Attached files
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter year ended June 30, 2010
[] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____ to _______
Commission file number: 333-103780
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PARADIGM OIL AND GAS, INC.
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(Exact name of small business issuer in its charter)
Nevada 33-1037546
-------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
123 E. Market St 75147
Mabank, Texas, United States of America
---------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (903) 880 1161
Securities Registered Under Section 12(b) of the Exchange Act: None
Securities Registered Under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value
------------------------------
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer as
defined in Rule 405 of the Securities Act. Yes No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes No [X]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-Q. Yes No [X]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer Accelerated filer
Non-accelerated (Do not check if a smaller Smaller reporting company [X]
reporting company) filer
Indicate by check mark whether the registrant is a shell company (as defined by
Rule 12b-2 of the Act). Yes No [X]
The Company's stock is traded on the OTC-BB. As of August 15, 2010, there were
23,888,058 shares of stock held by non-affiliates. As of August 15, 2010,
51,188,058 shares of the common stock of the registrant were outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
-----------------------------
PARADIGM OIL AND GAS, INC.
(An Exploration Stage Company)
Index to Consolidated Financial Statements
Page
----
Consolidated Balance Sheets at June 30, 2010
and January 28, 2010............................................. F-2
Consolidated Statements of Operations for the
three months and Period ended, June 30, 2010
and from January 28, 2010 (inception) through
June 30, 2010.................................................... F-3
Consolidated Statements of Comprehensive Income
(Loss) for the three months and Period ended
June 30, 2010 and from January 28, 2010
(inception) through June 30, 2010................................ F-4
Consolidated Statement of Changes in
Shareholders' Equity from January 28, 2010,
(inception) through June 30, 2010................................ F-5
Consolidated Statements of Cash Flows for
the period ended June 30, 2010
and from January 28, 2010 (inception)
through June 30, 2010............................................ F-6
Notes to Consolidated Financial Statements......................... F-7
F-1
PARADIGM OIL AND GAS, INC.
(An Exploration Stage Company)
Consolidated Balance Sheets
June 30, 2010 and January 28, 2010
June 30, January 28,
2010 2010
-------------- ----------------
(unaudited) (unaudited)
Assets
Cash $ 126,710 $ --
Employee advances 3,087 --
Prepaid field services 25,050 --
Inventory 6,258 --
-------------- ----------------
Total current assets 161,105 --
-------------- ----------------
Furniture and fixtures 1,178 --
Production equipment 105,183 --
Natural gas and oil properties
Unproved properties 601,566 541,539
-------------- ----------------
707,927 541,539
-------------- ----------------
Total assets $ 869,032 $ 541,539
============== ================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 154,680 $ --
Convertible note payable 494,918 --
Shareholder loans 69,546 --
Note payable 87,524 --
-------------- ----------------
Total current Liabilities 806,668 --
-------------- ----------------
Total liabilities 806,668 --
-------------- ----------------
Shareholders' equity:
Preferred stock, $.001 par value,
10,000,000 shares authorized, none
issued or outstanding -- --
Common stock, $.001 par value; 300,000,000
shares authorized, 51,188,058 and
188,058 shares issued and outstanding 51,188 188
Additional paid-in capital 2,290,351 541,351
Accumulated deficit during the
exploration stage (2,283,047) --
Accumulated comprehensive income 3,872 --
-------------- ----------------
Total shareholders' equity 62,364 541,539
-------------- ----------------
$ 869,032 $ 541,539
============== ================
The accompanying notes are an integral part of these financial statements.
F-2
PARADIGM OIL AND GAS, INC.
(An Exploration Stage Company)
Consolidated Statements of Operations
For the Three months and period ended June 30, 2010
and from January 28, 2010 (inception)
through June 30, 2010
January 28,
2010
Three Months (Inception)
Ended Period Ended Through
June 30, June 30, June 30,
2010 2010 2010
--------------- -------------- ----------------
Field Operation Expenses:
Field Supplies $ 6,683 $ 8,783 $ 8,783
Labor 30,041 30,041 30,041
Lease costs 13,613 13,613 13,613
Maintenance - 400 400
Natural gas and oil
exploration costs 240 692 692
Utilities 5,571 5,571 5,571
--------------- -------------- ----------------
Total Field
Operation Expenses 56,148 59,100 59,100
--------------- -------------- ----------------
General Expenses:
Accounting and Audit 12,845 15,345 15,345
Advertising and Promotion 6,698 6,956 6,956
Insurance 782 782 782
Legal fees 30,692 49,750 49,750
Management Fees 26,847 46,265 46,265
Meals and Entertainment 1,386 1,496 1,496
Office 4,943 5,677 5,677
Professional and
consulting fees 4,921 4,958 4,958
Telephone 3,722 4,900 4,900
Transfer Agent Fees 1,494 2,109 2,109
Travel 7,517 8,795 8,795
Interest 1,145 2,345 2,345
Utilities 65 1,290 1,290
Foreign Exchange Loss
(Income) (1,700) -- --
--------------- -------------- ----------------
Total expenses 101,357 150,668 150,668
--------------- -------------- ----------------
Loss from operations (157,505) (209,768) (209,768)
Other income (expense):
Assumption of Liabilities
in acquisition -- (633,279) (633,279)
Loss from shares issued
on debt conversion -- (1,440,000) (1,440,000)
--------------- -------------- ----------------
Net loss $ (157,505) $ (2,283,047) $ (2,283,047)
=============== ============== ================
Basic and diluted loss
per share $ (0.00) $ (0.05)
=============== ==============
Basic and diluted
weighted average common
shares outstanding 51,188,058 50,492,112
=============== ==============
The accompanying notes are an integral part of these financial statements.
F-3
PARADIGM OIL AND GAS, INC.
(An Exploration Stage Company)
Consolidated Statements of Comprehensive Income (Loss)
For the three months and period ended June 30, 2010
and from January 28, 2010 (inception)
through June 30, 2010
January 28,
2010
Three Months (Inception)
Ended Period Ended Through
June 30, June 30, June 30,
2010 2010 2010
--------------- -------------- ----------------
Loss for the period $ (157,505) $ (2,283,047) $ (2,283,047)
Other Comprehensive
Income (Loss)
Foreign currency
translation
adjustments 11,230 3,872 3,872
--------------- -------------- ----------------
Comprehensive Income (Loss) $ (146,275) $ (2,279,175) $ (2,279,175)
=============== ============== ================
The accompanying notes are an integral part of these financial statements.
F-4
PARADIGM OIL AND GAS, INC.
