Attached files

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EX-3 - BYLAWS- PERPETUAL INDUSTRIES - PERPETUAL INDUSTRIES INC.ex32.htm
EX-10 - MASTER LICENSE WITH ETI TECHNOLOGIES INC., AS AMENDED - PERPETUAL INDUSTRIES INC.ex101.htm
EX-20 - FINANCIAL STATEMENTS TO OCTOBER 31, 2012 - PERPETUAL INDUSTRIES INC.financialstatementstooctober.htm
EX-20 - FINANCIAL STATEMENTS TO JULY 31, 2012 - PERPETUAL INDUSTRIES INC.financialstatementstojuly312.htm
EX-3 - ARTICLES OF INCORPORATION - PERPETUAL INDUSTRIES INC.ex3.1.pdf
EX-5 - CONSENT & OPINION OF WILLIAMS SECURITIES LAW FIRM, P.A. - PERPETUAL INDUSTRIES INC.ex51.htm
EX-10 - MASTER LICENSE WITH MOTOR SPORT COUNTRY CLUB HOLDINGS, INC. - PERPETUAL INDUSTRIES INC.ex103.htm
EX-10 - SUB-LICENSE AGREEMENT WITH GLOBAL SEEDS INC. - PERPETUAL INDUSTRIES INC.ex104.htm
EX-10 - ETI TECHNOLOGIES INC. RATIFICATION OF SUB-LICENSES - PERPETUAL INDUSTRIES INC.ex105.htm
EX-23 - CONSENT OF WARREN AVERETT LLC, CPAS - PERPETUAL INDUSTRIES INC.ex231.htm
EX-10 - LOAN AGREEMENT WITH BEAVER PARTS LTD., AS AMENDED - PERPETUAL INDUSTRIES INC.ex102.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM S-1


REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933


Perpetual Industries Inc.

(Name of small business issuer in our charter)


Nevada

 

3823

 

71-103-2898

(State or other jurisdiction

of incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

IRS I.D.

 

 

#110, 5-8720 Macleod Trail South

Calgary, Alberta, Canada

 

T2H 0M4

 (Address of principal executive offices)

 

(Zip Code)

  
Telephone:  403-214-4321


David Calnan, Shea Nerland Calnan LLP

2800, 715 - 5 Avenue SW Calgary, AB T2P 2X6, tel. 403-299-9600

 (Name, address and telephone number of agent for service)

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.


If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x


If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. o


If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. o


If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. 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.

 

Large Accelerated Filer                    ¨

  

Accelerated Filer                    ¨

  

  

  

Non-accelerated Filer                       ¨

  

Smaller Reporting Company x




1



CALCULATION OF REGISTRATION FEE

 

Title of each class of securities to be registered

Amount to be registered [1]

Proposed maximum offering price per unit

Proposed maximum aggregate offering price

Amount of registration fee [2]

Common Stock offered by the Selling Stockholders [3]

19,395,000

 $       0.02

 $    387,900

 $       44.45


(1) Estimated in accordance with Rule 457(a) of the Securities Act of 1933 solely for the purpose of computing the amount of the registration fee based on the maximum aggregate offering price.


(2) Calculated under Section 6(b) of the Securities Act of 1933 as .0001146 of the aggregate offering price.


(3) Represents shares of the registrant’s common stock being registered for resale that have been issued to the selling shareholders named in this registration statement.


We hereby amend this registration statement on such date or dates as may be necessary to delay our effective date until we will file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a) may determine.



2




PROSPECTUS


Perpetual Industries Inc.

19,395,000 Shares of Common Stock

 

Selling shareholders are offering up to 19,395,000 shares of common stock.  The selling shareholders will offer their shares at $0.02 per share until our shares are quoted on the OTC Markets and, assuming we secure this qualification, thereafter at prevailing market prices or privately negotiated prices.    We will not receive proceeds from the sale of shares from the selling shareholders.


There are no underwriting commissions involved in this offering.  We have agreed to pay all the costs of this offering. Selling shareholders will pay no offering expenses.


Prior to this offering, there has been no market for our securities. Our common stock is not now listed on any national securities exchange or the NASDAQ stock market, and is not eligible to trade on the OTC Markets.  There is no guarantee that our securities will ever trade on the OTC Markets or on any listed exchange.


This offering is highly speculative and these securities involve a high degree of risk and should be considered only by persons who can afford the loss of their entire investment.  See “Risk Factors” beginning on page 12.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

The information in this prospectus is not complete and may be changed. This prospectus is included in the registration statement that was filed by us with the Securities and Exchange Commission. We may not sell these securities until the registration statement becomes effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

The date of this prospectus is March 7, 2013.



3





 

TABLE OF CONTENTS


SUMMARY INFORMATION

7

Organization

7

Business

7

Overview

7

Going Concern Qualification

10

Emerging Growth Company

10

The Offering

10

Financial Summary

11

RISK FACTORS

12

Risks Related to our Business

12

Risks Related to Management and Personnel

16

Risks Related to the Market for our Stock

16

Special Information Regarding Forward Looking Statements

19

USE OF PROCEEDS

19

DETERMINATION OF OFFERING PRICE

19

DILUTION

19

SELLING SHAREHOLDERS

19

Table of Selling Shareholders

19

Share Issuances to U.S. Investors

25

Share Issuances to Non-U.S. Investors

26

Blue Sky

27

PLAN OF DISTRIBUTION

28

OTC Markets Considerations

28

LEGAL PROCEEDINGS

29

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS

29

Family Relationships

31

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

32

DESCRIPTION OF SECURITIES

32

Common Stock

33

Warrants

33

INTEREST OF NAMED EXPERTS

34

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES LIABILITIES

34

DESCRIPTION OF BUSINESS

34

Organization

34

Business

34

Since Inception

34

Operating Plan

36

Our Competition and Our Market Position

36

Sources and Availability of Raw Materials

39

Dependence on One or a Few Major Customers

39

Intellectual Property

39

ETI License Agreement

39

Regulatory Environment

40

Research and Development

40

Our Employees

40

Board of Advisors

40



4



Going Concern Qualification

40

Reason for Going Public

40

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS FOR THE YEARS ENDED JULY 31, 2012 AND 2011, AND THE PERIOD JANUARY 25, 2005

 (INCEPTION) TO JULY 31, 2012 (AUDITED)

41

Overview

42

Business

42

Revenue Generation

42

Off Balance Sheet Arrangements

43

Critical Accounting Policies and Estimates

43

Loan Receivable

43

Fair Value of Derivative Financial Instruments

43

Income Taxes

43

Revenue Recognition

43

Loss Per Share

44

Stock

44

Impact of Recently Issued Accounting Standards

44

ASU 2011-04 Fair Value Measurement

44

ASU 2011-05 Comprehensive Income

45

Emerging Growth Company

45

Results of Operations

46

Revenue

46

Expenses

46

Income and Operation Taxes

46

Net Loss

46

Other Significant Items

47

Commitments and Contingencies

47

Liquidity and Capital Resources

47

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

 OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 2012 AND 2011, AND THE PERIOD

 JANUARY 25, 2005 (INCEPTION) TO OCTOBER 31, 2012 (UNAUDITED)

49

Overview

49

Business

49

Revenue Generation

50

Off Balance Sheet Arrangements

50

Other Critical Accounting Policies and Estimates

50

Loan Receivable

50

Fair Value of Derivative Financial Instruments

50

Income Taxes

51

Revenue Recognition

51

Loss Per Share

51

Stock

51

Impact of Recently Issued Accounting Standards

51

ASU 2011-04 Fair Value Measurement

51

ASU 2011-05 Comprehensive Income

52

Emerging Growth Company

52

Results of Operations

53

Revenue

53

Expenses

53

Income and Operation Taxes

54

Net Loss

54

Other Significant Items

54

Commitments and Contingencies

54

Liquidity and Capital Resources

55

DESCRIPTION OF PROPERTY

56

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

56

Wages and Other Expenses

56



5



Royalties and License Fees Pertaining to Exclusive Rights

57

Sales Agreements

57

Director Independence

57

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

57

Market Information

57

Penny Stock Considerations

57

OTC Markets Qualification for Quotation

58

Sales of our Common Stock Under Rule 144

58

Holders

58

Dividends

58

Reports to Shareholders

59

Where You Can Find Additional Information

59

EXECUTIVE COMPENSATION

59

Summary Compensation Table

59

Summary Equity Awards Table

59

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL

 DISCLOSURE

60

FINANCIAL STATEMENTS

61

PROSPECTUS – SUBJECT TO COMPLETION DATED MARCH 6, 2013

61

PART II-INFORMATION NOT REQUIRED IN PROSPECTUS

61

Other Expenses of Issuance and Distribution

61

Indemnification of Officers and Directors

61

RECENT SALES OF UNREGISTERED SECURITIES

62

Shares Issued for Cash

62

Matching Warrants Issued in Conjunction with Shares Issued for Cash

69

Shares Issued for Services

71

EXHIBITS

71

UNDERTAKINGS

72

SIGNATURES

73





6




SUMMARY INFORMATION


You should carefully read all information in the prospectus, including the financial statements and their explanatory notes, under the Financial Statements prior to making an investment decision.


Organization


Perpetual Industries Inc., or the “Company” is a Nevada corporation formed on January 25, 2005 with a principal business address at #110, 5 - 8720 Macleod Trail South, Calgary, Alberta, Canada T2H 0M4.  Telephone: 403-214-4321.


Business


Overview


We are a development stage company. Our business is the research and development of new and innovative energy efficient products. Our key technology is an automatic, mechanical, patented balancing device called XYO. We design, prototype, test, and manufacture or have manufactured products containing XYO technology, and sub-license XYO technology to third parties. XYO technology is used for balancing rotating parts in machines so that they produce less vibration, resulting in a machine that operates in a more energy efficient manner.


XYO is a patented technology that we have licensed from ETI Technologies Inc. on an exclusive worldwide basis. The term of the License Agreement is from January 27, 2005 to the end of the life of the last existing XYO patent defined in the agreement, which is currently projected to be September 1, 2019. Future patent applications regarding the XYO technology will be pursued in order to extend the patent protection component of this agreement and extend the term of the original agreement if possible. The territory of the Agreement is worldwide, and we have the right to manufacture or have manufactured, sell, and use, the products incorporating XYO (that is, XYO balancers and machines that use them), as well as to sub-license these rights to third parties. In consideration of the rights granted by this Agreement, Perpetual shall pay to ETI non-refundable royalties and annual license fees as described in Description of Business, below.


The License Agreement was modified by an Amendment and Waiver of Default effective July 31, 2010, in which ETI waived any rights to terminate the Agreement in the event of non-payment by Perpetual. The Amendment and Waiver of Default identified a net outstanding balance owed by Perpetual of approximately $383,000, and stated that the accumulating interest would be sufficient consideration for any growing balance resulting from Perpetual’s non-payment. It further stated that in the event of termination of the Agreement, ETI agrees to grandfather any and all agreements entered into by Perpetual with respect to the manufacture or sublicense of XYO. All such agreements would be assigned to ETI as the licensor, and all terms and conditions would remain in effect and be completely honored by ETI.


Since our inception, we have been engaged in significant and continuous operational activities.


In 2005 we organized the Company by incorporating in Nevada, setting up our main executive office in Calgary, opening our bank accounts, securing the exclusive rights to the XYO technology, and raising seed capital. Since inception we have gradually raised further operating capital through private equity investments from exempt investors. To issue this equity we identified and engaged securities attorneys with whom we drafted the necessary private placement documentation.


We developed and refined a business plan featuring three key revenue models:


·

prototype evaluation projects and commercialization of XYO implementations through other parties on a sub-license and royalty fee basis


·

design, production and sale of XYO branded balancers


·

design, production and sale of XYO branded products optimized around XYO balancers



7



We recruited and oriented a team of highly qualified engineering and industrial design resources who have become uniquely knowledgeable in the know-how surrounding the development and implementation of the XYO technology in a variety of applications. Fundamental research and development, and more recently technical marketing (including product design, testing, manufacturing planning, and sales support), have been essential to the commercialization of the XYO technology.


We recruited and oriented administration and business development professionals over the years to help plan and carry out the essential steps of our business plan at its various phases, as needed. We also built a formal board of advisors to provide advice, recommendations and guidance from a variety of perspectives.


We developed and refined our marketing plan, including corporate video and branding work and the creation of our informational websites and printed marketing collateral. We maintain our main corporate website at www.perpetualindustries.com, as well as a technical website at www.xyobalancer.com, and a high performance energy efficient automotive parts marketing website at www.xyoracing.com. Nothing on the websites is part of this prospectus. They are informational and not part of the revenue model, except for the XYO Racing online store, which is still in a testing phase.


We exhibited and won a gold medal and German engineering prize at the 2007 International Exhibition of Inventions of Geneva. Since that time, we have exhibited at trade shows and conferences in a variety of industries. We commenced sales activities in 2007 upon receiving an initiation fee from an agent through whom we carried out application evaluation projects for their customer, a large international steelmaker. The experience of carrying out these projects was instrumental to us in honing our engineering and sales procedures.


From approximately 2008 to 2011 we travelled to meet with dozens of manufacturing companies around the world (North and South America, Europe, the Far East and Oceania), at their facilities and at trade shows, to gauge their potential to become involved in the XYO technology as suppliers or licensees. We weighed the level of interest and the potential for profitable implementations of XYO through various potential relationships, and determined that sub-licensing of XYO as a value-added technology should remain one of our revenue models. However, we also determined that there would be advantages to our focusing on making and selling finished balancers and products optimized around balancers.


From 2011 to date, our primary focus has been on the design, testing, and manufacturing planning of potential Best-in-Category Energy Efficient XYO Branded Products including:


·

Low Hand-Arm Vibration Angle Grinders


·

Low-Vibration Motorcycle Engines (partially funded in 2012 by application evaluation revenue)


·

Low-Maintenance Mud Decanting Centrifuges


·

Low-Maintenance Marine Propellers (partially funded in 2012 by application evaluation revenue and license revenue)


·

Long Battery Life Electric Trolling Motors


·

Energy Efficient Domestic Washing Machines


·

Self-Balancing Spin Baskets for Domestic Washing Machines (partially funded in 2011 by application evaluation revenue)


·

Energy-Efficient High Performance Automotive Parts (our July 30, 2011 Master License Agreement with Motor Sport Country Club Holdings, Ltd., is discussed in further detail in Description of Business below)


·

Clutch Fans for Heavy Duty Diesel Trucks


·

Drive Shafts for Long Haul Buses and Trucks



8




Our activities have resulted in our generating approximately $130,000 in revenue from inception through July 31, 2012 ($152,000 in revenue through October 31, 2012), and approximately $106,000 in deferred revenue as at July 31, 2012 ($85,000 in deferred revenue as at October 31, 2012).


We commenced actions to become a public company in the U.S. to increase our presence and profile in the U.S. and elsewhere in the world by being a U.S. public company, an essential part of our business plan, and in that connection, we located SEC counsel, travelled to the U.S. to meet U.S. counsel and begin the process of drafting our registration statement, located accountants and auditors for the Company, and secured audited financial statements necessary for the filing of the registration statement.


We believe that by becoming a public company we can increase our visibility and prestige and thus grow our business faster than as a private company.


Our plan is to seek out joint venture partners in a number of industry segments where our technology, skills and know-how can lead to lower-cost and more energy-efficient and environmentally-responsible products. Our vision is that the joint venture partners will have deep knowledge of their industry, markets and competitors. We will work with the partners to create products that offer significant performance benefits when compared to products currently being offered in their respective markets. As an example of this, we recently signed an agreement to develop an implementation of XYO in marine propellers, in conjunction with another company.


As of July 31, 2012 (audited) and October 31, 2012 (unaudited), we had approximately $220,000 and $149,000, respectively, in cash in the bank. We anticipate that we will incur certain costs irrespective of our operational and business development activities, including bank service fees and those costs associated with SEC requirements associated with going and staying public, estimated to be approximately $100,000 in connection with this registration statement and thereafter $125,000 annually. We anticipate that we would incur approximately $900,000 in operational expenses during the next 12 months if we continue to implement our business plan at its current level, comprised of expenses related to continuing to conduct and participate in similar events and operational activities at the same rate as currently. As we estimate our total need for funds for operations at our current level, including all expense of going and staying public and continuing operations at their current level in the next 12 months is within $1,000,000, we accordingly anticipate an average monthly burn rate of approximately $85,000 during the next 12 months to maintain operations at their current levels as well as pay costs associated with going and staying public. We do not believe that our current cash resources plus anticipated revenues during the next 12 months will be sufficient to meet these requirements.


During the next 12 months, we anticipate engaging in the following activities to support the implementation of our business plan. We may vary our plans depending upon operational conditions and available funding:


SUPPLEMENTAL ACTIONS

 

COST

Securing of potential joint venture partners/investors for manufacturing and distribution in various industries, including international travel, marketing, due diligence, etc.

 

$

600,000

Provision of engineering and marketing support to industry joint ventures

 

$

1,000,000

Management, administration, insurance, and other overhead costs associated with the above

 

$

600,000

Public company governance and compliance costs associated with the above

 

$

200,000

Intellectual property augmentation: acquisition of additional IP, expansion of XYO patents, development of non-XYO patents, and IP enforcement

 

$

600,000

TOTAL

 

$

3,000,000


The primary obstacle to implementing this plan will be the lack of operating capital until the prospective joint ventures are able to return revenue to Perpetual in the form of sub-license fees, royalty fees, and other fees.



9




We estimate that we will need up to an additional $3,000,000 to support the implementation of our business plan at the level described in the table above. If we do not generate sufficient cash flow from operations in excess of the amount necessary to maintain operations at their current levels as well as pay costs associated with going and staying public, we may have to raise additional capital to finance activities desired to support the implementation of our business plan. Any such financing could be difficult to obtain or only available on unattractive terms and could result in significant dilution of stockholders’ interests. Failure to secure any necessary financing in a timely manner and on favorable terms could hinder our delay our desired activities to support the implementation of our business plan. Except as set forth above, we do not have any plans or specific agreements for new sources of funding or any planned material acquisitions.


Going Concern Qualification


Our lack of meaningful operating revenues to date, i.e. the fact that we are in the development stage, raises substantial doubt about our ability to continue as a going concern and our auditor has so indicated in our financial statements.


Emerging Growth Company


We are an emerging growth company under the JOBS Act. We shall continue to be deemed an emerging growth company until the earliest of:


(a)

the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more;


(b)

the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective IPO registration statement;


(c)

the date on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in nonconvertible debt; or


(d)

the date on which such issuer is deemed to be a ‘large accelerated filer’, as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto.’.


As an emerging growth company we are exempt from Section 404(b) of Sarbanes Oxley. Section 404(a) requires Issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures. Section 404(b) requires that the registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting. As an emerging growth company we are also exempt from Section 14A (a) and (b) of the Securities Exchange Act of 1934 which require the shareholder approval of executive compensation and golden parachutes. These exemptions are also available to us as a Smaller Reporting Company.


We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.


The Offering


As of the date of this prospectus, we had 32,220,000 shares of common stock outstanding.


Selling shareholders are offering up to 19,395,000 shares of common stock. The selling shareholders will offer their shares at $0.02 per share until our shares are quoted on the OTC Markets and thereafter at prevailing market prices or privately negotiated prices. We will pay all expenses of registering the securities, estimated at approximately $100,000. We will not receive any proceeds of the sale of these securities.



10



To be quoted on the OTC Markets, a market maker must file an application on our behalf in order to make a market for our common stock. There is no guarantee that our stock will ever be quoted on the OTC Markets. The current absence of a public market for our common stock may make it more difficult for you to sell shares of our common stock that you own.


Financial Summary


Because this is only a financial summary, it does not contain all the financial information that may be important to you. Therefore, you should carefully read all the information in this prospectus, including the financial statements and their explanatory notes before making an investment decision.

 

For the year ended July 31, 2012

For the period from January 25, 2005 (inception) to July 31, 2012

STATEMENTS OF OPERATIONS

 

 

Revenues

$

46,001 

$

130,401 

Related party expenses

$

704,002 

$

3,429,143 

Other operating expenses

$

210,837 

$

1,596,848 

Total Operating Expenses

$

914,839 

$

5,025,991 

Derivative Income

$

572,918 

$

945,763 

Net Income/(Loss)

$

(257,448)

$

(4,674,914)


 


As of July 31, 2012

As of July 31, 2011

BALANCE SHEET DATA

 

 

Cash

$

220,140 

$

289,334 

Accounts receivable

$

20,473 

$

17,850 

Equipment, net

$

9,729 

$

8,422 

Total Assets

$

250,342 

$

315,606 

Total Liabilities

$

1,709,049 

$

1,979,423 

Stockholders' Equity (Deficit)

$

(1,458,707)

$

(1,663,817)

 



For the three months ended October 31, 2012 (Q1 2013)

For the three months ended October 31, 2011 (Q1 2012)

STATEMENTS OF OPERATIONS

 

 

Revenues

$

21,103 

$

8,925 

Related party expenses

$

207,138 

$

196,303 

Other operating expenses

$

88,693 

$

86,062 

Total Operating Expenses

$

295,831 

$

282,365 

Derivative Income

$

234,197 

$

185,913 

Net Income/(Loss)

$

(42,770)

$

(80,395)


 


As of October 31, 2012 (Q1 2013)

As of July 31, 2012 (Q4 2012)

BALANCE SHEET DATA

 

 

Cash

$

149,269 

$

220,140 

Accounts receivable

$

473 

$

20,473 

Equipment, net

$

8,123 

$

9,729 

Total Assets

$

157,865 

$

250,342 

Total Liabilities

$

1,455,342 

$

1,709,049 

Stockholders' Equity (Deficit)

$

(1,297,477)

$

(1,458,707)



11




RISK FACTORS


In addition to the other information provided in this prospectus, you should carefully consider the following risk factors in evaluating our business before purchasing any of our common stock.  All material risks are discussed in this section.


Risks Related to our Business


Our minimal generation of revenues from operations makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance.


Although we have taken significant steps to develop our business plan since our inception, as of July 31, 2012 and October 31, 2012 we have generated minimal revenues.  Our business plan is still speculative and unproven.  There is no assurance that we will be successful in executing our business plan or that even if we successfully implement our business plan, we will ever generate significant revenues or profits, which makes it difficult to evaluate our business.  As a consequence, it is difficult, if not impossible, to forecast our future results based upon our historical data.  Because of the uncertainties related to our lack of historical operations, we may be hindered in our ability to anticipate and timely adapt to increases or decreases in sales, revenues or expenses.  If we make poor budgetary decisions as a result of unreliable historical data, we may never generate revenues or become profitable or incur losses, which may result in a decline in our stock price. 


Our auditor has indicated in its report that the fact that we are in the development stage raises substantial doubt about our ability to continue as a going concern and if we are unable to generate significant revenues or secure financing we may be required to cease or curtail our operations.


Our auditor has indicated in its report that the fact that we are in the development stage raises substantial doubt about our ability to continue as a going concern.   The financial statements do not include adjustments that might result from the outcome of this uncertainty. If we are unable to generate significant revenue or secure financing we may be required to cease or curtail our operations.


We will need a significant amount of capital to carry out our proposed business plan, and unless we are able to raise sufficient funds, we may be forced to discontinue our operations.

 

In order to carry out our business plan we will require a significant amount of capital. We estimate that to finance our planned operations and carry out our business plan during the next 12 months, we will need approximately $1,000,000 of which $125,000 will be attributable to costs associated with being a public company. These funds must be obtained through the sale of equity securities or from outside sources.  

 

As of July 31, 2012 we had approximately $220,000 in cash in our bank account ($149,000 as of October 31, 2012). Our ability to obtain the necessary financing to execute our business plan is subject to a number of factors, including general market conditions and investor acceptance of our business plan. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to us. If we are unable to raise sufficient funds, we will have to significantly reduce our spending, delay or cancel our planned activities or substantially change our current corporate structure. There is no guarantee that we will be able to obtain any funding or that we will have sufficient resources to continue to conduct our operations as projected, any of which could mean that we will be forced to discontinue our operations.


Any termination or failure to renew our license agreement with ETI could reduce our revenues or cause us to cease operations.


Our operations depend heavily on the continuation of our license agreement with ETI.  The agreement with ETI expires September 1, 2019 subject to earlier termination upon terms described in the Agreement. The License Agreement was modified by an Amendment and Waiver of Default effective July 31, 2010, in which ETI waived any rights to terminate the Agreement in the event of non-payment by Perpetual. Either Party may terminate this Agreement in the event that the other Party breaches a material condition other than non-payment by Perpetual.



