NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION
Polar Petroleum (“Polar”) was incorporated in the State of Nevada on March 22, 2011 as Post Data, Inc. We were previously a development stage company formed for purposes of decommissioning electronic data storage devices for permanent inoperability and unrecoverability of electronic data contained therein. On July 30, 2012, our management changed and we entered into the oil and gas business to engage in the exploration, development and production of oil and gas properties primarily in the State of Alaska. The Company has selected March 31 as it fiscal year end.
On August 22, 2012, we formed a wholly-owned subsidiary, Polar Petroleum (AK) Corp., in the State of Alaska for purposes of operating our oil and gas business in the State of Alaska.
On October 24, 2012, we filed a Certificate of Amendment to our Articles of Incorporation (the “Certificate of Amendment”) with the Nevada Secretary of State to change our company name from “Post Data, Inc.” to “Polar Petroleum Corp.” (the “Name Change”) in order to better reflect the change in our business plan to oil and gas exploration, development and production. The effective date of the Name Change was November 2, 2012.
On October 24, 2012, we also filed a Certificate of Change pursuant to Section 78.209 of the Nevada Revised Statutes (the “Certificate of Change”) with the Nevada Secretary of State to effect a seven for one forward stock split of our common stock (the “Forward Stock Split”). The Certificate of Change increased the number of authorized shares of our common stock from 100,000,000 to 700,000,000 and the number of issued and outstanding shares of common stock for shareholders of record as of November 1, 2012, from 5,845,000 shares to 40,915,000 shares. The effective date of the Forward Stock Split with the Nevada Secretary of State was November 2, 2012. The Name Change and the Forward Split took effect in the OTC markets at the open of business on November 6, 2012.
The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The accompanying interim unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the Company’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended December 31, 2012 are not necessarily indicative of the results for the full years. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim consolidated financial statements should be read in conjunction with the audited combined financial statements and the footnotes thereto for the periods ended March 31, 2012 filed in its annual report on Form 10-K. The Company is currently in the exploration stage. All activities of the Company to date relate to its organization, initial funding and share issuances. The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles related to exploration stage companies. An exploration-stage company is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from.
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Exploration Stage Company
The Company is considered to be in the exploration stage as defined in FASC 915-10-05,
“Development Stage Entity.”
The Company is devoting substantially all of its efforts to the execution of its business plan.
POLAR PETROLEUM CORP.
(f/k/a Post Data, Inc.).
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consists principally of currency on hand, demand deposits at commercial banks, and liquid investment funds having a maturity of three months or less at the time of purchase. The Company had $125,161 and $0 cash available as of December 31, 2012 and March 31, 2012, respectively.
Net Income or (Loss) Per Share of Common Stock
The Company follows financial accounting standards, which provide for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of any other securities that could share in the earnings of the entity. There were no common stock equivalents outstanding at December 31, 2012 and March 31, 2012. If there were, however, they would still be excluded from the calculation of diluted earnings per share. Net losses for the periods would have made the calculation result anti-dilutive.
As of December 31, 2012, the Company had 42,952,500 shares outstanding. The Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.
Oil and Gas Properties
Oil and gas investments are accounted for by the full-cost method of accounting. Accordingly, all costs associated with property acquisition, exploration, and development activities are capitalized. Depletion of capitalized oil and gas well costs is provided using the units of production method based on estimated proved developed oil and gas reserves of the respective oil and gas properties. Significant undeveloped leases are assessed individually for impairment, based on the Company’s current exploration plans, and a valuation allowance is provided if impairment is indicated.
Asset Retirement Obligations
In August 2001, the FASB issued ASC 410-20,"Accounting for Asset Retirement Obligations" (ASC 410-20). ASC 410-20 requires that the fair value of an asset retirement cost, and corresponding liability, should be recorded as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic and rational method.
POLAR PETROLEUM CORP.
(f/k/a Post Data, Inc.).
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Impairment of Long-Lived Assets
In accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets, long lived assets such as oil and gas properties and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount of the fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet. Impairment of unproved oil and gas properties is determined by ASC 932, “Extractive Activities – Oil and Gas”. The Company had no impairment charges as of December 31, 2012.
Foreign Currency Translation
The financial statements are presented in United States dollars. In accordance with ASC 830“Foreign Currency Translation”, foreign denominated monetary assets and liabilities are translated into United States dollars at rates of exchange in effect at the balance sheet date. Non-monetary items, including equity, are translated at the historical rate of exchange. Revenues and expenses are translated at the average rates of exchange during the year. During the nine months ended December 31, 2012, the company had immaterial translations which were deemed to be irrelevant.
Office Space and Labor
The Company’s Officers and Directors provide office space and labor to support the business plan. As of December 31, 2012, the only value that has been declared is where the Company’s President donated expertise and labor to develop a website for the Company. The fair value of his contribution is $1,500, which was reported as a capital contribution and website expense.
Recently Enacted Accounting Standards
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.
NOTE 3- PROVISION FOR INCOME TAXES
The Company recognizes the tax effects of transactions in the year in which such transactions enter into the determination of net income regardless of when reported for tax purposes. Deferred taxes are provided in the consolidated financial statements under FASC 740-10-65-1 to give effect to the temporary differences which may arise from differences in the bases of fixed assets, depreciation methods and allowances based on the income taxes expected to be payable in future years. Minimal development stage deferred tax assets arising as a result of net operating loss carry-forwards have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods. Operating loss carry-forwards generated during the period from March 22, 2011 (date of inception) through December 31, 2012, of approximately $281,000 will begin to expire in 2031. Accordingly, deferred tax assets of approximately $98,000 (calculated at an expected federal rate of 35%) were completely offset by a valuation allowance.
POLAR PETROLEUM CORP.
(f/k/a Post Data, Inc.).