(An Exploration Stage Company)
Consolidated Statement of Changes in Shareholders' Equity
For the period ended June 30, 2010
Additional Other
Common Stock Paid-In Accumulated Comprehensive
Shares Par Value Capital Deficit Income Total
-------------- -------------- --------------- --------------- --------------- -----------------
Balance at January 28,
2010 (inception) 188,058 $ 188 $ 541,351 $ -- $ -- $ 541,539
Issuance of common stock
for acquisition 42,000,000 42,000 8,358,000 -- -- 8,400,000
Adjustment to record
basis in Intergrated
Oil and Gas Solutions
Inc. -- -- (8,400,000) -- -- (8,400,000)
-------------- -------------- --------------- --------------- --------------- -----------------
Balance at January 28,
2010 after reverse
acquisition 42,188,058 42,188 499,351 -- -- 541,539
Common stock issued
February 2 on
conversion of debt 9,000,000 9,000 1,791,000 -- -- 1,800,000
Net loss -- -- -- (2,283,047) -- (2,283,047)
Foreign currency
translation adjustment -- -- -- -- 3,872 3,872
-------------- -------------- --------------- --------------- --------------- -----------------
Balance at June 30, 2010 51,188,058 $ 51,188 $ 2,290,351 $ (2,283,047) $ 3,872 $ 62,364
============== ============== =============== =============== =============== =================
The accompanying notes are an integral part of these financial statements.
F-5
PARADIGM OIL AND GAS, INC.
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
For the period ended June 30, 2010
and from January 28, 2010 (inception)
through June 30, 2010
January 28,
2010
(Inception)
Period Ended Through
June 30, June 30,
2010 2010
-------------- ----------------
Cash flows from operating activities:
Net loss $ (2,283,047) $ (2,283,047)
Adjustments to reconcile net loss
to net cash used
in operating activities:
Non-cash interest 2,345 2,345
Loss on Acquisition 633,279 633,279
Loss from extinguishment on debt
conversion 1,440,000 1,440,000
-------------- ----------------
(207,423) (207,423)
Changes in operating assets and
liabilities:
Employee advances (3,087) (3,087)
Prepaid field services (25,050) (25,050)
Inventory (6,258) (6,258)
Accounts payable and accrued expenses 10,356 10,356
Net cash used in
operating activities (231,462) (231,462)
-------------- ----------------
Cash flows from (used in) investing
activities:
Furniture and fixtures (1,178) (1,178)
Production equipment (105,183) (105,183)
Expenditures made on oil and gas
properties (60,027) (60,027)
-------------- ----------------
Net cash used in
investing activities (166,388) (166,388)
-------------- ----------------
Cash flows from financing activities:
Proceeds from convertible note payable 494,918 494,918
Proceeds from shareholder loan 29,521 29,521
Cash acquired in acquisition 121 121
-------------- ----------------
Net cash provided by
financing activities 524,560 524,560
-------------- ----------------
Net change in cash 126,710 126,710
Cash, beginning of period -- --
-------------- ----------------
Cash, end of period $ 126,710 $ 126,710
============== ================
Supplemental disclosure of cash flow
information:
Foreign currency translation of
liabilities $ 3,872 $ 3,872
Assumption of accounts payable in
acquisition $ 147,510 $ 147,510
Assumption of note payable, Shareholder
in acquisition $ 40,025 $ 40,025
Assumption of note payable in acquisition $ 85,864 $ 85,864
Assumption of convertible debt in
acquisition $ 360,000 $ 360,000
Issuance of common stock for convertible
debt $ (360,000) $ (360,000)
The accompanying notes are an integral part of these financial statements.
F-6
PARADIGM OIL & GAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the period ended June 30, 2010
and from January 28, 2010 (inception)
through June 30, 2010
1. UNAUDITED INFORMATION
The consolidated balance sheet of Paradigm Oil & Gas, Inc. (the "Company")
as of June 30, 2010, and as of January 28, 2010 Inception and the consolidated
statements of operations for the period ended June, 2010 and from January 28,
2010 Inception to June 30, 2010 have not been audited. However, in the opinion
of management, such information includes all adjustments (consisting only of
normal recurring adjustments) which are necessary to properly reflect the
consolidated financial position of the Company as of June 30, 2010, and the
results of operations for the period ended June 30, 2010.
Certain information and notes normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted, although management
believes that the disclosures are adequate to make the information presented not
misleading. Interim period results are not necessarily indicative of the results
to be achieved for an entire year. These consolidated financial statements
should be read in conjunction with the financial statements and notes to
financial statements included in the Company's financial statements as filed on
Form 10-K for the year ended December 31, 2009.
2. REVERSE MERGER OF INTERGRATED OIL AND GAS SOLUTIONS INC.
On January 28, 2010, the Company entered into a Share exchange agreement
with the shareholders of Intergrated Oil and Gas Solutions Inc. (the "Acquired
company") in exchange for their one hundred percent (100%) interest in all of
the capital stock of the Acquired company.
Paradigm issued 42,000,000 of its $.001 par value shares common shares
representing 82% of the fully-diluted capital of the company in exchange for
100% of the acquired company's outstanding shares. The Acquired company is now a
100% subsidiary of the Company.
The Acquired company holds 100% working interests in certain oil and gas
leases along with certain Oil and Gas production equipment. The total purchase
price to acquire these assets amounted to $541,539. These costs have been
capitalized on the acquired company's books at cost as Oil and Gas Properties
Under Lease.
3. OIL AND GAS INTERESTS
On January 28, 2010, the Company entered into a Share exchange agreement
with the shareholders of Intergrated Oil and Gas Solutions Inc. (the "Acquired
company") in exchange for their one hundred percent (100%) interest in all of
the capital stock of the Acquired company. The Acquired company is now a 100%
subsidiary of the Company.
The Acquired company holds 100% working interests in certain oil and gas
leases along with certain Oil and Gas production equipment. The costs to acquire
these assets have amounted to $541,539. Theses costs have been capitalized on
the acquired company's books at cost as Oil and Gas Properties Under Lease.
The oil and gas properties are comprised of 4 leases totaling
approximately nine hundred and thirty four (934) net mineral Acres, all located
in the State of Texas, USA. 692 acres in Kaufman County, carry a 80% Net Revenue
Interest, 40 acres located in the County of Wood, carry a 80% Net Revenue
Interest, 122.37 acres located in the County of Henderson carry a 81.25% Net
Revenue Interest and 80 acres in the County of Wichita carry a 75% Net Revenue
Interest. Combined there are a total of 9 existing previously producing wells
and available spacing to support the drilling of approximately 30 new wells in
the 3800' to 9000' range and approximately 50 new wells in the 800' to 1,800'
range.