12




Either Party may terminate the Agreement in the event that the other Party breaches a material condition, provided that the first Party gives written notice to the second Party of the breach. The second Party shall have thirty (30) days from receipt of such notice to correct the breach. In the event the breach is not remedied within this period, the first Party may, in its sole discretion, terminate this Agreement within a reasonable time after the expiry of the thirty (30) day period.


We may be unable to continue our operation if the agreement is terminated or not renewed


It is uncertain to what extent we will have to work with customer companies, manufacturers, and other strategic collaborators to finalize and bring to market our XYO product offering.


We do not have a history of manufacturing or distributing products. We may encounter market barriers such as resistance to adopting the XYO balancing technology, competition for shelf space, and disparity in bargaining power between us and our suppliers and customers. We may have to work with customer companies, manufacturers, and other strategic collaborators to design, fabricate, test, implement and optimize the XYO balancing technology in specific applications and configurations in order to sell or sub-license it.


If persons or entities that use products incorporating our technologies or their customers successfully assert product liability claims against us due to defects in our products, our operating results may suffer and our reputation may be harmed.


The XYO balancing technology will be applied in various products where balancing is essential.  If the technology does not perform as represented to and agreed with our customers, we could be subject to claims for damages based on theories of product liability and other legal theories. The costs and resources to defend such claims could be substantial and, if such claims are successful, we could be responsible for paying some or all of the damages. We do not have product liability insurance, and it is uncertain what liability protection will be afforded in our agreements with our customers and our manufacturers. The publicity surrounding these sorts of claims is also likely to damage our reputation, regardless of whether such claims are successful. Any of these consequences resulting from defects in products utilizing our technology would hurt our operating results and stockholder value


We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights.

 

A third party may sue us, our licensor or one of our strategic collaborators for infringing its intellectual property rights.  Likewise, we may need to resort to litigation to enforce licensed rights or to determine the scope and validity of third-party intellectual property rights.

 

The cost to us of any litigation or other proceeding relating to intellectual property rights, even if resolved in our favor, could be substantial, and the litigation would divert our efforts.  Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources.  If we do not prevail in this type of litigation, we or our strategic collaborators may be required to pay monetary damages; stop commercial activities relating to the affected products or services; obtain a license in order to continue manufacturing or marketing the affected products or services; or attempt to compete in the market with a substantially similar product.

 

Uncertainties resulting from the initiation and continuation of any litigation could limit our ability to continue some of our operations.  In addition, a court may require that we pay expenses or damages, and litigation could disrupt our commercial activities.


Any inability to protect our intellectual property rights could reduce the value of our balancing technologies and brand, which could adversely affect our financial condition, results of operations and business.



13




Our business is dependent upon our licensed patents, trademarks, trade secrets, copyrights and other intellectual property rights. Effective intellectual property rights protection, however, may not be available under the laws of every country in which we and our sub-licensees may operate. There is a risk of certain valuable trade secrets, beyond what is described publicly in patents, being exposed to potential infringers. Regardless of the XYO balancing technology being protected by patents, there is a risk that other companies may employ the technology without authorization and without recompensing us.


The efforts we have taken to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. In addition, protecting our intellectual property rights is costly and time consuming. There is a risk that we may have insufficient resources to counter adequately such infringements through negotiation or the use of legal remedies. It may not be practicable or cost effective for us to fully protect our intellectual property rights in some countries or jurisdictions. If we are unable to successfully identify and stop unauthorized use of our intellectual property, we could lose potential revenue and experience increased operational and enforcement costs, which could adversely affect our financial condition, results of operations and business.


The intellectual property behind the XYO balancing technology may include unpublished know-how as well as existing and pending patent protection. All patent protection eventually expires, and unpublished know-how is dependent on key individuals.


The commercialization of the XYO technology is partially dependent upon know-how and trade secrets held by certain individuals working with and for Perpetual Industries. Because the expertise runs deep in these few individuals, if something were to happen to any or all of them, the ability to properly design the XYO balancing technology in a cost-effective manner without compromising quality and performance could be diminished greatly.


Knowledge published in the form of patents has finite protection, as all patents have a limited life and an expiration date. While continuous efforts are made to apply for additional patents, there is no guarantee that additional patents will be granted. The expiration of patents relating to the XYO balancing technology may hinder our ability to sub-license or sell the technology for a long period of time without the development of a more complex licensing strategy.


We cannot ensure that any future sub-licensees will successfully manufacture or generate substantial sales of products containing the XYO balancing technology.


While we plan to directly sell balancers or products containing balancers, we also plan to generate revenues from sub-licensing the XYO balancing technology to manufacturers of end products, in which case we may not be involved in manufacturing or marketing the sub-licensees’ products. Developing products using new technologies can be risky because problems, expenses and delays frequently occur, and costs may or may not come down quickly enough for such products using new technologies to rapidly penetrate mass market applications. Because it is up to our sub-licensees to decide when and if they will introduce products using the XYO balancing technology, we cannot predict when and if our sub-licensees will generate substantial sales of such products, and we may not be able to completely mitigate this risk via performance clauses in our sub-license agreements.


Our potential for rapid growth and our entry into new markets make it difficult for us to evaluate our current and future business prospects, and we may be unable to effectively manage any growth associated with these new markets, which may increase the risk of your investment and could harm our business, financial condition, results of operations and cash flow.


Our entry into this new balancing market may place a significant strain on our resources and increase demands on our executive management, personnel and systems, and our operational, administrative and financial resources may be inadequate. We may also not be able to effectively manage any expanded operations, or achieve planned growth on a timely or profitable basis, particularly if the number of customers using our technology significantly increases or their demands and needs change as our business expands. If we are unable to manage expanded operations effectively, we may experience operating inefficiencies, the quality of our products and services could deteriorate, and our business and results of operations could be materially adversely affected.



14



 Our efforts may never demonstrate the feasibility of our XYO balancing technology for broad-based product applications.

 

Our research and development efforts remain subject to all of the risks associated with the development of new products based on emerging and innovative technologies, including without limitation unanticipated technical or other problems and the possible insufficiency of funds for completing development of these products. Technical problems may result in delays and cause us to incur additional expenses that would increase our losses. If we cannot complete, or if we experience significant delays in completing, research and development of our balancing technology and products for use in potential commercial applications, particularly after incurring significant expenditures, our business may fail.


The XYO balancing technology is for use with third-party technologies and products, and if we are unable to maintain the ability of our XYO balancing systems and other technologies to work with these third-party technologies and products, our business and operating results could be adversely affected.


The XYO balancing technology is for use with third-party technologies and products, such as fans, compressors, drive shafts and washing machines. Third-party technologies and products may be modified, re-engineered or removed altogether from the marketplace. In addition, third-party technologies used to interact with the XYO balancing technology can change without prior notice to us, which could result in increased costs or our inability to provide XYO to our customers. If we are unable to maintain the ability of XYO to work with these third-party technologies and products, our business and operating results could be adversely affected.


If we are unable to keep up with rapid technological changes, our processes, products or services may become obsolete.

 

The market for balancing technologies and other vibration reduction and energy efficiency technologies is characterized by significant and rapid technological change.  Although we will continue to expand our technological capabilities in order to remain competitive, research and discoveries by others may make our processes, products or services less attractive or even obsolete.


Competition from other providers of balancing technologies, or from alternatives to balancing, could adversely affect our business.


Our industry is highly competitive. Our primary competitors include not only other automatic movable-mass balancing technologies, but also market resistance to the adoption of automatic balancing in place of established methods of dealing with vibration, such as techniques of masking and damping. In addition, other companies, including end users themselves, may develop their own balancing technologies in the future. Customers may also perceive the quality of balancing technologies delivered by some of our competitors to be equivalent or superior to the XYO balancing technology. In addition, some of our current or future competitors may have significantly greater financial, technical, marketing and other resources than we do or may have more experience or advantages in the markets in which we will compete that will allow them to offer lower prices or higher quality technologies, products or services. If we do not successfully compete with these providers, we could fail to develop market share and our future business prospects could be adversely affected.


If we are unable to develop and maintain our brand and reputation for providing high quality balancing technologies, our business and prospects could be materially harmed.


Our business and prospects depend, in part, on developing and then maintaining and strengthening our brand and reputation for providing high quality balancing technologies in the markets we serve. If problems with our technologies cause end users to experience operational disruption or failure or delays in the delivery of their products and services to their customers, our brand and reputation could be diminished. If we fail to develop, promote and maintain our brand and reputation successfully, our business and prospects could be materially harmed.


We have not fully ascertained the performance and long-term reliability of the XYO balancing technology, and therefore there is no guarantee that it will successfully be incorporated into the product applications that we are targeting or will target in the future.


We expect that different product applications for the XYO balancing technology will have different performance and reliability specifications. We expect that our licensees will primarily be responsible for reliability testing, but that we may also continue to do reliability testing so that we can more effectively focus our research and development efforts towards constantly improving the performance characteristics and reliability of products using the XYO balancing technology.



15




Risks Related to Management and Personnel


We depend heavily on key personnel, and turnover of key senior management could harm our business.

 

Our future business and results of operations depend in significant part upon the continued contributions of our senior management personnel, including Brent Bedford, Chairman and CEO, and Doug Greig, General Manager of Operations. If we lose their services or if they fail to perform in their current positions, or if we are not able to attract and retain skilled employees as needed, our business could suffer. Significant turnover in our senior management could significantly deplete our institutional knowledge held by our existing senior management team. We depend on the skills and abilities of these key employees in managing the product acquisition, marketing and sales aspects of our business, any part of which could be harmed by turnover in the future.  We do not have written employment agreements with any of our senior management. We do not have key person insurance for any of our employees.


Our management has limited experience in managing the day to day operations of a public company and, as a result, we may incur additional expenses associated with the management of our company.


The management team, including Brent Bedford, Chairman and CEO, and Doug Greig, General Manager of Operations, is responsible for the operations and reporting of the combined company. The requirements of operating as a small public company are new to the management team and the employees as a whole. This may require us to obtain outside assistance from legal, accounting, investor relations, or other professionals that could be more costly than planned.  We may also be required to hire additional staff to comply with additional SEC reporting requirements. We estimate that the costs associated with SEC requirements associated with going and staying public will be approximately $100,000 in connection with this registration statement and thereafter $125,000 annually.  If we lack cash resources to cover these costs in the future, our failure to comply with reporting requirements and other provisions of securities laws could negatively affect our stock price and adversely affect our potential results of operations, cash flow and financial condition after we commence operations.

 

Our auditors have deemed the licensor of the XYO technology, ETI Technologies Inc., to be a related party.


Because the Company does not own the XYO technology but rather holds a license for the exclusive rights to it, our future business and results of operations depend in significant part upon our License Agreement with ETI Technologies. Brent Bedford, Perpetual’s Chairman and CEO, is a director of both companies and may be unable to consistently serve the best interests of both companies simultaneously. Although the Company’s board of directors must ratify any material contract, there is a risk that someone who is a director of both companies could influence Perpetual’s operations in a direction that is favorable to ETI and has adverse effects on Perpetual’s future and prospects. We may not be able to completely mitigate this risk by contractual means.


Risks Related to the Market for our Stock

 

Investors may have difficulty in reselling their shares due to the lack of market or state Blue Sky laws.


Our common stock is currently not quoted on any market. No market may ever develop for our common stock, or if developed, may not be sustained in the future.


The holders of our shares of common stock and persons who desire to purchase them in any trading market that might develop in the future should be aware that there may be significant state law restrictions upon the ability of investors to resell our shares. Accordingly, even if we are successful in having the Shares available for trading on the OTC Markets, investors should consider any secondary market for the Company's securities to be a limited one. We intend to seek coverage and publication of information regarding the company in an accepted publication which permits a "manual exemption." This manual exemption permits a security to be distributed in a particular state without being registered if the company issuing the security has a listing for that security in a securities manual recognized by the state. However, it is not enough for the security to be listed in a recognized manual. The listing entry must contain (1) the names of issuers, officers, and directors, (2) an issuer's balance sheet, and (3) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations.  We may not be able to secure a listing containing all of this information.  Furthermore, the manual exemption is a non issuer exemption restricted to secondary trading transactions, making it unavailable for issuers selling newly issued securities.



16



Most of the accepted manuals are those published in Standard and Poor's, Moody's Investor Service, Fitch's Investment Service, and Best's Insurance Reports, and many states expressly recognize these manuals. A smaller number of states declare that they “recognize securities manuals” but do not specify the recognized manuals. The following states do not have any provisions and therefore do not expressly recognize the manual exemption: Alabama, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and Wisconsin.


Accordingly, our shares should be considered totally illiquid, which inhibits investors’ ability to resell their shares.


We will be subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.


The SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions.  We anticipate that our common stock will become a “penny stock”, and we will become subject to Rule 15g-9 under the Exchange Act, or the “Penny Stock Rule”. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers. For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market.


For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.


We do not anticipate that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.

 

Sales of our common stock under Rule 144 could reduce the price of our stock.

 

There are 19,395,000 shares of our common stock held by non-affiliates and 12,825,000 shares held by affiliates that Rule 144 of the Securities Act of 1933 defines as restricted securities.


19,395,000 of our shares held by non-affiliates and none of the shares held by management and their affiliates are being registered in this offering; however all of the remaining shares will still be subject to the resale restrictions of Rule 144.  In general, persons holding restricted securities, including affiliates, must hold their shares for a period of at least six months, may not sell more than one percent of the total issued and outstanding shares in any 90-day period, and must resell the shares in an unsolicited brokerage transaction at the market price.  The availability for sale of substantial amounts of common stock under Rule 144 could reduce prevailing market prices for our securities.


Because we do not have an audit or compensation committee, shareholders will have to rely on the entire board of directors, three of which are independent, to perform these functions.


We do not have an audit or compensation committee comprised of independent directors.  Indeed, we do not have any audit or compensation committee. These functions are performed by the board of directors as a whole. Three members of the board of directors are independent directors.  Thus, there is a potential conflict in that board members who are also part of management will participate in discussions concerning management compensation and audit issues that may affect management decisions.



17




Certain of our stockholders hold a significant percentage of our outstanding voting securities which could reduce the ability of minority shareholders to effect certain corporate actions.


Our officers, directors and majority shareholders are the beneficial owners of approximately 37.94% of our outstanding voting securities. As a result, they possess significant influence and can elect a majority of our board of directors and authorize or prevent proposed significant corporate transactions. As a result, their ownership and control may have the effect of facilitating and expediting a future change in control, merger, consolidation, takeover or other business combination, or encouraging a potential acquirer to make a tender offer. Their ownership and control may also have the effect of delaying, impeding, or preventing a future change in control, merger, consolidation, takeover or other business combination, or discouraging a potential acquirer from making a tender offer.


There may not be funds available for net income because an officer maintains significant control and can determine management’s salary and perquisites.


Our officers, directors and majority shareholders are the beneficial owners of approximately 37.94% of our outstanding voting securities. As a result, there may not be funds available for net income because an officer maintains significant control and can determine management’s salary and perquisites.

 

If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may decline.


As a public company, we will be required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. In addition, assuming this registration statement is declared effective before July 31, 2013, beginning with our 2014 annual report on Form 10-K to be filed in 2014, we will be required to furnish a report by management on the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We are in the process of designing, implementing, and testing the internal control over financial reporting required to comply with this obligation, which process is time consuming, costly, and complicated. In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting beginning with our annual report on Form 10-K following the date on which we are no longer an "emerging growth company," which may be up to five full years following the date of this offering. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting when required, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the Securities and Exchange Commission, or the SEC, or other regulatory authorities, which could require additional financial and management resources. 


We are an "emerging growth company," and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.


We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although we could lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock held by non-affiliates exceeds $700 million as of any July 31 before that time, in which case we would no longer be an emerging growth company as of the following July 31. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.



18




We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

 

Special Information Regarding Forward Looking Statements


Some of the statements in this prospectus are “forward-looking statements.”  These forward-looking statements involve certain known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.  These factors include, among others, the factors set forth above under “Risk Factors.”  The words “believe,” “expect,” “anticipate,” “intend,” “plan,” and similar expressions identify forward-looking statements.  We caution you not to place undue reliance on these forward-looking statements.  We undertake no obligation to update and revise any forward-looking statements or to publicly announce the result of any revisions to any of the forward-looking statements in this document to reflect any future or developments.  However, the Private Securities Litigation Reform Act of 1995 is not available to us as a non-reporting issuer.  Further, Section 27A(b)(2)(D) of the Securities Act and Section 21E(b)(2)(D) of the Securities Exchange Act expressly state that the safe harbor for forward looking statements does not apply to statements made in connection with an initial public offering.


USE OF PROCEEDS


Not applicable.  We will not receive any proceeds from the sale of shares offered by the selling shareholders.


DETERMINATION OF OFFERING PRICE


Our management has determined the offering price for the selling shareholders' shares.  The price of the shares we are offering was arbitrarily determined based upon the prior offering price in our private placement.  We have no agreement, written or oral, with our selling shareholders about this price.  Based upon oral conversations with our selling shareholders, we believe that none of our selling shareholders disagree with this price.  The offering price bears no relationship whatsoever to our assets, earnings, book value or other criteria of value. The factors considered were:

 

·  

our lack of significant revenues

·  

our growth potential

·  

the price we believe a purchaser is willing to pay for our stock

 

The offering price does not bear any relationship to our assets, results of operations, or book value, or to any other generally accepted criteria of valuation. Prior to this offering, there has been no market for our securities.


DILUTION


Not applicable. We are not offering any shares in this registration statement. All shares are being registered on behalf of our selling shareholders.


SELLING SHAREHOLDERS


Table of Selling Shareholders


The selling security holders named below are selling the securities. The table assumes that all of the securities will be sold in this offering. However, any or all of the securities listed below may be retained by any of the selling security holders, and therefore, no accurate forecast can be made as to the number of securities that will be held by the selling security holders upon termination of this offering.



19



Except as noted, we believe that the selling security holders listed in the table have sole voting and investment powers with respect to the securities indicated, have had no material relationship with us other than as a shareholder at any time within the past three years, and have never been one of our officers or directors. We will not receive any proceeds from the sale of the securities by the selling security holders. None of our selling security holders is, or is affiliated with, a broker-dealer. All selling security holders may be deemed underwriters.


Name of Shareholders

Total Shares Owned

Shares Registered

% Before Offering

Remaining Shares if All Registered Shares Sold (assuming sale of all shares registered hereunder)

% After Offering (assuming sale of all shares registered hereunder)

Material Transactions with Selling Shareholder in past 3 years (incl. nature of services provided and dates provided)

David Surkan

 1,400,000

 1,400,000

4.3451%

0

0%

 

607462 Alberta Ltd. [1]

 1,255,000

 1,255,000

3.8951%

0

0%

 [1]

John Bezta

 1,000,000

 1,000,000

3.1037%

0

0%

 

Ken Hartviksen

 1,000,000

 1,000,000

3.1037%

0

0%

 

Redfall Singapore PTE Ltd. [2]

 1,000,000

 1,000,000

3.1037%

0

0%

 

McCreath Communications Ltd. [3]

 600,000

 600,000

1.8622%

0

0%

 

Craig Dansereau

 340,000

 340,000

1.0552%

0

0%

 

Kerry Russell

 335,000

 335,000

1.0397%

0

0%

 

Leslie Roberts

 307,500

 307,500

0.9544%

0

0%

 

Laura Calder

 275,000

 275,000

0.8535%

0

0%

 

Darcy Brown

 233,000

 233,000

0.7232%

0

0%

 

Rick Wiest

 210,000

 210,000

0.6518%

0

0%

 

531746 Alberta Ltd. [4]

 200,000

 200,000

0.6207%

0

0%

 

Dustin Wilson

 200,000

 200,000

0.6207%

0

0%

 

Stiven Holdings Inc. [5]

 200,000

 200,000

0.6207%

0

0%

 

Ulrich Olie Amendy

 200,000

 200,000

0.6207%

0

0%

 

Doug Naef

 187,500

 187,500

0.5819%

0

0%

 

Pete Stiven

 185,000

 185,000

0.5742%

0

0%

 

Gord Zelko

 183,000

 183,000

0.5680%

0

0%

 

Betty Stiven

 178,000

 178,000

0.5525%

0

0%

 

353939 Alberta Ltd. [6]

 175,000

 175,000

0.5431%

0

0%

 

Andrew McCreath

 175,000

 175,000

0.5431%

0

0%

 

Kensington Village Holdings Ltd. [7]

 175,000

 175,000

0.5431%

0

0%

 

George Trehas

 170,000

 170,000

0.5276%

0

0%

 

Marguerite Hache-Jones

 170,000

 170,000

0.5276%

0

0%

 

Williams Law Group, P.A.

160,500

160,500

0.4981%

0

0%

[27]

Darren Morrison

 150,000

 150,000

0.4655%

0

0%

 

Ron Cowles

 150,000

 150,000

0.4655%

0

0%

 

Tanya McGarrigle

150,000

 150,000

0.4655%

0

0%

 



20




Clayton Wiest

 147,500

 147,500

0.4578%

0

0%

 

Paula Stiven

 145,500

 145,500

0.4516%

0

0%

 

Dylan Lowry

 125,000

 125,000

0.3880%

0

0%

 

Gord Ross

 125,000

 125,000

0.3880%

0

0%

 

Jason Cowles

 125,000

 125,000

0.3880%

0

0%

 [8]

Scott Dore

 125,000

 125,000

0.3880%

0

0%

 

Kim Messier

100,000

 100,000

0.3104%

0

0%

 

1115993 Alberta Inc. [9]

 100,000

 100,000

0.3104%

0

0%

 

641621 Alberta Ltd. [10]

 100,000

 100,000

0.3104%

0

0%

 

Alex Douglas

 100,000

 100,000

0.3104%

0

0%

 

Cindy Conroy

 100,000

 100,000

0.3104%

0

0%

 

Arie Prins

 100,000

 100,000

0.3104%

0

0%

 

Barry & Theresa Boyer

 100,000

 100,000

0.3104%

0

0%

 

Brent Morrison

 100,000

 100,000

0.3104%

0

0%

 

Bruce Bianchini

 100,000

 100,000

0.3104%

0

0%

 

Chad Hewlett

 100,000

 100,000

0.3104%

0

0%

 

David Maxwell

 100,000

 100,000

0.3104%

0

0%

 

Dustin Whitney

 100,000

 100,000

0.3104%

0

0%

 

e-Wave Solutions, Inc [11]

 100,000

 100,000

0.3104%

0

0%

 

Garth McIntosh

 100,000

 100,000

0.3104%

0

0%

 

Gary Gardiner

 100,000

 100,000

0.3104%

0

0%

 

Grant Larsen

 100,000

 100,000

0.3104%

0

0%

 

Ian Jones

 100,000

 100,000

0.3104%

0

0%

 

James Carter

 100,000

 100,000

0.3104%

0

0%

 

Jason Plamandon

 100,000

 100,000

0.3104%

0

0%

 

John O'Lain

 100,000

 100,000

0.3104%

0

0%

 

John Sanders

 100,000

 100,000

0.3104%

0

0%

 

Karrie Yont

 100,000

 100,000

0.3104%

0

0%

 

Kristen Yont Professional Corporation [12]

 100,000

 100,000

0.3104%

0

0%

 

Linda Irvine

 100,000

 100,000

0.3104%

0

0%

 

Linear Fusion Corporation [13]

 100,000

 100,000

0.3104%

0

0%

 

Milt Roney

 100,000

 100,000

0.3104%

0

0%

 

Okpoti Holdings Inc. [14]

 100,000

 100,000

0.3104%

0

0%

 

Paul Kruse

 100,000

 100,000

0.3104%

0

0%

 

Ray Hulbert

 100,000

 100,000

0.3104%

0

0%

 

Edwin Walter Wedman as Executor of the Estate of Andrea Cunningham

 100,000

 100,000

0.3104%

0

0%

 

Robert Reader

 100,000

 100,000

0.3104%

0

0%

 

Schnell Stables Investment Club [15]

 100,000

 100,000

0.3104%

0

0%

 

Sheila Kobelka

 100,000

 100,000

0.3104%

0

0%

 

Steve Magus

 100,000

 100,000

0.3104%

0

0%

 

Steve Travis

 100,000

 100,000

0.3104%

0

0%

 

Trevor Ramage

 100,000

 100,000

0.3104%

0

0%

 



21




Valerie J. Metcalfe

 100,000

 100,000

0.3104%

0

0%

 

