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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

o ANNUAL REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended November 30, 2012

 

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to ___________.

 

Commission file number 000-53447

  

MASS PETROLEUM INC.

(Exact name of registrant as specified in its charter)

 

NEVADA

 

20-5893809

(State or Other Jurisdiction of Incorporation of Organization)

 

(I.R.S. Employer Identification No.)

 

 Suite 507-700 West Pender Street

Vancouver, British Columbia, V6C 1G8

 (Address of principal executive offices)

 

(604) 688-6380

(Registrant’s telephone number, including area code)

 

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.0001 par value


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o    No þ


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 o     No þ


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 þ    No o


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of 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-K. o


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 definition of large accelerated filer and accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.  (Check one):


Large accelerated filer o         Accelerated filer o         Non-accelerated filer o        Smaller reporting company þ


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes o  No þ


Aggregate market value of the voting and non-voting stock of the registrant held by non-affiliates of the registrant as of May 31, 2012: $11,412,480.86 (Non-affiliate holdings of 22,598,972 common shares, closing price of $0.505).


As of February 27, 2013 the registrant’s outstanding stock consisted of 52,655,864 common shares.

 


                
             

 




[f001mass10knov302012draft001.jpg]



TABLE OF CONTENTS


Page

PART I
Item 1

Description of Business                                                                                                                                                                                   

3
Item 1A Risk Factors 7
Item 1B

Unresolved Staff Comments

7
Item 2 Properties 7
Item 3

Legal Proceedings

7
Item 4

Mine Safety Disclosures

7
 

PART II

Item 5

Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

8
Item 7

Managements Discussion and Analysis of Financial Condition and Results of Operations

9
Item 8

Financial Statements and Supplementary Data

12
Item 9 Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 13
Item 9A

Controls and Procedures

13
Item 9B

Other Information                                                                                           

13


PART III

Item 10

Directors, Executive Officers and Corporate Governance

14
Item 11

Executive Compensation

15
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 16
Item 13

Certain Relationships and Related Transactions and Director Independence

17
Item 14

Principal Accountant Fees and Services

17

PART IV
Item 15

Exhibits, Financial Statement Schedules

18

 



2

                
             

PART I


Item 1.  Description of Business

 

Forward-looking Statements

 

This annual report contains forward-looking statements.  These statements relate to future events or our future financial performance.  In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "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 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, performance or achievements.  Except as required by applicable laws, including the securities laws of the United States, we do not intend to update any of the forward-looking statements so as to conform these statements to actual results.

 

As used in this annual report, the terms "we", "us", "our", “the Company”, and "MASS" mean MASS Petroleum Inc., unless otherwise indicated.

 

All dollar amounts refer to US dollars unless otherwise indicated.

 

Overview

 

We are a start up oil and gas exploration company.  We were incorporated in the State of Nevada on February 14, 2006, under the name “XTOL Energy Inc.”  We operated under this name until October 10, 2007, and then changed our name to LAUD Resources Inc.  On June 23, 2008, we changed our name to MASS Petroleum Inc. and on July 11, 2008, we received a new symbol for the quotation of our common stock on the OTC Bulletin Board, “MASP.OB”.

 

We do not have any subsidiaries.  Our principal office is located at Suite 507-700 West Pender Street, Vancouver, British Columbia, V6C 1G8.  Our telephone number is (604) 688-6380.  Our fiscal year end is November 30.

 

We have incurred losses since our inception.  We rely upon the sale of our securities to fund our operations.  We have generated limited revenues of $24,573 from our 2.34% non operated interest in three operating wells in Oklahoma from the time we acquired our interest on August 1, 2006 to November 30, 2012.


We intend to build our business through the acquisition of producing and exploration stage oil and natural gas wells, interests and leases.  Our strategy is to combine the secure and reliable revenue source of operated and non-operated interest from producing oil wells with the higher risk development of oil and gas exploration projects.  For the next twelve months (beginning April 2013), we plan to purchase additional operated and non-operated interests in producing oil and natural gas properties, to acquire additional development stage exploration properties and to carry out an exploration program on the acquired properties.  We are not involved in any bankruptcy, receivership or similar proceedings.

 

Future Oil and Gas Interests


We are currently actively searching for oil and gas leases or interests in leases in small and medium-sized oil and natural gas production companies and properties.  For our initial acquisitions, we are looking for low risk property interests.  During the 12 months beginning April 2012, we intend to include in our portfolio additional non-operated interests in producing wells as well as an exploration interest in a development stage oil and gas property.  As we continue the development of our portfolio of interests, we will be looking for properties and interests that have the following qualities:


·

at least developmental drilling in proven producing areas;

·

significant additional production capacity through developmental drilling, recompletions and work overs;

·

further developmental potential; and

·

in some cases, ability to assume operatorship or appointment of a known operator with relevant experience in the area.


Markets


We are currently in the exploration stage and we have generated only nominal revenues.  We are not producing oil or gas and we have no customers.  We only have a non-operated working interest in three wells in Oklahoma at this time.  The availability of a ready market and the prices obtained for oil and gas produced depend on many factors, including the extent of domestic production and imports of oil and gas, the proximity and capacity of natural gas pipelines and other transportation facilities, fluctuating demand for oil and gas, the marketing of competitive fuels, and the effects of governmental regulation of oil and gas production and sales.


A ready market exists for domestic oil and gas through existing pipelines and transportation of liquid products.  Whether an international market exists depends upon the existence of international delivery systems and on political and pricing factors.


If we are successful in producing oil and gas in the future, we expect our future customers for our oil and gas to be refiners, remarketers and third party intermediaries, who either have, or have access to, consumer delivery systems.  We intend to sell our oil and gas under both short-term (less than one year) and long-term (one year or more) agreements at prices negotiated with third parties.  Typically either the entire contract (in the case of short-term contracts) or the price provisions of the contract (in the case of long-term contracts) are renegotiated at intervals ranging in frequency from daily to annually.  We have not yet adopted any specific sales and marketing plans.  However, as we purchase future properties, the need to hire marketing personnel will be addressed.

 

Competition


The oil and gas industry is highly competitive.  We are a new exploration stage company and have a weak competitive position in the industry.  We compete with junior and senior oil and gas companies, independent producers and institutional and individual investors who are actively seeking to acquire oil and gas properties throughout the world together with the equipment, labor and materials required to operate on those properties.  Competition for the acquisition of oil and gas interests is intense with many oil and gas leases or concessions available in a competitive bidding process in which we may lack the technological information or expertise available to other bidders.




3

                
             



Many of the oil and gas companies with which we compete for financing and for the acquisition of oil and gas properties have greater financial and technical resources than those available to us.  Accordingly, these competitors may be able to spend greater amounts on acquiring oil and gas interests of merit or on exploring or developing their oil and gas properties.  This advantage could enable our competitors to acquire oil and gas properties of greater quality and interest to prospective investors who may choose to finance their additional exploration and development.  Such competition could adversely impact our ability to attain the financing necessary for us to acquire further oil and gas interests or explore and develop our current or future oil and gas properties.


We also compete with other junior oil and gas companies for financing from a limited number of investors that are prepared to invest in such companies.  The presence of competing junior oil and gas companies may impact our ability to raise additional capital in order to fund our acquisition or exploration programs if investors perceive that investments in our competitors are more attractive based on the merit of their oil and gas properties or the price of the investment opportunity.  In addition, we compete with both junior and senior oil and gas companies for available resources, including, but not limited to, professional geologists, land specialists, engineers, camp staff, helicopters, float planes, oil and gas exploration supplies and drill rigs.


General competitive conditions may be substantially affected by various forms of energy legislation and/or regulation introduced from time to time by the governments of the United States and other countries, as well as factors beyond our control, including international political conditions, overall levels of supply and demand for oil and gas, and the markets for synthetic fuels and alternative energy sources.


In the face of competition, we may not be successful in acquiring, exploring or developing profitable oil and gas properties or interests, and we cannot give any assurance that suitable oil and gas properties or interests will be available for our acquisition, exploration or development.  Despite this, we hope to compete successfully in the oil and gas industry by:


·

keeping our costs low;

·

relying on the strength of our management’s contacts; and

·

using our size and experience to our advantage by adapting quickly to changing market conditions or responding swiftly to potential opportunities.

Subsidiaries

 

On January 24, 2008 we incorporated APIC Resources, Inc. as our wholly owned subsidiary.  On February 5, 2008 we issued a dividend of $0.000001 to each of our 135,748,000 common shares outstanding as of February 5, 2008.  We satisfied this dividend by arranging APIC Resources, Inc. to issue one share of their common stock for every $0.0001 of dividend declared.  This effectively became an issuance of one APIC Resources, Inc. share for every 100 shares of our stock held by our shareholders at February 5, 2008.  These shares were issued without a prospectus in reliance on Regulation S and pursuant to exemptions from registration under Section 4(2) of the Securities Act of 1933.  In conjunction with this arrangement we cancelled our 100 shares in APIC Resources, Inc. and as of February 5, 2008, we no longer owned any shares in APIC Resources, Inc.

 

As of February 2013 we do not have any subsidiaries.

 

Intellectual Property

 

We have not filed for any protection of our trademarks for our corporate name.  We own the copyright of our logo and all of the contents of our website, www.masspetroleum.com.

 



4

                
             



Research and Development Expenditures

 

We have not spent any amounts on research and development activities since our inception.  Our planned expenditures for our operation and exploration programs are summarized under the section of this Annual Report entitled “Management Discussion and Analysis of Financial Condition and Results of Operations.”

 

Government Regulations

 

Our current and future operation and exploration activities are or will be subject to various laws and regulations in US and Canada in which we do or will conduct our activities.  These laws and regulations govern the protection of the environment, conservation, prospecting, development, energy production, taxes, labor standards, occupational health, work safety, toxic substances, chemical products and materials, waste management, and other matters relating to the oil and gas industry.  As we acquire more operating or exploration interests, we will likely experience an increase in government oversight and associated costs.