On June 22, 2010 the Company's subsidiary, Intergrated Oil and Gas
Solutions Inc. acquired the Corsicana lease. The cost to acquire this lease
amounted to $20,700 for a 50% working interest in the 80% Net Revenue Interest.
The lease has 9 previously producing wells and have spacing over a total of 60
acres to support the potential of 17 new wells to depths of up to 2000 feet. The
Corsicana lease is located in Navarro County, Texas.
F-7
OIL AND GAS INTERESTS (continued)
On June 30, 2010 the Company's subsidiary, Intergrated Oil and Gas
Solutions Inc. acquired 2 additional Chilson leases, known as Chilson B. The
cost to acquire these leases amounted to $17,977 for a 100% working interest in
the 81% Net Revenue Interest. Combined the 2 leases have 5 previously producing
wells and have spacing over a total of 154 acres to support the potential of 37
new wells to depths of up to 2000 feet. The new Chilson leases are adjacent to
the existing Chilson lease the Company has which are all located in Wichita
County, Texas.
The Oil and Gas Interests are accounted for on a consolidated basis as
follows;
June 30, 2010
----------------
Chilson Property
Acquisition cost January 28, 2010 $ 121,774
Cost of work program 21,350
----------------
$ 143,124
----------------
Lett Finlay Property
Acquisition cost January 28, 2010 $ 308,708
----------------
$ 308,708
----------------
Lumpkin Property
Acquisition cost January 28, 2010 $ 111,057
----------------
$ 111,057
----------------
Chilson B
Acquisition cost June 30, 2010 $ 17,977
----------------
$ 17,977
----------------
Corsicana
Acquisition cost June 22, 2010 $ 20,700
----------------
$ 20,700
----------------
Todd Creek Property
Acquisition cost $ 298,631
Cash call 52,102
Refund (17,022)
Written off (50,000)
Impairment expense (283,711)
----------------
$ -
----------------
Hillsprings Property
Acquisition cost $ 207,383
Impairment expense (207,383)
----------------
$ -
----------------
Sawn Lake Property
Farmout and option agreement $ 152,423
Impairment expense (152,423)
----------------
$ -
----------------
Total Oil and Gas Interests $ 601,566
================
F-8
4. SUBSIDIARY FORMED: PARADIGM INTEGRATED TECHNOLOGY SOLUTIONS INC.
On May 20, 2010 the Company formed Paradigm Integrated Technology
Solutions Inc., as a wholly owned subsidiary to conduct business related to
technologies that enhance secondary oil recovery.
5. PRODUCTION EQUIPMENT
On May 20, 2010 the Company's subsidiary, Paradigm Integrated Technology
Solutions Inc., entered into a Transfer of Technology and Know How Agreement for
the world wide marketing rights for the Transportable Enhanced Oil Recovery
Platform. Under the terms of the agreement the Company agreed to purchase the
first system which includes the exclusive ownership in the related technology
and know how for a fee of $250,000. $50,000 was paid on signing the agreement
and $50,000 was to be paid within thirty days of signing the agreement towards
the purchase of the first system. To date the Company has paid $105,183. A
further $44,817 is due on delivery. The remaining $100,000 is paid in $10,000
increments above the purchase price of the system, each time an additional
system is delivered up to a total of 10 additional systems.
6. CONVERTIBLE NOTE PAYABLE
The Company received a series of fundings through out the 2nd quarter
totaling $494,918 by way of a Convertible note. The note is Convertible to
Common Shares at the Company's option at a price to be negotiated by September
30, 2010. Up to September 30, 2010 the note is interest free. If the note is not
converted by September 30, 2010, the note begins to accumulate interest at an
annual rate of 12%. Subsequent to June 30, 2010, the Company received a further
$240,000 in Note funding.
7. SHAREHOLDERS' EQUITY
Common Stock
a) Effective January 28, 2010, Paradigm Oil & Gas Inc. (the "Company"), a
Nevada corporation, entered into a Share exchange agreement with the
shareholders of Intergrated Oil and Gas Solutions Inc. (the "Acquired company")
a Texas corporation, whereby the Company has issued 42,000,000, US$.001 Par
value common shares to unrelated shareholders in exchange for their one hundred
percent (100%) interest in all of the capital stock of the Acquired company The
Acquired company is now a 100% subsidiary of the Company.
Prior to the Acquisition, there were 188,058 shares of the Company's
Common Stock outstanding. Immediately following the Acquisition, there are
42,188,058 shares of Common Stock outstanding.
On the effective date of the acquisition, additional paid in Capital was
increased by $8,358,000. This was adjusted by $8,400,000 to record the basis
in Intergrated Oil and Gas Solutions Inc. An Expense of $633,279 was then
recorded to recognize the assumption of Paradigms' liabilities assumed at the
time of the acquisition.
b) On February 2, 2010 the convertible note payable of $360,000 was
converted into common shares at $.04 per share. 9,000,000 shares were issued to
the convertible debenture holders.
On the effective date of the conversion, additional paid in capital was
increased by $1,791,000. A loss of $1,440,000 was then recognized to match the
conversion to the book value of the convertible debenture.
As of August 14, 2010 there were 51,188,058 common shares outstanding.
8. RELATED PARTY TRANSACTIONS
Shareholders of the company have loans outstanding to the Company of
$69,546 at June 30, 2010. The loans are interest free and have no formal terms
of repayment.
F-9
9. NATURAL GAS AND OIL EXPLORATION RISK
Exploration Risk
The Company's future financial condition and results of operations will
depend upon prices received for its natural gas and oil production and the cost
of finding, acquiring, developing and producing reserves. Substantially all of
its production is sold under various terms and arrangements at prevailing market
prices. Prices for natural gas and oil are subject to fluctuations in response
to changes in supply, market uncertainty and a variety of other factors beyond
its control. Other factors that have a direct bearing on the Company's prospects
are uncertainties inherent in estimating natural gas and oil reserves and 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.
Distribution Risk
The Company is dependent on the operator to market any oil production from
its wells and any subsequent production which may be received from other wells
which may be successfully drilled on the Prospect. It relies on the operator's
ability and expertise in the industry to successfully market the same. Prices at
which the operator sells gas/oil both in intrastate and interstate commerce,
will be subject to the availability of pipe lines, demand and other factors
beyond the control of the operator. The Company and the operator believe any oil
produced can be readily sold to a number of buyers.
Foreign Operations Risk
The Company is exposed to foreign currency fluctuations, political risks,
price controls and varying forms of fiscal regimes or changes thereto which may
impair its ability to conduct profitable operations as it operates
internationally and holds foreign denominated cash and other assets.
