Notes to Financial Statements
June 30, 2021
NOTE 1 - DESCRIPTION OF BUSINESS AND HISTORY
Sino American Oil Company (the “Company”) was incorporated as Raphael Industries Ltd. on October 31, 2005 under the laws of the State of Nevada. On November 11, 2010 the Company changed its name to Sino American Oil Company in anticipation of the Company’s new business direction, the exploration for oil and gas.
The company has re-domiciled its corporate status from Nevada to Wyoming in August 2018.
NOTE 2 - SUMMARY OF SIGNIFICANT POLICIES
Basis of presentation
These unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). These financial statements and the notes attached hereto should be read in conjunction with the financial statements and notes included in the Company’s financial statements for its fiscal year ended September 30, 2020. In the opinion of the Company, all adjustments, including normal recurring adjustments necessary to present fairly the financial position of the Company, as of June 30, 2021 and the results of its operations and cash flows for the nine months then ended have been included. The results of operations for the interim period are not necessarily indicative of the results for the full year ending September 30, 2021.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.
Stock-based Compensation
In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 allows companies to account for nonemployee awards in the same manner as employee awards. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those annual periods. We adopted this ASU on January 1, 2019. The adoption of ASU 2018-07 did not have a material impact on our financial statements.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 3 - GOING CONCERN
The accompanying unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has no source of revenue, has suffered recurring losses since inception and has no assurance of future profitability. The Company will continue to require financing from external sources to finance its operating and investing activities until sufficient positive cash flows from operations can be generated. There is no assurance that financing or profitability will be achieved, accordingly, there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these uncertainties.
F-5
NOTE 4 - LOAN PAYABLE
During the nine months send June 30, 2021, White Sands Securities loaned the Company $53,541 through a note payable and cash advances. A portion of the loan is accruing interest at 8% per year. As of June 30, 2021, total accrued interest is $1,308.
NOTE 5 - COMMON STOCK
On May 13, 2020, the Company sold 2,467,000 shares of common stock at $0.15 per share for total proceeds of $370,050. As of September 30, 2020, the funds had not been received and have been disclosed as a stock subscription receivable in the Statement of Stockholders’ Deficit. On December 10, 2020, the Company cancelled the 2,467,000 shares of common stock sold for cash as the cash was never received from the purchasing parties.
During the nine months ended June 30, 2021, the Company granted 750,000 shares of common stock for services. The shares were valued $0.0001, for total non-cash stock compensation expense of $75.
During the nine months ended June 30, 2021, the Company sold 8,000 shares of common stock for total cash proceeds of $20,000. As of June 30, 2021, the shares have not yet been issued by the transfer agent and are disclosed as common stock to be issued.
During the nine months ended June 30, 2021, the Company granted 1,450,000 shares of common stock for services to White Sands Securities. The shares were valued $0.0001, for total non-cash stock compensation expense of $145.
NOTE 6 - PREFERRED STOCK
Effective June 3, 2019, the Company amended its article of incorporation and authorized 10,000,000 shares of Series A preferred stock, par value $0.001 and 10,000,000 shares of Series B preferred stock, par value $0.001.
Series A Preferred Stock
Each share of Series A is convertible into 1,000 shares of common.
During the nine months ended June 30, 2021, holders of 246,320,000 shares of common stock converted those shares into 492,640 shares of Series A preferred stock.
Series B Preferred Stock
Effective July 14, 2021, the Company, designated its Series B Preferred Stock as voting only shares at 1,000 votes per share.