Vance Blydo

 100,000

 100,000

0.3104%

0

0%

 

Darla Desmond

 92,500

 92,500

0.2871%

0

0%

 

David Kelcher

 82,500

 82,500

0.2561%

0

0%

 

Luciano Oliverio

 82,500

 82,500

0.2561%

0

0%

 

Divine Investments Inc. [16]

 80,000

 80,000

0.2483%

0

0%

 

488588 Alberta Ltd. [17]

 70,000

 70,000

0.2173%

0

0%

 

Greg Durling

 70,000

 70,000

0.2173%

0

0%

 

Kevin Slywka

 70,000

 70,000

0.2173%

0

0%

 [18]

Martin Janzen

 70,000

 70,000

0.2173%

0

0%

 

Tyler Seminuk

 70,000

 70,000

0.2173%

0

0%

 

Yurendra Singh Pandher

 70,000

 70,000

0.2173%

0

0%

 

Simon Jones

 65,000

 65,000

0.2017%

0

0%

 

Brent Roberts

 62,500

 62,500

0.1940%

0

0%

 

Brian Naef

 62,500

 62,500

0.1940%

0

0%

 

Catherine Stiven

 62,500

 62,500

0.1940%

0

0%

 

Dan Lane

 62,500

 62,500

0.1940%

0

0%

 

Elsie Rosby

 62,500

 62,500

0.1940%

0

0%

 

John Kitzke

 62,500

 62,500

0.1940%

0

0%

 

Ken Richter

 62,500

 62,500

0.1940%

0

0%

 

Max Fernandez

 62,500

 62,500

0.1940%

0

0%

 

Roz Daniels

 62,500

 62,500

0.1940%

0

0%

 

Solar Star Holdings Inc. [19]

 62,500

 62,500

0.1940%

0

0%

 

Wendy Brooks

 62,500

 62,500

0.1940%

0

0%

 

Brad Zacharuk

 50,000

 50,000

0.1552%

0

0%

 

Brett Woods

 50,000

 50,000

0.1552%

0

0%

 

Clarence & Janet Kachman

 50,000

 50,000

0.1552%

0

0%

 

Darcy Briggs

 50,000

 50,000

0.1552%

0

0%

 

David Lewis

 50,000

 50,000

0.1552%

0

0%

 

Fast Real Estate Consulting Inc [20]

 50,000

 50,000

0.1552%

0

0%

 

Jannie Otto

 50,000

 50,000

0.1552%

0

0%

 

John van Dyck

 50,000

 50,000

0.1552%

0

0%

 

Kenneth Morrison

 50,000

 50,000

0.1552%

0

0%

 

Kristen Yont

 50,000

 50,000

0.1552%

0

0%

 

Mark Grotski

 50,000

 50,000

0.1552%

0

0%

 

Mike Fast

 50,000

 50,000

0.1552%

0

0%

 

Norma Lichon

 50,000

 50,000

0.1552%

0

0%

 

SLC Development Corp. [21]

 50,000

 50,000

0.1552%

0

0%

 

Tessa McGarrigle

 50,000

 50,000

0.1552%

0

0%

 

Tim & Gloria Yont

 50,000

 50,000

0.1552%

0

0%

 

Tinepublic Inc. [22]

 50,000

 50,000

0.1552%

0

0%

 

Margo Purcell

 42,000

 42,000

0.1304%

0

0%

 

Brad Carter

 40,000

 40,000

0.1241%

0

0%

 

Brian Skyrme

 40,000

 40,000

0.1241%

0

0%

 



22




Bryce Evans

 40,000

 40,000

0.1241%

0

0%

 

Dean Huisman

 40,000

 40,000

0.1241%

0

0%

 

Dirk Heuck

 40,000

 40,000

0.1241%

0

0%

 

JWB Holdings LLC [23]

 40,000

 40,000

0.1241%

0

0%

 

Arthur Shaw

 35,000

 35,000

0.1086%

0

0%

 

Daniel Toews

 35,000

 35,000

0.1086%

0

0%

 

David Craig Harding

 35,000

 35,000

0.1086%

0

0%

 

Greg Soltys

 35,000

 35,000

0.1086%

0

0%

 

Jade Iluk

 35,000

 35,000

0.1086%

0

0%

 

Kelvin Huisman

 35,000

 35,000

0.1086%

0

0%

 

Kim Plews

 35,000

 35,000

0.1086%

0

0%

 

Leo Pernisch

 35,000

 35,000

0.1086%

0

0%

 

Milos Krnjaja

 35,000

 35,000

0.1086%

0

0%

 

Norm Devitt

 35,000

 35,000

0.1086%

0

0%

 

Norman Duval

 35,000

 35,000

0.1086%

0

0%

 

Patricia Newton

 35,000

 35,000

0.1086%

0

0%

 

Ron & Stella Slywka

 35,000

 35,000

0.1086%

0

0%

 

Sean Gorman

 35,000

 35,000

0.1086%

0

0%

 

Xinmeng Liu

 35,000

 35,000

0.1086%

0

0%

 

Darcie Facca

 32,500

 32,500

0.1009%

0

0%

 

Juanita Bremner

 32,500

 32,500

0.1009%

0

0%

 

Target Emission Services Ltd. [24]

 32,500

 32,500

0.1009%

0

0%

 

Marcia Jarvis

 30,000

 30,000

0.0931%

0

0%

 

Seminuk Holdings Ltd. [25]

 30,000

 30,000

0.0931%

0

0%

 

William Burness

 30,000

 30,000

0.0931%

0

0%

 

Daxton Yont

 27,000

 27,000

0.0838%

0

0%

 

Toonvox

 27,000

 27,000

0.0838%

0

0%

 

Tony Robinson

 25,000

 25,000

0.0776%

0

0%

 

1212906 Alberta Ltd. [26]

 20,000

 20,000

0.0621%

0

0%

 

Adam Kapcsos

 20,000

 20,000

0.0621%

0

0%

 

Andie Besgrove

 20,000

 20,000

0.0621%

0

0%

 

Colby Cattoni

 20,000

 20,000

0.0621%

0

0%

 

Joe Desmond

 20,000

 20,000

0.0621%

0

0%

 

Ken Schnell

 20,000

 20,000

0.0621%

0

0%

 

Nasie Schnell

 20,000

 20,000

0.0621%

0

0%

 

Scott Fabro

 20,000

 20,000

0.0621%

0

0%

 

Yvonne Taylor

 20,000

 20,000

0.0621%

0

0%

 

Carson Weist

 17,500

 17,500

0.0543%

0

0%

 

Cory Wiest

 17,500

 17,500

0.0543%

0

0%

 

Dave Filbrandt

 17,500

 17,500

0.0543%

0

0%

 

Doug Lough

 17,500

 17,500

0.0543%

0

0%

 

Gennaro

 17,500

 17,500

0.0543%

0

0%

 

Gillian Robinson

 17,500

 17,500

0.0543%

0

0%

 

John Kubik

 17,500

 17,500

0.0543%

0

0%

 



23




Sandra Lough

 17,500

 17,500

0.0543%

0

0%

 

Scott Barker

 17,500

 17,500

0.0543%

0

0%

 

Zarko & Rada Baljak

 17,500

 17,500

0.0543%

0

0%

 

Richard Jarvis

 12,000

 12,000

0.0372%

0

0%

 

Frank Cancilla & Stella Bendzera

 10,000

 10,000

0.0310%

0

0%

 

Gordon Schnell

 10,000

 10,000

0.0310%

0

0%

 

Mark Melnyk

 10,000

 10,000

0.0310%

0

0%

 

Sasa Baljak

 7,000

 7,000

0.0217%

0

0%

 

TOTAL

19,395,000

19,395,000

60.1955%

0

0%

 


The percentages in this table are based on a grand total of  32,220,000 shares issued and outstanding, including those held by affiliates.


[1]    Dean Brawn is the natural person having voting and investment control over the shares beneficially owned by 607462 Alberta Ltd. He was our Vice President of Marketing & Communications from July 2011 to July 2012.

[2]    Nancy Koh is the natural person having voting and investment control over the shares beneficially owned by Redfall Singapore PTE Ltd.

[3]    Andrew McCreath is the natural person having voting and investment control over the shares beneficially owned by McCreath Communications Ltd.  

[4]    Fidele Carriere is the natural person having voting and investment control over the shares beneficially owned by 531746 Alberta Ltd.  

[5]    Rob Stiven is the natural person having voting and investment control over the shares beneficially owned by Stiven Holdings Inc.  

[6]   Pat Hare is the natural person having voting and investment control over the shares beneficially owned by 353939 Alberta Ltd.  

[7]   Joyce Travis is the natural person having voting and investment control over the shares beneficially owned by Kensington Village Holdings Ltd.  

[8]    Jason Cowles was our Vice President of Finance from April 2008 to April 2012.

[9]    Kristin Yont is the natural person having voting and investment control over the shares beneficially owned by 1115993 Alberta Inc.  

[10]  Walter Byers is the natural person having voting and investment control over the shares beneficially owned by 641621 Alberta Ltd.  

[11]  Greg Soltys is the natural person having voting and investment control over the shares beneficially owned by e-Wave Solutions, Inc.

[12]  Kristen Yont is the natural person having voting and investment control over the shares beneficially owned by Kristen Yont Professional Corporation.

[13]  Pat Bremner and Wava Bremner are the natural persons having voting and investment control over the shares beneficially owned by Linear Fusion Corporation.

[14]  Keith Horsburgh is the natural person having voting and investment control over the shares beneficially owned by Okpoti Holdings Inc.  

[15]  Nasie Schnell is the natural person having voting and investment control over the shares beneficially owned by Schnell Stables Investment Club.

[16]  Harold Bewernick is the natural person having voting and investment control over the shares beneficially owned by Divine Investments Inc.  

[17]  Neil Malloch is the natural person having voting and investment control over the shares beneficially owned by 488588 Alberta Ltd.  

[18]  Kevin Slywka was our Vice President of Public Relations from October 2010 to October 2011.

[19]  John Mele is the natural person having voting and investment control over the shares beneficially owned by Solar Star Holdings Inc.  

[20]  Morley Fast is the natural person having voting and investment control over the shares beneficially owned by Fast Real Estate Consulting Inc.



24




[21]  Marc Staniloff is the natural person having voting and investment control over the shares beneficially owned by SLC Development Corp.  

[22]  Christian Darbyshire is the natural person having voting and investment control over the shares beneficially owned by Tinepublic Inc.  

[23]  John Burness is the natural person having voting and investment control over the shares beneficially owned by JWB Holdings LLC.  

[24]  Terence Treflak is the natural person having voting and investment control over the shares beneficially owned by Target Emission Services Ltd.  

[25]  Tyler Seminuk is the natural person having voting and investment control over the shares beneficially owned by Seminuk Holdings Ltd.  

[26]  Blaine Emelson is the natural person having voting and investment control over the shares beneficially owned by 1212906 Alberta Ltd.

[27] Williams Law Group, P.A. is the Company’s securities attorney.

 

Share Issuances to U.S. Investors


The following breakdown includes selling shareholders and non-registering affiliates.


We relied upon Section 4(2) of the Securities Act of 1933, as amended for the following issuances to U.S. citizens or residents. We believed that Section 4(2) of the Securities Act of 1933 was available because:


·

None of these issuances involved underwriters, underwriting discounts or commissions.

·

Restrictive legends were and will be placed on all certificates issued as described above.

·

The distribution did not involve general solicitation or advertising.

·

The distributions were made only to investors who were sophisticated enough to evaluate the risks of the investment.

 

Shares issued for cash:


YE July 31, 2005:  no sales to U.S. investors.


YE July 31, 2006: On various dates, 375,000 shares of Class A common stock were sold for an aggregate of $75,000 cash at a price per share of $0.20 to 4 accredited U.S. investors.


YE July 31, 2007: no sales to U.S. investors.


YE July 31, 2008: no sales to U.S. investors.


YE July 31, 2009: On September 4, 2008, 90,000 shares of Class A common stock were sold for $27,000 cash at a price per share of $0.30 to 1 accredited U.S. investor.


YE July 31, 2010: On various dates, 90,000 shares of Class A common stock were sold for an aggregate of $27,000 cash at a price per share of $0.30 to 3 accredited U.S. investors.


YE July 31, 2011: March 14, 2011, 30,000 shares of Class A common stock were sold for $9,000 cash at a price per share of $0.30 to 1 U.S. investor.


YE July 31, 2012: no sales to U.S. investors.


YE July 31, 2013 (year to date): no sales to U.S. investors.



25




Matching warrants issued in conjunction with shares issued for cash:


YE July 31, 2011: On December 7, 2010, all previously issued warrants were reset via amendment such that they were exercisable from March 1, 2011 to March 1, 2013 (and are now expired) including:


Warrants for 375,000 shares, issued to 4 U.S. investors, in conjunction with shares issued for cash at a share price of $0.20, the warrants being exercisable in months 1-12 at $0.30, months 13-18 at $0.40, and months 19-24 at $0.50.


Warrants for 200,000 shares, issued to 4 U.S. investors, in conjunction with shares issued for cash at a share price of $0.30, the warrants being exercisable in months 1-12 at $0.40, months 13-18 at $0.50, and months 19-24 at $0.60.


YE July 31, 2012: On August 12, 2011, warrants for 220,000 shares were issued to 5 U.S. investors, in conjunction with shares issued for cash at a share price of $0.30, the warrants being exercisable from August 12, 2011 to August 12, 2013 in months 1-12 at $0.40, months 13-18 at $0.50, and months 19-24 at $0.60:


Shares issued for services:


YE July 31, 2005: 300,000 vested shares of Class A common stock were issued to a director who is a U.S. investor, having a fair value of $300, based on a nominal value of $0.001 per share.


YE July 31, 2013 (year to date): 160,500 vested shares of Class A common stock were issued to 1 U.S. investor, having a fair value of $48,150.


Share Issuances to Non-U.S. Investors


For the following issuances to non-U.S. citizens or residents, we relied upon Regulation S of the Securities Act of 1933, as amended. We believed that Regulation S was available because:

 

·

None of these issuances involved underwriters, underwriting discounts or commissions;

·

We placed Regulation S required restrictive legends on all certificates issued;

·

No offers or sales of stock under the Regulation S offering were made to persons in the United States;

·

No direct selling efforts of the Regulation S offering were made in the United States.


The following breakdown includes selling shareholders and non-registering affiliates. It is calculated without double-counting, in the same fiscal year, any shareholder who is also the natural person having voting and investment control over the shares beneficially owned by a company.


For full details of all issuances, see Recent Sales of Unregistered Securities, below.


Shares issued for cash:


YE July 31, 2005: On various dates, 3,200,000 shares of Class A common stock were sold for $160,000 cash at a price per share of $0.05 to 6 non-U.S. investors.


YE July 31, 2006: On various dates, 1,565,000 shares of Class A common stock were sold for $283,000 cash with various prices per share ranging from $0.05 to $0.20 to 16 non-U.S. investors.


YE July 31, 2007: On various dates, 1,437,500 shares of Class A common stock were sold for $349,000 cash with various prices per share ranging from $0.20 to $0.30 to 15 non-U.S. investors.


YE July 31, 2008: On various dates, 1,853,000 shares of Class A common stock were sold for $555,900 cash at a price per share of $0.30 to 22 non-U.S. investors.


YE July 31, 2009: On various dates, 2,780,000 shares of Class A common stock were sold for $834,000 cash at a price per share of $0.30 to 30 non-U.S. investors.


YE July 31, 2010: On various dates, 3,727,000 shares of Class A common stock were sold for $1,118,100 cash at a price per share of $0.30 to 41 non-U.S. investors.



26




YE July 31, 2011: On various dates, 2,074,000 shares of Class A common stock were sold for $622,200 cash at a price per share of $0.30 to 31 non-U.S. investors.


YE July 31, 2012: On various dates, 2,228,000 shares of Class A common stock were sold for $668,400 cash at a price per share of $0.30 to 19 non-U.S. investors.


YE July 31, 2013 (year to date): On August 30, 2012, 700,000 shares of Class A common stock were sold for $210,000 cash at a price per share of $0.30 to 1 non-U.S. investor.


Matching warrants issued in conjunction with shares issued for cash:


YE July 31, 2011: On December 7, 2010, all previously issued warrants were reset via amendment such that they were exercisable from March 1, 2011 to March 1, 2013 (and are now expired) including:


Warrants for 2,187,500 shares, issued to 24 non-U.S. investors, in conjunction with shares issued for cash at a share price of $0.20, the warrants being exercisable in months 1-12 at $0.30, months 13-18 at $0.40, and months 19-24 at $0.50.


Warrants for 7,900,000 shares, issued to 95 non-U.S. investors, in conjunction with shares issued for cash at a share price of $0.30, the warrants being exercisable in months 1-12 at $0.40, months 13-18 at $0.50, and months 19-24 at $0.60.


YE July 31, 2012: On August 12, 2011, warrants for 3,069,000 shares were issued to 30 non-U.S. investors, in conjunction with shares issued for cash at a share price of $0.30, the warrants being exercisable from August 12, 2011 to August 12, 2013 in months 1-12 at $0.40, months 13-18 at $0.50, and months 19-24 at $0.60.


Shares issued for services:


YE July 31, 2005: 11,600,000 vested shares of Class A common stock were issued to directors who are non-U.S. investors, having a fair value of $11,600, based on a nominal value of $0.001 per share.


Blue Sky

 

The holders of our shares of common stock and persons who desire to purchase them in any trading market that might develop in the future should be aware that there may be significant state law restrictions upon the ability of investors to resell our shares. Accordingly, even if we are successful in having the Shares available for trading on the OTC Markets, investors should consider any secondary market for the Company's securities to be a limited one. There is no guarantee that our stock will ever be quoted on the OTC Markets.   We intend to seek coverage and publication of information regarding the company in an accepted publication which permits a "manual exemption”. This manual exemption permits a security to be distributed in a particular state without being registered if the company issuing the security has a listing for that security in a securities manual recognized by the state. However, it is not enough for the security to be listed in a recognized manual. The listing entry must contain (1) the names of issuers, officers, and directors, (2) an issuer's balance sheet, and (3) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. We may not be able to secure a listing containing all of this information. Furthermore, the manual exemption is a non issuer exemption restricted to secondary trading transactions, making it unavailable for issuers selling newly issued securities. Most of the accepted manuals are those published in Standard and Poor's, Moody's Investor Service, Fitch's Investment Service, and Best's Insurance Reports, and many states expressly recognize these manuals. A smaller number of states declare that they “recognize securities manuals” but do not specify the recognized manuals. The following states do not have any provisions and therefore do not expressly recognize the manual exemption: Alabama, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and Wisconsin.

 

We currently do not intend to and may not be able to qualify securities for resale in other states which require shares to be qualified before they can be resold by our shareholders.



27




PLAN OF DISTRIBUTION


Our common stock is currently not quoted on any market.  No market may ever develop for our common stock, or if developed, may not be sustained in the future.  Accordingly, our shares should be considered totally illiquid, which inhibits investors’ ability to resell their shares.

 

Selling shareholders are offering up to 19,395,000 shares of common stock. The selling shareholders will offer their shares at $0.02 per share until our shares are quoted on the OTC Markets and thereafter at prevailing market prices or privately negotiated prices. We will not receive proceeds from the sale of shares from the selling shareholders.   There is no guarantee that our stock will ever be quoted on the OTC Markets.

 

The securities offered by this prospectus will be sold by the selling shareholders. Selling shareholders in this offering may be considered underwriters.  We are not aware of any underwriting arrangements that have been entered into by the selling shareholders. The distribution of the securities by the selling shareholders may be effected in one or more transactions that may take place in the OTC Markets, including broker's transactions or privately negotiated transactions.


The selling shareholders may pledge all or a portion of the securities owned as collateral for margin accounts or in loan transactions, and the securities may be resold pursuant to the terms of such pledges, margin accounts or loan transactions. Upon default by such selling shareholders, the pledge in such loan transaction would have the same rights of sale as the selling shareholders under this prospectus. The selling shareholders may also enter into exchange traded listed option transactions, which require the delivery of the securities listed under this prospectus. After our securities are qualified for quotation on the OTC Markets, the selling shareholders may also transfer securities owned in other ways not involving market makers or established trading markets, including directly by gift, distribution, or other transfer without consideration, and upon any such transfer the transferee would have the same rights of sale as such selling shareholders under this prospectus.


In addition to the above, each of the selling shareholders will be affected by the applicable provisions of the Securities Exchange Act of 1934, including, without limitation, Regulation M, which may limit the timing of purchases and sales of any of the securities by the selling shareholders or any such other person. We have instructed our selling shareholders that they may not purchase any of our securities while they are selling shares under this registration statement.


Upon this registration statement being declared effective, the selling shareholders may offer and sell their shares from time to time until all of the shares registered are sold; however, this offering may not extend beyond two years from the initial effective date of this registration statement.


There can be no assurances that the selling shareholders will sell any or all of the securities. In various states, the securities may not be sold unless these securities have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.


All of the foregoing may affect the marketability of our securities. Pursuant to oral promises we made to the selling shareholders, we will pay all the fees and expenses incident to the registration of the securities.


Should any substantial change occur regarding the status or other matters concerning the selling shareholders or us, we will file a post-effective amendment to this registration statement disclosing such matters.


OTC Markets Considerations


To be quoted on the OTC Markets, a market maker must file an application on our behalf in order to make a market for our common stock. We anticipate that after this registration statement is declared effective, market makers will enter “piggyback” quotes and our securities will thereafter trade on the OTC Markets.


The OTC Markets is separate and distinct from the NASDAQ stock market. NASDAQ has no business relationship with issuers of securities quoted on the OTC Markets. The SEC’s order handling rules, which apply to NASDAQ-listed securities, do not apply to securities quoted on the OTC Markets.



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Although the NASDAQ stock market has rigorous listing standards to ensure the high quality of its issuers, and can delist issuers for not meeting those standards, the OTC Markets has no listing standards. Rather, it is the market maker who chooses to quote a security on the system, files the application, and is obligated to comply with keeping information about the issuer in its files. FINRA cannot deny an application by a market maker to quote the stock of a company. The only requirement for inclusion in the quotation service is that the issuer be current in its reporting requirements with the SEC.


Although we anticipate listing on the OTC Markets will increase liquidity for our stock, investors may have greater difficulty in getting orders filled because it is anticipated that if our stock trades on a public market, it initially will trade on the OTC Markets rather than on NASDAQ. Investors’ orders may be filled at a price much different than expected when an order is placed. Trading activity in general is not conducted as efficiently and effectively as with NASDAQ-listed securities.


Investors must contact a broker-dealer to trade OTC Markets securities. Investors do not have direct access to the quotation service. For OTC Markets securities, there only has to be one market maker.


OTC Markets transactions are conducted almost entirely manually. Because there are no automated systems for negotiating trades on the quotation service, they are conducted via telephone. In times of heavy market volume, the limitations of this process may result in a significant increase in the time it takes to execute investor orders. Therefore, when investors place market orders - an order to buy or sell a specific number of shares at the current market price - it is possible for the price of a stock to go up or down significantly during the lapse of time between placing a market order and getting execution.


Because OTC Markets stocks are usually not followed by analysts, there may be lower trading volume than for NASDAQ-listed securities.

 

There is no guarantee that our stock will ever be quoted on the OTC Markets.


LEGAL PROCEEDINGS


We are not aware of any pending or threatened legal proceedings in which we are involved.


DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS


The board of directors elects our executive officers annually.  A majority vote of the directors who are in office is required to fill vacancies. Each director shall be elected for the term of one year, and until his successor is elected and qualified, or until his earlier resignation or removal. Our directors and executive officers are as follows:


Name

Age

Position

Brent Bedford

45

Chairman, President and CEO

Doug Greig

44

General Manager of Operating (non-officer)

Thomas Ristow

45

Director

Rod Egan

45

Director

Alan Wizemann

37

Director


Brent W. Bedford founded the Company in January 2005 and has served continuously as Chairman, President, and CEO. Since 1999 he has been a Director of ETI Technologies Inc., the licensor of the XYO technology. Since January 2006 he has been President of Pulseman Inc., a management services company (100% of time is spent on Perpetual at present).  Since July 2012 he has been a Director of Shabu Shabu Shack Inc., and since October 2012, he has been a Director of Graffiti Group Inc., an importer of alcoholic beverages and other goods. Among his earlier accomplishments, he founded the independent music label Inferno Records and the international licensing, marketing, and distribution company One Tree Hill International Traders. Through One Tree Hill he obtained some of the first marketing and distribution rights to products based on television’s “The Simpsons”, and also marketed the U.K.’s patented “Qwicksilver” tarnish removal system through the development and creation of over 200 independent distributors in North America. Qualifications as Director: As a member of the board, Mr. Bedford contributes his knowledge of the company and a deep understanding of all aspects of our business, products and markets, as well as substantial experience developing corporate strategy, assessing emerging industry trends, and carrying out business operations. He has a strong background in mechanical applications, and expertise in finance, private and public company startups, and corporate turnarounds.



