. Mathot. Pursuant to the agreement, we agreed to provide Mr. Mathot a final lump sum payment of $5,000.
Outstanding Equity Awards at Fiscal Year-End
The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of December 31, 2011.
Director Compensation
We do not pay our directors any fees or other compensation for acting as directors. We have not paid any fees or other compensation to any of our directors for acting as directors to date.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of January 24, 2012, certain information as to shares of our common stock owned by (i) each person known by us to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, and (iii) all of our executive officers and directors as a group.
Unless otherwise indicated below, to our knowledge, all persons listed below have sole voting and investment power with respect to their shares of Common Stock, except to the extent authority is shared by spouses under applicable law. Unless otherwise indicated below, each entity or person listed below maintains an address of 1400 16th Street, Suite 400, Denver, CO 80202.
The number of shares beneficially owned by each stockholder is determined under rules promulgated by the SEC. The information is not necessarily indicative of beneficial ownership for any other purpose. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting or investment power and any shares as to which the individual or entity has the right to acquire beneficial ownership within 60 days after January 24, 2012 through the exercise of any stock option, warrant or other right. The inclusion in the following table of those shares, however, does not constitute an admission that the named stockholder is a direct or indirect beneficial owner.
(1) Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power (or shares that power with that person’s spouse) with respect to all shares of common stock listed as owned by that person or entity.
(2) A total of 54,937,267 shares of the Company’s common stock are considered to be outstanding pursuant to Rule 13d-3(d)(1) under the Securities Exchange Act of 1934. The forgoing percentages are based on the Company’s stock transfer report as of January 24, 2012.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Other than the transactions described below and under the heading “Executive Compensation” (or with respect to which such information is omitted in accordance with SEC regulations), since November 30, 2010 there have not been, and there is not currently proposed, any transaction or series of similar transactions to which we were or will be a participant in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any director, executive officer, holder of 5% or more of any class of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.
During the year ended November 30, 2011, total management fees pursuant to employment contracts were $293,225.
As of the date of this annual report, our common stock is traded on the OTC Bulletin Board (the “Bulletin Board”). The Bulletin Board does not impose on us standards relating to director independence or the makeup of committees with independent directors, or provide definitions of independence.
Item 14.
Item 14. Principal Accounting Fees and Services
Below is the table of Audit Fees (amounts in US$) billed by our auditor in connection with the audit of the Company’s annual financial statements for the years ended:
PART IV
Item 15.
Item 15. Exhibits, Financial Statements Schedules
Index to Financial Statements Required by Article 8 of Regulation S-X:
(a) Financial Statements and Schedules
The following financial statements and schedules listed below are included in this Form 10-K.
Financial Statements (See Item 8)
(b) Exhibits
Exhibit Number Description
3.1 Articles of Incorporation, as amended (1)
3.2 Bylaws, as amended (1)
10.1 Settlement Agreement, dated August 4, 2010(2)
10.2 Option Agreement, dated July 6, 2010(3)
10.3 Employment Agreement with Tim DeHerrera dated August 10, 2010(4)
10.4 Employment Agreement with Michael Mathot dated July 23, 2010(5)
10.5 Employment Agreement with Tim DeHerrera dated July 18, 2011
31.1 Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1 Technical Report, dated September 4, 2009(3)
99.2 Bubble and Gridded Data Plots
99.3 Table 1 - Analytical Results
Incorporated by reference to the Registration Statement on Form SB-2 filed on June 5, 2006.
Incorporated by reference to the Current Report on Form 8-K filed on September 9, 2010.
Incorporated by reference to the Current Report on Form 8-K filed on August 31, 2010.
Incorporated by reference to the Current Report on Form 8-K filed on August 16, 2010.
Incorporated by reference to the Current Report on Form 8-K filed on July 28, 2010.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Force Energy Corp.
By: /s/ Tim DeHerrera
Tim DeHerrera
President, Chief Executive Officer, Principal Executive Officer,
Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer and Director
February 23, 2012
In accordance with Section 13 or 15(d) of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
By: /s/ Tim DeHerrera
Tim DeHerrera
President, Chief Executive Officer, Principal Executive Officer,
Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer and Director
February 23, 2012