NOTE 7 - RELATED PARTY TRANSACTIONS
On April 18, 2017, the Company entered into a Convertible Loan Agreement with Kim Halvorson, COO. The loan agreement was entered into pursuant to Ms. Halvorson’s agreement to fund the initial expenses of the Company. Per the terms of the agreement any funds loaned to the company or paid out on behalf of the Company will be convertible into shares of common stock at $0.0001 per share. The loans are due on demand and non-interest bearing. The Company accounted for the initial conversion feature as a beneficial conversion feature. A beneficial conversion feature arises when the conversion price of a convertible instrument is below the per share fair value of the underlying stock into which it is convertible, with the resulting expense not to exceed the loan amount. The Company accounted for an additional beneficial conversion feature expense of $897 and $9,566 for the years ended September 30, 2020, and 2019, respectively. The amount was immediately expensed to interest expense with a credit to additional paid in capital. During the nine months send June 30, 2021, Ms. Halvorson and Triage MicroCap Advisors LLC (“Triage”) (a company owned by Ms. Halvorson) loaned the Company an additional $31,815 and converted $8,707 into 8,680,000 shares of common stock. As of June 30, 2021, and September 30, 2020, the balance due to Ms. Halvorson is $45,522 and $17,414, respectively.
During the nine months ended June 30, 2021, the Company granted 750,000 shares of common stock for services to Triage. The shares were valued $0.0001, for total non-cash stock compensation expense of $75.
F-6
During the nine months ended June 30, 2021, the Company granted 1,450,000 shares of common stock for services to Maximum Ventures Holdings LLC. The shares were valued $0.0001, for total non-cash stock compensation expense of $145. Mr. Tang is a member of Maximum Ventures Holdings LLC.
During the nine months ended June 30, 2021, the Company granted 1,450,000 shares of common stock for services to Avatele Group LLC. The shares were valued $0.0001, for total non-cash stock compensation expense of $145. Mr. Tang is a member of Avatele Group LLC.
During the nine months send June 30, 2021, Richard Tang, CEO, advance the Company $494 to pay general operating expenses. The advance is non-interest bearing and due on demand.
During the nine months ended June 30, 2021, the Mr. Tang converted $408,000 of accrued compensation into 150,000,000 shares of common stock. On June 30, 2021, Mr. Tang forgave of $24,000 of accrued compensation due to him. The $24,000 was credited to additional paid in capital.
NOTE 8 - RESTATEMENT
Per ASC 250-10 Accounting Changes and Error Corrections, the June 30, 2021 financial statements have been restated for the following:
1 - account for an additional payable
2 - correct fair value of shares issued for services
3 - cancel stock granted to former CEO
As of June 30, 2021
|
|
| As Reported
|
| Adjusted
|
| As Restated
|
Balance Sheet:
|
|
|
|
|
|
|
|
|
|
Cash
|
| $
| 9,442
|
|
| $
| -
|
| $
| 9,442
|
Total Assets
|
| $
| 9,442
|
|
| $
| -
|
| $
| 9,442
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
| $
| 9,429
|
|
| $
| 20,000
| 1
| $
| 29,429
|
Accrued interest
|
|
| 1,308
|
|
|
| -
|
|
| 1,308
|
Accrued compensation - related party
|
|
| 90,000
|
|
|
| -
|
|
| 90,000
|
Accrued compensation
|
|
| 90,000
|
|
|
| -
|
|
| 90,000
|
Loan payable
|
|
| 53,541
|
|
|
| -
|
|
| 53,541
|
Loans payable - related party