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Until his resignation June 15, 2001, Mr. Bedford was a Director of Steely Group Inc. (a Canadian company formerly known as European Technologies International Inc.). On June 18, 2001, Steely Group Inc. was petitioned into bankruptcy by a secured creditor, Kelowna, BC, Canada native Mr. Donald Jensen. The bankruptcy was finalized September 4, 2002, in the Court of Queens Bench of Alberta in Bankruptcy and Insolvency, Judicial District of Calgary, Alberta, Bankruptcy Action No. 076478. The bankruptcy trustee, Deloitte & Touche, approved the sale of all remaining assets of Steely Group Inc. to Mr. Jensen. These assets included shareholdings of ETI Technologies Inc., which held (and still does hold) the patents for the technology that, along with subsequently developed Know-How, is currently referred to as XYO. Since then Mr. Jensen has been the sole shareholder of ETI Technologies Inc.


Steely Group’s demise can be attributed to an overburden of debt coupled with failed attempts at selling an underdeveloped technology. Potential customers required significant engineering support in order to implement the technology into their product lines. Steely Group could not provide engineering support due to lack of resources. Computer software and hardware was not advanced or affordable enough in those times to easily collect, measure, and calculate various design parameters needed to efficiently develop the technology to a usable state. Very little was known about the technology at this time, and a considerable amount of R&D was going to be required in order to fully commercialize the technology. With few employees, limited engineering, marketing or sales resources and in a state of transition and weakness, Steely Group became the target of various takeover attempts, culminating in its petition into bankruptcy.


Perpetual Industries was created several years after Steely’s demise, and we intend to avoid a similar failure. We have developed the balancing technology to a finished product stage and can answer potential customers’ questions concerning costs, reliability, performance and quantifiable benefits up front. We provide test data that proves the benefits of utilizing the technology and we have developed the proprietary software and expertise to properly support the design, optimization and implementation stages. Instead of a technology transfer approach, we control and protect our Know-How by keeping it more internal. We may provide finished product drawings and costing quotes but we control the fabrication, assembly and supply of the balancing technology in the form of balancers or products containing them. Our business plan focuses on building a sustainable business model based on developing innovative energy-efficient products in a variety of industries. We are constantly evaluating other new and innovative products that are not restricted to the function of balancing machinery.


Doug Greig has served as our General Manager of Operations since January 2006. From March 2005 to present, he has been President of Blackbird Insight Inc., a management services company (100% of time is spent on Perpetual at present). From May 2004 to April 2005, he was General Manager and from August 2005 to December 2011 volunteered as Director of the MBA Consulting Alliance, a grad student management consultancy. He received an MBA in 2005 from the Haskayne School of Business, Calgary AB, Canada and a BA in 2003 from the University of Calgary. Mr. Greig oversees Perpetual’s governance, compliance and administration. He is the company’s controller, and is very active in its strategic business planning including all legal and financial aspects of day to day operations. He contributes the benefit of his many years as a generalist in startup, mid-size, and multinational companies, including eight years at cellular and GPS pioneer NovAtel, followed by a several years in a wireless technology company undergoing a merger with Intel Corp. He has acquired both a hands-on and executive-level familiarity with a wide range of disciplines such as corporate finance, human resource management, project/product management, application engineering, and new business development in relation to innovative, value-add technologies.


Thomas Ristow has served as a Director since August 2005. From April 2005 to date, he has been Sales Manager for Sekisui Chemical GmbH, a chemical products company. At ETI Technologies Inc., the intellectual property licensing firm which is now the licensor of the XYO technology, he served from 1993 through 2005, as European Sales Representative from 1993 to 1996, European Marketing Manager from 1996 to 2001, and European Business Development Manager 2001 to 2005.  He received a Diplom-Kaufmann in 1999 from the University of Cologne, Germany. Qualifications as Director: As a member of the board, Mr. Ristow contributes significant industry-specific experience and expertise on our products and services. He has significant knowledge and experience in the European marketplace.



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Rod Egan has served as a Director since August 2005. From September 2007 to date, he has been Owner, Director of RIJ Holdings, LLC, a personal holding company. From October 2005 to date, he has been Owner, Managing Partner of The Worldwide Group, LLC which runs collector automobile auctions. From July 2005 to date, he has been Owner, Director, and President of Cinch Ventures Ltd., a management and promotion company. From September 2004 to December 2009, he was Owner, Director of Asset Solutions International, LLC, a holding company. From October 2005 to February 2007, he was Owner, Director of Automax, LLC, a retail automobile sales firm. He holds state auctioneer licenses in Texas, Indiana, and Florida. Qualifications as Director: As a member of the board, Mr. Egan contributes the benefits of his executive leadership and management experience, in particular with regard to running startup companies and negotiating purchase and sale agreements. An elite collector car auctioneer specializing in the valuation of fine automobiles, he oversees corporate operations at The Worldwide Group, LLC, where he has demonstrated his appraisal and sales abilities (his sales history totals over $3 billion, privately and through auction) and helped to close some of the largest private car collection sales in North America in recent years.


Alan Wizemann has served as a Director since August 2005. From October 2007 to date, he has been Founder, Chief Product Officer of ShopIgniter, Inc. (formerly Cularis, Inc.), an e-commerce systems company. From January 2004 to September 2007, he was Owner and Managing Director of Loft Rent LLC, a real estate leasing web portal.  From November 1999 to December 2004, he was Managing/Creative Director of SloanPeterson, Inc., formerly mediaWORKS Ltd., an advertising and web development company. He is a director and developer of enterprise web sites and applications. Qualifications as Director: As a member of the board, Mr. Wizemann contributes the benefits of his executive leadership and management experience, and his knowledge of online retail, public relations and brand building. He has extensive expertise and connections in both print and web-based advertising and marketing. He spent over fifteen years in advertising and interactive design for clients in Las Vegas, Miami, New York and the Caribbean. He has won coveted advertising awards such as the Bronze Quill from the IABC, the Addy from the AdClub, and honorable mention awards from the AIGA. As the Executive Creative Director for SloanPeterson, he has created interactive, web and print media for Ford Motor Company, Air Force Reserve, Sprint Telecommunications and the Caribbean Hotel Association, among others.


Family Relationships

 

There are no family relationships between our officers and directors.


Legal Proceedings


Except as set forth above, no officer, director, or persons nominated for such positions, promoter or significant employee has been involved in the last ten years in any of the following:


·

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,

·

Being found by a court of competent jurisdiction (in a civil action), the Commission 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.

·

Having any government agency, administrative agency, or administrative court impose an administrative finding, order, decree, or sanction against them as a result of their involvement in any type of business, securities, or banking activity.

·

Being the subject of a pending administrative proceeding related to their involvement in any type of business, securities, or banking activity.

·

Having any administrative proceeding been threatened against you related to their involvement in any type of business, securities, or banking activity.




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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


The following tables set forth the ownership, as of the date of this prospectus, of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, our directors, and our executive officers and directors as a group.  To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted.  There are not any pending or anticipated arrangements that may cause a change in control.


The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a "beneficial owner" of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such person has the right to acquire voting or investment power within 60 days. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below and under applicable community property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown. The business address for these shareholders is #110, 5 - 8720 Macleod Trail South, Calgary, Alberta, Canada T2H 0M4.

Name

Title

Number of Shares

% of Common Share

Number of Warrants currently exercisable or exercisable in the next 60 days

Brent Bedford

Chairman, President and CEO

11,000,000

34.14%

0

Doug Greig

General Manager of Operations

125,000

0.39%

0

Thomas Ristow

Director

300,000

0.93%

0

Rod Egan

Director

500,000

1.55%

0

Alan Wizemann

Director

300,000

0.93%

0

All officers and directors (and management) as a group) [5 persons]

 

12,225,000

37.94%

0


This table is based upon information derived from our stock records. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, each of the shareholders named in this table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned. Except as set forth above, applicable percentages are based upon 32,220,000 shares of common stock outstanding as of March 7, 2013.


DESCRIPTION OF SECURITIES


The following description is a summary of the material terms of the provisions of our Articles of Incorporation and Bylaws.  The Articles of Incorporation and Bylaws have been filed as exhibits to the registration statement of which this prospectus is a part.



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Common Stock


We are authorized to issue 100,000,000 shares of common stock with $0.001 par value per share. As of the date of this registration statement, there were 32,220,000 shares of common stock issued and outstanding, held by 184 shareholders of record.


Each share of common stock entitles the holder to one vote, either in person or by proxy, at meetings of shareholders. The holders are not permitted to vote their shares cumulatively. Accordingly, the shareholders of our common stock who hold, in the aggregate, more than fifty percent of the total voting rights can elect all of our directors and, in such event, the holders of the remaining minority shares will not be able to elect any of such directors. The vote of the holders of a majority of the issued and outstanding shares of common stock entitled to vote thereon is sufficient to authorize, affirm, ratify or consent to such act or action, except as otherwise provided by law.


Holders of common stock are entitled to receive rateably such dividends, if any, as may be declared by the Board of Directors out of funds legally available. We have not paid any dividends since our inception, and we presently anticipate that all earnings, if any, will be retained for development of our business. Any future disposition of dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements, and other factors.


Holders of our common stock have no pre-emptive rights or other subscription rights, conversion rights, redemption or sinking fund provisions. Upon our liquidation, dissolution or winding up, the holders of our common stock will be entitled to share rateably in the net assets legally available for distribution to shareholders after the payment of all of our debts and other liabilities. There are not any provisions in our Articles of Incorporation or our Bylaws that would prevent or delay change in our control.


Warrants


We currently have outstanding additional warrants to acquire 2,069,000 shares of our common stock on the following terms:


Exercisable

Exercise Price

From August 12, 2011

Months 1-12, $0.40

To August 12, 2013

Months 13-18, $0.50

 

Months 19-24, $0.60


These warrants were issued with an adjustment provision whereby the exercise price would be adjusted in the event of any of the following: the Company issues or sells any shares of common stock for a price less than the exercise price, the Company's shares of common stock outstanding are subdivided into greater or consolidated into fewer shares, or in the case of any capital reorganization.


We currently have outstanding additional warrants to acquire 2,828,000 shares of our common stock on the following terms:


Exercisable

Exercise Price

From February 15, 2013

Months 1-12, $0.40

To February 15, 2015

Months 13-18, $0.50

 

Months 19-24, $0.60


These warrants were issued with an adjustment provision whereby the exercise price would be adjusted in the event of any of the following: the Company's shares of common stock outstanding are subdivided into greater or consolidated into fewer shares, or in the case of any capital reorganization.



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INTEREST OF NAMED EXPERTS


The consolidated balance sheets of Perpetual Industries Inc. as of July 31, 2012 and 2011, and the related statements of loss, shareholders’ equity, and cash flows for the years ended July 31, 2012 and 2011 and the period January 25, 2005 (Inception) to July 31, 2012 included in this prospectus have been audited by Warren Averett LLC, which are independent certified public accountants, to the extent and for the periods set forth in our report and are incorporated herein in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.


The legality of the shares offered under this registration statement is being passed upon by Williams Law Group, P.A., Tampa, Florida.  Michael Williams, principal of Williams Law Group, P.A. owns 160,500  shares of common stock.


DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES LIABILITIES


Our Bylaws, subject to the provisions of Nevada Law, contain provisions which allow the corporation to indemnify any person against liabilities and other expenses incurred as the result of defending or administering any pending or anticipated legal issue in connection with service to us if it is determined that person acted in good faith and in a manner which he reasonably believed was in the best interest of the corporation.  Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.


DESCRIPTION OF BUSINESS


Organization


Perpetual Industries Inc. is a Nevada corporation formed on January 25, 2005, with a principal business address at #110, 5 - 8720 Macleod Trail South, Calgary, Alberta, Canada T2H 0M4.  Phone: 403-214-4321.  


Perpetual has not been involved in any bankruptcy, receivership, or similar proceeding.


There has been no material reclassification, merger, consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business.


Business


We are a development stage company. Our business is the research and development of new and innovative energy efficient products.


Our key technology is a mechanical patented balancing device called XYO. We design, prototype, test, and manufacture or have manufactured products containing XYO technology, and sub-license XYO technology to third parties. XYO technology is used for automatically balancing rotating parts in machines so that they produce less vibration, resulting in a machine that operates in a more energy efficient manner.


The overall intellectual property surrounding the XYO technology is comprised of specialized know-how, various granted and pending patents, and specific design and testing procedures.


The current focus for Perpetual Industries is to re-design mechanical products in a number of industries, implementing the XYO technology as the core ingredient. This will allow XYO to reach its full potential, which in turn helps to provide better and more energy efficient products. Our plan is to do this with joint-venture partners in each of the industries under consideration.


Since Inception


Since our inception, we have been engaged in significant and continuous operational activities.



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In 2005 we organized the Company by incorporating in Nevada, setting up our main executive office in Calgary, opening our bank accounts, securing the exclusive rights to the XYO technology, and raising seed capital. Since inception we have gradually raised further operating capital through private equity investments from exempt investors. To issue this equity we identified and engaged securities attorneys with whom we drafted the necessary private placement documentation.


We developed and refined a business plan featuring three key revenue models:


·

prototype evaluation projects and commercialization of XYO implementations through other parties on a sub-license and royalty fee basis


·

design, production and sale of XYO branded balancers


·

design, production and sale of XYO branded products optimized around XYO balancers


We recruited and oriented a team of highly qualified engineering and industrial design resources who have become uniquely knowledgeable in the know-how surrounding the development and implementation of the XYO technology in a variety of applications. Fundamental research and development, and more recently technical marketing (including product design, testing, manufacturing planning, and sales support), have been essential to the commercialization of the XYO technology.


We recruited and oriented a number of administration and business development professionals over the years to help plan and carry out the essential steps of our business plan at its various phases, as needed. We also built a board of advisors to provide advice, recommendations and guidance from a variety of perspectives.


We developed and refined our marketing plan, including corporate video and branding work and the creation of our informational websites and printed marketing collateral. We maintain our main corporate website at www.perpetualindustries.com, as well as a technical website at www.xyobalancer.com, and a high performance energy efficient automotive parts marketing website at www.xyoracing.com. Nothing on the websites is part of this prospectus. They are informational and not part of the revenue model, except for the XYO Racing online store which is still in a testing phase.


We exhibited and won a gold medal and German engineering prize at the 2007 International Exhibition of Inventions of Geneva. Since that time, we have exhibited at trade shows and conferences in a variety of industries. We commenced sales activities in 2007 upon receiving an initiation fee from an agent through whom we carried out application evaluation projects for their customer, a large international steelmaker. The experience of carrying out these projects was instrumental to us in honing our engineering and sales procedures.


From approximately 2008 to 2011 we travelled to meet with dozens of manufacturing companies around the world (North and South America, Europe, the Far East and Oceania), at their facilities and at trade shows, to gauge their potential to become involved in the XYO technology as suppliers or licensees. We weighed the level of interest and the potential for profitable implementations of XYO through various potential relationships, and determined that sub-licensing of XYO as a value-added technology should remain one of our revenue models. However, we also determined that there would be advantages to our focusing on making and selling finished balancers and products optimized around balancers.


Our activities have resulted in our generating approximately $130,000 in revenue from inception through July 31, 2012 ($152,000 in revenue through October 31, 2012), and approximately $106,000 in deferred revenue as at July 31, 2012 ($85,000 in deferred revenue as at October 31, 2012), and additional volume-based royalty terms are in place.


The XYO technology has been proven to work quite well in prototypes in a variety of applications. Initial sales efforts were focused on licensing the XYO technology to manufacturers of washing machines, power tools, compressors, marine propellers and a few retrofit automotive applications. Perpetual is now positioned to move into the actual production of its own line of energy efficient XYO branded products, as well as continuing to be able to sub-license and supply the XYO technology to interested manufacturers.



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Operating Plan


Our plan is to seek out joint venture partners in a number of industry segments where our technology, skills and know-how can lead to lower-cost and more energy-efficient and environmentally-responsible products. Our vision is that the joint venture partners will have deep knowledge of their industry, markets and competitors. We will work with the partners to create products that offer significant performance benefits when compared to products currently being offered in their respective markets. As an example of this, we recently signed an agreement to implement XYO in marine propellers, in conjunction with another company.


We are planning joint ventures for the manufacture of XYO branded products in industries with unsatisfied demand for lower vibration. We believe these projects can be off the ground and profitable within one or two years of raising sufficient operating capital. Our goal is to implement XYO as simply and cost effectively as possible into our custom product designs. We have already identified suitable suppliers that will assist in the production and assembly of XYO branded products. In some cases it may be appropriate for Perpetual or one of its Canadian associates, such as Beaver Parts, to enter into contracted supplier arrangements with manufacturing and assembly partners.


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For the next few years we will be primarily focused on designing and implementing the XYO technology into some of the following products:


·

Household products: washing machines, grass and weed trimmers, and power tools (angle grinders)

·

Heavy transportation and trucking parts: wheels, clutch fans, and drive shafts

·

Motorcycles: crankshaft flywheels on V-twin engines

·

Marine applications: boat propellers for commercial and personal watercraft

·

Natural resources applications: oil, gas, mining and agricultural

·

Power generation applications: electric motors, alternative energy

·

Aviation applications: aircraft propellers and motor components

·

Pump, Compressor and Turbine applications: down-hole, submersible, water, and refrigeration


Our Competition and Our Market Position 


A high-end niche opportunity exists for best-in-category products that can challenge the status quo by delivering superior performance.


For reasons of cost and competitive nearsightedness, many large brand-name companies with established product lines are inhibited from implementing the fullest version of the XYO technology. Like a large ship trying to change course, it becomes a cumbersome and slow process. By contrast, Perpetual has the flexibility and dedication to make the most of new innovations such as XYO, capitalizing on our head start from patents, our secret know-how and our ability to manufacture and implement XYO cost-effectively.



36




In fact, making our own branded products is our key revenue model. We have developed a plan to pursue this opportunity through designing, manufacturing, and distributing our own XYO branded line. This will include XYO branded balancers sold either as after-market add-ons for end-users or as major components supplied to industry, depending on the application. It will also include innovative, energy efficient XYO-branded products that are optimized around XYO balancers.


As a potential secondary revenue stream, we will continue to pursue sub-licensing opportunities, essentially selling a prototype, an engineering drawing, technical support and rights to use our intellectual property, however the XYO-branded strategy will better showcase the benefits provided by the XYO technology when it is implemented to its fullest potential, and will create revenue streams that can go on indefinitely. The inventive features and unique designs of many of the XYO-branded products may even prove to be eligible for new patent protection.


Examples of potential Best-in-Category Energy Efficient XYO Branded Products:


Low Hand-Arm Vibration Angle Grinders  We have conducted research and prototype development in pursuit of reducing the presence of hand-arm vibration emission in angle grinders, a versatile type of handheld power tool widely used in industry. Such vibration currently places workers at risk from vibration-related repetitive stress injuries, creating problems of liability and productivity for employers. Other than limiting hours of usage, there is currently no viable solution to minimize vibration to within safe exposure limits. Our goal is to produce a best-in-class XYO-branded angle grinder that exhibits the lowest vibration in the world. Through experimentation and prototyping we have identified a number of design variables that we believe we can radically modify in order to accomplish this. We have identified and are pursuing potential manufacturing and distribution partners with whom we can work to bring our designs to market.


Low-Vibration Motorcycle Engines (partially funded in 2012 by application evaluation revenue) The V-twin engines used in many cruiser-type motorcycles are characterized by high vibration that causes discomfort for the operator and wear-and-tear on components. We were engaged to conduct a prototype evaluation project examining various approaches to incorporating XYO balancing technology into engine components such as the crankshaft. Our goal is to optimize such applications and market them as XYO branded after-market products, and/or to motorcycle makers for implementation as factory-installed parts. To accomplish this, we will need to complete further engineering and testing, design marketable embodiments of XYO, and pursue distribution of XYO-branded motorcycle engine balancers.


Low-Maintenance Mud Decanting Centrifuges  We have begun computational analysis of the balancing scenarios for mud centrifuges. A decanting centrifuge uses centrifugal force to separate solid materials from liquids that are mixed together in slurry, for example in oil and gas applications, or in wastewater and chemical treatment plants. Because any imbalance in the system can cause severe vibrations, centrifuge manufacturers have to balance the bowl and auger, which is an expensive and time-consuming process. Conventional static balancing prior to operation does not address imbalances that occur when solid particles in the slurry create additional imbalance in the system and increase vibration levels. Our goal is to partner with a centrifuge manufacturer and create a self-balancing centrifuge that will not need to be shut down so often for servicing.


Low-Maintenance Marine Propellers (partially funded in 2012 by application evaluation revenue and license revenue) Ski- and wake- boat owners are familiar with the high cost of propeller maintenance, as unbalanced props lead to destructive, inefficient and uncomfortable vibration affecting the entire drive train. Even well-made propellers inevitably become out-of-balance because of accidental damage, residue buildup, and erosion from the micro-implosive impacts caused by cavitation at high RPMs.  We have developed and are optimizing an after-market, shaft mounted XYO-branded boat prop balancer.


Long Battery Life Electric Trolling Motors  We have experimented with the balancing of electric trolling motors, which depend on smooth operation for optimal battery life. We have developed a design and a manufacturing plan for a propeller with a built-in balancer, that can be sold in outdoor sporting goods outlets to end-users of trolling motors, as well as to trolling motor suppliers as a higher-end propeller option. We have also confirmed the feasibility of incorporating XYO into trolling motors’ electric armatures in order to prevent unbalance issues that are inherent in currently available designs. As a result we are in a position to develop a product line of self-balancing trolling motors that run smoother and have longer battery life than those currently on the market.



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Energy Efficient Domestic Washing Machines  We are creating an innovative, energy-efficient domestic washing machine that utilizes XYO. We have designed and plan to build and test a prototype. After optimizing the design for mass production, we will have to design and produce specialized plastic injection molds for certain components, and source contract manufacturers that can make the molds and produce and supply the washing machines. The machines will have certain features that will rely on programmed electronic components. We will identify and pursue procurement departments within various retail chains to secure orders for washing machines, in order to sell and distribute. We will have to finalize shipping and distribution channels, create an online store for direct sales to consumers of washing machines, and establish warranty and service location(s) and personnel.


Self-Balancing Spin Baskets for Domestic Washing Machines (partially funded in 2011 by application evaluation revenue) Our prototype testing has established that XYO balancing is highly effective at reducing vibration in washing machines, when built into the spin basket assembly. Reduced vibration in washing machines means lower power consumption and higher RPMs, hence faster and more effective water extraction. We have investigated the washing machine parts manufacturing industry and are presently searching for joint venture partners capable of collaborating with us to certify, manufacture and market our designs. Washing machine manufacturers often source their spin basket components from such specialized manufacturers, and our XYO-balanced spin baskets can be designed as a value-added alternative, in form factors suitable for incorporation into washing machine manufacturers’ existing models.


Energy-Efficient High Performance Automotive Parts Perpetual has made a number of inroads to develop the energy-efficient high performance automotive parts segment. On July 30, 2011, Motor Sport Country Club Holdings, Inc. (OTCQB:VIIN) entered into a worldwide exclusive master license agreement with us in which they received rights with respect to the marketing, use, distribution and sublicense of products utilizing XYO in the automotive industry, and the right to use the XYO Racing Brand. Our role has been to assist Motor Sport with marketing support, including website development/maintenance and promotional materials; and engineering support, including mass production sourcing and design of XYO balancers for use within the automotive industry. We launched and are expanding our high-performance automotive website, www.xyoracing.com, which includes an online store that features a number of aftermarket XYO balancers. In 2011 we exhibited at the Specialty Equipment Market Association (SEMA) trade show in Las Vegas and at the Bonneville Salt Flats Speed Week, where we were represented by motorcycle and race car driver Carl Dilley, who set a world land speed record there. See further discussion of Motor Sport in the annual and first quarter Management’s Discussion and Analysis sections below.