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 3- PROVISION FOR INCOME TAXES
Continued)
The Company has no tax positions at December 31, 2012, for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
The Company recognizes interest accrued relative to unrecognized tax benefits in interest expense and penalties in operating expense. During the period from March 22, 2011, inception, to December 31, 2012, the Company recognized no income tax related interest and penalties. The Company had no accruals for income tax related interest and penalties at December 31, 2012.
NOTE 4 -
OIL WELL PROPERTIES
On November 5, 2012, Polar Petroleum (AK) Corp., a wholly-owned subsidiary (the “Subsidiary”) of Polar entered into and closed a lease purchase agreement (the “Purchase Agreement”) with Daniel K. Donkel and Samuel H. Cade (together, the “Sellers”) pursuant to which the Subsidiary acquired 100% of the record title of the Sellers to 17 oil and gas leases located in the State of Alaska (the “Leases”), while reserving a royalty of 16.67% for the State of Alaska and an overriding royalty of 4% for the Sellers, in exchange for a total purchase price of $1,250,000, with $150,000 of the purchase price due in cash at closing and the remaining $1,100,000 due in accordance with the terms of a promissory note between the Subsidiary and the Sellers (the “Promissory Note”). The Purchase Agreement also provides that the Subsidiary is required to drill a test well (the “Test Well”) to a depth of at least 8,000 feet on one of three designated Leases (the “Test Well Leases”) within 2 years of the closing of the Purchase Agreement and, upon such drilling of the Test Well, the Subsidiary will assign a 20% working interest in such Test Well Lease to Donkel Oil & Gas, LLC. Failure to complete drilling of the Test Well will result in the Subsidiary’s forfeiture of its interest in all of the three Test Well Leases. The Purchase Agreement contains customary representations and warranties by the Subsidiary and the Sellers.
In connection with the Purchase Agreement, the Subsidiary entered into an Escrow Agreement with the Sellers (the “Escrow Agreement”) pursuant to which the Subsidiary executed and delivered to the escrow agent assignments (the “Assignments”) to re-assign 100% of its record title to the Test Well Leases back to the Sellers as collateral and security for the Subsidiary’s performance pursuant to the terms of the Purchase Agreement. In the event the Subsidiary fails to drill the Test Well, the Assignments will be delivered by the escrow agent to the Sellers for filing with the State of Alaska.
NOTE 5 -
NOTE PAYABLE
In connection with the Purchase Agreement, the Subsidiary entered into a Promissory Note with the Sellers in the amount of $1,100,000.00. The Promissory Note bears an annual interest rate of 0.30% and is payable in installments of $125,000 due every three months for the first year, $100,000 due every three months thereafter and the final payment of $300,000 due on or before October 31, 2014. The Promissory Note is secured by terms and provisions of the Purchase Agreement.
NOTE 6 -
LOANS FROM STOCKHOLDERS
Stockholders have made unsecured loans to the Company for working capital purposes. The total loans from stockholders were $78,596 as of December 31, 2012.
POLAR PETROLEUM CORP.
(f/k/a Post Data, Inc.).
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 7 -
STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock
As of December 31, 2012, the Company has 20,000,000 shares of preferred stock authorized with a par value of $0.001 per share. No preferred shares are issued and outstanding.
Common Stock
As of December 31, 2012, the Company has 700,000,000 shares of common stock authorized with a par value of $0.001 per share. 42,952,500 shares are outstanding as of December 31, 2012.
The following details the stock transactions for the Company:
On March 25, 2011, the Company authorized the sale of 14,000,000 shares of its common stock to its founding President for $.001 per share for a total of $20,000 cash to provide initial working capital.
During August, 2011, the Company sold 19,915,000 shares at $.001 per share for proceeds of $28,450. The proceeds were used for administrative expenses.
On August 7, 2012, the Company’s former President and director sold 14,000,000 shares of common stock to a new sole officer and director, in a private transaction. As a result of the stock purchase, the new President owns 14,000,000 shares of common stock, which equals approximately 41.28% of the Company’s issued and outstanding common stock.
On October 11, 2012, the Company issued 7,000,000 shares of the Company’s common stock (“Shares”) to Daniel Walker, its sole officer and director (“Walker”), valued at $100,000 as payment for services rendered to the Company
On November 6, 2012, the Company entered into a subscription agreement with a non-U.S. investor pursuant to which the Company issued 1,500,000 shares of the Company’s $.001 par value common stock in exchange for proceeds of $150,000, or $0.10 per share
On December 18, 2012, the Company entered into a subscription agreement with a non-U.S. investor pursuant to which the Company issued 225,000 shares of the Company’s $.001 par value common stock in exchange for proceeds of $90,000, or $0.40 per share
On December 24, 2012, the Company entered into a subscription agreement with a non-U.S. investor pursuant to which the Company issued 312,500 shares of the Company’s $.001 par value common stock in exchange for proceeds of $125,000, or $0.40 per share
POLAR PETROLEUM CORP.
(f/k/a Post Data, Inc.).
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 8 - DTC ELIGIBILITY
The Company has made application, with a payment of $10,000, for its shares to be deposited with the Depository Trust Corporation. Future trades of its securities will consequently be simplified and expedited.
NOTE 9 - GOING CONCERN
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. The Company has incurred an operating deficit since its inception, is in the development stage and has generated no operating revenue. These items raise substantial doubt about the Company’s ability to continue as a going concern.
In view of these matters, realization of the assets of the Company is dependent upon the Company’s ability to meet its financial requirements through equity financing and the success of future operations. These consolidated financial statements do not include adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
NOTE 10 - SUBSEQUENT EVENTS
The Company has evaluated events from December 31, 2012, through the date the consolidated financial statements were issued. There are no subsequent events required to be disclosed.