Regarding our current non-operated interest, we are responsible for a 2.34% share of the costs of (1) any claims arising from the production and sale of hydrocarbons from the interest after August 1, 2006, which is the date we acquired our 2.34% interest in the three wells in Oklahoma; (2) any governmental request or requirement to plug, re-plug or abandon any wells, status or classification, or take any clean up or other actions with respect to our interest; and (3) any claims for personal injury, death, damage to property or damage to the environment arising directly or indirectly from the use, occupation, operation, maintenance or abandonment of our interest. As at November 30, 2012 we have not incurred any such costs.


Permits, registrations or other authorizations will be required for the operation of our future facilities and for our future oil and gas exploration and production activities.  These permits, registrations or authorizations are subject to revocation, modification and renewal.  Governmental authorities have the power to enforce compliance with these regulatory requirements, the provisions of required permits, registrations or other authorizations, and lease conditions, and violators are subject to civil and criminal penalties, including fines, injunctions or both.  Failure to obtain or maintain a required permit may also result in the imposition of civil and criminal penalties.  Third parties may have the right to sue to enforce compliance.


We expect to be able to comply with those laws and do not believe that compliance will have a material adverse effect on our competitive position.  We have obtained, and intend to obtain all licenses and permits required by all applicable regulatory agencies in connection with any oil and gas operations we carry out and our future exploration activities.  We intend to maintain standards of environmental compliance consistent with regulatory requirements.  We have obtained, and will obtain at the appropriate time, environmental permits, licenses or approvals required for our operations.  We are not aware of any material violations of environmental permits, licenses or approvals issued with respect to our operations.  We believe that the operator of the properties in which we have an interest complies with all applicable laws, rules and regulations relating to the control of air emissions on the properties.  At this time, we do not anticipate any material capital expenditures to comply with various environmental requirements.


Compliance with environmental requirements, including financial assurance requirements and the costs associated with the cleanup of any spill, could have a material adverse effect on our capital expenditures, earnings or competitive position.  Failure to comply with any laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of injunctive relief or both.  Legislation affecting the oil and gas industry is under constant review for amendment or expansion, frequently increasing the regulatory burden.  Changes in any of these laws and regulations could have a material adverse effect on business.  In view of the many uncertainties with respect to current and future laws and regulations, including their applicability to us, we cannot predict the overall effect of such laws and regulations on our future operations.

 

US Regulations


Our operations are or will be subject to various types of regulation at the federal, state and local levels.  Such regulation includes requiring permits for the drilling of wells; maintaining bonding requirements in order to drill or operate wells; implementing spill prevention plans; submitting notification and receiving permits relating to the presence, use and release of certain materials incidental to oil and gas operations; and regulating the location of wells, the method of drilling and casing wells, the use, transportation, storage and disposal of fluids and materials used in connection with drilling and production activities, surface usage and the restoration of properties upon which wells have been drilled, the plugging and abandoning of wells and the transporting of production.

Our operations are or will be also subject to various conservation matters, including the regulation of the size of drilling and of spacing units or proration units, the number of wells which may be drilled in each unit and the unitization or pooling of oil and gas properties.  In this regard, some states allow the forced pooling or integration of tracts to facilitate exploration while other states rely on voluntary pooling of lands and leases, which may make it more difficult to develop oil and gas properties.  In addition, state conservation laws establish maximum rates of production from oil and gas wells, generally limit the venting or flaring of gas, and impose certain requirements regarding the ratable purchase of production.  The effect of these regulations is to limit the amounts of oil and gas we may be able to produce from our wells and to limit the number of wells or the locations at which we may be able to drill.


Operations on properties in which we have an interest are subject to extensive federal, state and local environmental laws that regulate the discharge or disposal of materials or substances into the environment and otherwise are intended to protect the environment.  Numerous governmental agencies issue rules and regulations to implement and enforce such laws, which are often difficult and costly to comply with and which carry substantial administrative, civil and criminal penalties and in some cases injunctive relief for failure to comply.


Some laws, rules and regulations relating to the protection of the environment may, in certain circumstances, impose “strict liability” for environmental contamination.  These laws render a person or company liable for environmental and natural resource damages, cleanup costs and, in the case of oil spills in certain states, consequential damages without regard to negligence or fault.  Other laws, rules and regulations may require the rate of oil and gas production to be below the economically optimal rate or may even prohibit exploration or production activities in environmentally sensitive areas.  In addition, state laws often require some form of remedial action, such as closure of inactive pits and plugging of abandoned wells, to prevent pollution from former or suspended operations.


Legislation has been proposed in the past and continues to be evaluated in Congress from time to time that would reclassify certain oil and gas exploration and production waste as hazardous waste.  If such reclassification is successful, it would make these wastes subject to much more stringent storage, treatment, disposal and clean-up requirements, which could have a significant adverse impact on operating costs.  From time to time initiatives to further regulate the disposal of oil and gas wastes are also proposed in certain states and may include initiatives at the county, municipal and local government levels.  These various initiatives could have a similar adverse impact on operating costs.




5

                
             



The regulatory burden of environmental laws and regulations increases our cost and risk of doing business and consequently affects our profitability.  The federal Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, also known as the “Superfund” law, imposes liability, without regard to fault, on certain classes of persons with respect to the release of a “hazardous substance” into the environment.  These persons include the current or prior owner or operator of the disposal site or sites where the release occurred and companies that transported disposed or arranged for the transport or disposal of the hazardous substances found at the site.  Persons who are or were responsible for releases of hazardous substances under CERCLA may be subject to joint and several liabilities for the costs of cleaning up the hazardous substances that have been released into the environment and for damages to natural resources.  It is not uncommon for the federal or state government to pursue such claims.  The federal Environmental Protection Agency and various state agencies continue to promulgate regulations that limit the disposal and permitting options for certain hazardous and non-hazardous wastes.


It is also not uncommon for neighboring landowners and other third parties to file claims for personal injury or property or natural resource damages allegedly caused by the release of hazardous substances into the environment.

 

Canadian Regulations


As our business plan may involve operation or exploration activities in Canada, we expect to comply with Canadian laws and regulations related to the oil and gas industry.  Canada has regulatory provisions relating to permits for the drilling of wells, the spacing of wells, the prevention of oil and natural gas waste, allowable rates of production and other matters.  The amount of oil and natural gas produced is subject to control by regulatory agencies in each province that periodically regulate allowable rates of production. 


In addition to the foregoing, our Canadian operations may be affected from time to time by future political developments in Canada and by Canadian federal, provincial and local laws and regulations, such as restrictions on production and export, oil and natural gas allocation and rationing, price controls, tax increases, expropriation of property, modification or cancellation of contract rights, and environmental protection controls.


The Canada Oil and Gas Operations Act provides for the making of regulations concerning the design, safety, construction, installation, inspection, testing, monitoring, operation, maintenance and repair of installations used in the exploration, development and production of oil and gas.  The Act prohibits anyone from carrying on any work or activity related to the exploration for or the production of oil or gas unless they first obtain a license or authorization issued by the National Energy Board.  As part of the application process, a plan must be submitted which shows that Canadians are being employed and that Canadian goods and services are being used.  The National Energy Board may require that certain conditions be fulfilled, for example, that the person obtain appropriate insurance and that environmental studies be carried out.


The Oil and Gas Spills and Debris Liability Regulations govern the limits of liability for spills, authorized discharges and debris emanating or originating from work or activity related to the exploration or production of oil and gas.


The Canada Oil and Gas Drilling Regulations govern the exploration, drilling and conservation of oil and gas and specify measures to ensure the safety of these operations.  These regulations stipulate that no person may drill a well without authorization and approval, which is obtained upon application to the Chief Conservation Officer.




 

6

                
             



The Registration of Storage Tank Systems for Petroleum Products and Allied Petroleum Products on Federal Lands or Aboriginal Lands Regulations require registration of all specified storage tank systems located on federal lands or aboriginal lands, with the appropriate federal department administering the land.  Environment Canada will have access to the consolidated storage tank system records in each appropriate federal department.  A prohibition on fuel delivery is provided for any unregistered storage tank systems.

 

Employees and Consultants

 

As of November 30, 2012, we did not have any full time or part time employees.  Our Chief Executive Officer and our Chief Financial Officer work as part time consultants in the areas of business development and management; each contributing approximately 15% of their time to us.  We currently engage independent contractors in the areas of accounting, geologist services, legal, auditing services, investment banking and corporate development.

Item 1A.  Risk Factors


Not required.


Item 1B.  Unresolved Staff Comments


None.


Item 2.  Properties


The Kingfisher County Wells

 

On August 1, 2006, we purchased a 2.34% non operated interest in three producing wells located in Kingfisher County, Oklahoma, which are described as Stebens #1, Oblander #1-29 and Schneider #1.  Our interest gives us the right to receive 2.34% of the operating profits from the operator of the wells, Range Resources Corporation of Fort Worth, Texas.


During the first six months of 2007, these wells produced a combined average of approximately 130 thousand cubic feet of gas per day and 1.2 barrels of oil per day.  The 2.34% interest generated an average monthly income of approximately $515 per month during the past five years.  We received revenues of $24,573 from our 2.34% interest from February 2006 to November 30, 2012.


The following table describes our interest in the Kingfisher County wells:


Name of Well

Location

Nature of Interest

Stebens #1

Kingfisher County, Oklahoma

2.34% non operated interest

Oblander #1-29

Kingfisher County, Oklahoma

2.34% non operated interest

Schneider #1

Kingfisher County, Oklahoma

2.34% non operated interest


Other than our interests in the Oklahoma Properties, we do not own or have any rights to acquire any interests in any other oil and gas properties.


We have an executive office located at Suite 507-700 West Pender Street, Vancouver, British Columbia, Canada, V6C 1G8.  


Item 3.  Legal Proceedings


We know of no material pending or active legal proceedings to which we are a party or concerning any of our properties.  We are not aware of any legal proceedings contemplated by any governmental authority against us.


Item 4.  Mine Safety Disclosures

 

Not applicable.



 



7

                
             


 

PART II

 

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Market Information

 

There is a limited public market for our common shares.  Our common shares are quoted on the OTC Bulletin Board under the symbol “MASP.OB”.  Trading in stocks quoted on the OTC Bulletin Board is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s operations or business prospects.  We cannot assure you that there will be a market in the future for our common stock.

 

OTC Bulletin Board securities are not listed or traded on the floor of an organized national or regional stock exchange.  Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers in stocks.  OTC Bulletin Board issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.