Self-Balancing Truck Wheels Unbalanced wheels cause pronounced vibration and even “hopping” in trucks, which is hard on drivers and cargo, and creates mechanical inefficiencies and fatigue in the drive train. Tire wear, buildup, rim damage, and manufacturing imperfections are some of the inevitable causes. Balancing by affixing weights to the wheel rim is labor intensive and does not address the constantly changing location and degree of unbalance. With XYO we believe it is possible to automatically and continuously balance the wheel during the life of the wheel, reducing the need for servicing. Our goal is to develop XYO balancer implementations either into the wheel rim itself, or as add-on accessories to conventional wheel rims.


Clutch Fans for Heavy Duty Diesel Trucks  A clutch fan is mounted at the front of the engine and forces air through the radiator when the engine requires additional cooling. Debris coming through the front grill can cause buildup or pockmarks on blades of the fan, creating unbalance that results in harmful vibration that is transmitted into the rest of the engine. Furthermore, when the fan is engaged, it robs power from the drive train. For all of these reasons, the fan needs to be kept balanced and efficient. The conventional solution is to affix weights to the blades opposite “heavy” spots, which is labor intensive. Our prototype testing has demonstrated that XYO can accomplish the same thing, plus continually and automatically adjust itself while the engine is operating, throughout the life of the fan. Our goal is to optimize and market clutch fan balancers as add-on parts, and/or have them manufactured directly into the clutch fan hubs.


Drive Shafts for Long Haul Buses and Trucks The function of a drive shaft is to transmit torque and rotation from the engine to the wheels. A primary cause of vibration in drive shafts is mass imbalance due to manufacturing tolerances, material defects, and uneven welding, as well as to buildup, erosion and wear while on the road. Vibration represents wasted energy, and therefore a well-balanced, low-vibration drive shaft translates to better power transmission, quieter operation, better fuel efficiency, and less wear and tear on the drive shaft and adjoining parts. Our testing has demonstrated that incorporating XYO technology into draft shafts can reduce the need for costly precision in some conventional stages of the drive shaft’s manufacture, while resulting in a better-balanced, self re-balancing, end product that requires less servicing over time. We are looking for capable, innovative manufacturers to work with to optimize and implement XYO balancing into existing or new product designs.



38




Sources and Availability of Raw Materials


Because we will be working with established manufacturers to make products that are relatively commonplace except for the addition of our innovative XYO technology, there are no concerns about the sources and availability of raw materials. XYO balancers themselves can be made of materials that are abundantly available.


Dependence on One or a Few Major Customers


We do not intend to be dependent on one or a few major customers in the long term, however in the early stages of our manufacturing and sales activity, this may be the case.


Intellectual Property


We are investigating the potential to expand the catalog of patents and know-how that we have generated, acquired, or obtained the rights to, including the pursuit of patents for innovative features emerging in our product designs.


ETI License Agreement


XYO is a patented technology that we have licensed from ETI Technologies Inc. on an exclusive worldwide basis. The term of the License Agreement is from January 27, 2005 to the end of the life of the last existing XYO patent defined in the agreement, which is currently projected to be September 1, 2019. Future patent applications regarding the XYO technology will be pursued in order to extend the patent protection component of this agreement and extend the term of the original agreement if possible. The territory of the Agreement is worldwide, and we have the right to manufacture or have manufactured, sell, and use, the products incorporating XYO (that is, XYO balancers and machines that use them), as well as to sub-license these rights to third parties. In consideration of the rights granted by this Agreement, Perpetual shall pay to ETI non-refundable royalties and annual license fees.


Royalties are calculated each January 31, equal to the greater of: a royalty of 2.5% on any revenue in the foregoing twelve months that Perpetual derived from the use, manufacture, sale, or sub-licensing of XYO or Products incorporating XYO during the Term of the Agreement; or minimum annual royalties due each January 31, escalating from zero to $125,000 in the Initial Five-Year Period Feb 2006 to Jan 2011, and subsequently $75,000 annually until the end of the term. Royalties shall be subject to 6% annual interest compounded quarterly, on outstanding balances after January 31, 2010.


Annual license fees are due each January 31, escalating from $25,000 to $90,000 from Jan 2005 to Jan 2010, and from $50,000 to $90,000 from Jan 2011 to Jan 2015, with no subsequent annual license fees.  Annual license fees shall be subject to 6% annual interest compounded quarterly.


The License Agreement was modified by an Amendment and Waiver of Default effective July 31, 2010, in which ETI waived any rights to terminate the Agreement in the event of non-payment by Perpetual. The Amendment and Waiver of Default stated that the outstanding balance on July 31, 2010, net of payments to ETI and net of patent fees paid on behalf of ETI, was recognized to be comprised of:


Royalty fees (cumulative as of 7/31/10)

$

150,000

Royalty fee interest (cumulative as of 7/31/10)

$

4,058

Licensing fees (cumulative as of 7/31/10)

$

185,174

Licensing fee interest (cumulative as of 7/31/10)

$

43,835


It stated that the accumulating interest would be sufficient consideration for any growing balance resulting from Perpetual’s non-payment. In order to protect the rights of potential sub-licensees, and with the intent of preventing sub-licensee claims against Perpetual in the event of termination for any other material breach, it further stated that in the event of termination of the Agreement, ETI agrees to grandfather any and all agreements entered into by PI with respect to the manufacture or sublicense of XYO. All such agreements would be assigned to ETI as the licensor, and all terms and conditions would remain in effect and be completely honored by ETI.



39




Either Party may terminate this Agreement in the event that the other Party breaches a material condition other than non-payment by Perpetual, provided that the first Party gives written notice to the second Party of the breach. The second Party shall have thirty (30) days from receipt of such notice to correct the breach. In the event the breach is not remedied within this period, the first Party may, in its sole discretion, terminate this Agreement within a reasonable time after the expiry of the thirty (30) day period.


Regulatory Environment


The company deals with government approvals, regulations, and environmental laws primarily by having a business model in which it is our contract manufacturers and our sublicensed customers who are ultimately responsible for their facilities’ and products’ compliance in the regions and markets of their expertise.


Research and Development


Our know-how regarding the design principles, production, and implementation of XYO balancing solutions is the result of many years of fundamental R&D. In the early years we carried out R&D work to refine our core know-how and other intellectual property, and optimized the implementation of XYO in certain applications. Some of these results are available to the public at our technical website, www.xyobalancer.com.


We developed relationships with arm’s length engineering support firms such as Beaver Parts Ltd., with which we have an ongoing relationship in which they are Authorized XYO Specialists. Such relationships enable us to easily carry out prototyping, design and comparative testing, and to give accurate quotes on materials, assembly and manufacturing.


Each implementation of the XYO technology requires its own intensive prototype testing phase. However, the cost of these projects is typically borne in large part by customers who hope to obtain a sublicense for the technology, and we have not incurred substantial R&D costs during the last two fiscal years or the current year-to-date.


Our Employees


We have two employees, both full-time. We outsource on an as-needed basis in order to have better control over our costs and commitments. For example, we presently utilize three individuals, including highly qualified engineers, on a full time, third party basis in activities such as prototype evaluation projects, manufacturing planning, and technical marketing support.


Board of Advisors


Emerging companies with limited resources must develop creative external support structures. With this in mind we have assembled a Board of Advisors, a formal network of people outside the Company who can help it the most. In addition to being an effective and diverse source of advice, ideas and opinions, the Board of Advisors can help set policy, serve as mentors, and assist with a variety of critical activities from time to time. The Board of Advisors provides advice, recommendations and guidance to the Company’s Board of Directors and management team, aiding in the establishment, growth, and profitability of the Company. The current members bring a variety of perspectives, such as business experience in various industries, finance industry expertise, advanced engineering knowledge in our field, international connections in regions of interest to us, and involvement in high performance motor sports.


Going Concern Qualification


Our lack of meaningful operating revenues to date, i.e. the fact that we are in the development stage, raises substantial doubt about our ability to continue as a going concern and our auditor has so indicated in our financial statements.


Reason for Going Public


We commenced actions to become a public company in the U.S. to increase our presence and profile in the U.S. and elsewhere in the world by being a U.S. public company, an essential part of our business plan, and in that connection, we located SEC counsel, travelled to the U.S. to meet U.S. counsel and begin the process of drafting our registration statement, located accountants and auditors for the Company, and secured audited financial statements necessary for the filing of the registration statement.



40




We believe that by becoming a public company we can increase our visibility and prestige and thus grow our business faster than as a private company.


As of July 31, 2012 (audited) and October 31, 2012 (unaudited), we had approximately $220,000 and $149,000, respectively, in cash in the bank. We anticipate that we will incur certain costs irrespective of our operational and business development activities, including bank service fees and those costs associated with SEC requirements associated with going and staying public, estimated to be approximately $100,000 in connection with this registration statement and thereafter $125,000 annually. We anticipate that we would incur approximately $900,000 in operational expenses during the next 12 months if we continue to implement our business plan at its current level, comprised of expenses related to continuing to conduct and participate in similar events and operational activities at the same rate as currently. As we estimate our total need for funds for operations at our current level, including all expense of going and staying public and continuing operations at their current level in the next 12 months is within $1,000,000, we accordingly anticipate an average monthly burn rate of approximately $85,000 during the next 12 months to maintain operations at their current levels as well as pay costs associated with going and staying public. We do not believe that our current cash resources plus anticipated revenues during the next 12 months will be sufficient to meet these requirements.


During the next 12 months, we anticipate engaging in the following activities to support the implementation of our business plan. We may vary our plans depending upon operational conditions and available funding:


SUPPLEMENTAL ACTIONS

 

COST

Securing of potential joint venture partners/investors for manufacturing and distribution in various industries, including international travel, marketing, due diligence, etc.

 

$

600,000

Provision of engineering and marketing support to industry joint ventures

 

$

1,000,000

Management, administration, insurance, and other overhead costs associated with the above

 

$

600,000

Public company governance and compliance costs associated with the above

 

$

200,000

Intellectual property augmentation: acquisition of additional IP, expansion of XYO patents, development of non-XYO patents, and IP enforcement

 

$

600,000

TOTAL

 

$

3,000,000


The primary obstacle to implementing this plan will be the lack of operating capital until the prospective joint ventures are able to return revenue to Perpetual in the form of sub-license fees, royalty fees, and other fees.


We estimate that we will need up to an additional $3,000,000 to support the implementation of our business plan at the level described in the table above. If we do not generate sufficient cash flow from operations in excess of the amount necessary to maintain operations at their current levels as well as pay costs associated with going and staying public, we may have to raise additional capital to finance activities desired to support the implementation of our business plan. Any such financing could be difficult to obtain or only available on unattractive terms and could result in significant dilution of stockholders’ interests. Failure to secure any necessary financing in a timely manner and on favorable terms could hinder or delay our desired activities to support the implementation of our business plan. Except as set forth above, we do not have any plans or specific agreements for new sources of funding or any planned material acquisitions.


MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE YEARS ENDED JULY 31, 2012 AND 2011, AND THE PERIOD JANUARY 25, 2005 (INCEPTION) TO JULY 31, 2012 (AUDITED)


Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national, and local general economic and market conditions; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; change in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; the risk of foreign currency exchange rate; and other risks that might be detailed from time to time in our filing with the Securities and Exchange Commission.



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Although the forward-looking statements in this Registration Statement reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.


Overview


Perpetual Industries Inc., or the “Company” is a Nevada corporation formed on January 25, 2005 with a principal business address at #110, 5 - 8720 Macleod Trail South, Calgary, Alberta, Canada T2H 0M4.  Telephone: 403-214-4321.


Business


We are a development stage company. Our business is the research and development of new and innovative energy efficient products. Our key technology is a mechanical patented balancing device called XYO. We design, prototype, test, and manufacture or have manufactured products containing XYO technology, and sub-license XYO technology to third parties. XYO technology is used for balancing rotating parts in machines so that they produce less vibration, resulting in a machine that operates in a more energy efficient manner.


XYO is a patented technology that we have licensed from ETI Technologies Inc. on an exclusive worldwide basis. The term of the License Agreement is from January 27, 2005 to the end of the life of the last existing XYO patent defined in the agreement, which is currently projected to be September 1, 2019. Future patent applications regarding the XYO technology will be pursued in order to extend the patent protection component of this agreement and extend the term of the original agreement if possible. The territory of the Agreement is worldwide, and we have the right to manufacture or have manufactured, sell, and use, the products incorporating XYO (that is, XYO balancers and machines that use them), as well as to sub-license these rights to third parties.


Revenue Generation


Revenue is generated from agent fees, prototype evaluation projects, licensing and royalties, and sale of finished goods.


The process of revenue generation involves market research and interaction with potential customer companies to understand their industries and the specific vibration-related technical issues involved with the machines they manufacture. With interested customers, we enter into a prototype evaluation contract in which we provide baseline testing, XYO balancer design, fabrication and installation, comparative testing, and a feasibility report. If results are acceptable, we may attempt to negotiate a sub-licensing and royalty agreement with the customer. The wide range of our prototyping experience has equipped us to begin the process of designing and manufacturing XYO balancers ourselves, and supplying them to customers instead of the customers handling the manufacturing themselves.


Since our inception, we have executed or prepared to execute the following types of activities which have already resulted in our generating $130,401 in revenue from inception through July 31, 2012, and total deferred revenue of $106,322 as well as $20,473 of accounts receivable as at July 31, 2012:


·

design, production and sale of XYO branded balancers


·

design, production and sale of XYO branded products optimized around XYO balancers


·

prototype evaluation projects and commercialization of XYO implementations through other parties on a sub-license and royalty fee basis



42




Off Balance Sheet Arrangements


We do not have any 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, revenue or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.


Critical Accounting Policies and Estimates


Our Financial Statements have been prepared in accordance with US GAAP and fairly present our financial position and results of operations. We believe the following accounting policies are critical to an understanding of our financial statements. The application of these policies requires management’s judgment and estimates in areas that are inherently uncertain.


Loan Receivable


Loan receivable is stated at the unpaid principal balance, less an allowance for loan losses. Interest income generally is not recognized on impaired loans unless the likelihood of further loss is remote. The Company records an allowance for loan losses to allow for any amounts that may not be recoverable, which is based on the Company’s evaluation of the collectability of the loan including current economic conditions and adverse situations that may affect the borrower’s ability to repay.  An allowance for uncollectible interest is established by a charge to interest income. Based on management’s review of loan and interest receivable, an allowance for loan and interest losses was considered necessary at July 31, 2010 for $809,245. The carrying balance of the loan receivable net of allowance was zero at July 31, 2012 and 2011.


Fair Value of Derivative Financial Instruments


The Company’s derivative financial instruments consist of warrants, which are recorded in the accompanying balance sheets at fair value. Fair value is estimated using the Black-Scholes option valuation technique, utilizing  observable inputs including the exercise price of the warrants, the treasury yield curve, the Company’s common stock price and the expected volatility, which is based on the average volatilities of five similar public entities.  Option-based techniques are highly volatile and sensitive to changes in the Company’s trading market price and the trading market price of various peer companies, which historically have high volatility. Gains or losses resulting from changes in the fair value of derivative financial instruments are included in derivative income (expense) in the accompanying statements of operations.


Income Taxes


On January 1, 2007, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 740-10, “Uncertainty in Income Taxes” (“ASC Topic 740-10”). The Company has not recognized a liability as a result of the implementation of ASC Topic 740-10. A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there are no unrecognized benefits at July 31, 2012 or 2011 and since the date of adoption. The Company has not recognized interest expense or penalties as a result of the implementation of ASC Topic 740-10. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to the unrecognized tax benefit in interest expense and penalties in operating expenses. The Company is subject to examination by the Internal Revenue Service and state tax authorities for all tax years since Inception.


The Company has not filed any U.S. or Canadian income or other tax returns. Had the returns been filed there would be taxable losses and tax losses available to offset future taxable income. The Company has not determined the amount of the potential benefits for these tax losses, because at this time it is more likely than not that the benefits will not be realized.


Revenue Recognition


The Company recognizes revenue when all of the following conditions are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, there is a fixed or determinable sales price, and collectability is reasonably assured. Deferred revenue arises from amounts received from potential and actual licensees prior to services being provided and is being amortized to income as it is earned. Certain of these revenues are categorized as noncurrent due to the length of the contract.



43




Loss Per Share


Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the periods presented. Diluted loss per share is computed by dividing net loss by the weighted average common shares and potentially dilutive common share equivalents. The effects of potential common stock equivalents are not included in computations when their effect is anti-dilutive. Because of the net losses for all periods presented, the basic and diluted weighted average shares outstanding are the same since including the additional shares would have an anti-dilutive effect on the loss per share calculations. Common stock warrants to purchase 13,951,500, 11,862,500 and 13,951,500 shares of common stock were not included in the computation of diluted weighted average common shares outstanding for the periods ended July 31, 2012 and 2011 and the period January 25, 2005 (Inception) through July 31, 2012, respectively.


Stock


The Company issues shares of its common stock in tranches once the Board of Directors accepts the tranche of stock subscribers. As of July 31, 2012 and 2011, the Company had received cash for common stock payable in the amounts of $638,400 and $596,700 for stock subscriptions of 2,128,000 and 1,989,000 shares respectively, which were satisfied via stock issuance subsequent to the respective year-ends.


Impact of Recently Issued Accounting Standards


Other than as listed below, we do not believe that any accounting pronouncements recently issued by the FASB, the AICPA, and the SEC, but not yet effective, would if adopted have a material effect on our present or future financial statements.


ASU 2011-04 Fair Value Measurement


In May 2011, the FASB issued the FASB Accounting Standards Update No. 2011-04 “Fair Value Measurement” (“ASU 2011-04”). This amendment and guidance are the result of the work by the FASB and the IASB to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and International Financial Reporting Standards (IFRSs).


This update does not modify the requirements for when fair value measurements apply; rather, they generally represent clarifications on how to measure and disclose fair value under ASC 820, Fair Value Measurement, including the following revisions:


·

An entity that holds a group of financial assets and financial liabilities whose market risk (that is, interest rate risk, currency risk, or other price risk) and credit risk are managed on the basis of the entity’s net risk exposure may apply an exception to the fair value requirements in ASC 820 if certain criteria are met. The exception allows such financial instruments to be measured on the basis of the reporting entity’s net, rather than gross, exposure to those risks.


·

In the absence of a Level 1 input, a reporting entity should apply premiums or discounts when market participants would do so when pricing the asset or liability consistent with the unit of account.


·

Additional disclosures about fair value measurements.


The amendments in this Update are to be applied prospectively and are effective for a public entity during interim and annual periods beginning after December 15, 2011.



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ASU 2011-05 Comprehensive Income


In June 2011, the FASB issued the FASB Accounting Standards Update No. 2011-05 “Comprehensive Income” (“ASU 2011-05”), which was the result of a joint project with the IASB and amends the guidance in ASC 220, Comprehensive Income, by eliminating the option to present components of other comprehensive income (OCI) in the statement of stockholders’ equity. Instead, the new guidance now gives entities the option to present all non-owner changes in stockholders’ equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements. Regardless of whether an entity chooses to present comprehensive income in a single continuous statement or in two separate but consecutive statements, the amendments require entities to present all reclassification adjustments from OCI to net income on the face of the statement of comprehensive income.


The amendments in this Update should be applied retrospectively and are effective for a public entity for fiscal years, and interim periods within those years, beginning after December 15, 2011.


Emerging Growth Company


We are an emerging growth company under the JOBS Act. We shall continue to be deemed an emerging growth company until the earliest of:


(a)

the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more;


(b)

the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective IPO registration statement;


(c)

the date on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in nonconvertible debt; or


(d)

the date on which such issuer is deemed to be a ‘large accelerated filer’, as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto.’.


As an emerging growth company we are exempt from Section 404(b) of Sarbanes Oxley. Section 404(a) requires Issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures. Section 404(b) requires that the registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting. As an emerging growth company we are also exempt from Section 14A (a) and (b) of the Securities Exchange Act of 1934 which require the shareholder approval of executive compensation and golden parachutes. These exemptions are also available to us as a Smaller Reporting Company.


We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.



45




Results of Operations


Revenue


We obtain revenue in several ways: agent fees, application evaluation contracts, licensing, royalties from licensees, and the sale of our own products. For the period from January 25, 2005 (date of inception) to July 31, 2012, we had $130,401 in revenues. Of this, $105,401 was derived from application evaluation contracts and the remainder from agency fees. At July 31, 2012, we had deferred revenues of $106,322, consisting of $31,322 in deferred application evaluation fees, $45,000 in deferred licensing fees, and $30,000 in prepayment of XYO balancers.


Expenses


Our expenses for the year ended July 31, 2012, the year ended July 31, 2011 and cumulative since inception are shown in the table below. Advertising and Marketing expense rose by 79.2% in 2012 when compared to 2011 as a result of having several prototype products designed and built, to be used in selling and marketing activities. Wages declined by 31.7% in 2012 when compared to 2011 as a result of reductions in headcount and salary reductions for management. Travel expense declined by 32.8% as a result of changing patterns of travel. License and Royalty fees declined in 2012 when compared to 2011, from $170,000 to $130,000. The decrease is due to the variable annual amounts payable under the ETI agreement. For the upcoming year, we plan to keep operating expenses around the same level as 2012. However, we expect professional fees to increase substantially due to compliance and governance costs related to applying to become a public company.


 

YE July 31, 2012

YE July 31, 2011

January 26, 2005 (Inception) to July 31, 2012

Advertising and Marketing

$

312,560

$

174,380

$

793,710

Travel

$

69,099

$

102,922

$

438,934

Wages

$

220,807

$

323,347

$

1,921,188

License and Royalty Fees

$

130,000

$

170,000

$

780,000

Other

$

182,373

$

263,898

$

1,092,159

Total Expenses

$

914,839

$

1,034,547

$

5,025,991


Income and Operation Taxes


The Company has not filed U.S. or Canadian income tax returns since its inception, as it has incurred continual losses since that time. The Company has not recognized any tax benefits for the years presented as it is more likely than not that the tax benefits will not be realized..


Net Loss


We incurred a net loss of ($257,448) for the year ended July 31, 2012, and a net loss of ($1,120,435) for the year ended July 31, 2011.



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Other Significant Items


On July 30, 2011 we entered into a Master License Agreement with Motor Sport Country Club, a public company, for certain exclusive rights in the automotive industry. This deal had the potential to be a significant licensing event. It was conceived as a $2.5 million license with royalties to follow, and we also invoiced them over $100,000 for a variety of services in 2012, to prepare and support the XYO Racing brand and to support the master license relationship. Unfortunately, they did not execute their operations successfully, and under our revenue recognition policy, which considers factors such as the inactivity of their stock and the unlikelihood of collection from them judging from their public filings, our financial statements do not recognize any of the transactions in that relationship. We did, however, receive a non-refundable payment from them in the form of 10 million shares, which we value at zero and which make us an approximately one-third owner. This share ownership may carry with it certain obligations with regard to Motor Sport’s governance and compliance, and there may be certain business opportunities to pursue in relation to that company’s future. During the year ended July 31, 2012, Motor Sport notified the Company that it disputed certain invoices for work performed by the Company during the year. Motor Sport indicated their opinion that the Company was in breach of contract for not obtaining sufficient pre-approval for the invoices, and stated that they may terminate the license if the invoices were not withdrawn. The Company is of the opinion that Motor Sport has no basis for a suit against the Company. Due to the inherent uncertainties in matters of this type, the Company cannot give a probability of an unfavorable outcome or a range of loss, and no accrual has been made to reflect any such risk. We plan to investigate the foregoing matters with the assistance of our legal counsel.


In July 2011, March 2012, and July 2012, we entered into prototype evaluation agreements with three potential licensees, all paid in full. Under this type of agreement, the Company provides baseline testing, XYO balancer design, fabrication and installation, comparative testing, and a feasibility report. In conjunction with one of the evaluation projects, we also entered into an exclusive North American sublicense agreement involving pre-purchase of XYO balancers and an upfront license fee for the exclusive right to manufacture or have manufactured, sell, use, and sublicense a type of marine propeller, or balancer thereof, incorporating XYO.


Commitments and Contingencies


The table below lists our future contractual obligations for License and Royalty fees, Office Rent, Accrued Wages and Derivative Liability. The Derivative Liability arises from share purchase warrants that were issued as part of common share issuances for cash. These are detailed in the footnotes to the financial statements.