|
|
| 46,016
|
|
|
| -
|
|
| 46,016
|
Total current liabilities
|
|
| 290,294
|
|
|
| 20,000
|
|
| 310,294
|
|
|
|
|
|
|
|
|
|
|
|
Series A Preferred stock
|
|
| 246
|
|
|
| 247
|
|
| 493
|
Common stock
|
|
| 11,210
|
|
|
| (36)
|
|
| 11,174
|
Common stock to be issued
|
|
| 926,250
|
|
|
| (906,250)
|
|
| 20,000
|
Additional paid-in capital
|
|
| 17,622,346
|
|
|
| (15,530,876)
| 2
|
| 2,091,470
|
Accumulated deficit
|
|
| (18,840,904)
|
|
|
| 16,416,915
|
|
| (2,423,989)
|
Total stockholders’ deficit
|
|
| (280,852)
|
|
|
| (20,000)
|
|
| (300,852)
|
Total liabilities and stockholders' equity
|
| $
| 9,442
|
|
| $
| -
|
| $
| 9,442
|
F-7
For the Three Months Ended June 30, 2021
|
| As Reported
|
| Adjustment
|
| As Restated
|
Operating Expenses:
|
|
|
|
|
|
|
|
Officer compensation
| $
| 1,836,500
|
| $
| (1,812,500)
| 3
| $
| 24,000
|
Consulting
|
| 5,554,756
|
|
| (5,499,780)
| 2
|
| 54,976
|
Consulting - related party
|
| 9,170,000
|
|
| (9,125,000)
| 2
|
| 45,000
|
General and administration expenses
|
| 11,302
|
|
| -
|
|
| 11,302
|
Total operating expense
|
| 16,572,558
|
|
| (16,437,280)
|
|
| 135,278
|
Loss from operations
|
| (16,572,558)
|
|
| 16,437,280
|
|
| (135,278)
|
|
|
|
|
|
|
|
|
|
Other expense:
|
|
|
|
|
|
|
|
|
Interest expense
|
| (788)
|
|
| -
|
|
| (788)
|
Total other expense
|
| (788)
|
|
| -
|
|
| (788)
|
|
|
|
|
|
|
|
|
|
Net Loss
| $
| (16,573,336)
|
| $
| 16,437,280
|
| $
| (136,056)
|
|
|
|
|
|
|
|
|
|
Net loss per share
| $
| (0.16)
|
| $
| 0.16
|
| $
| (0.00)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding-basic and diluted
|
| 103,215,857
|
|
| (143,406)
|
|
| 103,072,451
|
For the Six Months Ended June 30, 2021
|
| As Reported
|
| Adjustment
|
| As Restated
|
Operating Expenses:
|
|
|
|
|
|
|
|
Officer compensation
| $
| 1,884,500
|
| $
| (1,810,500)
| 3
| $
| 74,000
|
Consulting
|
| 5,599,756
|
|
| (5,499,780)
| 2
|
| 99,976
|
Consulting - related party
|
| 9,230,000
|
|
| (9,124,635)
| 2
|
| 105,365
|
General and administration expenses
|
| 86,081
|
|
| 18,000
| 1
|
| 104,081
|
Total operating expense
|
| 16,800,337
|
|
| (16,416,915)
|
|
| 383,422
|
Loss from operations
|
| (16,800,337)
|
|
| 16,416,915
|
|
| (383,422)
|
|
|
|
|
|
|
|
|
|
Other expense:
|
|
|
|
|
|
|
|
|
Interest expense
|
| (1,308)
|
|
| -
|
|
| (1,308)
|
Total other expense
|
| (1,308)
|
|
| -
|
|
| (1,308)
|
|
|
|
|
|
|
|
|
|
Net Loss
| $
| (16,801,645)
|
| $
| 16,416,915
|
| $
| (384,703)
|
|
|
|
|
|
|
|
|
|
Net loss per share
| $
| (0.34)
|
| $
| 0.33
|
| $
| (0.01)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding-basic and diluted
|
| 49,809,204
|
|
| (72,099)
|
|
| 49,737,105
|
F-8
NOTE 9 - SUBSEQUENT EVENTS
Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855, Subsequent Events, from the balance sheet date through the date the financial statements were issued and has determined that no additional material subsequent events exist other than the following.
On August 9, 2021, pursuant to the terms of a consulting agreement, the Company granted 1,200,000 shares of common stock for services to be rendered.
On August 14, 2021, pursuant to the terms of a consulting agreement, the Company granted 1,000,000 shares of common stock for services to be rendered.
F-9
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our condensed consolidated financial statements and notes to our financial statements included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors discussed elsewhere in this report.