 

Our common shares became eligible for quotation on the OTC Bulletin Board on July 9, 2007, but no trades were made until October 4, 2007.

 

The following table shows the high and low bid quotations of our common shares on the OTC Bulletin Board.  The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions:

 

 

 

 

Period

High ($)

Low ($)

September 1, 2012 – November 30, 2012

0.90

0.30

June 1, 2012 – August 31, 2012

0.51

0.30

March 1, 2012 – May 31, 2012

1.88

0.25

December 1, 2011 – February 29, 2012

3.80

0.0009

September 1, 2011 – November 30, 2011

4.30

1.30

June 1, 2011 – August 31, 2011

7.40

1.10

March 1, 2011 – May 31, 2011

3.80

1.70

December 1, 2010 – February 28, 2011

3.80

1.30

 

Holders

 

As of February 27, 2013, there were approximately 99 holders of record of our common stock.

 

Dividends


We did not issue any stock dividends during our fiscal year ended November 30, 2012.


Equity Compensation Plans

 

We have not implemented any equity compensation plans.

 

Recent Sales of Unregistered Securities


We did not make any sales of unregistered securities which were not previously reported in our quarterly filings for fiscal 2012.




8

                
             



Use of Proceeds from Sale of Registered Securities

 

None during the fiscal year ended November 30, 2012.

 

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operation

 

Safe Harbor

 

This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties.  These statements relate to future events or our future financial performance.  In some cases, you can identify forward-looking statements by terminology including, "could" "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology.  These statements are only predictions.  Actual events or results may differ materially.

 

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this Annual Report.

 

Overview

 

We are engaged in the acquisition of interests and leases of producing oil and natural gas wells.  Our plan of operations for the next twelve months is to create revenue from non-operated interests of producing oil and gas wells and to acquire an interest in, and further develop a development stage oil and gas exploration project.

 

We have only recently begun our current operations, have earned nominal revenues and have accumulated a net loss of $9,796,860 from February 14, 2006 (date of inception) to November 30, 2012.

 

We acquired a 2.34% interest in three wells in Kingfisher County, Oklahoma.  We do not yet have any exploration projects, but we are looking for new opportunities.  We need additional capital to carry out our current business plan.  We also anticipate that we will require additional financing in order to pursue full exploration of our acquired claims.  We not have sufficient financing to undertake our current and future business and there is no assurance that we will be able to obtain the necessary financing.

 

We are a start-up stage corporation with limited operations and limited revenues from our business operations.  Our auditors have issued us with a going concern opinion.  This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to fund our operations.  Our only source of cash at this time is investments by others in our company.  We must raise cash to implement our plan of operation.

 

Liquidity and Capital Resources

 

As of November 30, 2012, we had cash of $14,093 compared to $5,571 in cash at November 30, 2011 and total assets of $103,329 compared to $27,794 as at November 30, 2011.  The increase in cash and total assets were attributed to a loan receivable.


At November 30, 2012, we had a working capital deficit of $555,825 compared to a working capital deficit of $524,137 at November 30, 2011.  The increase in the working capital deficit was due to the fact that we issued new loans payable.  




9

                
             



Our accumulated deficit as at November 30, 2012 was $9,796,860 and has been funded primarily through the sale of shares of our common stock, along with loans from our management team and other non-related parties.  During the year ended November 30, 2012, we received $181,692 in financing from the issuance of loans payable, and we raised $3,000 from equity financing.  

 

We plan to begin raising additional equity if and when markets improve.  We will attempt to renegotiate our loan agreements or make other arrangements to defer payment on our outstanding loans.  There can be no assurance that markets will improve in the near future or that we will be successful in arranging suitable terms for repayment of our outstanding loans.  Our ability to continue as a going concern remains uncertain.

 

Cashflows from Operating Activities


During the year ended November 30, 2012, we used $100,653 of cash flows for operating activities compared to $178,992 for the year ended November 30, 2011. The decrease in the amount of cash used for operating activities was attributed to the fact that the Company had limited amounts of cash flow for operating activities. From February 15, 2006 (date of inception) to November 30, 2012, the Company has used $998,932 of cash for operating activities.  


Cashflows from Investing Activities

 

During the year ended November 30, 2012, we used $75,517 of cash flows for investing activities compared to the use of $nil for the year ended November 30, 2011.  The increase in the use of cash for investing activities was due to issuance of a loan.  From February 15, 2006 (date of inception) to November 30, 2012, the Company has used $191,883 of cash for investing activities, including issuance of $150,000 in loans receivable to Uraltransneft which has been fully impaired in 2008 due to uncertainty of collection, $7,845 for the purchase of property and equipment, and $34,038 for the acquisition of the oil and gas properties in 2006.    


Cashflows from Financing Activities


During the year ended November 30, 2012, we received $184,692 of cash flows from financing activities compared to $173,324 for the year ended November 30, 2011.  The increase in proceeds from financing activities was attributed to the issuance of $181,692 of proceeds received from loans in 2012.  From February 15, 2006 (date of inception) to November 30, 2012, the Company has received $1,204,908 of cash from financing activities including $661,783 of proceeds from loans payable, $449,000 from the issuance of common shares less $1,500 for share issuance costs, and $95,625 from related parties.    


During the fiscal year ended November 30, 2012, we required approximately $8,388 in cash to fund our operations each month.  As of November 30, 2012, we had cash of $14,093.  However, we anticipate that beginning April 2013 our monthly expenses will increase to $269,000, which includes $7,000 monthly for general and administrative expenses, $10,000 monthly for consulting and employee expenses, $8,000 monthly for professional fees, $2,500,000 for the acquisition of non-operated working interests and an exploration project and approximately $66,667 monthly for exploration costs.

 

Currently, we are reviewing additional non-operated working interests and leases in Oklahoma, California, Texas and Canada.

 

We expect to require approximately $3,937,000 in financing to continue our planned operation and exploration over the next year.  Our planned acquisition and exploration expenditures for oil and gas interests and properties over the next twelve months (beginning December 2013) are summarized as follows:

Description

Potential completion date

Estimated Expenses ($)

Retain a full-time engineer, a full- time land specialist and a full-time geologist

April 1, 2013

242,000

Purchase non-operated working interests in existing leases

May 1, 2013

2,000,000

Acquire a development stage exploration project

August 1, 2013

500,000

Develop and carry out a preliminary exploration program on an acquired property

September 1, 2013 – November 30, 2013

800,000

Total

 

3,542,000


 

10

                
             


Our other planned operational expenses for the next twelve months (beginning December 2013) are summarized as follows:

 

Description

Potential
completion date

Estimated
Expenses ($)

Select and appoint a new Board member

May 1, 2013

-

Raise additional private or public equity (legal, accounting and marketing fees)

May 1, 2013

70,000

General and administrative expenses

12 months

84,000

Professional fees (legal, accounting and auditing fees)

12 months

96,000

Consulting and employee fees

12 months

120,000

Marketing expenses

12 months

25,000

Total

 

395,000

 

Of the $3,937,000 we need for the next 12 months, we had $14,093 in cash as of November 30, 2012.  We intend to raise the balance of our cash requirements for the next 12 months ($3,922,907) from private placements or possibly a registered public offering, or through further debt financing.  At this time we do not have any commitments from any broker-dealers to provide us with financing.

 

There is no assurance that any financing will be available or if available, on terms that will be acceptable to us.  We also may need additional financing to carry out our business plan.

 

Obtaining additional financing will be subject to a number of factors including market conditions, investor acceptance of our business plan, investor sentiment, the availability of credit and our ability to secure credit on reasonable terms.  These factors may make the timing, amount, terms and conditions of additional financing unattractive or unavailable to us.  If we cannot secure sufficient amounts to fund our business plan, we will have to significantly reduce our spending, delay or cancel planned activities or substantially change our current corporate structure.  In such an event, we intend to implement expense reduction plans in a timely manner.  However, these actions would have material adverse effects on our business, revenues, operating results, and prospects, resulting in a possible failure of our business.


 Results of Operations

 

We earned nominal revenues for the year ended November 30, 2012 from our non-operated working interests in three producing wells.  We plan to purchase additional non-operated working interests in existing leases.  However, we anticipate that we will incur substantial losses over the next two years.

 

For the fiscal year ended November 30, 2012, we generated revenues of $1,363 from our non-operating interest in the Kingfisher property compared to revenues of $3,563 for the fiscal year ended November 30, 2011.  From inception on February 14, 2006 to November 30, 2012 we have earned total revenues of $24,573.

 

During the year ended November 30, 2012, we incurred operating expenses of $116,902 compared to operating expenses of $178,134 for the year ended November 30, 2011.  The increase in operating expenses in 2012 is attributed to increased general and administrative expenses.  During the year ended November 30, 2012, we did not issue additional stock options.  


During the year ended November 30, 2012, we recorded a loss on settlement of debt of $5,602,500 as compared to $52,000 for the year ended November 30, 2011.  


Our net loss for the year ended November 30, 2012 was $5,737,658 compared to a net loss of $245,125 for the year ended November 30, 2011.  The reason for the significantly decreased net loss for 2012 was due to a large increase in loss on settlement of debt.


Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

 



 

11

                
             





Item 8.  Financial Statements and Supplementary Data

 


MASS Petroleum Inc.

(An Exploration Stage Company)

November 30, 2012

(Expressed in US dollars)


Index


Report of Independent Registered Public Accounting Firm

F-1


Balance Sheets

F-2


Statements of Operations

F-3


Statement of Stockholders’ Equity (Deficit)

F-4


Statements of Cash Flows

F-7


Notes to the Financial Statements

F-8





 

12

                
             


 


 





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders of

MASS Petroleum Inc.

(An Exploration Stage Company)


We have audited the accompanying balance sheets of MASS Petroleum Inc. (An Exploration Stage Company) as of November 30, 2012 and 2011, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended and accumulated from December 1, 2009 to November 30, 2012.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audit.  The financial statements of MASS Petroleum Inc. for the period from February 14, 2006 (date of inception) to November 30, 2009 were audited by other auditors, and included an explanatory paragraph regarding the Company’s ability to continue as a going concern.  The financial statements for the periods for the period from February 14, 2006 (date of inception) to November 30, 2009 reflect a net loss of $2,831,447 of the related cumulative totals.  The auditors’ report has been furnished to us, and our opinion, insofar as it related to the amounts included for such periods, is based solely on the report of such auditors.  