 

Payments due by period

Contractual Obligations

Total

Less than 1 year (up to July 31, 2013)

1-3 years (up to July 31, 2015)

3-5 years (up to July 31, 2017)

More than 5 years

License and Royalty Fees (through 2019, subject to increase based on revenue)

$

795,000

$

140,000

$

310,000

$

195,000

$

150,000

Office Rent (through March 2015)

$

96,000

$

36,000

$

60,000

-

-

Accrued Wages

$

151,000

-

$

151,000

-

-

Derivative Liability (total as at July 31, 2012; subsequent years not calculated at this time)

$

587,531

$

587,531

-

-

-

Total

$

1,629,531

$

763,531

$

521,000

$

195,000

$

150,000


Liquidity and Capital Resources


We have executed or prepared to execute the types of activities described in “Revenue Recognition” above which have already resulted in our generating $130,401 of revenue from inception through July 31, 2012, and total deferred revenue of $106,322 as well as $20,473 of accounts receivable as at July 31, 2012.



47




As of July 31, 2012, we had approximately $220,000 in cash in the bank. We anticipate that we will incur certain costs irrespective of our operational and business development activities, including bank service fees and those costs associated with SEC requirements associated with going and staying public, estimated to be approximately $100,000 in connection with this registration statement and thereafter $125,000 annually. We anticipate that we would incur approximately $900,000 in operational expenses during the next 12 months if we continue to implement our business plan at its current level, comprised of expenses related to continuing to conduct and participate in similar events and operational activities at the same rate as currently. As we estimate our total need for funds for operations at our current level, including all expense of going and staying public and continuing operations at their current level in the next 12 months is within $1,000,000, we accordingly anticipate an average monthly burn rate of approximately $85,000 during the next 12 months to maintain operations at their current levels as well as pay costs associated with going and staying public. We do not believe that our current cash resources plus anticipated revenues during the next 12 months will be sufficient to meet these requirements.


During the next 12 months, we anticipate engaging in the following activities to support the implementation of our business plan. We may vary our plans depending upon operational conditions and available funding:


SUPPLEMENTAL ACTIONS

 

COST

Securing of potential joint venture partners/investors for manufacturing and distribution in various industries, including international travel, marketing, due diligence, etc.

 

$

600,000

Provision of engineering and marketing support to industry joint ventures

 

$

1,000,000

Management, administration, insurance, and other overhead costs associated with the above

 

$

600,000

Public company governance and compliance costs associated with the above

 

$

200,000

Intellectual property augmentation: acquisition of additional IP, expansion of XYO patents, development of non-XYO patents, and IP enforcement

 

$

600,000

TOTAL

 

$

3,000,000


The primary obstacle to implementing this plan will be the lack of operating capital until the prospective joint ventures are able to return revenue to Perpetual in the form of sub-license fees, royalty fees, and other fees.


We estimate that we will need up to an additional $3,000,000 to support the implementation of our business plan at the level described in the table above. If we do not generate sufficient cash flow from operations in excess of the amount necessary to maintain operations at their current levels as well as pay costs associated with going and staying public, we may have to raise additional capital to finance activities desired to support the implementation of our business plan. Any such financing could be difficult to obtain or only available on unattractive terms and could result in significant dilution of stockholders’ interests. Failure to secure any necessary financing in a timely manner and on favorable terms could hinder our delay our desired activities to support the implementation of our business plan. Except as set forth above, we do not have any plans or specific agreements for new sources of funding or any planned material acquisitions.


Our auditor has indicated in its report that the fact that we are in the development stage raises substantial doubt about our ability to continue as a going concern. The financial statements do not include adjustments that might result from the outcome of this uncertainty and if we are unable to generate significant revenue or secure financing we may be required to cease or curtail our operations.



48




MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 2012 AND 2011, AND THE PERIOD JANUARY 25, 2005 (INCEPTION) TO OCTOBER 31, 2012 (UNAUDITED)


Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national, and local general economic and market conditions; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; change in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; the risk of foreign currency exchange rate; and other risks that might be detailed from time to time in our filing with the Securities and Exchange Commission.


Although the forward-looking statements in this Registration Statement reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.


Overview


Perpetual Industries Inc., or the “Company” is a Nevada corporation formed on January 25, 2005 with a principal business address at #110, 5 - 8720 Macleod Trail South, Calgary, Alberta, Canada T2H 0M4.  Telephone: 403-214-4321.


Business


We are a development stage company. Our business is the research and development of new and innovative energy efficient products. Our key technology is a mechanical patented balancing device called XYO. We design, prototype, test, and manufacture or have manufactured products containing XYO technology, and sub-license XYO technology to third parties. XYO technology is used for balancing rotating parts in machines so that they produce less vibration, resulting in a machine that operates in a more energy efficient manner.


XYO is a patented technology that we have licensed from ETI Technologies Inc. on an exclusive worldwide basis. The term of the License Agreement is from January 27, 2005 to the end of the life of the last existing XYO patent defined in the agreement, which is currently projected to be September 1, 2019. Future patent applications regarding the XYO technology will be pursued in order to extend the patent protection component of this agreement and extend the term of the original agreement if possible. The territory of the Agreement is worldwide, and we have the right to manufacture or have manufactured, sell, and use, the products incorporating XYO (that is, XYO balancers and machines that use them), as well as to sub-license these rights to third parties.



49




Revenue Generation


Revenue is generated from agent fees, prototype evaluation projects, licensing and royalties, and sale of finished goods.


The process of revenue generation involves market research and interaction with potential customer companies to understand their industries and the specific vibration-related technical issues involved with the machines they manufacture. With interested customers, we enter into a prototype evaluation contract in which we provide baseline testing, XYO balancer design, fabrication and installation, comparative testing, and a feasibility report. If results are acceptable, we may attempt to negotiate a sub-licensing and royalty agreement with the customer.


The wide range of our prototyping experience has equipped us to begin the process of designing and manufacturing XYO balancers ourselves, and supplying them to customers instead of the customers handling the manufacturing themselves.


Since our inception, we have executed or prepared to execute the following types of activities which have already resulted in our generating $151,504 in revenue from inception through October 31, 2012, and total deferred revenue of $85,219 as at October 31, 2012:


·

design, production and sale of XYO branded balancers


·

design, production and sale of XYO branded products optimized around XYO balancers


·

prototype evaluation projects and commercialization of XYO implementations through other parties on a sub-license and royalty fee basis


Off Balance Sheet Arrangements


We do not have any 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, revenue or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.


Other Critical Accounting Policies and Estimates


Our Financial Statements have been prepared in accordance with US GAAP and fairly present our financial position and results of operations. We believe the following accounting policies are critical to an understanding of our financial statements. The application of these policies requires management’s judgment and estimates in areas that are inherently uncertain.


Loan Receivable


Loan receivable is stated at the unpaid principal balance, less an allowance for loan losses. Interest income generally is not recognized on impaired loans unless the likelihood of further loss is remote. The Company records an allowance for loan losses to allow for any amounts that may not be recoverable, which is based on the Company’s evaluation of the collectability of the loan including current economic conditions and adverse situations that may affect the borrower’s ability to repay.  An allowance for uncollectible interest is established by a charge to interest income. Based on management’s review of loan and interest receivable, an allowance for loan and interest losses was considered necessary at July 31, 2010 for $809,245. The carrying balance of the loan receivable net of allowance was zero at October 31, 2012 and July 31, 2012.


Fair Value of Derivative Financial Instruments


The Company’s derivative financial instruments consist of warrants, which are recorded in the accompanying balance sheets at fair value. Fair value is estimated using the Black-Scholes option valuation technique, utilizing  observable inputs including the exercise price of the warrants, the treasury yield curve, the Company’s common stock price and the expected volatility, which is based on the average volatilities of five similar public entities.  Option-based techniques are highly volatile and sensitive to changes in the Company’s trading market price and the trading market price of various peer companies, which historically have high volatility. Gains or losses resulting from changes in the fair value of derivative financial instruments are included in derivative income (expense) in the accompanying statements of operations.



50




Income Taxes


On January 1, 2007, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 740-10, “Uncertainty in Income Taxes” (“ASC Topic 740-10”). The Company has not recognized a liability as a result of the implementation of ASC Topic 740-10. A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there are no unrecognized benefits at October 31, 2012 or July 31, 2012 and since the date of adoption. The Company has not recognized interest expense or penalties as a result of the implementation of ASC Topic 740-10. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to the unrecognized tax benefit in interest expense and penalties in operating expenses. The Company is subject to examination by the Internal Revenue Service and state tax authorities for all tax years since Inception.


The Company has not filed any U.S. or Canadian income or other tax returns. Had the returns been filed there would be taxable losses and tax losses available to offset future taxable income. The Company has not determined the amount of the potential benefits for these tax losses, because at this time it is more likely than not that the benefits will not be realized.


Revenue Recognition


The Company recognizes revenue when all of the following conditions are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, there is a fixed or determinable sales price, and collectability is reasonably assured. Deferred revenue arises from amounts received from potential and actual licensees prior to services being provided and is being amortized to income as it is earned. Certain of these revenues are categorized as noncurrent due to the length of the contract.


Loss Per Share


Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the periods presented. Diluted loss per share is computed by dividing net loss by the weighted average common shares and potentially dilutive common share equivalents. The effects of potential common stock equivalents are not included in computations when their effect is anti-dilutive. Because of the net losses for all periods presented, the basic and diluted weighted average shares outstanding are the same since including the additional shares would have an anti-dilutive effect on the loss per share calculations. Common stock warrants to purchase 13,931,500, 11,862,500 and 13,931,500 shares of common stock were not included in the computation of diluted weighted average common shares outstanding for the periods ended October 31, 2012 and 2011 and the period January 25, 2005 (Inception) through October 31, 2012, respectively.


Stock


The Company issues shares of its common stock in tranches once the Board of Directors accepts the tranche of stock subscribers. As of October 31, 2012 and 2011, the Company had received cash for common stock payable in the amounts of $848,400 and $49,900 for stock subscriptions of 2,828,000 and 166,333 shares respectively, which were satisfied via stock issuance subsequent to the respective period-ends.


Impact of Recently Issued Accounting Standards


Other than as listed below, we do not believe that any accounting pronouncements recently issued by the FASB, the AICPA, and the SEC, but not yet effective, would if adopted have a material effect on our present or future financial statements.


ASU 2011-04 Fair Value Measurement


In May 2011, the FASB issued the FASB Accounting Standards Update No. 2011-04 “Fair Value Measurement” (“ASU 2011-04”). This amendment and guidance are the result of the work by the FASB and the IASB to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and International Financial Reporting Standards (IFRSs).



51




This update does not modify the requirements for when fair value measurements apply; rather, they generally represent clarifications on how to measure and disclose fair value under ASC 820, Fair Value Measurement, including the following revisions:


·

An entity that holds a group of financial assets and financial liabilities whose market risk (that is, interest rate risk, currency risk, or other price risk) and credit risk are managed on the basis of the entity’s net risk exposure may apply an exception to the fair value requirements in ASC 820 if certain criteria are met. The exception allows such financial instruments to be measured on the basis of the reporting entity’s net, rather than gross, exposure to those risks.


·

In the absence of a Level 1 input, a reporting entity should apply premiums or discounts when market participants would do so when pricing the asset or liability consistent with the unit of account.


·

Additional disclosures about fair value measurements.


The amendments in this Update are to be applied prospectively and are effective for a public entity during interim and annual periods beginning after December 15, 2011.


ASU 2011-05 Comprehensive Income


In June 2011, the FASB issued the FASB Accounting Standards Update No. 2011-05 “Comprehensive Income” (“ASU 2011-05”), which was the result of a joint project with the IASB and amends the guidance in ASC 220, Comprehensive Income, by eliminating the option to present components of other comprehensive income (OCI) in the statement of stockholders’ equity. Instead, the new guidance now gives entities the option to present all non-owner changes in stockholders’ equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements. Regardless of whether an entity chooses to present comprehensive income in a single continuous statement or in two separate but consecutive statements, the amendments require entities to present all reclassification adjustments from OCI to net income on the face of the statement of comprehensive income.


The amendments in this Update should be applied retrospectively and are effective for a public entity for fiscal years, and interim periods within those years, beginning after December 15, 2011.


Emerging Growth Company


We are an emerging growth company under the JOBS Act. We shall continue to be deemed an emerging growth company until the earliest of:


(a)

the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more;


(b)

the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective IPO registration statement;


(c)

the date on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in nonconvertible debt; or


(d)

the date on which such issuer is deemed to be a ‘large accelerated filer’, as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto.’.


As an emerging growth company we are exempt from Section 404(b) of Sarbanes Oxley. Section 404(a) requires Issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures. Section 404(b) requires that the registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting.



52



As an emerging growth company we are also exempt from Section 14A (a) and (b) of the Securities Exchange Act of 1934 which require the shareholder approval of executive compensation and golden parachutes. These exemptions are also available to us as a Smaller Reporting Company.


We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.


Results of Operations


Revenue


We obtain revenue in several ways: agent fees, application evaluation contracts, licensing, royalties from licensees, and the sale of our own products.


For the three months ended October 31, 2012 we had $21,103 in revenues. Of this, $18,853 was derived from application evaluation contracts and $2,250 from licensing fees. At October 31, 2012, we had deferred revenues of $85,219, consisting of $12,469 in deferred application evaluation fees, $42,750 in deferred licensing fees, and $30,000 in prepayment of XYO balancers.


For the three months ended October 31, 2011 we had $8,925 in revenues from application evaluation contracts. At October 31, 2011, we had deferred revenues of $8,925 in deferred application evaluation fees.


For the period from January 25, 2005 (date of inception) to October 31, 2012 we had $151,504 in revenues. Of this, $124,254 was derived from application evaluation contracts and $25,000 from agency fees.


Expenses


Our expenses for the three months ended October 31, 2012 (Q1 2013) and 2011 (Q1 2012) and cumulative since inception are shown in the table below. Advertising and Marketing expense rose by 19.3% in Q1 2013 when compared to Q1 2012 as a result of having several prototype products designed and built, to be used in selling and marketing activities. Wages declined by 35.7% in Q1 2013 when compared to Q1 2012 as a result of reductions in headcount and salary reductions for management. Travel expense declined by only 3.7% despite changing patterns of travel. License and Royalty fees declined in Q1 2013 when compared to Q1 2012, from $33,750 to $31,250. The decrease is due to the variable annual amounts payable under the ETI agreement.


 

Three Months Ended October 31, 2012 (Q1 2013)

Three Months Ended October 31, 2011 (Q1 2012)

January 26, 2005 (Inception) to October 31, 2012

Advertising and Marketing

$

101,405

$

85,017

$

895,116

Travel

$

21,853

$

22,687

$

460,787

Wages

$

49,692

$

77,316

$

1,970,879

License and Royalty Fees

$

33,750

$

31,250

$

813,750

Other

$

89,131

$

66,095

$

1,181,291

Total Expenses

$

295,831

$

282,365

$

5,321,822


Our expenses for the three months ended October 31, 2012 (Q1 2013) and July 31, 2012 (Q4 2012) and cumulative since inception are shown in the table below. Advertising and Marketing expense rose by 32.7% in Q1 2013 when compared to Q4 2012 as a result of having several prototype products designed and built, to be used in selling and marketing activities. Wages increased by 24.8% in Q1 2013 when compared to Q4 2012 as a result of increased draws by management. Travel expense declined by 6.9% as a result of changing patterns of travel. License and Royalty fees remained steady in Q1 2013 when compared to Q4 2012, at $33,750.



53




 

Three Months Ended October 31, 2012 (Q1 2013)

Three Months Ended July 31, 2012 (Q4 2012)

January 26, 2005 (Inception) to October 31, 2012

Advertising and Marketing

$

101,405

$

76,440

$

895,116

Travel

$

21,853

$

23,474

$

460,787

Wages

$

49,692

$

39,814

$

1,970,879

License and Royalty Fees

$

33,750

$

33,750

$

813,750

Other

$

89,131

$

15,494

$

1,181,291

Total Expenses

$

295,831

$

188,972

$

5,321,822


For the upcoming year, we plan to keep operating expenses around the same level as for the three months ended October 31, 2012. However, we expect professional fees to increase substantially due to compliance and governance costs related to applying to become a public company.


Income and Operation Taxes


The Company has not filed U.S. or Canadian income tax returns since its inception, as it has incurred continual losses since that time. The Company has not recognized any tax benefits for the years presented as it is more likely than not that the tax benefits will not be realized.


Net Loss


We incurred net losses of $42,770 and $80,395 for the three months ended October 31, 2012, and the three months ended October 31, 2011, respectively.


Other Significant Items


On July 30, 2011 we entered into a Master License Agreement with Motor Sport Country Club, a public company, for certain exclusive rights in the automotive industry. This deal had the potential to be a significant licensing event. It was conceived as a $2.5 million license with royalties to follow, and we also invoiced them over $100,000 for a variety of services in 2012, to prepare and support the XYO Racing brand and to support the master license relationship. Unfortunately, they did not execute their operations successfully, and under our revenue recognition policy, which considers factors such as the inactivity of their stock and the unlikelihood of collection from them judging from their public filings, our financial statements do not recognize any of the transactions in that relationship. We did, however, receive a non-refundable payment from them in the form of 10 million shares, which we value at zero and which make us an approximately one-third owner. This share ownership may carry with it certain obligations with regard to Motor Sport’s governance and compliance, and there may be certain business opportunities to pursue in relation to that company’s future. During the year ended July 31, 2012, Motor Sport notified the Company that it disputed certain invoices for work performed by the Company during the year. Motor Sport indicated their opinion that the Company was in breach of contract for not obtaining sufficient pre-approval for the invoices, and stated that they may terminate the license if the invoices were not withdrawn. The Company is of the opinion that Motor Sport has no basis for a suit against the Company. Due to the inherent uncertainties in matters of this type, the Company cannot give a probability of an unfavorable outcome or a range of loss, and no accrual has been made to reflect any such risk. We plan to investigate the foregoing matters with the assistance of our legal counsel.


Commitments and Contingencies


The table below lists our future contractual obligations for License and Royalty fees, Office Rent, Accrued Wages and Derivative Liability. The Derivative Liability arises from share purchase warrants that were issued as part of common share issuances for cash. These are detailed in the footnotes to the financial statements.



54




 

Payments due by period

Contractual Obligations

Total

Less than 1 year (up to July 31, 2013)

1-3 years (up to July 31, 2015)

3-5 years (up to July 31, 2017)

More than 5 years

License and Royalty Fees (through 2019, subject to increase based on revenue)

$

761,250

$

106,250

$

310,000

$

195,000

$

150,000

Office Rent (through March 2015)

$

87,000

$

27,000

$

60,000

-

-

Accrued Wages

$

151,000

-

$

151,000

-

-

Derivative Liability (total as at October 31, 2012; subsequent years not calculated at this time)

$

353,334

$

353,334

-

-

-

Total

$

1,352,584

$

486,584

$

521,000

$

195,000

$

150,000


Liquidity and Capital Resources


We have executed or prepared to execute the types of activities described in “Revenue Recognition” above which have already resulted in our generating $151,504 in revenue from inception through October 31, 2012, and total deferred revenue of $85,219 as at October 31, 2012. For the three months ended October 31, 2012 we had $21,103 in revenues, and at October 31, 2012, we had deferred revenues of $85,219.


As of October 31, 2012, we had approximately $149,000 in cash in the bank. We anticipate that we will incur certain costs irrespective of our operational and business development activities, including bank service fees and those costs associated with SEC requirements associated with going and staying public, estimated to be approximately $100,000 in connection with this registration statement and thereafter $125,000 annually. We anticipate that we would incur approximately $900,000 in operational expenses during the next 12 months if we continue to implement our business plan at its current level, comprised of expenses related to continuing to conduct and participate in similar events and operational activities at the same rate as currently. As we estimate our total need for funds for operations at our current level, including all expense of going and staying public and continuing operations at their current level in the next 12 months is within $1,000,000, we accordingly anticipate an average monthly burn rate of approximately $85,000 during the next 12 months to maintain operations at their current levels as well as pay costs associated with going and staying public. We do not believe that our current cash resources plus anticipated revenues during the next 12 months will be sufficient to meet these requirements.  


During the next 12 months, we anticipate engaging in the following activities to support the implementation of our business plan. We may vary our plans depending upon operational conditions and available funding:


SUPPLEMENTAL ACTIONS

 

COST

Securing of potential joint venture partners/investors for manufacturing and distribution in various industries, including international travel, marketing, due diligence, etc.

 

$

600,000

Provision of engineering and marketing support to industry joint ventures

 

$

1,000,000

Management, administration, insurance, and other overhead costs associated with the above

 

$

600,000

Public company governance and compliance costs associated with the above

 

$

200,000

Intellectual property augmentation: acquisition of additional IP, expansion of XYO patents, development of non-XYO patents, and IP enforcement

 

$

600,000

TOTAL

 

$

3,000,000


The primary obstacle to implementing this plan will be the lack of operating capital until the prospective joint ventures are able to return revenue to Perpetual in the form of sub-license fees, royalty fees, and other fees.



55




We estimate that we will need up to an additional $3,000,000 to support the implementation of our business plan at the level described in the table above. If we do not generate sufficient cash flow from operations in excess of the amount necessary to maintain operations at their current levels as well as pay costs associated with going and staying public, we may have to raise additional capital to finance activities desired to support the implementation of our business plan. Any such financing could be difficult to obtain or only available on unattractive terms and could result in significant dilution of stockholders’ interests. Failure to secure any necessary financing in a timely manner and on favorable terms could hinder our delay our desired activities to support the implementation of our business plan. Except as set forth above, we do not have any plans or specific agreements for new sources of funding or any planned material acquisitions.


Our auditor has indicated in its report that the fact that we are in the development stage raises substantial doubt about our ability to continue as a going concern. The financial statements do not include adjustments that might result from the outcome of this uncertainty and if we are unable to generate significant revenue or secure financing we may be required to cease or curtail our operations.


DESCRIPTION OF PROPERTY


There is a Lease Agreement between Beaver Parts Ltd. (the "Landlord") and Perpetual Industries Inc. (the “Tenant”) effective January 25, 2013 for our offices at 4009 - 4th Street SE, Calgary, Alberta, Canada T2G 2W4.


·

Number of Square Feet: Combined total approx. 3,000 square feet

·

Term of Lease: renewable March 31, 2015

·

Monthly Rental: Canadian $3,000 including utilities and sales tax.


The property is adequate for our current needs. We do not intend to renovate, improve, or develop properties.  We are not subject to competitive conditions for property and currently have no property to insure. We have no policy with respect to investments in real estate or interests in real estate and no policy with respect to investments in real estate mortgages. Further, we have no policy with respect to investments in securities of or interests in persons primarily engaged in real estate activities.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


Wages and Other Expenses


The Company’s president, Brent Bedford, deferred portions of the first three years of compensation due him. The balances due him as of October 31, 2012 and July 31, 2012 for amounts deferred totalled $151,000, at both period-ends. These back wages are unsecured, non-interest bearing and due upon demand. Repayment is not expected until after October 31, 2013, therefore, the Company has recorded these amounts as long-term in the accompanying balance sheets.


During the period January 25, 2005 (Inception) through October 31, 2012, the Company paid certain entities owned by members of management (Brent Bedford, Doug Greig, Jason Cowles, Dean Brawn, James Devitt, and Kevin Slywka) for management services rendered. The amounts for the years ended July 31, 2012 and 2011 and for the period January 25, 2005 (Inception) through July 31, 2012 were approximately $220,000, $277,000 and $1,245,000, respectively. The amounts for the three months ended October 31, 2012 and 2011 and for the period January 25, 2005 (Inception) through October 31, 2012 were approximately $49,000, $76,000 and $1,294,000, respectively. As of October 31, 2012 and July 31, 2012, the Company owed these entities approximately $14,000 and $23,000, respectively.


During the periods presented, the Company was provided multi-media marketing, advertising and website maintenance services from a related entity, Flip Flop Studios Inc. The owner of the entity is Shelley Bedford, a small shareholder of the Company, and the wife of the Company’s president. There was no amount due to this entity at October 31, 2012 and July 31, 2012. Total services provided from this entity to the Company during the years ended July 31, 2012 and 2011 and the period January 25, 2005 (Inception) through July 31, 2012 relating to services provided by this related party were approximately $16,000, $41,000, and $433,000, respectively. Total services provided from this entity to the Company during the three months ended October 31, 2012 and 2011 and the period January 25, 2005 (Inception) through October 31, 2012 relating to services provided by this related party were approximately $13,000, $5,000, and $446,000, respectively.