10. NOTE PAYABLE
The Company is indebted under a note payable to 1132559 Alberta Ltd,
bearing annual interest of 7% and secured by 100% of the first proceeds of
production under the Farmout and Option Agreement for the Sawn Lake Property.
There are no fixed repayment terms. The Company may be in default of this note
as more fully explained in note 11 of the December 31, 2009 financial
statements.
June 30
2010
----------------
1132559 Alberta Ltd $ 87,524
----------------
$ 87,524
================
11. CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The Company is in default of its obligation to Compton Petroleum in
respect to the Todd Creek Property, as it has not paid the full share of costs
of drilling or to complete the well. As a result the Company has received no
further information about the Todd Creek project. The Company does not expect to
receive further information from the operator until all outstanding
participation costs have been paid.
Inconjunction with the year end audit in 2007 and 2008, 1132559 Alberta
Ltd alleged that the Company was in default of the Sawn Lake Property Lake
farmout agreement over which their note payable (refer to note 6) is secured by
100% of the first proceeds of production of the Sawn Lake Property. Accordingly
1132559 Alberta Ltd position is that they own the Sawn Lake Property Lake
farmout agreement. The Company does not believe there has been any default and
maintains its ownership in the Sawn Lake farmout agreement.
12. SUBSEQUENT EVENT
On July 21, 2010 the Company received a further $240,000 as a convertible
note payable. See note 6.
F-10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations
-------------
This quarterly report contains forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. These
statements relate to future events or our future financial performance. Some
discussions in this report may contain forward-looking statements that involve
risk and uncertainty. A number of important factors could cause our actual
results to differ materially from those expressed in any forward-looking
statements made by us in this report. Forward-looking statements are often
identified by words like: "believe", "expect", "estimate", "anticipate",
"intend", "project" and similar expressions or words which, by their nature,
refer to future events.
In some cases, you can also identify forward-looking statements by terminology
such as "may", "will", "should", "plans", "predicts", "potential" or "continue"
or the negative of these terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, uncertainties and
other factors, including the risks in the section entitled "Risk Factors", that
may cause our or our industry's actual results, levels of activity, performance
or achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity or achievements. Except as required by applicable law, including the
securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States Dollars (US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles. Any references to "CA$" refer to Canadian Dollars and all references
to "common shares" refer to the common shares in our capital stock.
As used in this annual report, the terms "we", "us", "our", and "Paradigm" mean
Paradigm Oil And Gas, Inc., unless otherwise indicated.
Paradigm is an exploration stage company. There is no assurance that
commercially viable reserves of oil and/or gas exist on our farming lands or
that commercially viable mineral deposits exist on the claims that we have under
option. Some further drilling and exploration will be required before a final
evaluation as to the economic and legal feasibility of our properties can be
determined.
OVERVIEW
--------
We were incorporated as Paradigm Enterprises, Inc. in the state of Nevada on
July 15, 2002 and established a year end of December 31. On February 7, 2005 we
changed our name from Paradigm Enterprises, Inc. to Paradigm Oil And Gas, Inc.
From July, 2002 to December, 2004, we were in the business of the exploration
and development of a mineral property in British Columbia. The Company decided
to abandon its interest in this mineral property and on August 26, 2005. We have
not spent anything on research and development activities.
On December 06, 2004, we entered into two participation proposals with Win
Energy Corporation. On June 18, 2005, the Company received a payment of $147,258
from Win for the sale of 50% of the Company's 10% interest in the Todd Creek
Property and currently holds a 5% interest in the project.
On February 15, 2005, Paradigm entered into a Farmout and Option Agreement with
1132559 Alberta Ltd., a private Alberta corporation whereby Paradigm will farm
in to a 5% interest in a test well at Township 91, Range 13 W5M, SE Section 36,
and a similar interest in an additional option well at Township 91, Range 12
W5M, NW Section 29 in the Sawn Lake, Alberta, oil and gas project. In March
2006, a well was drilled in Section 36. The well is not producing at this time
and Paradigm is waiting for further information from the operator on their plan
of operations.
Effective January 28, 2010, Paradigm Oil & Gas Inc. entered into a Share
exchange agreement with the shareholders of Intergrated Oil and Gas Solutions
Inc. (the "Acquired company") a Texas corporation, whereby the Company has
issued 42,000,000, US$.001 Par value common shares to unrelated shareholders in
exchange for their one hundred percent (100%) interest in all of the capital
stock of the Acquired company . The Transaction is considered to be a reverse
acquisition. The acquisition date now becomes the inception date of the company.
The Acquired company is now a 100% subsidiary of Paradigm.
The Acquired company holds 100% working interests in certain oil and gas leases
along with certain Oil and Gas production equipment. The costs to acquire these
assets have amounted to $541,539. These costs have been capitalized on the
acquired company's books at cost as Oil and Gas Properties Under Lease.
2
On May 20, 2010 the Company formed Paradigm Integrated Technology Solutions
Inc., as a wholly owned subsidiary to conduct business related to technologies
that enhance secondary oil recovery.
On May 20, 2010 the Company's subsidiary, Paradigm Integrated Technology
Solutions Inc., entered into a Transfer of Technology and Know How Agreement for
the world wide marketing rights for the Transportable Enhanced Oil Recovery
Platform. Under the terms of the agreement the Company agreed to purchase the
first system which includes the exclusive ownership in the related technology
and know how for a fee of $250,000.
On June 22, 2010 the Company's subsidiary, Intergrated Oil and Gas Solutions
Inc. acquired the Corsicana lease. The cost to acquire this lease amounted to
$20,700 for a 50% working interest in the 80% Net Revenue Interest. The lease is
located in Navarro County, Texas.
On June 30, 2010 the Company's subsidiary, Intergrated Oil and Gas Solutions
Inc. acquired 2 additional Chilson leases, known as Chilson B. The cost to
acquire these leases amounted to $17,977 for a 100% working interest in the 81%
Net Revenue Interest. The new Chilson leases are adjacent to the existing
Chilson lease the Company has which are all located in Wichita County, Texas.
We have not been involved in any bankruptcy, receivership or similar proceeding
nor has there been any material reclassification or merger, consolidation or
purchase or sale of a significant amount of assets not in the ordinary course of
business other than the acquisition mentioned above on January 28, 2010.
OUR CURRENT BUSINESS
--------------------
PETROLEUM EXPLORATION, DEVELOPMENT AND RECOVERY
Effective January 28, 2010, Paradigm Oil & Gas Inc. entered into a Share
exchange agreement with the shareholders of Intergrated Oil and Gas Solutions
Inc. (the "Acquired company") a Texas corporation, whereby the Company has
issued 42,000,000, US$.001 Par value common shares to unrelated shareholders in
exchange for their one hundred percent (100%) interest in all of the capital
stock of the Acquired company The Acquired company is now a 100% subsidiary of
the Company.