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of November 30, 2012 and 2011, and the results of its operations and its cash flows for the years then ended and accumulated from February 14, 2006 (date of inception) to November 30, 2012, in conformity with accounting principles generally accepted in the United States.


The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  As discussed in Note 1 to the financial statements, the Company has a working capital deficit and has incurred operating losses since inception.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in regard to these matters are also discussed in Note 1 to the financial statements.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.




/s/ SATURNA GROUP CHARTERED ACCOUNTANTS LLP

 

Saturna Group Chartered Accountants LLP

Vancouver, Canada

 

February 27, 2013




F-1

                
             





MASS Petroleum Inc.

(An Exploration Stage Company)

Balance Sheets

(Expressed in US dollars)



 

November 30,

2012

$

November 30,

2011

$

 

 

ASSETS

Current Assets

 

Cash

14,093

5,571

Amounts receivable

9,338

9,780

Prepaid expenses

325

2,845

Loan receivable (Note 5)

76,253

Total Current Assets

100,009

18,196

 

 

Property and equipment (Note 3)

1,063

2,016

Oil and gas property (Note 4)

2,257

7,582

 

Total Assets

103,329

27,794

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

Current Liabilities

 

Accounts payable

48,285

14,972

Accrued liabilities

48,519

35,387

Due to related parties (Note 7)

45,563

66,283

Loans payable (Note 6)

513,467

425,691

 

Total Current Liabilities

655,834

542,333

 

Loans payable (Note 6)

91,692

20,000

 

Total Liabilities

747,526

562,333

 

 

Nature of Operations and Continuance of Business (Note 1)

Subsequent Event (Note 12)

 

Stockholders’ Deficit

 

Preferred stock, 20,000,000 shares authorized, $0.0001 par value;

1,000,000 shares issued and outstanding

100

100

 

Common stock, 1,000,000,000 shares authorized, $0.0001 par value;

52,655,864 and 155,748 shares issued and outstanding, respectively

5,266

16

 

Additional paid-in capital

9,147,297

3,524,547

 



Deficit accumulated during the exploration stage

(9,796,860)

(4,059,202)

 

Total Stockholders’ Deficit

(644,197)

(534,539)

 

Total Liabilities and Stockholders’ Deficit

103,329

27,794

 




(The accompanying notes are an integral part of these financial statements)


F-2

                
             




MASS Petroleum Inc.

(An Exploration Stage Company)

Statements of Operations

(Expressed in US dollars)




Year

Ended

Year

Ended

Accumulated from

February 14, 2006

(Date of Inception)

 

November 30,

November 30,

to November 30,

 

2012

2011

2012

 

$

$

$

 

 

 

 

Revenue

1,363

3,563

24,573

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

Depletion

778

1,798

27,234

Depreciation

1,470

1,312

6,782

General and administrative (Note 7)

107,922

173,045

2,428,354

Impairment of oil and gas property

4,547

4,547

Mineral property costs

1,693

Oil and gas production costs

2,185

1,979

16,586

 

 

 

 

Total Operating Expenses

116,902

178,134

2,485,196

 

 

 

 

Operating Loss

(115,539)

(174,571)

(2,460,623)

 

 

 

 

Other Income (Expense)

 

 

 

 

 

 

 

Gain on settlement of account payable

12,585

Interest expense

(19,619)

(18,554)

(65,952)

Loss on settlement of debt

(5,602,500)

(52,000)

(7,207,870)

Provision for loan receivable

(75,000)

 

 

 

 

Total Other Income (Expense)

(5,622,119)

(70,554)

(7,336,237)

 

 

 

 

Net Loss and Comprehensive Loss

(5,737,658)

(245,125)

(9,796,860)

 

 

 

 

Net Loss Per Share – Basic and Diluted

(0.15)

(1.74)

 

 

 

 

 

Weighted Average Shares Outstanding

38,824,000

141,008

 

 

 

 

 




(The accompanying notes are an integral part of these financial statements)


F-3

                
             




MASS Petroleum Inc.

(An Exploration Stage Company)

Statement of Stockholders’ Equity (Deficit)

For the Period from February 14, 2006 (Date of Inception) to November 30, 2012

(Expressed in US dollars)



 

 

 

 

 

 

 

 

Deficit

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Additional

Common

 

During the

 

 

Preferred Stock

Common Stock

Paid-in

Stock

Donated

Exploration

 

 

 

Amount

 

Amount

Capital

Subscribed

Capital

Stage

Total

 

$

$

$

$

$

$

$

$

$

 

 

 

 

 

 

 

 

 

 

Balance, February 14, 2006 (Date of Inception)

 

 

 

 

 

 

 

 

 

Common stock issued at $0.0001 per share

100,000

10

4,990

5,000

 

 

 

 

 

 

 

 

 

 

Common stock issued at $0.05 per share

3,100

77,500

77,500

 

 

 

 

 

 

 

 

 

 

Common stock issued at $0.25 per share

684

85,500

85,500

 

 

 

 

 

 

 

 

 

 

Cancellation of common stock

(40,000)

(4)

4

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

800

800

 

 

 

 

 

 

 

 

 

 

Common stock issued for consulting services

12,000

1

224,999

225,000

 

 

 

 

 

 

 

 

 

 

Common stock to be issued for consulting services rendered

2,500

2,500

 

 

 

 

 

 

 

 

 

Donated services and rent

11,250

11,250

 

 

 

 

 

 

 

 

 

 

Net loss for the period

(58,427)

(58,427)

 

 

 

 

 

 

 

 

 

 

Balance, November 30, 2006

75,784

7

393,793

2,500

11,250

(58,427)

349,123

 

 

 

 

 

 

 

 

 

 



(The accompanying notes are an integral part of these financial statements)


F-4

                
             




MASS Petroleum Inc.

(An Exploration Stage Company)

Statement of Stockholders’ Equity (Deficit)

For the Period from February 14, 2006 (Date of Inception) to November 30, 2012

(Expressed in US dollars)

 

 

 

 

 

 

 

 

Deficit

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Additional

Common

 

During the

 

 

Preferred Stock

Common Stock

Paid-in

Stock

Donated

Exploration

 

 

 

Amount

 

Amount

Capital

Subscribed

Capital

Stage

Total

 

$

$

$

$

$

$

$

$

$

 

 

 

 

 

 

 

 

 

 

Balance, November 30, 2006

75,784

7

393,793

2,500

11,250

(58,427)

349,123

 

 

 

 

 

 

 

 

 

 

Common stock issued at $0.125 per share

80

10,000

10,000

 

 

 

 

 

 

 

 

 

 

Common stock issued for consulting services

20

2,500

(2,500)

 

 

 

 

 

 

 

 

 

 

Common stock issued at $0.25 per share less share issuance costs

60

15,000

15,000

 

 

 

 

 

 

 

 

 

 

Common stock issuance costs

(1,500)

(1,500)

 

 

 

 

 

 

 

 

 

 

Common stock issued for advisory services

20

5,000

5,000

 

 

 

 

 

 

 

 

 

 

Common stock issued at $0.225 per share

1,124

253,000

253,000

 

 

 

 

 

 

 

 

 

 

Common stock issued for consulting services

4,000

1

359,999

360,000

 

 

 

 

 

 

 

 

 

 

Donated services and rent

15,000

15,000

 

 

 

 

 

 

 

 

 

 

Net loss for the year

(452,318)

(452,318)

 

 

 

 

 

 

 

 

 

 

Balance, November 30, 2007

81,088

8

1,037,792

26,250

(510,745)

553,305

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

348,067

348,067

 

 

 

 

 

 

 

 

 

 

Donated services and rent

7,500

7,500

 

 

 

 

 

 

 

 

 

 

Net loss for the year

(960,685)

(960,685)

 

 

 

 

 

 

 

 

 

 

Balance, November 30, 2008

81,088

8

1,385,859

33,750

(1,471,430)

(51,813)

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

344,226

344,226

 

 

 

 

 

 

 

 


 

Common stock issued to settle debt

16,660

2

773,018

773,020

 

 

 

 

 

 

 

 

 

 

Net loss for the year

(1,360,017)

(1,360,017)

 

 

 

 

 

 

 

 

 

 

Balance, November 30, 2009

97,748

10

2,503,103

33,750

(2,831,447)

(294,584)



(The accompanying notes are an integral part of these financial statements)


F-5

                
             




MASS Petroleum Inc.

(An Exploration Stage Company)

Statement of Stockholders’ Equity (Deficit)

For the Period from February 14, 2006 (Date of Inception) to November 30, 2012

(Expressed in US dollars)


 

 

 

 

 

 

 

 

Deficit

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Additional

Common

 

During the

 

 

Preferred Stock

Common Stock

Paid-in

Stock

Donated

Exploration

 

 

 

Amount

 

Amount

Capital

Subscribed

Capital

Stage

Total

 

$

$

$

$

$

$

$

$

$

 

 

 

 

 

 

 

 

 

 

Balance, November 30, 2009

97,748

10

2,503,103

33,750

(2,831,447)

(294,584)

 

 

 

 

 

 

 

 

 

 

Common stock issued to settle debt

38,000

4

859,996

860,000

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

52,470

52,470

 

 

 

 

 

 

 

 

 

 

Donated services

20,330

20,330

 

 

 

 

 

 

 

 

 

 

Net loss for the year

(982,630)

(982,630)

 

 

 

 

 

 

 

 

 

 

Balance, November 30, 2010

135,748

14

3,415,569

54,080

(3,814,077)

(344,414)

 

 

 

 

 

 

 

 

 

 

Common stock issued to settle debt

20,000

2

53,998

54,000

 

 

 

 

 

 

 

 

 

 

Preferred stock issued for management services

1,000,000

100

900

1,000

 

 

 

 

 

 

 

 

 

 

Net loss for the year

(245,125)

(245,125)

 

 

 

 

 

 

 

 

 

 

Balance, November 30, 2011

1,000,000

100

155,748

16

3,470,467

54,080

(4,059,202)

(534,539)

 

 

 

 

 

 

 

 

 

 

Rounding for reverse stock split

116

 

 

 

 

 

 

 

 

 

 

Common stock issued at $0.0001 per share

30,000,000

3,000

3,000

 

 

 

 

 

 

 

 

 

 

Common stock issued to settle debt

22,500,000

2,250

5,622,750

5,625,000

 

 

 

 

 

 

 

 

 

 

Net loss for the year

(5,737,658)

(5,737,658)

 

 

 

 

 

 

 

 

 

 

Balance, November 30, 2012

1,000,000

100

52,655,864

5,266

9,093,217

54,080

(9,796,860)

(644,197)



(The accompanying notes are an integral part of these financial statements)


F-6

                
             




MASS Petroleum Inc.