56




Royalties and License Fees Pertaining to Exclusive Rights


In January 2005, the Company entered into a licensing agreement with a related party, ETI Technologies Inc., whose primary business is the ownership and maintenance of patents concerning the XYO technology, for the exclusive rights in XYO for automatic balancing systems suitable in the balancing and stabilization of rotating systems. These rights enable the Company to manufacture, or have manufactured, sell, and use, the products incorporating this technology, and to sub-license to third parties the right to manufacture or have manufactured, sell and use, the products incorporating this technology. The agreement calls for annual royalties and license fees. Royalties are calculated annually at a rate of 2.5% on any revenue derived from the use of the technology, subject to a varying minimum annual royalty fee of up to $125,000, for a period that is equal to the life of the underlying patents, i.e., until September 1, 2019.


The license fees are due annually in escalating amounts as stated in the agreement through January 2015. The agreement also requires 6% annual interest on any unpaid license fees, and 6% annual interest on any unpaid royalty fees outstanding after January 2010.


Sales Agreements


In the year ended July 31, 2012, the Company entered into sales agreements with a related party whose owner, David Surkan, is a shareholder of the Company. A prototype evaluation agreement for approximately $25,000 was entered into, and the Company received payment in full. This revenue was deferred and is recognized over a six month period, beginning with $12,500 in the three months ended October 31, 2012. The Company also entered into an exclusive North American license agreement with this party, involving a $30,000 fee for pre-purchase of XYO balancers and a $45,000 upfront license fee for the exclusive right to manufacture or have manufactured, sell, use, and sublicense a type of marine propeller, or balancer thereof, incorporating XYO. The license agreement also calls for royalties to be paid to the Company, calculated quarterly as 50% of any revenue derived by the related party from the manufacture, sale, use, or sublicensing of products incorporating XYO. The revenue in relation to the pre-purchase is deferred and is to be recognized upon delivery. The revenue in relation to the license fee is deferred and is being recognized quarterly over a five year period, beginning with $2,250 in the three months ended October 31, 2012.


Director Independence


Our board of directors has determined that we have three board members (Rod Egan, Thomas Ristow, and Alan Wizemann) that qualify as “independent” as the term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by Rule 4200(a)(15) of the NASDAQ Marketplace Rules. Brent Bedford, Chairman, President and CEO, does not qualify as “independent”.


MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


Market Information


There is no established public trading market for our securities and a regular trading market may not develop, or if developed, may not be sustained.  A shareholder in all likelihood, therefore, will not be able to resell his or her securities should he or she desire to do so when eligible for public resales. Furthermore, it is unlikely that a lending institution will accept our securities as pledged collateral for loans unless a regular trading market develops.  


Penny Stock Considerations


Our shares will be "penny stocks", as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00.  Thus, our shares will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.


Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer must make a special suitability determination regarding the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt.  



57




In addition, under the penny stock regulations, the broker-dealer is required to:


·

Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;

·

Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;

·

Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer's account, the account's value, and information regarding the limited market in penny stocks; and

·

Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction, prior to conducting any penny stock transaction in the customer's account.


Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our Common Stock, which may affect the ability of selling shareholders or other holders to sell their shares in the secondary market, and have the effect of reducing the level of trading activity in the secondary market.  These additional sales practice and disclosure requirements could impede the sale of our securities, if our securities become publicly traded.  In addition, the liquidity for our securities may be decreased, with a corresponding decrease in the price of our securities.  Our shares in all probability will be subject to such penny stock rules and our shareholders will, in all likelihood, find it difficult to sell their securities.


OTC Markets Qualification for Quotation


To have our shares of Common Stock on the OTC Markets, a market maker must file an application on our behalf in order to make a market for our Common Stock.  We have engaged in preliminary discussions with a FINRA Market Maker to file our application on Form 211 with FINRA, but as of the date of this Prospectus, no filing has been made.  We anticipate that after this registration statement is declared effective, it will take approximately 2 - 8 weeks for FINRA to issue a trading symbol and allow sales of our Common Stock under Rule 144.


Sales of our Common Stock Under Rule 144


There are 19,395,000 shares of our common stock held by non-affiliates and 12,825,000 shares held by affiliates that Rule 144 of the Securities Act of 1933 defines as restricted securities.


19,395,000 of our shares held by non-affiliates and none of the shares held by management and their affiliates are being registered in this offering, however all of the remaining shares will still be subject to the resale restrictions of Rule 144.  In general, persons holding restricted securities, including affiliates, must hold their shares for a period of at least six months, may not sell more than one percent of the total issued and outstanding shares in any 90-day period, and must resell the shares in an unsolicited brokerage transaction at the market price.  The availability for sale of substantial amounts of common stock under Rule 144 could reduce prevailing market prices for our securities.


Holders


As of the date of this registration statement, we had 184 shareholders of record of our common stock.


Dividends


We have not declared any cash dividends on our common stock since our inception and do not anticipate paying such dividends in the foreseeable future.  We plan to retain any future earnings for use in our business.  Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the Board of Directors deems relevant.  



58




Reports to Shareholders


As a result of this offering and assuming the registration statement is not declared effective before July 31, 2013, as required under Section 15(d) of the Securities Exchange Act of 1934, we will file periodic reports with the Securities and Exchange Commission through July 31, 2013, including a Form 10-K for the year ended July 31, 2013.  At or prior to July 31, 2013, we intend voluntarily to file a registration statement on Form 8-A which will subject us to all of the reporting requirements of the 1934 Act. This will require us to file quarterly and annual reports with the SEC and will also subject us to the proxy rules of the SEC. In addition, our officers, directors and 10% stockholders will be required to submit reports to the SEC on their stock ownership and stock trading activity.  We are not required under Section 12(g) or otherwise to become a mandatory 1934 Act filer unless we have more than 500 shareholders and total assets of more than $10 million on July 31, 2013.  If we do not file a registration statement on Form 8-A at or prior to July 31, 2013, we will continue as a voluntary reporting company and will not be subject to the proxy statement or other information requirements of the 1934 Act, our securities can no longer be quoted on the OTC Markets, and our officers, directors and 10% stockholders will not be required to submit reports to the SEC on their stock ownership and stock trading activity.


Where You Can Find Additional Information


We have filed with the Securities and Exchange Commission a registration statement on Form S-1.  For further information about us and the shares of common stock to be sold in the offering, please refer to the registration statement and the exhibits and schedules thereto. The registration statement and exhibits may be inspected, without charge, and copies may be obtained at prescribed rates, at the SEC's Public Reference Room at 100 F St., N.E., Washington, D.C. 20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The registration statement and other information filed with the SEC are also available at the web site maintained by the SEC at http://www.sec.gov.


EXECUTIVE COMPENSATION

 

Summary Compensation Table


The table below summarizes all compensation awarded to, earned by, or paid to our Principal Executive Officer, our two most highly compensated executive officers other than our PEO who occupied such position at the end of our latest fiscal year and up to two additional executive officers who would have been included in the table below except for the fact that they were not executive officers at the end of our latest fiscal year, by us, or by any third party where the purpose of a transaction was to furnish compensation, for all services rendered in all capacities to us for the years ended July 31, 2011 and 2012.


Name

 

Brent Bedford

 

Doug Greig

Title

 

Chairman and CEO

 

GM of Operations

Year

 

Year Ended

 

Year Ended

 

Year Ended

 

Year Ended

 

 

July 31, 2011

 

July 31, 2012

 

July 31, 2011

 

July 31, 2012

Salary

 

$

144,626

 

$

119,002

 

$

60,919

 

$

53,566

Bonus

 

$

0

 

$

0

 

$

0

 

$

0

Stock awards

 

$

0

 

$

0

 

$

0

 

$

0

Option awards

 

$

0

 

$

0

 

$

0

 

$

0

Non equity incentive plan compensation

 

$

0

 

$

0

 

$

0

 

$

0

Non qualified deferred compensation

 

$

0

 

$

0

 

$

0

 

$

0

All other compensation

 

$

0

 

$

0

 

$

0

 

$

0

Total

 

$

144,626

 

$

119,002

 

$

60,919

 

$

53,566


Summary Equity Awards Table


The following table sets forth certain information for our executive officers concerning unexercised options, stock that has not vested, and equity incentive plan awards as of July 31, 2012. There is no equity awards plan in place.



59



Brent Bedford, Chairman, President and CEO, has an oral agreement under which he provides management services through an entity that he owns. Under this agreement, he is paid at monthly intervals. He is a shareholder.


Doug Greig, General Manager of Operations, has an oral agreement under which he provides management services through an entity that he owns. Under this agreement he is paid at monthly intervals. He is a shareholder.


Outstanding Equity Awards at Fiscal Year-End July 31, 2012:


Name

Brent Bedford

Doug Greig

Number of Securities Underlying Unexercised Options (#) Exercisable

0

0

Number of Securities Underlying Unexercised Options (#) Unexercisable

0

0

Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)

0

0

Option Exercise Price ($)

NA

NA

Option Expiration Date

NA

NA

Number of Shares or Units of Stock That Have Not Vested (#)

0

0

Market Value of Shares or Units of Stock That Have Not Vested ($)

$0

$0

Equity Incentive Plan Awards: Number Of Unearned Shares, Units or Other Rights That Have Not Vested (#)

0

0

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)

$0

$0


At no time during the last fiscal year with respect to any person listed in the Table above was there:


·

any outstanding option or other equity-based award re-priced or otherwise materially modified (such as by extension of exercise periods, the change of vesting or forfeiture conditions, the change or elimination of applicable performance criteria, or the change of the bases upon which returns are determined);

·

any waiver or modification of any specified performance target, goal or condition to payout with respect to any amount included in non-stock incentive plan compensation or payouts;

·

any option or equity grant;

·

any non-equity incentive plan award made to a named executive officer;

·

any nonqualified deferred compensation plans including nonqualified defined contribution plans; or

·

any payment for any item to be included under All Other Compensation in the Summary Compensation Table.


Board of Directors


Director Compensation

Name

Fees earned or paid in cash ($)

Stock awards ($)

Option awards ($)

Non-equity incentive plan compensation ($)

All other compensation ($)

Total ($)

Brent Bedford

0

0

0

0

0

0

Thomas Ristow

0

0

0

0

0

0

Rod Egan

0

0

0

0

0

0

Alan Wizemann

0

0

0

0

0

0


We have no compensation arrangements (such as fees for retainer, committee service, service as Chairman and CEO of the board or a committee, and meeting attendance) with directors.


CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


None



60




FINANCIAL STATEMENTS


PROSPECTUS – SUBJECT TO COMPLETION DATED MARCH 6, 2013


PERPETUAL INDUSTRIES INC.


Selling shareholders are offering up to 19,395,000 shares of common stock.  The selling shareholders will offer their shares at $0.02 per share until our shares are quoted on the OTC Markets and thereafter at prevailing market prices or privately negotiated prices.


Our common stock is not now listed on any national securities exchange, the NASDAQ stock market or the OTC Markets.


Dealer Prospectus Delivery Obligation


Until June 5, 2013 (90 days from the date of this prospectus) all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.



PART II-INFORMATION NOT REQUIRED IN PROSPECTUS


Other Expenses of Issuance and Distribution


The following table is an itemization of all expenses, without consideration to future contingencies, incurred or expected to be incurred by us in connection with the issuance and distribution of the securities being offered by this prospectus. Items marked with an asterisk (*) represent estimated expenses. We have agreed to pay all the costs and expenses of this offering. Selling security holders will pay no offering expenses.


ITEM

AMOUNT

 

 

SEC Registration Fee*

 $                       45

Legal Fees and Expenses

36,000

Accounting Fees and Expenses*

60,000

Miscellaneous

4,000

          Total*

 $             100,045

* Estimated Figure


Indemnification of Officers and Directors


Our Bylaws provide, in pertinent part, as follows:


Every person who was or is a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or a person of whom he is the legal representative is or was a Director or Officer of the Corporation or is or was serving at the request of the Corporation or for its benefit as a Director or Officer of another Corporation, or as its representative in a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless to the fullest extent legally permissible under the general Corporation law of the State of Nevada from time to time against all expenses, liability and loss (including attorneys' fees, judgments, fines and amounts paid or to be paid in settlement) reasonably incurred or suffered by him in connection therewith. The expenses of Officers and Directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the Corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding upon receipt of an undertaking by or on behalf of the Director or Officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the Corporation. Such right of indemnification shall be a contract right which may be enforced in any manner desired by such person.



61



Such right of indemnification shall not be exclusive of any other right which such Directors, Officers or representatives may have or hereafter acquire and, without limiting the generality of such statement, they shall be entitled to their respective rights of indemnification under any bylaw, agreement, vote of Stockholders, provision of law or otherwise, as well as their rights as set out in [the current Bylaws].


The Board of Directors may cause the Corporation to purchase and maintain insurance on behalf of any Person who is or was a Director or Officer of the Corporation, or is or was serving at the request of the Corporation as a Director or Officer of another Corporation, or as its representative in a partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred in any such capacity or arising out of such status, whether or not the Corporation would have the power to indemnify such person.  


The Board of Directors may from time to time adopt further Bylaws with respect to indemnification and may amend these and such Bylaws to provide at all times the fullest indemnification permitted by the General Corporation Law of the State of Nevada.


With regard to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of the Corporation in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by a controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by us is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such case.


RECENT SALES OF UNREGISTERED SECURITIES


In connection with the following transactions, although some of the investors may have also been accredited, we provided the following to all investors:


·

Access to all our books and records.

·

Access to all material contracts and documents relating to our operations.

·

The opportunity to obtain any additional information, to the extent we possessed such information, necessary to verify the accuracy of the information to which the investors were given access.


Prospective investors were invited to review at our offices at any reasonable hour, after reasonable advance notice, any materials available to us concerning our business. Prospective Investors were also invited to visit our offices.


We relied upon Section 4(2) of the Securities Act of 1933, as amended for issuances to U.S. citizens or residents; and upon Regulation S of the Securities Act of 1933, as amended, for issuances to non-U.S. citizens or residents.


The following breakdown includes selling shareholders and non-registering affiliates.


All of the shares referred to below are Class A Common Stock.


Shares Issued for Cash  


YE July 31, 2005


3,200,000 shares of Class A common stock were sold for $160,000 cash at a price per share of $0.05 to 6 individuals:



62




Name

Date Cash Received

Date of Issuance

Shares

Issue Price

Ken Hartviksen

February 4, 2005

July 31, 2005

 1,000,000

 $0.050

Shelley Bedford

April 20, 2005

July 31, 2005

 600,000

 $0.050

Laura Calder

May 18, 2005

July 31, 2005

 200,000

 $0.050

Darcy Brown

June 21, 2005

July 31, 2005

 200,000

 $0.050

John Bzeta

June 22, 2005

July 31, 2005

 1,000,000

 $0.050

Stiven Holdings Inc.

June 29, 2005

July 31, 2005

 200,000

 $0.050


YE July 31, 2006


1,940,000 shares of Class A common stock were sold for $358,000 cash with various prices per share ranging from $0.05 to $0.20 to 20 individuals:


Name

Date Cash Received

Date of Issuance

Shares

Issue Price

Cinch Ventures Ltd.

August 31, 2005

July 31, 2005

 200,000

 $0.050

Schnell Stables Investment Club

September 9, 2005

March 14, 2007

 100,000

 $0.200

Tony Robinson

October 31, 2005

March 14, 2007

 25,000

 $0.200

Dan Lane

November 23, 2005

March 14, 2007

 62,500

 $0.200

Scott Dore

December 6, 2005

March 14, 2007

 125,000

 $0.200

Laura Calder

April 7, 2006

March 14, 2007

 75,000

 $0.200

Elsie Rosby

April 13, 2006

March 14, 2007

 62,500

 $0.200

Gord Ross

April 17, 2006

March 14, 2007

 125,000

 $0.200

Jason Cowles

May 9, 2006

March 14, 2007

 125,000

 $0.200

Roz Daniels

May 26, 2006

March 14, 2007

 62,500

 $0.200

Doug Naef

June 9, 2006

March 14, 2007

 187,500

 $0.200

John Kitzke

June 12, 2006

March 14, 2007

 62,500

 $0.200

Dirk Heuck

June 26, 2006

March 14, 2007

 40,000

 $0.200

Leslie Roberts

July 12, 2006

March 14, 2007

 187,500

 $0.200

Brian Naef

July 13, 2006

March 14, 2007

 62,500

 $0.200

Darla Desmond

July 13, 2006

March 14, 2007

 62,500

 $0.200

Dylan Lowry

July 14, 2006

March 14, 2007

 125,000

 $0.200

Kensington Village Holdings Ltd.

July 15, 2006

March 14, 2007

 125,000

 $0.200

Ken Richter

July 21, 2006

March 14, 2007

 62,500

 $0.200

Solar Star Holdings Inc.

July 21, 2006

March 14, 2007

 62,500

 $0.200


YE July 31, 2007


1,437,500 shares of Class A common stock were sold for $349,000 cash with various prices per share ranging from $0.20 to $0.30 to 15 individuals:



63




Name

Date Cash Received

Date of Issuance

Shares

Issue Price

Brent Roberts

August 18, 2006

March 14, 2007

 62,500

 $0.200

Paula Stiven

August 21, 2006

March 14, 2007

 62,500

 $0.200

Wendy Brooks

August 21, 2006

March 14, 2007

 62,500

 $0.200

353939 Alberta Ltd.

August 28, 2006

March 14, 2007

 125,000

 $0.200

Betty Stiven

September 6, 2006

March 14, 2007

 125,000

 $0.200

Catherine Stiven

September 6, 2006

March 14, 2007

 62,500

 $0.200

Max Fernandez

December 15, 2006

March 14, 2007

 62,500

 $0.200

Doug Greig

December 15, 2006

March 14, 2007

 125,000

 $0.200

Pete Stiven

February 2, 2007

March 14, 2007

 135,000

 $0.200

Paula Stiven

May 8, 2007

November 30, 2007

 50,000

 $0.300

Alex Douglas

May 15, 2007

November 30, 2007

 65,000

 $0.300

Trevor Ramage

May 15, 2007

November 30, 2007

 100,000

 $0.300

Marguerite Hache-Jones

June 5, 2007

November 30, 2007

 100,000

 $0.300

Robert Reader

June 5, 2007

November 30, 2007

 100,000

 $0.300

Steve Travis

July 4, 2007

November 30, 2007

 100,000

 $0.300

Valerie J. Metcalfe

July 19, 2007

November 30, 2007

 100,000

 $0.300


YE July 31, 2008


1,853,000 shares of Class A common stock were sold for $555,900 cash at a price per share of $0.30 to 22 individuals:


Name

Date Cash Received

Date of Issuance

Shares

Issue Price

Alex Douglas

August 2, 2007

November 30, 2007

 35,000

 $0.300

Darcy Brown

August 29, 2007

November 30, 2007

 33,000

 $0.300

George Trehas

October 1, 2007

November 30, 2007

 100,000

 $0.300

Garth McIntosh

October 30, 2007

November 30, 2007

 100,000

 $0.300

James Carter

October 30, 2007

November 30, 2007

 100,000

 $0.300

Ray Hulbert

November 8, 2007

November 30, 2007

 100,000

 $0.300

Craig Dansereau

November 8, 2007

November 30, 2007

 170,000

 $0.300

Darcy Briggs

November 9, 2007

November 30, 2007

 50,000

 $0.300

Marguerite Hache-Jones

January 23, 2008

July 31, 2008

 70,000

 $0.300

Patricia Newton

March 24, 2008

July 31, 2008

 35,000

 $0.300

Dustin Wilson

April 28, 2008

July 31, 2008

 100,000

 $0.300

Seminuk Holdings Ltd.

May 20, 2008

July 31, 2008

 30,000

 $0.300

Tyler Seminuk

May 21, 2008

July 31, 2008

 70,000

 $0.300

Kerry Russell

May 22, 2008

July 31, 2008

 335,000

 $0.300

Fast Real Estate Consulting Inc.

May 24, 2008

July 31, 2008

 50,000

 $0.300

Mike Fast

May 27, 2008

July 31, 2008

 50,000

 $0.300

Rob and Andrea Cunningham [transferred to Edwin Walter Wedman as Executor of the Estate of Andrea Cunningham December 9, 2012]

June 9, 2008

July 31, 2008

 100,000

 $0.300



64




641621 Alberta Ltd.

June 10, 2008

July 31, 2008

 100,000

 $0.300

Pete Stiven

June 13, 2008

July 31, 2008

 50,000

 $0.300

353939 Alberta Ltd.

June 13, 2008

July 31, 2008

 50,000

 $0.300

George Trehas

June 17, 2008

July 31, 2008

 25,000

 $0.300

David Lewis

June 17, 2008

July 31, 2008

 50,000

 $0.300

Kensington Village Holdings Ltd.

July 18, 2008

July 31, 2008

 50,000

 $0.300


YE July 31, 2009


2,880,000 shares of Class A common stock were sold for $864,000 cash at a price per share of $0.30 to 31 individuals:


Name

Date Cash Received

Date of Issuance

Shares

Issue Price

Kristen Yont Professional Corporation

August 5, 2008

December 31, 2008

 100,000

 $0.300

Darren Morrison

August 5, 2008

December 31, 2008

 100,000

 $0.300

Bruce Bianchini

August 6, 2008

December 31, 2008

 100,000

 $0.300

Steve Magus

August 7, 2008

December 31, 2008

 100,000

 $0.300

John O'Lain

August 8, 2008

December 31, 2008

 100,000

 $0.300

Paul Kruse

August 8, 2008

December 31, 2008

 100,000

 $0.300

Milt Roney

August 8, 2008

December 31, 2008

 100,000

 $0.300

Linear Fusion Corporation

August 12, 2008

December 31, 2008

 100,000

 $0.300

Darcie Facca

August 14, 2008

December 31, 2008

 32,500

 $0.300

John Sanders

August 17, 2008

December 31, 2008

 100,000

 $0.300

531746 Alberta Ltd.

August 20, 2008

December 31, 2008

 200,000

 $0.300

David Maxwell

August 21, 2008

December 31, 2008

 100,000

 $0.300

Allan & Cindy Conroy [transferred to Cindy Conroy February 15, 2013]

September 4, 2008

December 31, 2008

 100,000

 $0.300

Ulrich Olie Amendy

September 8, 2008

December 31, 2008

 200,000

 $0.300

Vance Blydo

September 8, 2008

December 31, 2008

 100,000

 $0.300

Sheila Kobelka

September 8, 2008

December 31, 2008

 100,000

 $0.300

Barry & Theresa Boyer

October 6, 2008

December 31, 2008

 100,000

 $0.300

Brent Morrison

October 30, 2008

December 31, 2008

 100,000

 $0.300

Darren Morrison

November 17, 2008

December 31, 2008

 50,000

 $0.300

Arie Prins

November 17, 2008

December 31, 2008

 100,000

 $0.300

Kristen Yont

November 17, 2008

December 31, 2008

 50,000

 $0.300

1075501 Alberta Ltd. [transferred to Kim Messier August 12, 2011]

November 25, 2008

December 31, 2008

 100,000

 $0.300

Tim & Gloria Yont

November 28, 2008

December 31, 2008

 50,000

 $0.300

Grant Larsen

December 17, 2008

December 31, 2008

 100,000

 $0.300

Karrie Yont

December 18, 2008

December 31, 2008

 100,000

 $0.300

Jannie Otto

January 21, 2009

January 21, 2010

 50,000

 $0.300

Luciano Oliverio

April 15, 2009

January 21, 2010

 32,500

 $0.300

Target Emission Services Ltd.