The Acquired company holds 100% working interests in certain oil and gas leases
along with certain Oil and Gas production equipment. The costs to acquire these
assets have amounted to $541,538.90. These costs have been capitalized on the
acquired company's books at cost as Oil and Gas Properties Under Lease.
The oil and gas properties are comprised of 4 leases totaling approximately nine
hundred and thirty four (934) net mineral Acres, all located in the State of
Texas, USA. 692 acres in Kaufman County, carry a 80% Net Revenue Interest, 40
acres located in the County of Wood, carry a 80% Net Revenue Interest, 122.37
acres located in the County of Henderson carry a 81.25% Net Revenue Interest and
80 acres in the County of Wichita carry a 75% Net Revenue Interest. Combined
there are a total of 9 existing previously producing wells and available spacing
to support the drilling of approximately 30 new wells in the 3800' to 9000'
range and approximately 50 new wells in the 800' to 1,800' range.
On June 22, 2010 the Company's subsidiary, Intergrated Oil and Gas Solutions
Inc. acquired the Corsicana lease. The cost to acquire this lease amounted to
$20,700 for a 50% working interest in the 80% Net Revenue Interest. The lease
has 9 previously producing wells and have spacing over a total of 60 acres to
support the potential of 17 new wells to depths of up to 2000 feet. The
Corsicana lease is located in Navarro County, Texas.
On June 25, 2010 the Company's subsidiary, Intergrated Oil and Gas Solutions
Inc. acquired 2 additional Chilson leases, known as Chilson B. The cost to
acquire these leases amounted to $17,977 for a 100% working interest in the 81%
Net Revenue Interest. Combined the 2 leases have 5 previously producing wells
and have spacing over a total of 154 acres to support the potential of 37 new
wells to depths of up to 2000 feet. The new Chilson leases are adjacent to the
existing Chilson lease the Company has which are all located in Wichita County,
Texas.
On May 20, 2010 the Company formed Paradigm Integrated Technology Solutions
Inc., as a wholly owned subsidiary to conduct business related to technologies
that enhance secondary oil recovery. On May 20, 2010 the Company's subsidiary,
Paradigm Integrated Technology Solutions Inc., entered into a Transfer of
Technology and Know How Agreement for the world wide marketing rights for the
Transportable Enhanced Oil Recovery Platform. Under the terms of the agreement
the Company agreed to purchase the first system which includes the exclusive
ownership in the related technology and know how for a fee of $250,000. $50,000
was paid on signing the agreement and $50,000 was to be paid within thirty days
of signing the agreement towards the purchase of the first system. To date the
Company has paid $105,183. A further $44,817 is due on delivery. The remaining
$100,000 is paid in $10,000 increments above the purchase price of the system,
each time an additional system is delivered up to a total of 10 additional
systems.
3
The Transportable Enhanced Oil Recovery Platform is a portable production system
than can be easily and economically moved from well to well and quickly
installed to remove Oil from the existing well bore. This allows for quick Oil
recovery without the time and expense currently required to implement the
infrastructure need to produce Oil today. By utilizing this system, wells can be
produced from immediately and monitored as to flow rates to determine which
wells are suitable for making additional investment for a more permanent
operational infrastructure. The company plans utilize this technology on it's
existing properties and then introduce this technology to the market place.
BUSINESS PRIOR TO ACQUISITION OF JANUARY 28, 2010
On December 06, 2004, we entered into two participation proposal agreements with
Win Energy Corporation.
HILLSPRINGS PROPERTY
Paradigm paid $207,383 to Win to acquire a 10% working interest in one section
(640 acres) in the Hillsprings Property (Township 10, Range 34,Section 29 W4),
Alberta, Canada. It is now anticipated that a test well will be drilled on our
property interest in 2007.
TODD CREEK PROPERTY
Paradigm paid $298,631 to Win to acquire a 10% working interest in 13.75
sections (8800 acres) in the Todd Creek Property, Alberta, Canada. In June,
2005, we sold 50% of our interest back to Win for net proceeds of $127,349
(value of the interest less certain uppaid operating expenses) as of the date of
this report, Paradigm holds a 5% in the Todd Creek property and has paid a net
cost of $149,316 to acquire its interest. During the second quarter of 2005, a
well located in Todd Creek property was drilled to a specifically targeted
depth. This well is located in 13-28-9-2W5 in Alberta, Canada and we will refer
to this well as the "13-28 well." The 13-28 well was evaluated and tested. The
operator encountered gas reservoirs and concluded that this well is a potential
gas well. This well was tied into a newly constructed gas processing plant and
production commenced in September 2006. To date we have received no revenue from
this well due to the fact we owe Win Energy drilling costs. In January 2007, we
completed the drilling of a second well in the Todd Creek Prospect located in
13-33-8-2 in Alberta, Canada and we will refer to this well as the "13-33 well."
Reports by other farmin partners indicate that no economic hydrocarbons are
present.
SAWN LAKE PROJECT
On February 15, 2005 Paradigm entered into a Farmout and Option Agreement with
1132559 Alberta Ltd., a private Alberta corporation whereby Paradigm will farm
in to a 5% interest in a test well at Township 91, Range 13 Section 36 W5M SE ,
and a similar interest in an additional option well at Township 91, Range 12,
Section 29 W5M NW in the Sawn Lake, Alberta exploratory oil and gas project.
Paradigm will also have a right of first refusal to participate in each drilling
spacing unit through a farm-in on the lands held by Deep Well Oil and Gas, Inc.
in the Sawn Lake project in which 1132559 Alberta Ltd has an interest. The final
terms of the option for the additional DSUs are yet to be agreed upon by both
parties. Paradigm will earn 100% of the farmor's interest (an undivided 10%
interest in the drilling spacing unit) before payout (BPO), reverting to 50% of
the farmor's interest (an undivided 5% interest) after payout(APO). Paradigm
will have then earned a 5% interest in the remaining wells to be drilled in that
drilling spacing unit.
In order to earn its interest in the initial test well, total costs of the test
well, estimated to be CA $216,489, up to the point of commercial oil sales are
to be borne one hundred percent (100%) by Paradigm. Total costs, estimated to be
$173,200, of the option well up to the point of commercial oil sales are also to
be borne one hundred percent (100%) by Paradigm in order to earn its undivided
interest. Payment of the full AFE amount is due upon invoicing of Paradigm by
the operator (1132559 Alberta Ltd.) for each of the test and option wells. In
March 2006, a well was drilled in Section 36. The well is not producing at this
time and Paradigm is waiting for further information from the operator on their
plan of operations.