(An Exploration Stage Company)

Statements of Cash Flows

(Expressed in US dollars)


 


Year

Ended

November 30,

2012

$

Year

Ended

November 30,

2011

$

Accumulated from February 14, 2006 (Date of Inception)

To November 30,

2012

$

 

 

 

 

Operating Activities

 

 

 

 

 

 

 

Net loss

 (5,737,658)

 (245,125)

 (9,796,860)

Adjustments to reconcile net loss to net cash used in
operating activities:

 

 

 

 

 

 

Depletion

 778

 1,798

 27,234

Depreciation

 1,470

 1,312

 6,782

Donated services and rent

 –

 54,080

Gain on settlement of account payable

 –

 (12,585)

Impairment of oil and gas properties

 4,547

 4,547

Loss on settlement of debt

 5,602,500

52,000

 7,207,870

Loss on foreign currency translation

 276

 276

Provision for loan receivable

 –

 75,000

Stock-based compensation

 –

1,000

 1,339,063

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

Amounts receivable

 (811)

(3,658)

 (10,591)

Prepaid expenses

 2,520

(261)

 (325)

Accounts payable

 33,312

3,436

 60,869

Accrued liabilities

 13,133

22,474

 49,120

Due to related parties

 (20,720)

(11,968)

 (3,412)

 

 

 

 

Net Cash Used In Operating Activities

 (100,653)

(178,992)

 (998,932)

 

 

 

 

Investing Activities

 

 

 

 

 

 

 

Loan receivable

(75,000)

 (150,000)

Purchase of property and equipment

(517)

 (7,845)

Purchase of oil and gas property

 (34,038)

 

 

 

 

Net Cash Used in Investing Activities

(75,517)

 (191,883)

 

 

 

 

Financing Activities

 

 

 

 

 

 

 

Proceeds from loans payable

 181,692

 173,324

 661,783

Proceeds from related party loans

 –

 –

 95,625

Proceeds from issuance of common stock

 3,000

 –

 449,000

Share issuance costs

 –

 –

 (1,500)

 

 

 

 

Net Cash Provided by Financing Activities

 184,692

173,324

 1,204,908

 

 

 

 

Increase (Decrease) in Cash

 8,522

(5,668)

 14,093

 

 

 

 

Cash, Beginning of Period

 5,571

11,239

 –

 

 

 

 

Cash, End of Period

 14,093

5,571

 14,093

 

 

 

 

Supplemental Disclosures

 

 

 

 

 

 

 

Interest paid

 –

Income taxes paid

 –

 

 

 

 

Non-cash Investing and Financing Activities

 

 

 

 

 

 

 

   Common stock issued to settle debt

 5,625,000

54,000

 7,312,020



(The accompanying notes are an integral part of these financial statements)


F-7

                
             


MASS Petroleum Inc.

(An Exploration Stage Company)

Notes to the Financial Statements
November 30, 2012

(Expressed in US dollars)



1.

Nature of Operations and Continuance of Business

MASS Petroleum Inc. (the “Company”) was incorporated in the State of Nevada on February 14, 2006 under the name XTOL Energy Inc.  On October 11, 2007, the Company changed its name to LAUD Resources Inc.  On June 23, 2008, the Company changed its name from LAUD Resources Inc. to MASS Petroleum Inc.  The Company is an Exploration Stage Company, as defined by Accounting Standards Codification (“ASC”) 915, Development Stage Entities.  The Company’s principal business is the acquisition and exploration of oil and gas properties located in the United States.

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business.  The Company has not generated significant revenues since inception and is unlikely to generate earnings in the immediate or foreseeable future.  The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations.  As at November 30, 2012, the Company has a working capital deficit of $555,825 and has accumulated losses totaling $9,796,860 since inception.  These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.  These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.


2.

Summary of Significant Accounting Policies

(a)

Basis of Presentation

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars.  The Company’s fiscal year-end is November 30.

(b)

Use of Estimates

The preparation of financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  The Company regularly evaluates estimates and assumptions related to the valuation of long-lived assets and oil and gas properties, stock-based compensation and deferred income tax asset valuation allowances.  The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources.  The actual results experienced by the Company may differ materially and adversely from the Company’s estimates.  To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

(c)

Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

(d)

Oil and Gas Properties

The Company utilizes the full-cost method of accounting for petroleum and natural gas properties.  Under this method, the Company capitalizes all costs associated with acquisition, exploration, and development of oil and natural gas reserves, including leasehold acquisition costs, geological and geophysical expenditures, lease rentals on undeveloped properties and costs of drilling of productive and non-productive wells into the full cost pool on a country-by-country basis.  When the Company obtains proven oil and gas reserves, capitalized costs, including estimated future costs to develop the reserves proved and estimated abandonment costs, net of salvage, will be depleted on the units-of-production method using estimates of proved reserves.  The costs of unproved properties are not amortized until it is determined whether or not proved reserves can be assigned to the properties.  Until such determination is made, the Company assesses annually whether impairment has occurred, and includes in the amortization base drilling exploratory dry holes associated with unproved properties.

The Company applies a ceiling test to the capitalized cost in the full cost pool.  The ceiling test limits such cost to the estimated present value, using a ten percent discount rate, of the future net revenue from proved reserves based on current economic and operating conditions.  Specifically, the Company computes the ceiling test so that capitalized cost, less accumulated depletion and related deferred income tax, do not exceed an amount (the ceiling) equal to the sum of: The present value of estimated future net revenue computed by applying current prices of oil and gas reserves (with consideration of price changes only to the extent provided by contractual arrangements) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet presented, less estimated future expenditures (based on current cost) to be incurred in developing and producing the proved reserves computed using a discount factor of ten percent and assuming continuation of existing economic conditions; plus the cost of property not being amortized; plus the lower of cost or estimated fair value of unproven properties included in the costs being amortized; less income tax effects related to differences between the book and tax basis of the property. For unproven properties, the Company excludes from capitalized costs subject to depletion, all costs directly associated with the acquisition and evaluation of the unproved property until it is determined whether or not proved reserves can be assigned to the property.  Until such a determination is made, the Company assesses the property at least annually to ascertain whether impairment has occurred.  In assessing impairment the Company considers factors such as historical experience and other data such as primary lease terms of the property, average holding periods of unproved property, and geographic and geologic data.  The Company adds the amount of impairment assessed to the cost to be amortized subject to the ceiling test.

(e)

Asset Retirement Obligations

The Company follows the provisions of ASC 410, Asset Retirement and Environmental Obligations, which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets.  As at November 30, 2012 and 2011, the Company did not have any asset retirement obligations.

(f)

Property and Equipment

Property and equipment consists of computer hardware, and is recorded at cost and amortized on a straight-line basis over its estimated life of three years.



 

F-8

                
             


MASS Petroleum Inc.

(An Exploration Stage Company)

Notes to the Financial Statements
November 30, 2012

(Expressed in US dollars)



2.

Summary of Significant Accounting Policies (continued)

(g)

Long-lived Assets

In accordance with ASC 360, Property, Plant, and Equipment, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable.  Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances.  An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

(h)

Revenue Recognition

The Company recognizes oil and gas revenue when production is sold at a fixed or determinable price, persuasive evidence of an arrangement exists, delivery has occurred and title has transferred, and collectability is reasonably assured.

(i)

Stock-based Compensation

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation and ASC 505, Equity Based Payments to Non-Employees, which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based awards made to employees and directors, including stock options.  

ASC 718 requires company to estimate the fair value of share-based awards on the date of grant using an option-pricing model.  The Company uses the Black-Scholes option pricing model as its method of determining fair value.  This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables.  These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviours.  The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the statement of operations over the requisite service period.

All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

(j)

Loss Per Share

The Company computes loss per share in accordance with ASC 260, Earnings per Share.  ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement.  Basic EPS is computed by dividing the loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period.  Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method.  In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.  Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

(k)

Comprehensive Loss

ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements.  As at November 30, 2012 and 2011, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

(l)

Foreign Currency Translation

The Company’s functional and reporting currency is the United States dollar.  Transactions may occur in a foreign currency and management has adopted ASC 830, Foreign Currency Translation Matters.  Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date.  Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction.  Average monthly rates are used to translate revenues and expenses.  Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

(m)

Financial Instruments and Fair Value Measures

ASC 820, Fair Value Measurements and Disclosures, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value.  A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, amounts receivable, loan receivable, accounts payable, amounts due to related parties, and loans payable.  Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, the fair value of our cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets.  The Company believes that the recorded values of all of the other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.



F-9

                
             



MASS Petroleum Inc.

(An Exploration Stage Company)

Notes to the Financial Statements
November 30, 2012

(Expressed in US dollars)



2.

Summary of Significant Accounting Policies (continued)

(m)

Financial Instruments and Fair Value Measures (continued)

The Company has transactions in both Canada and the United States, which results in exposure to market risks from changes in foreign currency rates.  The Company’s function currency is the United States dollar.  The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates.  Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.

(n)

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and 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.


3.

Property and Equipment

 

Cost

$

Accumulated

Depreciation

$

November 30,

2012

Net Carrying

Value

$

November 30, 2011

Net Carrying

Value

$

 

 

 

 

 

Computer hardware

4,454

3,391

1,063

2,016


4.

