SEC Form 10-Q Summary
Filing identity: The supplied filing identifies the registrant as Freedom Petroleum, Inc., not Tianci International, Inc. Investors should verify the company and filing reference before relying on this summary.
Business Context and Reporting Period
Freedom Petroleum, Inc. is a Nevada exploration-stage company incorporated June 13, 2012, intending to explore and develop oil and gas properties. The filing covers the quarter and nine months ended April 30, 2013, within the fiscal year ending July 31. The company had no operating revenues and had not commenced significant operations.
The company held an unproved oil and gas lease covering approximately 624 net acres in Lewis and Clark County, Montana, recorded at $15,000. No exploration or development costs had been incurred on the lease.
Financial Results and Position
| Metric | Three Months Ended April 30, 2013 | Nine Months Ended April 30, 2013 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $24,136 | $32,714 |
| Net loss | $24,136 | $32,714 |
| Net loss per share | $0.00, rounded | $0.00, rounded |
| Weighted-average shares | 52,182,000 | 42,588,000 |
- Accumulated deficit was $41,118 at April 30, 2013.
- Cash and cash equivalents were $9,539, down from $24,230 at July 31, 2012.
- Total assets were $24,539, including $15,000 of unproved oil and gas properties.
- Current liabilities were $724, consisting of amounts due to a related party; accounts payable declined from $19,650 at July 31, 2012 to zero.
- Working capital was $8,815 at April 30, 2013.
- Stockholders’ equity was $23,815, compared with $18,756 at July 31, 2012.
- Nine-month cash used in operating activities was $52,464. No cash was used for investing activities during the nine-month period.
- Nine-month financing cash inflows were $37,773 from common-stock issuances, resulting in a $14,691 decrease in cash.
- The company had no bank financing, credit facilities, derivative contracts, or material off-balance-sheet arrangements.
Material Changes and Capitalization
Compared with the July 31, 2012 balance sheet, cash declined by $14,691, accounts payable decreased by $19,650, and stockholders’ equity increased by $5,059. The company issued 25,182,000 common shares between December 1, 2012 and April 30, 2013 for $37,773, increasing shares outstanding from 27,000,000 to 52,182,000. This financing supported operations but materially increased potential shareholder dilution.
The nine-month loss was $32,714, compared with a cumulative loss of $41,118 from inception through April 30, 2013. The filing does not provide a prior comparable quarterly period because the company began operations in June 2012.
Outlook, Risks, and Unusual Items
- Management expects additional capital will be required and plans to rely on existing cash, director advances, and future equity or debt issuances.
- Management stated that existing working capital and anticipated financing were expected to fund operations for approximately the next three months, but long-term funding is not assured.
- The financial statements and auditor’s report include a going-concern emphasis. Continued operations depend on profitable operations or obtaining additional financing.
- Future equity or convertible-debt issuances may dilute existing shareholders and may include rights senior to common stock. Financing may be unavailable or available only on unfavorable terms.
- The Montana lease requires annual rental payments of $937 beginning June 5, 2013, with minimum annual rentals totaling $8,434 over the stated nine-year term.
- Oil and gas activities may be affected by commodity prices, drilling results, regulatory restrictions, environmental liabilities, remediation obligations, and changes in governmental policy. No asset-retirement obligation was recorded.
- Management concluded that disclosure controls and procedures were not effective as of April 30, 2013. No material change in internal control over financial reporting was reported during the quarter.
- No material legal proceedings or subsequent events requiring disclosure were reported.
Investor Verification Items
- Confirm whether this filing belongs to Freedom Petroleum, Inc. or Tianci International, Inc.; the supplied document names Freedom Petroleum throughout.
- Verify the company’s current financing needs, ability to raise capital, and going-concern status.
- Review the terms and potential dilution from the issuance of 25,182,000 common shares.
- Assess the economic value, renewal terms, and required payments associated with the Montana oil and gas lease.
- Investigate the remediation and environmental exposure disclosures and whether any liabilities have subsequently been identified.
- Review remediation of the ineffective disclosure controls and any later auditor or management assessment.