ITEM 2. DESCRIPTION OF PROPERTY
PETROLEUM PROPERTIES
--------------------
Our initial petroleum project was acquired as a result of our perception of the
continued demand for oil and gas on a world wide scale and the increase in the
price of petroleum projects. In late 2004 the Board decided to review the
feasibility of becoming involved in that sector and found available a number of
reasonably low cost, low risk projects provided we could raise sufficient
capital to participate in the projects.
HILLSPRINGS
On December 06, 2004, we entered into a participation proposal with Win Energy
Corporation whereby we could acquire an interest in the Hillsprings exploratory
oil and gas drilling project about 100 miles south of Calgary in the Alberta
foothills for the payment of a total of $207,383 excluding drilling costs. We
acquired a 5% interest in one section (640 acres) of land located at Section 34,
Township 5, Range 29 W4M.
4
TODD
On December 06, 2004, we entered into a second participation proposal with Win
Energy whereby we could acquire an interest in the Todd exploratory oil and gas
drilling project also about 100 miles south of Calgary in the foothills of the
Rocky Mountains for the payment of a total of $298,631 including drilling costs.
On January 25, 2005, we concluded final payments and finalized the agreements
whereby we acquired a 10% interest in 13.75 sections (8800 acres) of land
located at Section 16, Township 9, Range 2 W5 and an option to December 31, 2006
to earn a 7.5% interest in an additional seven sections 4480 acres) in the
surrounding area by contributing 10% of the drilling costs. Contributions to
each well drilled will earn an interest in two sections. On June 18, 2005, the
Corporation received a net payment of CA $117,442.50 from Win Energy Corporation
for the sale of 50% of Paradigm's 10% interest in the Todd Creek Oil and Gas
Property to Win, the original vendor. Paradigm now holds a 5% interest in the
Todd Creek 13-28 well.
On June 27, 2005, we announced that drilling of the Todd Creek Well had been
moved into the final completion stage which may take up to 50 days to complete.
The operators have placed the well on "tight hole" status and further news will
be released upon completion of testing. As of the date of this report, that
status continues; we will release further information as it comes available.
"Tight hole" is a petroleum industry term used colloquially in which the
performance data of a well is closely guarded. During this period, all
information about the well - depth, formations, drilling rates, logs and other
pertinent data - is not shared or made public. Following the evaluation of the
13-28 well, additional drilling is anticipated during the last quarter of the
year on company lands.
A test well drilled in Section 16, Township 9, Range 2 W5 is included in the
transaction, the results of which have not been released. Further details will
be provided once the tight hole status has been lifted. The next proposed well
will likely be drilled at location 13-28-9-2W5 with anticipated production from
two reservoirs. Estimates indicate initial potential daily production could
reach 400 barrels of oil equivalent per day based upon the flow rates from
adjacent and similarly structured wells. It is anticipated that it will require
more than 20 such wells to fully exploit the reservoirs in the project area.
Producing wells in the area typically are of long life with minimal declines.
The gas is sweet with minimal sulfur or CO2 and generally receives excellent
prices. Existing wells on the Todd Creek prospect typically produce at depths
between 1,600 and 1,900 meters.
The operator has obtained a license to build a gas plant in the project area,
for up to 10,000 Mcf/day of gas which is anticipated to come on stream towards
the end of 2005. This plant will be located close to the gas export line to the
United States and will considerably facilitate access to this market.
SAWN LAKE
On February 18, 2005, we announced that we have farmed into a 10% interest in a
major heavy oil exploratory project located the Sawn Lake area of the Peace
River region of Alberta in a project owned by 1132559 Alta. Ltd. The general
terms of the farm-in agreement is that Paradigm will pay 10% to earn the full
10% interest until payout, and will retain 5% interest after payout. Paradigm's
participation in any subsequent wells in that Drilling Spacing Unit (DSU) will
be at 5% to earn an equal 5% interest. The first well will be drilled on DSU
located at Township 91, Range 13 W5M, SE Section 36. Paradigm has also
negotiated participation in another well in Township 91, Range 12 W5M, NW
Section 29 under the same terms. Furthermore, Paradigm will have the option to
participate in all future 1132559 Alta. Ltd.'s interests in Sawn Lake wells
under terms to be negotiated.
The Sawn Lake project includes over 69.5 sections of land and is operated by
Signet Energy. An independent resource evaluation carried out by Ryder Scott
Company estimates 820 million barrels of oil in place for the Sawn Lake Project.
For reference, this report can be reviewed at the Deep Well Web site at
www.deepwelloil.com.
Other operators targeting the deeper Slave Point Formation have previously
drilled much of the land. Because of the earlier extensive exploration for
deeper light oil, Sawn Lake project is able to benefit from data collected by
others pertaining to the drilling of 67 wells that penetrated and partially
delineated the Bluesky Formation heavy oil reservoir.
This acquisition is in line and consistent with Paradigm's investment strategy
to acquire small interests in a variety of domestic and international upstream
oil and gas projects to develop a high impact and diversified portfolio.
5
PROPERTY ACQUIRED BY ACQUISITION OF INTERGRATED OIL AND GAS SOLUTIONS INC.
JANUARY 28, 2010
The Acquired company holds 100% working interests in certain oil and gas leases
along with certain Oil and Gas production equipment. The costs to acquire these
assets have amounted to $541,539. Theses costs have been capitalized on the
acquired company's books at cost as Oil and Gas Properties Under Lease.
The oil and gas properties are comprised of 4 leases totaling approximately nine
hundred and thirty four (934) net mineral Acres, all located in the State of
Texas, USA. And are summarized as follows;
Chelson Property, 80 acres in the County of Wichita carry a 87.5% Net Revenue
Interest. There are 7 existing wells on the property that have previously
produced. Approximately 69 new wells can be drilled to depths that vary between
800 to 5,000 feet.
Lett Finley Property, Consists of 2 leases-40 acres located in the County of
Wood, carry a 75% Net Revenue Interest, and 122.37 acres located in the County
of Henderson carry a 81.25% Net Revenue Interest There are 2 existing wells on
the properties that have previously produced. 2 new offset wells can be drilled
to 9,500 feet and another 7 infield wells can be drilled.
Lumpkin Property 692 acres in Kaufman County, carry a 80% Net Revenue Interest.
This lease is considered an exploration field with existing production nearby.
17 new wells can be drilled to 9,000 feet.