Oil and Gas Property

 

 

 

November 30,

2012

Net Carrying

Value

$

November 30,

2011

Net Carrying

Value

$

 

 

 

 

 

Proved Property

 

 

 

 

 

 

 

 

 

Acquisition Costs

 

 

34,038

34,038

Depletion

 

 

(27,234)

(26,456)

Impairment

 

 

(4,547)

 

 

 

 

 

Net Carrying Value

 

 

2,257

7,582

On August 1, 2006, the Company acquired a 2.34% non-operating interest in three oil and gas wells located in Oklahoma for $34,038.

During the year ended November 30, 2012, the Company abandoned one oil and gas well located in Oklahoma and recognized an impairment of $4,547.


5.

Loan Receivable

On June 27, 2012, the Company entered into a bridge loan agreement with D-Helix Inc. (“D-Helix”), whereby the Company agreed to lend $75,000 to D-Helix.  This loan is evidenced by a promissory note pursuant to which the principal amount will be due and payable on the earlier of September 30, 2012 or within ten business days of the closing of a potential share exchange agreement between the Company and D-Helix.  The loan bears interest at the rate of 10% per annum, payable in quarterly installments from September 30, 2012.  As at November 30, 2012, the Company accrued interest receivable of $1,253 and the outstanding amount has not been repaid.  




F-10

                
             


MASS Petroleum Inc.

(An Exploration Stage Company)

Notes to the Financial Statements
November 30, 2012

(Expressed in US dollars)




6.

Loans Payable

(a)

On October 15, 2008, the Company entered into a loan agreement for $30,000 which was payable on October 15, 2009 or when the Company completes a private placement or receives proceeds from other loans.  The amount owing is unsecured and bears interest at 2% per annum, calculated on the basis of 360 day year for actual days elapsed.  If interest is not paid as it becomes due, it will be added to the principal sum and treated as part of the principal sum.  On October 15, 2009, the Company did not repay the loan and accrued interest of $600 was added to the loan.  On November 23, 2009, the Company agreed to settle $10,000 of the loans by issuing of 4,000,000 common shares of the Company.  On October 15, 2010, the loan was extended to June 15, 2011.  On June 15, 2011, the Company did not repay the note and the note became due on demand.

(b)

On July 6, 2009, the Company entered into a loan agreement for $7,500 which is payable on the earlier of July 15, 2010 or within seven days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On June 15, 2011, the Company did not repay the note and the note became due on demand.

(c)

On July 14, 2009, the Company entered into a loan agreement for $15,000 which is payable on the earlier of July 15, 2010 or within seven days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On July 15, 2010, the loan was extended to June 15, 2011.  On June 15, 2011, the Company did not repay the note and the note became due on demand.

(d)

On July 17, 2009, the Company entered into a loan agreement for $5,000 which is payable on the earlier of July 15, 2010 or within seven days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On July 15, 2010, the loan was extended to June 15, 2011.  On June 15, 2011, the Company did not repay the note and the note became due on demand.

(e)

On September 9, 2009, the Company entered into a loan agreement for $7,000 which is payable on the earlier of September 9, 2011 or within seven days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On September 9, 2011, the Company did not repay the note and the note became due on demand.

(f)

On September 24, 2009, the Company entered into a loan agreement for $13,000 which is payable on the earlier of September 24, 2011 or within seven days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On September 24, 2011, the Company did not repay the note and the note became due on demand.

(g)

On October 5, 2009, the Company entered into a loan agreement for $30,000 which is payable on the earlier of October 5, 2012 or within seven days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On March 22, 2012, the Company issued 22,500,000 shares of common stock at a fair value of $5,625,000 to settle $22,500 of the loan, resulting in a loss of $5,602,500 on settlement of debt.

(h)

On December 4, 2009, the Company entered into a loan agreement with a shareholder of the Company for $7,500 which is payable on the earlier of December 4, 2010 or within seven days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On December 4, 2010, the Company extended the maturity date of the loan to June 15, 2011.  On June 15, 2011, the Company did not repay the note and the note became due on demand.

(i)

On December 17, 2009, the Company entered into a loan agreement for $10,000 which is payable on the earlier of December 17, 2012 or within seven days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On December 17, 2012, the Company did not repay the note and the note became due on demand.  See Note 12(b).

(j)

On January 12, 2010, the Company entered into a loan agreement for $6,500 which is payable on the earlier of January 12, 2011 or within 7 days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 2% per annum.  On January 12, 2011, the Company extended the maturity date of the loan to June 15, 2011.  On June 15, 2011, the Company did not repay the note and the note became due on demand.

(k)

On January 20, 2010, the Company entered into a loan agreement for $10,000 which is payable on the earlier of January 20, 2012 or within seven days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On January 20, 2012, the Company did not repay the note and the note became due on demand.

(l)

On January 21, 2010, the Company entered into a loan agreement for $1,500 which is payable on the earlier of January 21, 2012 or within 7 days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On January 21, 2012, the Company did not repay the note and the note became due on demand.

(m)

On January 29, 2010, the Company entered into a loan agreement for $9,057 (Cdn$9,000) which is payable on the earlier of January 29, 2011 or within seven days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On January 29, 2011, the Company extended the maturity date of the loan to June 15, 2011.  On June 15, 2011, the Company did not repay the note and the note became due on demand.

(n)

On March 25, 2010, the Company entered into a loan agreement for $20,000 which is payable on the earlier of March 25, 2012 or within seven days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On March 25, 2012, the Company did not repay the note and the note became due on demand.

(o)

On May 5, 2010, the Company entered into a loan agreement for $90,000 which is payable on the earlier of May 5, 2012 or within seven days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On May 5, 2012, the Company did not repay the note and the note became due on demand.

(p)

On July 16, 2010, the Company entered into a loan agreement for $20,000 which is payable on the earlier of July 1, 2012 or within seven days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On July 1, 2012, the Company did not repay the note and the note became due on demand.

(q)

On December 2, 2010, the Company entered into a loan agreement for $10,000 which is payable on the earlier of December 5, 2012 or within seven days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On December 5, 2012, the Company did not repay the note and the note became due on demand.  See Note 12(a).

(r)

On March 15, 2011, the Company received a loan of $29,300, which is payable on the earlier of March 15, 2012 or within 7 days of the Company completing a financing in excess of $1,500,000.  The amount owing is unsecured and bears interest at 5% per annum.  On March 15, 2012, the Company did not repay the note and the note became due on demand.

(s)

On March 23, 2011, the Company entered into a loan agreement for $20,000 which is payable on the earlier of September 23, 2011 or within 7 days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On September 23, 2011, the Company did not repay the note and the note became due on demand.

(t)

On July 19, 2011, the Company entered into a loan agreement for $25,000 which is payable on the earlier of July 19, 2012 or within 7 days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On July 19, 2012, the Company did not repay the note and the note became due on demand.



F-11

                
             


MASS Petroleum Inc.

(An Exploration Stage Company)

Notes to the Financial Statements
November 30, 2012

(Expressed in US dollars)




6.

Loans Payable (continued)

(u)

On August 31, 2011, the Company entered into a loan agreement for $75,000 which is payable on the earlier of August 31, 2012 or within seven days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On August 31, 2012, the Company did not repay the note and the note became due on demand.

(v)

On October 13, 2011, the Company entered into a loan agreement for $1,510 (Cdn$1,500) which is payable on the earlier of October 13, 2012 or within seven days of the Company completing a financing in excess of $1,000,000.  The amount owing is unsecured and bears interest at 5% per annum.  On October 13, 2012, the Company did not repay the note and the note became due on demand.

(w)

On November 14, 2011, the Company entered into a loan agreement for $12,500 which is payable on the earlier of November 14, 2012 or within seven days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured and bears interest at 5% per annum.  On November 14, 2012, the Company did not repay the note and the note became due on demand.

(x)

On February 29, 2012, the Company entered into a loan agreement for $15,000 which is payable on the earlier of February 29, 2013 or within seven days of the Company completing a financing in excess of $800,000.  The amount owing is unsecured, bearing interest at 5% per annum.  

(y)

On June 29, 2012, the Company entered into a loan agreement for proceeds of $75,000.  The amount owing is unsecured, non-interest bearing, and due on demand.

(z)

On August 29, 2012, the Company entered into a loan agreement for $61,500 which is payable on the earlier of August 29, 2014 or within ten days of the Company completing a financing in excess of $2,000,000.  The amount owing is unsecured and bears interest at 5% per annum.

(aa)

On November 2, 2012, the Company entered into a loan agreement for $30,192 (Cdn$30,000) which is payable on the earlier of November 2, 2014 or within ten days of the Company completing a financing in excess of $2,000,000.  The amount owing is unsecured and bears interest at 5% per annum.

 

7.

Related Party Transactions

(a)

During the year ended November 30, 2012, the Company incurred $12,367 (2012 - $12,952) of management fees to the Chief Financial Officer (“CFO”) of the Company and a company controlled by the CFO of the Company.  As at November 30, 2012, the Company is indebted to the company controlled by the CFO of the Company for $2,254 (Cdn$2,240) (2011 - $nil).

(b)

On October 13, 2011, the Company entered into a loan agreement with the a company controlled by the President of the Company for $1,510 (Cdn$1,500) (2011 - $1,470 (Cdn$1,500)) which is unsecured, bears interest at 5% per annum, and is due on October 13, 2012 or within seven days of the Company completing a financing in excess of $1,000,000.  As at November 30, 2012, the Company has not repaid the loan.

As at November 30, 2012, the Company is also indebted to this company for $1,082 (2011 - $476), which is non-interest bearing, unsecured and due on demand.

(c)

On December 4, 2009, the Company entered into a loan agreement with the President of the Company for $7,000 which is payable on the earlier of December 4, 2010 or within seven days of the Company completing a financing in excess of $800,000.  The amount is unsecured and bears interest at 5% per annum.  On December 4, 2010, the Company extended the maturity date of the loan to December 4, 2013.  On August 26, 2011, the Company repaid $2,000 of the loan by issuance of 20,000 common shares at $0.0001 per share resulting in a loss on settlement of $52,000.

(d)

As at November 30, 2012, the Company is indebted to the President of the Company for $35,717 (2011 - $59,337), representing accrued interest and expenditures paid on behalf of the Company.  These amounts are unsecured, non-interest bearing and due on demand.


 

8.