April 15, 2009

January 21, 2010

 32,500

 $0.300

David Kelcher

April 30, 2009

January 21, 2010

 32,500

 $0.300



65




Ron Cowles

July 30, 2009

January 21, 2010

 150,000

 $0.300

Linda  Irvine

July 30, 2009

January 21, 2010

 100,000

 $0.300


YE July 31, 2010


3,817,000 shares of Class A common stock were sold for $1,145,100 cash at a price per share of $0.30 to 45 individuals:


Name

Date Cash Received

Date of Issuance

Shares

Issue Price

Brett Woods

September 3, 2009

January 21, 2010

 50,000

 $0.300

Betty Stiven

September 8, 2009

January 21, 2010

 20,000

 $0.300

Arthur  Shaw

September 9, 2009

January 21, 2010

 35,000

 $0.300

David Craig Harding

September 18, 2009

January 21, 2010

 35,000

 $0.300

Scott Barker

September 24, 2009

January 21, 2010

 17,500

 $0.300

Nasie Schnell

September 24, 2009

January 21, 2010

 20,000

 $0.300

Daxton Yont

September 28, 2009

January 21, 2010

 27,000

 $0.300

Leslie Roberts

September 28, 2009

January 21, 2010

 120,000

 $0.300

Ken Schnell

September 28, 2009

January 21, 2010

 20,000

 $0.300

Andie  Besgrove

August 28, 2009

January 21, 2010

 20,000

 $0.300

William  Burness

September 29, 2009

January 21, 2010

 30,000

 $0.300

Kevin  Slywka

September 29, 2009

January 21, 2010

 35,000

 $0.300

JWB Holdings LLC

September 30, 2009

January 21, 2010

 40,000

 $0.300

Greg Durling

September 30, 2009

January 21, 2010

 70,000

 $0.300

Yvonne Taylor

September 30, 2009

January 21, 2010

 20,000

 $0.300

Darla Desmond

September 30, 2009

January 21, 2010

 30,000

 $0.300

Norm Devitt

September 30, 2009

January 21, 2010

 35,000

 $0.300

Mark Melnyk

October 1, 2009

January 21, 2010

 10,000

 $0.300

Dave Filbrandt

October 1, 2009

January 21, 2010

 17,500

 $0.300

Joe Desmond

October 2, 2009

January 21, 2010

 20,000

 $0.300

Gennaro (John) Logullo

October 2, 2009

January 21, 2010

 17,500

 $0.300

Gordon Schnell

October 5, 2009

January 21, 2010

 10,000

 $0.300

1075501 Alberta Ltd. [transferred to Tanya McGarrigle August 12, 2011]

October 7, 2009

January 21, 2010

 100,000

 $0.300

Ian Jones

October 19, 2009

January 21, 2010

 100,000

 $0.300

Rick Wiest

October 30, 2009

January 21, 2010

 150,000

 $0.300

Clayton  Wiest

October 30, 2009

January 21, 2010

 50,000

 $0.300

Tessa McGarrigle

November 16, 2009

January 21, 2010

 50,000

 $0.300

Tanya McGarrigle

November 16, 2009

January 21, 2010

 50,000

 $0.300

1212906 Alberta Ltd.

December 10, 2009

August 4, 2010

 20,000

 $0.300

Dean Huisman

December 15, 2009

August 4, 2010

 40,000

 $0.300

Kelvin Huisman

December 15, 2009

August 4, 2010

 35,000

 $0.300

Juanita  Bremner

December 29, 2009

August 4, 2010

 32,500

 $0.300

Dustin Wilson

January 15, 2010

August 4, 2010

 100,000

 $0.300



66




Redfall Pacific Ltd. [transferred to Redfall Singapore PTE Ltd. August 12, 2011]

January 25, 2010

August 4, 2010

 1,000,000

 $0.300

Luciano Oliverio

January 27, 2010

August 4, 2010

 50,000

 $0.300

David Kelcher

January 29, 2010

August 4, 2010

 50,000

 $0.300

McCreath Communications Ltd.

February 19, 2010

August 4, 2010

 500,000

 $0.300

Andrew McCreath

February 19, 2010

August 4, 2010

 75,000

 $0.300

Kenneth Morrison

April 1, 2010

August 4, 2010

 50,000

 $0.300

Adam Kapcsos

April 6, 2010

August 4, 2010

 20,000

 $0.300

Bryce  Evans

April 6, 2010

August 4, 2010

 40,000

 $0.300

Clayton  Wiest

April 6, 2010

August 4, 2010

 20,000

 $0.300

Rick Wiest

April 6, 2010

August 4, 2010

 60,000

 $0.300

Chad Hewlett

April 8, 2010

August 4, 2010

 100,000

 $0.300

Scott Fabro

April 8, 2010

August 4, 2010

 20,000

 $0.300

Clayton  Wiest

April 12, 2010

August 4, 2010

 20,000

 $0.300

McCreath Communications Ltd.

April 27, 2010

August 4, 2010

 100,000

 $0.300

Andrew McCreath

April 27, 2010

August 4, 2010

 100,000

 $0.300

John vanDyck

May 10, 2010

August 4, 2010

 50,000

 $0.300

Gary  Gardiner

June 1, 2010

August 4, 2010

 100,000

 $0.300

Kevin Slywka

July 7, 2010

August 4, 2010

 35,000

 $0.300


YE July 31, 2011: 2,104,000 shares of Class A common stock were sold for $631,200 cash at a price per share of $0.30 to 32 individuals:


Name

Date Cash Received

Date of Issuance

Shares

Issue Price

Greg Soltys

September 7, 2010

September 8, 2010

 35,000

 $0.300

e-Wave Solutions, Inc.

September 7, 2010

September 8, 2010

 100,000

 $0.300

488588 Alberta Ltd.

January 6, 2011

August 12, 2011

 70,000

 $0.300

SLC Development Corp.

January 12, 2011

August 12, 2011

 50,000

 $0.300

Norman Duval

January 21, 2011

August 12, 2011

 35,000

 $0.300

Jade Iluk

January 21, 2011

August 12, 2011

 35,000

 $0.300

Kim Plews

January 24, 2011

August 12, 2011

 35,000

 $0.300

Daniel Toews

January 27, 2011

August 12, 2011

 35,000

 $0.300

Carson Weist

February 5, 2011

August 12, 2011

 17,500

 $0.300

Cory Wiest

February 5, 2011

August 12, 2011

 17,500

 $0.300

Clayton Wiest

February 5, 2011

August 12, 2011

 17,500

 $0.300

John Kubik

February 11, 2011

August 12, 2011

 17,500

 $0.300

Simon Jones

February 23, 2011

August 12, 2011

 65,000

 $0.300

Sasa Baljak

February 28, 2011

August 12, 2011

 7,000

 $0.300

Zarko & Rada Baljak

February 28, 2011

August 12, 2011

 17,500

 $0.300

Mark Grotski

March 2, 2011

August 12, 2011

 50,000

 $0.300

Clarence & Janet Kachman

March 1, 2011

August 12, 2011

 50,000

 $0.300

Leo Pernisch

March 5, 2011

August 12, 2011

 35,000

 $0.300



67




Ron & Stella Slywka

March 1, 2011

August 12, 2011

 35,000

 $0.300

Gillian Robinson

March 8, 2011

August 12, 2011

 17,500

 $0.300

Clayton Wiest

March 8, 2011

August 12, 2011

 20,000

 $0.300

Frank Cancilla & Stella Bendzera

March 7, 2011

August 12, 2011

 10,000

 $0.300

Marcia Jarvis

March 14, 2011

August 12, 2011

 30,000

 $0.300

Yurendra Singh Pandher

March 29, 2011

August 12, 2011

 70,000

 $0.300

Richard Jarvis

April 4, 2011

August 12, 2011

 12,000

 $0.300

Milos Krnjaja

April 12, 2011

August 12, 2011

 35,000

 $0.300

Tinepublic Inc.

April 15, 2011

August 12, 2011

 50,000

 $0.300

Clayton Wiest

April 29, 2011

August 12, 2011

 20,000

 $0.300

Brad Zacharuk

May 27, 2011

August 12, 2011

 50,000

 $0.300

Colby Cattoni

May 27, 2011

August 12, 2011

 20,000

 $0.300

Dustin Whitney

June 29, 2011

August 12, 2011

 100,000

 $0.300

Norma Lichon

June 30, 2011

August 12, 2011

 50,000

 $0.300

607462 Alberta Ltd.

July 21, 2011

August 12, 2011

 850,000

 $0.300

George Trehas

July 26, 2011

August 12, 2011

 45,000

 $0.300


YE July 31, 2012


2,228,000 shares of Class A common stock were sold for $668,400 cash at a price per share of $0.30 to 19 individuals:


Name

Date Cash Received

Date of Issuance

Shares

Issue Price

Jason Plamandon

August 4, 2011

August 12, 2011

100,000

$0.300

1115993 Alberta Inc.

October 25, 2011

February 15, 2013

100,000

$0.300

Betty Stiven

October 28, 2011

February 15, 2013

33,000

$0.300

607462 Alberta Ltd.

November 9, 2011

February 15, 2013

335,000

$0.300

Paula Stiven

November 15, 2011

February 15, 2013

33,000

$0.300

Craig Dansereau

November 28, 2011

February 15, 2013

170,000

$0.300

607462 Alberta Ltd.

March 1, 2012

February 15, 2013

70,000

$0.300

Margo Purcell

March 1, 2012

February 15, 2013

42,000

$0.300

Toonvox

April 2, 2012

February 15, 2013

27,000

$0.300

Doug Lough

April 5, 2012

February 15, 2013

17,500

$0.300

Sandra Lough

April 5, 2012

February 15, 2013

17,500

$0.300

Brad Carter

April 27, 2012

February 15, 2013

40,000

$0.300

Xinmeng Liu

April 27, 2012

February 15, 2013

35,000

$0.300

Martin Janzen

May 25, 2012

February 15, 2013

35,000

$0.300

Sean Gorman

May 25, 2012

February 15, 2013

35,000

$0.300

Brian Skyrme

May 31, 2012

February 15, 2013

40,000

$0.300

David Surkan

May 31, 2012

February 15, 2013

700,000

$0.300

Divine Investments Inc.

May 31, 2012

February 15, 2013

80,000

$0.300

Gordon Zelko

June 8, 2012

February 15, 2013

183,000

$0.300

Okpoti Holdings Inc.

June 29, 2012

February 15, 2013

100,000

$0.300

Martin Janzen

July 13, 2012

February 15, 2013

35,000

$0.300




68




YE July 31, 2013 to date


700,000 shares of Class A common stock were sold for $210,000 cash at a price per share of $0.30 to 1 individual:


Name

Date Cash Received

Date of Issuance

Shares

Issue Price

David Surkan

August 30, 2012

February 15, 2013

700,000

$0.300


Matching Warrants Issued in Conjunction with Shares Issued for Cash


YE July 31, 2011


Effective December 7, 2010, all previously issued warrants were reset via amendment such that they were exercisable from March 1, 2011 to March 1, 2013 (and are now expired) including:


Warrants for 2,562,500 shares, issued to 28 individuals, in conjunction with shares issued for cash at a share price of $0.20, the warrants being exercisable in months 1-12 at $0.30, months 13-18 at $0.40, and months 19-24 at $0.50:


Name

Original Date of Issuance

Warrants

Schnell Stables Investment Club

March 14, 2007

 100,000

Tony Robinson

March 14, 2007

 25,000

Dan Lane

March 14, 2007

 62,500

Scott Dore

March 14, 2007

 125,000

Laura Calder

March 14, 2007

 75,000

Elsie Rosby

March 14, 2007

 62,500

Gord Ross

March 14, 2007

 125,000

Jason Cowles

March 14, 2007

 125,000

Roz Daniels

March 14, 2007

 62,500

Doug Naef

March 14, 2007

 187,500

John Kitzke

March 14, 2007

 62,500

Dirk Heuck

March 14, 2007

 40,000

Leslie Roberts

March 14, 2007

 187,500

Brian Naef

March 14, 2007

 62,500

Darla Desmond

March 14, 2007

 62,500

Dylan Lowry

March 14, 2007

 125,000

Kensington Village Holdings Ltd.

March 14, 2007

 125,000

Ken Richter

March 14, 2007

 62,500

Solar Star Holdings Inc.

March 14, 2007

 62,500

Brent Roberts

March 14, 2007

 62,500

Paula Stiven

March 14, 2007

 62,500

Wendy Brooks

March 14, 2007

 62,500

353939 Alberta Ltd.

March 14, 2007

 125,000

Betty Stiven

March 14, 2007

 125,000

Catherine Stiven

March 14, 2007

 62,500

Max Fernandez

March 14, 2007

 62,500



69




Doug Greig

March 14, 2007

 125,000

Pete Stiven

March 14, 2007

 135,000


Warrants for 8,100,000 shares issued to 99 individuals, in conjunction with shares issued for cash at a share price of $0.30, the warrants being exercisable in months 1-12 at $0.40, months 13-18 at $0.50, and months 19-24 at $0.60:


Name

Original Date of Issuance

Warrants

Paula Stiven

November 30, 2007

 50,000

Alex Douglas

November 30, 2007

 65,000

Trevor Ramage

November 30, 2007

 100,000

Marguerite Hache-Jones

November 30, 2007

 100,000

Robert Reader

November 30, 2007

 100,000

Steve Travis

November 30, 2007

 100,000

Valerie J. Metcalfe

November 30, 2007

 100,000

Alex Douglas

November 30, 2007

 35,000

Darcy Brown

November 30, 2007

 33,000

George Trehas

November 30, 2007

 100,000

Garth McIntosh

November 30, 2007

 100,000

James Carter

November 30, 2007

 100,000

Ray Hulbert

November 30, 2007

 100,000

Craig Dansereau

November 30, 2007

 170,000

Darcy Briggs

November 30, 2007

 50,000

Marguerite Hache-Jones

July 31, 2008

 70,000

Patricia Newton

July 31, 2008

 35,000

Dustin Wilson

July 31, 2008

 100,000

Seminuk Holdings Ltd.

July 31, 2008

 30,000

Tyler Seminuk

July 31, 2008

 70,000

Kerry Russell

July 31, 2008

 335,000

Fast Real Estate Consulting Inc

July 31, 2008

 50,000

Mike Fast

July 31, 2008

 50,000

Rob and Andrea Cunningham

July 31, 2008

 100,000

641621 Alberta Ltd.

July 31, 2008

 100,000

Pete Stiven

July 31, 2008

 50,000

353939 Alberta Ltd.

July 31, 2008

 50,000

George Trehas

July 31, 2008

 25,000

David Lewis

July 31, 2008

 50,000

Kensington Village Holdings Ltd.

July 31, 2008

 50,000

Kristen Yont Professional Corporation

December 31, 2008

 100,000

Darren Morrison

December 31, 2008

 100,000

Bruce Bianchini

December 31, 2008

 100,000

Steve Magus

December 31, 2008

 100,000



70




John O'Lain

December 31, 2008

 100,000

Paul Kruse

December 31, 2008

 100,000

Milt Roney

December 31, 2008

 100,000

Linear Fusion Corporation

December 31, 2008

 100,000

Darcie Facca

December 31, 2008

 32,500

John Sanders

December 31, 2008

 100,000

531746 Alberta Ltd.

December 31, 2008

 200,000

David Maxwell

December 31, 2008

 100,000

Allan & Cindy Conroy [transferred to Cindy Conroy February 15, 2013]

December 31, 2008

 100,000

Ulrich Olie Amendy

December 31, 2008

 200,000

Vance Blydo

December 31, 2008

 100,000

Sheila Kobelka

December 31, 2008

 100,000

Barry & Theresa Boyer

December 31, 2008

 100,000

Brent Morrison

December 31, 2008

 100,000

Darren Morrison

December 31, 2008

 50,000

Arie Prins

December 31, 2008

 100,000

Kristen Yont

December 31, 2008

 50,000

Tim & Gloria Yont

December 31, 2008

 50,000

Grant Larsen

December 31, 2008

 100,000

Karrie Yont

December 31, 2008

 100,000

Jannie Otto

January 21, 2010

 50,000

Luciano Oliverio

January 21, 2010

 32,500

Target Emission Services Ltd.

January 21, 2010

 32,500

David Kelcher

January 21, 2010

 32,500

Ron Cowles

January 21, 2010

 150,000

Linda  Irvine

January 21, 2010

 100,000

Brett Woods

January 21, 2010

 50,000

Betty Stiven

January 21, 2010

 20,000

Arthur  Shaw

January 21, 2010

 35,000

David Craig Harding

January 21, 2010

 35,000

Scott Barker

January 21, 2010

 17,500

Nasie Schnell

January 21, 2010

 20,000

Daxton Yont

January 21, 2010

 27,000

Leslie Roberts

January 21, 2010

 120,000

Ken Schnell

January 21, 2010

 20,000

Andie  Besgrove

January 21, 2010

 20,000

William  Burness

January 21, 2010

 30,000

Kevin  Slywka

January 21, 2010

 35,000

JWB Holdings LLC

January 21, 2010

 40,000

Greg Durling

January 21, 2010

 70,000

Yvonne Taylor

January 21, 2010

 20,000



71




Darla Desmond

January 21, 2010

 30,000

Norm Devitt

January 21, 2010

 35,000

Mark Melnyk

January 21, 2010

 10,000

Dave Filbrandt

January 21, 2010

 17,500

Joe Desmond

January 21, 2010

 20,000

Gennaro (John) Logullo

January 21, 2010

 17,500

Gordon Schnell

January 21, 2010

 10,000

Ian Jones

January 21, 2010

 100,000

Rick Wiest

January 21, 2010

 150,000

Clayton  Wiest

January 21, 2010

 50,000

Tessa McGarrigle

January 21, 2010

 50,000

Tanya McGarrigle

January 21, 2010

 50,000

1212906 Alberta Ltd.

August 4, 2010

 20,000

Dean Huisman

August 4, 2010

 40,000

Kelvin Huisman

August 4, 2010

 35,000

Juanita  Bremner

August 4, 2010

 32,500

Dustin Wilson

August 4, 2010

 100,000

Luciano Oliverio

August 4, 2010

 50,000

David Kelcher

August 4, 2010

 50,000

McCreath Communications Ltd.

August 4, 2010

 500,000

Andrew McCreath

August 4, 2010

 75,000

Kenneth Morrison

August 4, 2010

 50,000

Adam Kapcsos

August 4, 2010

 20,000

Bryce  Evans

August 4, 2010

 40,000

Clayton  Wiest

August 4, 2010

 20,000

Rick Wiest

August 4, 2010

 60,000

Chad Hewlett

August 4, 2010

 100,000

Scott Fabro

August 4, 2010

 20,000

Clayton  Wiest

August 4, 2010

 20,000

McCreath Communications Ltd.

August 4, 2010

 100,000

Andrew McCreath

August 4, 2010

 100,000

John vanDyck

August 4, 2010

 50,000

Gary  Gardiner

August 4, 2010

 100,000

Kevin Slywka

August 4, 2010

 35,000

Greg Soltys

September 8, 2010

 35,000

e-Wave Solutions, Inc.

September 8, 2010

 100,000


YE July 31, 2012


Warrants for 2,069,000 shares were issued to 31 individuals, in conjunction with shares issued for cash at a share price of $0.30, the warrants being exercisable from August 12, 2011 to August 12, 2013 in months 1-12 at $0.40, months 13-18 at $0.50, and months 19-24 at $0.60:



72




Name

Original Date of Issuance

Warrants

488588 Alberta Ltd.

August 12, 2011

 70,000

SLC Development Corp.

August 12, 2011

 50,000

Norman Duval

August 12, 2011

 35,000

Jade Iluk

August 12, 2011

 35,000

Kim Plews

August 12, 2011

 35,000

Daniel Toews

August 12, 2011

 35,000

Carson Weist

August 12, 2011

 17,500

Cory Wiest

August 12, 2011

 17,500

Clayton Wiest

August 12, 2011

 17,500

John Kubik

August 12, 2011

 17,500

Simon Jones

August 12, 2011

 65,000

Sasa Baljak

August 12, 2011

 7,000

Zarko & Rada Baljak

August 12, 2011

 17,500

Mark Grotski

August 12, 2011

 50,000

Clarence & Janet Kachman

August 12, 2011

 50,000

Leo Pernisch

August 12, 2011

 35,000

Ron & Stella Slywka

August 12, 2011

 35,000

Gillian Robinson

August 12, 2011

 17,500

Clayton Wiest

August 12, 2011

 20,000

Frank Cancilla & Stella Bendzera

August 12, 2011

 10,000

Marcia Jarvis

August 12, 2011

 30,000

Yurendra Singh Pandher

August 12, 2011

 70,000

Richard Jarvis

August 12, 2011

 12,000

Milos Krnjaja

August 12, 2011

 35,000

Tinepublic Inc.

August 12, 2011

 50,000

Clayton Wiest

August 12, 2011

 20,000

Brad Zacharuk

August 12, 2011

 50,000

Colby Cattoni

August 12, 2011

 20,000

Dustin Whitney

August 12, 2011

 100,000

Norma Lichon

August 12, 2011

 50,000

607462 Alberta Ltd.

August 12, 2011

 850,000

George Trehas

August 12, 2011

 45,000

Jason Plamandon

August 12, 2011

 100,000


YE July 31, 2013 to date


Warrants for 2,828,000 shares were issued to 18 individuals, in conjunction with shares issued for cash at a share price of $0.30, the warrants being exercisable from February 15, 2013 to February 15, 2015 in months 1-12 at $0.40, months 13-18 at $0.50, and months 19-24 at $0.60:



73




Name

Date of Issuance

Warrants

1115993 Alberta Inc.

February 15, 2013

100,000

Betty Stiven

February 15, 2013

33,000

607462 Alberta Ltd.

February 15, 2013

335,000

Paula Stiven

February 15, 2013

33,000

Craig Dansereau

February 15, 2013

170,000

607462 Alberta Ltd.

February 15, 2013

70,000

Margo Purcell

February 15, 2013

42,000

Toonvox

February 15, 2013

27,000

Doug Lough

February 15, 2013

17,500

Sandra Lough

February 15, 2013

17,500

Brad Carter

February 15, 2013

40,000

Xinmeng Liu

February 15, 2013

35,000

Martin Janzen

February 15, 2013

35,000

Sean Gorman

February 15, 2013

35,000

Brian Skyrme

February 15, 2013

40,000

David Surkan

February 15, 2013

700,000

Divine Investments Inc.

February 15, 2013

80,000

Gordon Zelko

February 15, 2013

183,000

Okpoti Holdings Inc.

February 15, 2013

100,000

Martin Janzen

February 15, 2013

35,000

David Surkan

February 15, 2013

700,000


Shares Issued for Services


YE July 31, 2005


11,900,000 vested shares of Class A common stock were issued to the founder and directors, having a fair value of $11,900, based on a nominal value of $0.001 per share:


Name

Date of Issuance

Shares

Issue Price

Brent Bedford, founding director

April 20, 2005

 11,000,000

 $0.001

Thomas Ristow, director

August 18, 2005

 300,000

 $0.001

Alan Wizemann, director

August 18, 2005

 300,000

 $0.001

Rod Egan, director

August 18, 2005

 300,000

 $0.001


YE July 31, 2013 (year to date)


160,500 vested shares of Class A common stock were issued to the Company’s securities attorney, having a fair value of $48,150, based on a share price of $0.30.

Name

Date of Issuance

Shares

Issue Price

Williams Law Group, P.A.

March 7, 2013

 160,500

 $0.300




74




EXHIBITS


Item 3

 

1

Articles of Incorporation – Perpetual Industries Inc.

 

 

2

Bylaws – Perpetual Industries Inc.

 

Item 4


1

Form of common stock Certificate of Perpetual Industries Inc(1)


Item 5


1

Legal Opinion of Williams Law Group, P.A.

 

Item 10


1

Master License with ETI Technologies Inc., as Amended

 

 

2

Loan Agreement with Beaver Parts Ltd., as Amended

 

 

3

Master License Agreement with Motor Sport Country Club Holdings, Inc.

 

 

4

Sub-License Agreement with Global Seeds Inc.

 

 

5

ETI Technologies Inc. Ratification of Sub-Licenses

 

Item 23

 

1

Consent of Warren Averett LLC, Certified Public Accountants*

 

 

2

Consent of Williams Law Group, P.A. (included in Exhibit 5.1)

 

*Filed herewith


All other Exhibits called for by Rule 601 of Regulation SK are not applicable to this filing.

____________

(1) Information pertaining to our common stock is contained in our Articles of Incorporation and Bylaws.



75



UNDERTAKINGS


The undersigned registrant hereby undertakes:

 

 

1.

To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

i.

To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

ii.

To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement.

iii.

To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;


 

2.

That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.


 

3.

To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

 

4.

That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:  Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of the corporation in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by a controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by us is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such case.




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SIGNATURES

 

Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on our behalf by the undersigned, thereunto duly authorized, in Calgary, Alberta, Canada on March 7, 2013.


 

 

 

Perpetual Industries Inc.

 

 

 

March 7, 2013

 

By: /s/ Brent Bedford

 

 

Brent Bedford

 

 

Principal Executive Officer


Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.

 

Signature

 

Title

 

Date

/s/ Brent Bedford

 

Chairman of the Board, CEO, Principal Executive Officer,

 

March 7, 2013

Brent Bedford

 

 Principal Accounting Officer and Principal Financial Officer

 

 

 

 

 

 

 

/s/ Thomas Ristow

 

Director

 

March 7, 2013

Thomas Ristow

 

 

 

 

 

 

 

 

 

/s/ Rod Egan

 

Director

 

March 7, 2013

Rod Egan

 

 

 

 

 

 

 

 

 

/s/ Alan Wizemann

 

Director

 

March 7, 2013

Alan Wizemann

 

 

 

 




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