On June 22, 2010 the Company's subsidiary, Intergrated Oil and Gas Solutions
Inc. acquired the Corsicana lease. The cost to acquire this lease amounted to
$20,700 for a 50% working interest in the 80% Net Revenue Interest. The lease
has 9 previously producing wells and have spacing over a total of 60 acres to
support the potential of 17 new wells to depths of up to 2000 feet. The
Corsicana lease is located in Navarro County, Texas.
On June 30, 2010 the Company's subsidiary, Intergrated Oil and Gas Solutions
Inc. acquired 2 additional Chilson leases, known as Chilson B. The cost to
acquire these leases amounted to $17,977 for a 100% working interest in the 81%
Net Revenue Interest. Combined the 2 leases have 5 previously producing wells
and have spacing over a total of 154 acres to support the potential of 37 new
wells to depths of up to 2000 feet. The new Chilson leases are adjacent to the
existing Chilson lease the Company has which are all located in Wichita County,
Texas.
Financial Condition and Changes in Financial Condition
The Company had no revenues from the sale of oil and gas in the period ended
June 30, 2010.
Consolidated Operating expenses for the quarter ended June 30, 2010 amounted to
$157,505 and were $209,768 for the year to date period ended June 30, 2010. The
increase in expenses is attributable to the increased activity the Company
experienced due to their newly acquired properties through the reverse merger of
Intergrated Oil and Gas Solutions Inc effective January 28, 2010.
During the quarter the work program was ramped up on the properties. Field
supplies were $6,683, labor $30,041, lease maintenance and work costs $13,613
and utility costs to bring power to the properties amounted to $5,571, for a
total of $56,148 classified as field operation expenses.
With the increased activity, general expenses increased to $101,357. The more
significant items consisted of;
an increase of accounting and audit costs amounting to $12,845 associated with
the reverse merger and increase activity,
Advertising and promotion amounted to $6,698 for the web page redesign and
press release activity,
Legal fees increased to 30,692 which were due to legal work on agreements, lease
title searches and new lease acquisitions, reporting requirements and general
legal and corporate affairs,
Management fees were $26,847 which is reflected of the growth in the management
team,
Travel was $7,517 to support the financing activity and business development.
General office costs were $4,943 and consulting fees amounted to $4,921,
Transfer agent and filing fees were $1,494 and Interest on the note payable
amounted to $1,145 which is consistent with terms of the note.
6
Other Expense Items;
Expense on Assumption of Liabilities on Acquisition
On a year to date basis there was an expense on assumption of liabilities on
acquisition which was booked in the period ended March 31, 2010.
On the effective date of the acquisition, additional paid in capital was
increased by $8,358,000. This was offset by $8,400,000 to record the basis in
Intergrated Oil and Gas Solutions Inc. An expense of $633,279 was then recorded
to recognize the assumption of liabilities on the acquisition.
Loss from share issue on debt conversion
On the effective date of the conversion, additional paid in Capital was
increased by $1,791,000. A loss of $1,440,000 was then recognized to match the
conversion to the book value of the convertible debenture.
These charges were booked in the period ended March 31, 2010, there were no
other income or expense charges for the 3 months ended June 30,2010.
Other Current Assets
Advances of $3,087 were made to contractors and employees to pay for certain
expenses. Prepaid field services amounted to $25,050 as amounts were required
to be prepaid to various contractors who will be performing the work programs.
With the purchase of one of the leases, there was existing Oil in the storage
tank on the lease which amounted to $6,258 which has been accounted for as
stored Oil.
Production Equipment
During the quarter the Company's subsidiary, Paradigm Integrated Technology
Solutions Inc., entered into a Transfer of Technology and Know How Agreement for
the world wide marketing rights for the Transportable Enhanced Oil Recovery
Platform. Under the terms of the agreement the Company agreed to purchase the
first system which includes the exclusive ownership in the related technology
and know how for a fee of $250,000. $50,000 was paid on signing the agreement
and $50,000 was to be paid within thirty days of signing the agreement towards
the purchase of the first system. To date the Company has paid $105,183 which
has been capitalized as production equipment. A further $44,817 is due on
delivery. The remaining $100,000 is paid in $10,000 increments above the
purchase price of the system, each time an additional system is delivered up to
a total of 10 additional systems.
Natural Gas and Oil Properties
During the quarter the Company purchased three additional leases.
On June 22, 2010 the Company's subsidiary, Intergrated Oil and Gas Solutions
Inc. acquired the Corsicana lease. The cost to acquire this lease amounted to
$20,700 for a 50% working interest in the 80% Net Revenue Interest.
On June 30, 2010 the Company's subsidiary, Intergrated Oil and Gas Solutions
Inc. acquired 2 additional Chilson leases, known as Chilson B. The cost to
acquire these leases amounted to $17,977 for a 100% working interest in the 81%
Net Revenue Interest.
An additional $5,608 was spent on the Chilson property as it is being prepared
for the implementation of the Transportable Enhanced Oil Recovery Platform.
These costs were capitalized bringing the total cost for Natural gas and Oil
properties to $601,566.
7
Liquidity and Capital Resources
As of the period ended June 30, 2010, we have yet to generate any revenues from
our business operations.
Since inception, we have received loans or used our common stock to raise money
for our optioned mineral and petroleum acquisitions, for corporate expenses,
acquisitions and to repay outstanding indebtedness. Net cash provided by
financing activities for the period ended June 30, 2010 was $524,560, all
provided by way of a convertible note payable and $29,521 was provided by way
of shareholder loans. Subsequent to June 30, 2010 an additional $240,000 in
cash was provided as an additional amount under the convertible note payable.
As of June 30, 2010, our total assets which consist of cash, advances, prepaids,
stored oil, furniture, Production equipment and oil and gas properties amounted
to $869,032 and our total liabilities were $806,668 from which $494,918
consists of a convertible note payable which management expects to convert to
common shares before the end of the third quarter ending September 30, 2010.
Working capital stood at $(150,645) with the removal of the convertible note
payable. Subsequent to June 30, 2010 an additional $240,000 in cash was
provided as an additional amount under the convertible note payable.
For the quarter ended June 30, 2010 our net loss was $157,505 ($0.003) per
share. For the period ended June 30, 2010, our net loss was $2,283,047, ($0.05)
per share. The loss per share was based on a weighted average of 50,492,112
common shares outstanding.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to the impact of market fluctuations associated with
commodity prices and foreign currency. At this time, the Company has not entered
into any hedging agreements due to limited value of transactions in foreign
currency. The Company has entered into convertible debentures which have been
determined to require derivative treatment.
ITEM 4T. CONTROLS AND PROCEDURES.