Preferred Stock

(a)

On November 14, 2011, the Company filed a Certificate of Designation to designate 20,000,000 shares of preferred stock as Series A Preferred Stock with a par value of $0.0001 per share.  The Series A Preferred Stock are not entitled to receive dividends of any kind, are non-convertible, and have liquidation rights.

(b)

On November 16, 2011, the Company issued 1,000,000 shares of preferred stock with a fair value of $1,000 for management services provided by the President of the Company.



F-12

                
             


MASS Petroleum Inc.

(An Exploration Stage Company)

Notes to the Financial Statements
November 30, 2012

(Expressed in US dollars)


9.

Common Stock

(a)

On March 22, 2012, the Company issued 22,500,000 common shares at a fair value of $0.25 per share to settle debt of $22,500.  

(b)

On February 22, 2012, the Company issued 30,000,000 common shares at $0.0001 per share for proceeds of $3,000 to the President of the Company and a company controlled by the President of the Company.

(c)

On December 6, 2011, the Company increased its authorized capital from 160,000,000 common shares to 1,000,000,000 common shares with no change par value.  The Company also effected a 1,000 to 1 reverse stock split of its issued and outstanding shares.  All share and per share information has been retroactively adjusted to reflect the reverse stock split.

(d)

On August 26, 2011, the Company issued 20,000 common shares to the President and Director of the Company for settlement of debt of $2,000.  The fair value of the common shares issued was $54,000, which resulted in a loss on settlement of debt of $52,000.


10.

Stock Options

A summary of the Company’s stock option activity is as follows:

 

Number of Options

Weighted Average Exercise

Price

$


Aggregate

Intrinsic

Value

$

 

 

 

 

Outstanding and exercisable, November 30, 2010 , 2011 and 2012


500

500


As at November 30, 2012, the weighted average remaining contractual life was 0.51 years and there was no unrecognized compensation costs related to non-vested share-based compensation.

 


11.

Income Taxes

The Company has a net operating loss carryforward of $1,466,929 available to offset taxable income in future years which commence expiring in fiscal 2026.  

The Company is subject to United States federal and state income taxes at an approximate rate of 35%.  The reconciliation of the recovery for income taxes at the United States federal statutory rate compared to the Company’s income tax recovery reported is as follows:

 

 

2012

$

 

2011

$

 

 

 

 

 

Net loss before income taxes per financial statements

 

(5,737,658)

 

(245,125)

 

 

 

 

 

Income tax rate

 

35%

 

35%

 

 

 

 

 

Income tax recovery

 

2,008,180

 

85,794

 

 

 

 

 

Permanent differences and other

 

(1,959,278)

 

(16,336)

 

 

 

 

 

Change in valuation allowance

 

(48,902)

 

(69,458)

 

 

 

 

 

Provision for income taxes

 

 

The significant components of deferred income tax assets and liabilities at November 30, 2012 and 2011 are as follows:


 

 

2012

$

 

2011

$

 

 

 

 

 

Net operating losses carried forward

 

573,266

 

525,036

 

 

 

 

 

Oil and gas property

 

2,784

 

2,112

 

 

 

 

 

Valuation allowance

 

(576,050)

 

(527,148)

 

 

 

 

 

Net deferred income tax asset

 

 


12.

Subsequent Event

(a)

On December 24, 2012, the Company entered into a loan agreement for $80,000 which is payable on the earlier of December 24, 2014 or within seven days of the Company completing a financing in excess of $2,000,000.  The amount owing is unsecured and bears interest at 5% per annum.



 

F-13

                
             

 

Item 9.  Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.


Item 9A.  Controls and Procedures


Evaluation of Disclosure Controls and Procedures


Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of November 30, 2012 (the “Evaluation Date”). Based upon the evaluation of our disclosure controls and procedures as of the Evaluation Date, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective because of the identification of a material weakness in our internal control over financial reporting which is identified below, which we view as an integral part of our disclosure controls and procedures.


Management’s Report on Internal Control over Financial Reporting


Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Rule 13a-15(f).  Our internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and our receipts and expenditures of are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.


Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements.  All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls.  Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


Our management assessed the effectiveness of our internal control over financial reporting as of November 30, 2012.  In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.  Based on its evaluation, our management concluded that there is a material weakness in our internal control over financial reporting and Management has concluded that the Company’s internal controls over financial reporting are ineffective as of November 30, 2012.  A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness relates to the lack of segregation of duties in our financial reporting process and we utilize outside third party consultants.  We do not have a separately designated audit committee.  This weakness is due to our lack of excess working capital to hire additional staff.  To remedy this material weakness, we intend to engage an internal accountant to assist with financial reporting as soon as our finances will allow.


Saturna Group Chartered Accountants LLP, our registered independent public accounting firm, was not required to and has not issued a report concerning the effectiveness of our internal control over financial reporting as of November 30, 2012.


Changes in Internal Control over Financial Reporting


There were no changes in our internal control over financial reporting during the fourth quarter of our fiscal year ended November 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Limitations on the Effectiveness of Controls


Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, 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, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.


The design of any system of controls also 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; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.


Changes in Internal Control and Financial Reporting


During the quarter ended November 30, 2012 there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Item 9B.  Other Information.

 

None.



13

                
             


 

PART III

 

Item 10.  Directors, Executive Officers and Corporate Governance.


Directors and Officers

 

Our bylaws allow the number of directors to be fixed by the Board of Directors.  Our Board of Directors has fixed the number of directors at three.

 

Our current directors and officers are as follows:


Name 

Age

Position 

Jordan Shapiro

40

Director, President, Chief Executive Officer, Secretary, Treasurer

Vitaly Melnikov

38

Director, Chief Financial Officer

 

The directors will serve as directors until our next shareholder meeting or until a successor is elected who accepts the position.  Officers hold their positions at the will of the Board of Directors.  There are no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of our affairs.

 

Jordan Shapiro, President, Chief Executive Officer, Secretry, Treasurer and Director


Mr. Shapiro has been a director and our Secreatary since our inception on February 14, 2006 to present.  He became our President on March 16, 2011.  From 2002 to present, Mr. Shapiro has been the founder and President of Hudson Capital Corporation, a venture capital firm assisting companies in the areas of corporate finance, business development and investor relations.  From 1997 to 2002, Mr. Shapiro worked as an investment advisor at Canaccord Capital Corporation, a company in the business of providing financial services and investment advice to private investors and companies in Canada and the United States.  At Canaccord Capital, Mr. Shapiro specialized in venture capital financings and derivatives trading.  Mr. Shapiro holds a Bachelor of Arts degree from the University of Western Ontario.

 

Vitaly Melnikov, Director and Chief Financial Officer

 

Vitaly Melnikov has been a director since June 17, 2010 and our Chief Financial Officer since June 9, 2010.  From July 2002 to September 2005, Mr. Melnikov held the position of Finance Manager (Marketing and Trading) of Hurricane Hydrocarbons Ltd.(also known as PetroKazakhstan), a Calgary, Canada based, publicly traded energy corporation engaged in the exploration, development, production, acquisition, refining and marketing of oil and refined products in the Republic of Kazakhstan.  Among his duties there, Mr. Melnikov managed a multi-national team of 30 financial and accounting specialists and oversaw the financial affairs and sales units of companies with annual revenues of over $450 million.  From December 2005 to June 2007 Mr. Melnikov served as Vice President, Finance and Administration of UrAsia Energy Ltd. (now Uranium One), a TSX and AIM listed company with a market cap of $3 billion.  While there, he assisted in the merger of UrAsia Energy with Uranium One, creating a uranium producer with a $5 billion market cap.  From July 2007 to November 2007, Mr. Melnikov served as Interim Chief Financial Officer and Controller of Tsar Emerald Corporation, a Vancouver based company engaged in the extraction, processing and sale of gemstones.  From November 2007 to present, Mr. Melnikov has worked as a self employed financial and accounting consultant in the natural resources sector.  Mr. Melnikov holds a masters degree in business administration from American University in Kyrgyzstan.

  

Other than as disclosed above, our directors currently do not serve on the boards of other public companies.


Significant Employees

 

There are no individuals other than our executive officer who make a significant contribution to our business.


Family Relationships

 

There are no family relationships among our officers or directors.


14

                
             


Legal Proceedings

 

None of our directors, executive officers, promoters or control persons has been involved in any of the following events during the past five years:


·

any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;


·

any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);


·

 being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or


·

being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.


Section 16(a) Beneficial Ownership Compliance Reporting


Section 16(a) of the Securities Exchange Act of 1934 requires a company’s directors and officers, and persons who own more than ten-percent (10%) of the company’s common stock, to file with the Securities and Exchange Commission reports of ownership on Form 3 and reports of change in ownership on Forms 4 and 5.  Such officers, directors and ten-percent stockholders are also required to furnish the company with copies of all Section 16(a) reports they file.  Based solely on our review of the copies of such forms received by us and on written representations from certain reporting persons, we believe that all Section 16(a) reports applicable to our officers, directors and ten-percent stockholders with respect to the fiscal year ended November 30, 2012 were filed.


Code of Ethics

 

We have not yet adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions because we have not yet finalized the content of such a code.  Companies whose equity securities are listed for trading on the OTC Bulletin Board are not currently required to implement a code of ethics.

 

Director Nominees

As of November 30, 2012 there have been no material changes to the procedures by which security holders may recommend nominees to our Board of Directors.


Audit Committee

 

The functions of the Audit Committee are currently carried out by our Board of Directors.  Our Board of Directors has determined that we do not presently need an audit committee financial expert on our Board of Directors carrying out the duties of the Audit Committee.  Our Board of Directors has determined that the cost of hiring a financial expert to act as one of our directors and to be a member of the Audit Committee or otherwise perform Audit Committee functions outweighs the benefits of having a financial expert on the Audit Committee.

 

Item 11.  Executive Compensation.

 

The following Summary Compensation Table sets forth the total annual compensation paid or accrued by us to or for the account of the Principal Executive Officer (“PEO”) and our Principal Financial Officer (“PFO”).  None of our other executive officers received compensation in excess of $100,000 during the fiscal year ended November 30, 2012.