Overview
Sino American Oil Company (the “Company”) is a development stage enterprise that was originally incorporated, on April 2, 2010, under the laws of the State of Nevada. The Company is in the Oil and Gas Exploration, Development and Production Business and has been since inception. The Company had appointed Ronald Hughes as CEO from the company formation to December 16, 2016 and then appointed Richard Tang to be the CEO and sole director on December 16, 2016. On November 11, 2018, the Company filed a re-domestication to have its domestic corporation be administered under the laws of the State of Wyoming. On January 31, 2021, the Company appointed Jeffrey Standen, as CEO and Director to negotiate and oversee the exploration, development, acquisition and development of new oil and natural gas reserves as well as explore new sources of revenue opportunities.
Sino American Oil Company plans to grow shareholder value through securing oil and natural gas reserves and negotiating oil and natural gas exploration, development and production deals within the United States of America and Canada. The focused industries are oil & gas exploration, oil & gas development, and oil & gas production sales. We anticipate being able to generate revenue on the sale of oil and gas.
Sino American Oil Company is currently negotiating deals within a very large exploration area oil field owners located in the Western Canadian sedimentary basin. The deals involve oil and gas production acquisitions, mineral land acquisitions and further production increases through production optimization and drilling activities as well as production infrastructure installations.
On January 16, 2020, the Company received a Cease Trade Order from the British Columbia Securities Commission for failure to file records required as an OTC reporting issuer. We are working to remedy this Order.
Results of Operations for the Three Months Ended June 30, 2021, Compared to the Three Months Ended June 30, 2020
We have not generated any revenue to date.
Officer compensation was $24,000 compared to $24,000, for the three months ended June 30, 2021 and 2020, respectively. Officer compensation is accrued at $24,000 per quarter for our CEO. In addition, during the current period we granted 725,000 shares of common stock for total non-cash expense of $725.
Consulting expense was $54,976 compared to $0 for the three months ended June 30, 2021 and 2020, respectively.
Consulting expense - related party was $45,000 compared to $0 for the three months ended June 30, 2021 and 2020, respectively. During the three months ended June 30, 2021, we incurred consulting expense of $15,000 per month for services provided by Triage.
General and administrative expense (“G&A”) was $11,302 compared to $196 for the three months ended June 30, 2021 and 2020, respectively. G&A expense increased primarily due to legal expense.
Results of Operations for the Nine Months Ended June 30, 2021, Compared to the Nine Months Ended June 30, 2020
We have not generated any revenue to date.
Officer compensation was $74,000 compared to $72,000 for the nine months ended June 30, 2021 and 2020, respectively. Officer compensation is accrued at $24,000 per quarter for our CEO.
2
Consulting expense was $99,976 compared to $0 for the nine months ended June 30, 2021 and 2020, respectively. During the nine months ended June 30, 2021.
Consulting expense - related party was $105,365 compared to $0 for the nine months ended June 30, 2021 and 2020, respectively. During the nine months ended June 30, 2021, we incurred consulting expense of $15,000 per month for services provided by Triage.
General and administrative expense (“G&A”) was $104,081 compared to $712 for the nine months ended June 30, 2021 and 2020, respectively. G&A expense increased primarily due to audit, legal and accounting expense. We also incurred $58,000 of expense related to oil and gas fees.
Liquidity and Capital Resources
Cash flow from operations
Cash used in operating activities for the nine months ended June 30, 2021 was $101,408 as compared to $712 of cash used in operating activities for the nine months ended June 30, 2020.
Cash Flows from Financing
For the nine months ended June 30, 2021, we received $20,000 from the sale of common stock and $90,850 from related party loans. In the prior period we received $712 from a related party loan.
Going Concern
The accompanying unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has no source of revenue, has suffered recurring losses since inception and has no assurance of future profitability. The Company will continue to require financing from external sources to finance its operating and investing activities until sufficient positive cash flows from operations can be generated. There is no assurance that financing or profitability will be achieved, accordingly, there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these uncertainties.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies
We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations. Refer to Note 2 - Summary of Significant Accounting Policies for discussion.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of June 30, 2021, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive and financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, management concluded that our disclosure controls and procedures were not effective as of June 30, 2021, to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the periods prescribed by U.S. Securities and Exchange Commission and that such information is accumulated and communicated to management, including our chief executive and financial officer, as appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, 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. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended June 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
4