The Company maintains "disclosure controls and procedures," as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Act of 1934, as amended (the
"Exchange Act"), that are designed to ensure that information required to be
disclosed by the Company in reports it files or submits under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to our management including the Company's principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
The management of the Company has designed and evaluated the Company's
disclosure controls and procedures. Management recognizes that disclosure
controls and procedures, no matter how well conceived and operated, can provide
only reasonable assurance of achieving the desired control objectives, and the
Company necessarily is required to apply its judgment in evaluating the
cost-benefit relationship of possible disclosure controls and procedures.
The Company's management, including its principal executive officer and
principal financial officer, evaluated the effectiveness of the design and
operation of its disclosure controls and procedures as of March 31, 2010. Based
on that evaluation, the Company's President and Chief Executive Officer
concluded that the Company's disclosure controls and procedures, as of the end
of the period ended March 31, 2010 covered by this Form 10-Q, were effective
CHANGE IN INTERNAL CONTROL OVER FINANCIAL REPORTING
None.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are currently not a party to any pending legal proceedings and no such
actions by, or to the best of our knowledge, against us have been threatened.
8
tem 1A. Risk Factors
IN ADDITION TO THE OTHER INFORMATION IN THIS REPORT, THE FOLLOWING FACTORS
SHOULD BE CONSIDERED CAREFULLY IN EVALUATING OUR BUSINESS AND PROSPECTS,
CONDITIONS EXIST WHICH CAUSE SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS
A GOING CONCERN.
Market for Our Products and Services
Each oil and gas property that we now own and those that we may later acquire a
percentage of interest in, will have an operator who will be responsible for
marketing production.
The availability of a ready market for oil and gas, and the prices of such oil
and gas, depends upon a number of factors, which are beyond our control. These
include, among other things:
o the level of domestic production;
o actions taken by foreign oil and gas producing nations;
o the availability of pipelines with adequate capacity;
o the availability and marketing of other competitive fuels;
o fluctuating and seasonal demand for oil, gas and refined products;
and
o the extent of governmental regulation and taxation (under both
present and future legislation) of the production, importation,
refining, transportation, pricing, use and allocation of oil, gas,
refined products and alternative fuels.
In view of the many uncertainties affecting the supply and demand for crude oil,
gas and refined petroleum products, it is not possible to predict accurately the
prices or marketability of the gas and oil produced for sale.
Competition
The oil producing properties and exploratory drilling prospects, and gas
industry is highly competitive in all its phases. Properties in which we have an
interest will encounter strong competition from many other oil and gas
producers, including many that possess substantial financial resources, in
acquiring economically desirable producing properties and exploratory drilling
prospects, and in obtaining equipment and labor to operate and maintain their
properties.
Existing and Probable Governmental Regulation
We monitor and comply with current government regulations that affect our
activities, although our operations may be adversely affected by changes in
government policy, regulations or taxation. There can be no assurance that we
will be able to obtain all of the necessary licenses and permits that may be
required to carry out our exploration and development programs. It is not
expected that any of these controls or regulations will affect our operations in
a manner materially different than they would affect other natural gas and oil
companies operating in the areas in which we operate.
Canadian Government Regulation and US State of Texas Regulation
The natural gas and oil industry is subject to extensive controls and
regulations imposed by various levels of government. It is not expected that any
of these controls or regulations will affect our operations in a manner
materially different than they would affect other natural gas and oil companies
of similar size.
Pricing and Marketing Natural Gas
In the United States in the State of Texas, we are focused on Oil production.
Oil is sold to refineries at spot prices. In Canada, the price of natural gas
sold in interprovincial and international trade is determined by negotiation
between buyers and sellers. Natural gas exported from Canada is subject to
regulation by the NEB and the Government of Canada. Exporters are free to
negotiate prices and other terms with purchasers, provided that the export
contracts continue to meet certain criteria prescribed by the NEB and the
Government of Canada. Natural gas exports for a term of less than two years or
for a term of two to 20 years (in quantities of not more than 30,000 m3/day),
must be made pursuant to an NEB order. Any natural gas export to be made
pursuant to a contract of longer duration (to a maximum of 25 years) or a larger
quantity requires an exporter to obtain an export license from the NEB and the
issue of such a license requires the approval of the Governor in Council.
The government of Alberta also regulates the volume of natural gas that may be
removed from the province for consumption elsewhere based on such factors as
reserve availability, transportation arrangements and market considerations.
9
Royalties and Incentives
In Canada in addition to federal regulation, each province has legislation and
regulations that govern land tenure, royalties, production rates, environmental
protection and other matters. The royalty regime is a significant factor in the
profitability of natural gas and oil production. Royalties payable on production
from lands other than Crown lands are determined by negotiations between the
mineral owner and the lessee. Crown royalties are determined by government
regulation and are generally calculated as a percentage of the value of the
gross production, and the rate of royalties payable generally depends in part on
prescribed reference prices, well productivity, geographical location, field
discovery date and the type or quality of the petroleum product produced. In the
United States in the State of Texas, mineral rights owners usually have a
royalty paid to them which range from 5-25% of net revenue.
Land Tenure
Crude natural gas and oil located in the western provinces is owned
predominantly by the respective provincial governments. Provincial governments
grant rights to explore for and produce natural gas and oil pursuant to leases,
licenses and permits for varying terms from two years and on conditions set
forth in provincial legislation including requirements to perform specific work
or make payments. Natural gas and oil located in such provinces can also be
privately owned and rights to explore for and produce such natural gas and oil
are granted by lease on such terms and conditions as may be negotiated. In the
United States in the State of Texas, mineral owners sell and lease those rights
to Operators who provide the infrastructure and support to develop and produce
from the property. Leases usually remain in effect as long as work is being
performed on the property or they are held by production.
Compliance with Environmental Laws
We did not incur any costs in connection with the compliance with any federal,
state, or local environmental laws. However, costs could occur at any time
through industrial accident or in connection with a terrorist act or a new
project. Costs could extend into the millions of dollars for which we could be
totally liable. In the event of liability, we would be entitled to contribution
from other owners so that our percentage share of a particular project would be
the percentage share of our liability on that project. However, other owners may
not be willing or able to share in the cost of the liability. Even if liability
is limited to our percentage share, any significant liability would wipe out our
assets and resources.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The 42,000,000 shares issued for the acquisition of Intergrated Oil and Gas
Solutions Inc., were unregistered and are therefore issued as restricted shares.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits.
Exhibit Number Exhibit Title
31.1 Certification of CEO pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Certification of CFO pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
10
SIGNATURES
In accordance with the requirements of Section Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Paradigm Oil & Gas, Inc.
By: /s/ Ron Polli
-------------------------------------
President and Chief Executive Officer
Date: August 16, 2010 By: /s/ Brian Kennedy
-------------------------------------
Brian Kennedy
Chief Financial Officer
11
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