Summary Compensation


Name and Principal Position

Year

Salary

($)

Bonus

($)

Stock Awards

($)

Option Awards

($)

Non-Equity Incentive

Plan Compensa tion

($)

Non-qualified Deferred

Compensation Earnings

($)

All Other Compensa tion

($)

Total

($)

Jordan Shapiro,

President, CEO, Secretary, Treasurer and   Director (1)

2012

0

0

3,000

0

0

0

0

3,000

 

2011

0

0

0

0

0

0

0

0

Gary Chayko

Former President, CEO, Director (2)

2012

0

0

0

0

0

0

0

0

2011

0

0

0

0

0

0

0

0

Vitaly Melnikov , CFO, Director (3)

2012

12,367

0

0

0

0

0

0

12,367

2011

12,952

0

0

0

0

0

0

12,952


(1)

Jordan Shapiro is our President, CEO, Secretary, Treasurer and a director.

(2)

Gary Chayko was a director and our President and Chief Executive Officer from August 10, 2009 to March 16, 2011.

(3)

Vitaly Melnikov has been our Chief Financial Officer since June 9, 2008 and a Director since June 17, 2009.

(4)  Mr. Shapiro and Mr. Melnikov each spend approximately 15% of their time on our business.


We pay compensation of CAD $1,000 per month to Vitaly Melnikov for services as our director.


Except for options granted to Mr. Melnikov as provided below, our executive officers and directors did not receive any other compensation as directors or officers or any benefits.

 



15

                
             

 

Outstanding Equity Awards at Fiscal Year End


The following table sets forth certain information concerning unexercised stock options held by the named executive officers as of November 30, 2012.  None of the named executive officers exercised any of their stock options during the period from inception (February 14, 2006) to November 30, 2012.




Name


Number Of Securities Exercisable

Option Exercise Price per Share

($)


Option Expiration Date

Vitaly Melnikov

500,000 (1)

1.50

Two years following vesting date (1)


(1)

On June 9, 2009, we granted to Vitaly Melnikov options to purchase 500,000 shares of our common stock at an exercise price of $1.50 per share.  The stock options will vest at a rate of 125,000 options on December 6, 2009, June 6, 2010, December 6, 2010 and June 6, 2010.  They are exercisable until the earlier of two years following their respective vesting dates or upon termination of the option agreement.  All non-vested stock options will vest immediately, and may be exercised for a period of ninety days after such occurrence, if during the term of the agreement any non-affiliated third party assumes control of us or acquires substantially all of our assets.  On March 24, 2010, we entered into an option amendment agreement to re-price the exercise price of 500,000 stock options from $1.50 per share to $0.50 per share and also extend the term of the 500,000 stock options to June 5, 2013.


Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth the ownership, as of February 27, 2013, of our common stock by each of our directors, and by all executive officers and directors as a group, and by each person known to us who is the beneficial owner of more than 5% of any class of our securities.  As of February 27, 2013, there were 52,655,864 common shares issued and outstanding.  All persons named have sole voting and investment power with respect to the shares, except as otherwise noted.  The number of shares described below includes shares which the beneficial owner described has the right to acquire within 60 days of the date of this Annual Report.


Title of Class

Name and Address of Beneficial Owner

Amount and  Nature of  Beneficial  Ownership

Percent of Class (5)

Common 

Jordan Shapiro (2)

507-700 West Pender Street,

Vancouver, British Columbia, V6C 1G8 Canada

30,056,892

(3)

57.1%

 Common

Vitaly Melnikov (3)

1130 – 4825 Hazel Street

Burnaby, British Columbia, V5H 4N4 Canada

500,000

(4)

0.9%

 

All Executive Officers and Directors as a Group 

30,556,892

58.0%

 

(1)

Jordan Shapiro is our President, Secretary, Treasurer and Director.

(2)

Vitaly Melnikov is our Director and Chief Financial Officer.

(3)

Includes 15,010,300 common shares held by Hudson Capital Inc., a company wholly owned by Jordan Shapiro, 15,046,592 common shares held by Jordan Shapiro.

(4)

Options to purchase common stock at a price of to $0.50 per share until June 5, 2013.

(5)

Calculated based on issued and outstanding shares of 52,655,864 as February 27, 2013, and as if all 500,000 options were exercised by Vitaly Melnikov.


Pension, Retirement or Similar Benefit Plans


There are no arrangements or plans in which we provide pension, retirement or similar benefits to our directors or executive officers.  We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.


Compensation Committee


We currently do not have a compensation committee of the Board of Directors or a committee performing a similar function.  It is the view of the Board that it is appropriate for us not to have such a committee because of our size and because the Board as a whole determines executive compensation.  Each of our directors is also is a senior officer of the company.


Compensation Committee Report


Our Board of Directors as a whole has revised and discussed the compensation discussion and analysis disclosed in this Form 10-K and based on this review and discussion, has determined that the disclosure be included in this annual report.  The directors participating in this deliberation included Vitaly Melnikov and Jordan Shapiro.

 

Compensation of Directors

 

We do not pay our directors any fees for attendance at Board meetings or similar remuneration or reimburse them for any out-of-pocket expenses incurred by them in connection with our business.


Change of Control


As of November 30, 2012 we had no pension plans or compensatory plans or other arrangements which provide compensation in the event of a termination of employment or a change in our control.


16

                
             


Item 13.  Certain Relationships and Related Transactions, and Director Independence


During the year ended November 30, 2012, we incurred $12,367 (2012 - $12,952) of management fees to our Chief Financial Officer (“CFO”) and a company controlled by our CFO.  As at November 30, 2012, we are indebted to the company controlled by our CFO for $2,254 (Cdn$2,240) (2011 - $nil).


On October 13, 2011, we entered into a loan agreement with a company controlled by our President for $1,510 (Cdn$1,500) (2011 - $1,470 (Cdn$1,500)) which is unsecured, bears interest at 5% per annum, and is due on October 13, 2012 or within seven days of us completing a financing in excess of $1,000,000.  As at November 30, 2012, we have not repaid the loan.


As at November 30, 2012, we are also indebted to this company for $1,082 (2011 - $476), which is non-interest bearing, unsecured and due on demand.


On December 4, 2009, we entered into a loan agreement with our President for $7,000 which is payable on the earlier of December 4, 2010 or within seven days of us completing a financing in excess of $800,000.  The amount is unsecured and bears interest at 5% per annum.  On December 4, 2010, we extended the maturity date of the loan to December 4, 2013.  On August 26, 2011, we repaid $2,000 of the loan by issuance of 20,000 common shares at $0.0001 per share resulting in a loss on settlement of $52,000.


As at November 30, 2012, we are indebted to our President for $35,717 (2011 - $59,337), representing accrued interest and expenditures paid on our behalf.  These amounts are unsecured, non-interest bearing and due on demand.


Director Independence

 

The OTC Bulletin Board on which our common shares are listed on does not have any director independence requirements.  We also do not have a definition of independence as our directors also hold positions executive officer positions with us.  Once we engage further directors and officers, we plan to develop a definition of independence and scrutinize our Board of Directors with regards to this definition.


Item 14.  Principal Accounting Fees and Services

Audit, Audit-Related and Non-Audit Fees

 

The following table represents fees for the professional audit services and fees billed for other services rendered by our current auditors, Saturna Group Chartered Accountants LLP for the audit of our consolidated annual financial statements for the years ended November 30, 2012 and 2011 and any other fees billed for other services rendered during that period.

 

 

Description of Service

 

Year ended November 30,

2012

($)

 

Year ended November 30,

2011

($)

 

Audit fees

 

 

15,000

 

 

15,750

 

Audit-related fees

 

 

-

 

 

-

 

Tax fees

 

 

-

 

 

-

 

All other fees

 

 

-

 

 

-

 

Total

 

 

15,000

 

 

15,750

 

 

Audit Committee Approval


Since our inception, our Board of Directors, performing the duties of the audit committee, has reviewed all audit and non-audit related fees at least annually.  The Board, acting as the audit committee, pre-approved all audit related services for the year ended November 30, 2012.

 


17

                

             


 

PART IV

 

 

Item 15.  Exhibits, Financial Statement Schedules


The financial statement schedules are omitted because they are inapplicable or the requested information is shown in our financial statements or related notes thereto.


Exhibits


Exhibit

Number

Exhibit

Description

3.1

Certificate of Amendment changing our name from LAUD Resources Inc. to MASS Petroleum Inc. *

10.1

Share Exchange Agreement with Uraltransneft Co. Ltd. dated May 16, 2010 and addendum thereto *

10.2

Consulting Agreement with Vitaly Melnikov for Services as CFO *

10.3

Agreement for Loan to Uraltransneft Co. Ltd. dated July 3, 2010 *

10.4

Agreement for Loan from Hudson Capital Corporation dated July 3, 2010 *

10.5

Agreement for Loan from Mark Levy dated July 3, 2010 *

10.6

Financial Services Letter Agreement with Gryphon Trade and Finance LLC dated August 21, 2010 *

10.7

Option Agreement with Vitaly Melnikov dated October 15, 2010 *

31.1

Certification of the Chief Executive Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of the Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1  

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

EX-101.INS

XBRL Instance Document

EX-101.SCH

XBRL Taxonomy Extension Schema

EX-101.CAL

XBRL Taxonomy Extension Calculation Linkbase

EX-101.LAB

XBRL Taxonomy Extension Label Linkbase

EX-101.PRE

XBRL Taxonomy Extension Presentation Linkbase

EX-101.DEF

XBRL Taxonomy Extension Definition Linkbase


* Previously filed.



18

                

             


 

SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

  MASS PETROLEUM INC.

 

                                                                                                                                                                                                                                                                          

 

 

Date: February ­­­­­­28, 2013

By:

/s/ Jordan Shapiro 

 

 

Jordan Shapiro

 

 

President, Chief Executive Officer, Secretary, Treasurer and Director

  

Pursuant to the requirements of the Exchange Act this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

   

  Signature  

Title    

Date

 

 

 

 /s/ Jordan Shapiro    

President, Chief Executive Officer, Secretary, Treasurer and Director 

February 28, 2013

 Jordan Shapiro

 

 

 

 

 

 /s/ Vitaly Melnikov   

Chief Financial Officer and Director

February 28, 2013

Vitaly Melnikov  

 

 

 




19