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EX-32 - SPIRITS TIME INTERNATIONAL, INC.exhibit32.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________

 

FORM 10-K


 

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

 

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016

 

Commission File Number:  333-151300

_______________________________

 

SEARS OIL AND GAS CORPORATION

(Exact name of registrant as specified in its charter)

 

NEVADA

 

20-3455830

(State or other jurisdiction of incorporation or organization)

 

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

 

1661 Lakeview Circle

Ogden, Utah 84403

(Address of principal executive offices, including zip code)

 

(801) 399-3632

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

None

 



Securities registered pursuant to Section 12(g) of the Act:

None

 

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

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. 


Yes [  ]    No [X]



Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                                                                           Yes [X]    No [  ]




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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [  ]

  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer[  ]

 

Accelerated filer [  ]

 

 

 

Non-accelerated filer [  ]

(Do not check if smaller reporting company)

 

Smaller Reporting Company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes [X]    No [  ]

 

As of June 30, 2016, the last business day of the registrants most recently completed second fiscal quarter, the aggregate market value of the outstanding shares of the registrant's common stock held by non-affiliates was $104,218, based upon a closing price of $1.80 per common share.

 

As of March 14, 2017, the Registrant had outstanding 181,005 shares of Common Stock with a par value of $0.001 per share.

 


DOCUMENTS INCORPORATED BY REFERENCE

 

     List hereunder the following documents if incorporated by reference and the part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated:  (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933.  The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 31, 2016).

None.

 



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INDEX

SEARS OIL AND GAS CORPORATION

 

 

 

PAGE NO

PART I

 

 

 

 

 

ITEM 1

DESCRIPTION OF BUSINESS

4

ITEM 1A

RISK FACTORS

6

ITEM 1B

UNRESOLVED STAFF COMMENTS

8

ITEM 2

PROPERTIES

8

ITEM 3

LEGAL PROCEEDINGS

8

ITEM 4

MINE SAFETY DISCLOSURES

8

 

 

 

PART II

 

 

 

 

 

ITEM 5

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

8

ITEM 6

SELECTED FINANCIAL DATA

9

ITEM 7

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

9

ITEM 7A

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

10

ITEM 8

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

10

ITEM 9

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

10

ITEM 9A

CONTROLS AND PROCEDURES

10

ITEM 9B

OTHER INFORMATION

11

 

 

 

PART III

 

 

 

 

 

ITEM 10

DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

12

ITEM 11

EXECUTIVE COMPENSATION

13

ITEM 12

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

13

ITEM 13

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

14

ITEM 14

PRINCIPAL ACCOUNTANT FEES AND SERVICES

14

 

 

 

PART IV

 

 

 

 

 

ITEM 15

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

14

 

 

 

SIGNATURES

16

 


 




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PART I.

 

Cautionary Note

 

This Annual Report on Form 10-K contains forward-looking statements which are subject to a number of risks and uncertainties. All statements that are not historical facts are forward-looking statements, including statements about our business strategy, the effect of Generally Accepted Accounting Principles ("GAAP") pronouncements, uncertainty regarding our future operating results and our profitability, anticipated sources of funds and all plans, objectives, expectations and intentions and the statements regarding future potential revenue, gross margins and our prospects for fiscal 2015. These statements appear in a number of places and can be identified by the use of forward-looking terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "future," "intend," or "certain" or the negative of these terms or other variations or comparable terminology, or by discussions of strategy.

 

Actual results may vary materially from those in such forward-looking statements as a result of various factors that are identified in "Item 1A.Risk Factors" and elsewhere in this document. No assurance can be given that the risk factors described in this Annual Report on Form 10-K are all of the factors that could cause actual results to vary materially from the forward-looking statements.  References in this Annual Report on Form 10-K to (i) the "Company," the "Registrant," "Sears, "we," "our," SRSG, and "us" refer to Sears Oil and Gas Corporation.


Investors and security holders may obtain a free copy of the Annual Report on Form 10-K and other documents filed by SRSG with the Securities and Exchange Commission ("SEC") at the SEC's website at http://www.sec.gov. Free copies of the Annual Report on Form 10-K and other documents filed by SRSG with the SEC may also be obtained from SRSG by directing a request to Sears Oil and Gas Corporation, Inc., Attention: Mark A. Scharmann, 1661 Lakeview Circle, Ogden, Utah 84403.

 

ITEM 1

BUSINESS.

 

General


Sears Oil and Gas Corporation (SRSG), a Nevada corporation, was incorporated on October 18, 2005. At the time SRSG was organized its principal business objective was to take advantage of the many and varied opportunities presented within the oil and gas industry.  SRSG intended to exploit multiple revenue streams throughout the natural resources industry, including oil, gas and mining areas. However, after various failed efforts, the principals sold controlling interest in the Company. The Company now seeks another company with which to merge or acquire for stock.  SRSG has never declared bankruptcy, it has never been in receivership, and it has never been involved in any legal action or proceedings. Since incorporation, SRSG has not made any significant purchase or sale of assets, nor has it been involved in any mergers, acquisitions or consolidations.  SRSG has no subsidiaries.  Our fiscal year end is December 31st.

 

Description of Business

 

The Company intends to continue to seek, investigate and, if warranted, acquire an interest in a business opportunity. Management has not established any firm criteria with respect to the type of business with which the Company desires to become involved and will consider participating in a business enterprise in a variety of different industries or areas with no limitation as to the geographical location of the enterprise.  The Companys management will have unrestricted discretion in reviewing, analyzing, and ultimately selecting a business enterprise for acquisition or participation by the Company.  It is anticipated that any enterprise ultimately selected will be selected by management based on its analysis and evaluation of the business and financial condition of the enterprise, as well as its business plan, potential for growth, and other factors, none of which can be anticipated to be controlling.  If the Company is able to locate a suitable business enterprise, the decision to acquire or participate in the enterprise may be made by the Companys board of directors without stockholder approval.  Approval may also be obtained pursuant to the consent of a majority of the Companys stockholders and, since the principal stockholders of the Company own approximately 68% of the Companys outstanding shares, they would be able to approve any transaction with the affirmative vote of a limited number of additional shares.  Further, it is anticipated that the acquisition of or participation in an enterprise may involve the issuance by the Company of a controlling interest in the Company, which would dilute the respective equity interests of the Companys stockholders and may also result in a reduction of the Companys net tangible asset value per share.  


The activities of the Company will continue to be subject to several significant risks which arise primarily as a result of the fact that the Company has no specific business and may acquire or participate in a business opportunity based on the decision of management which will, in all probability, act without the consent, vote, or approval of the Companys stockholders.  The risks faced by the Company are further increased as a result of its limited resources and its inability to provide a prospective business opportunity with additional capital.  (See Item 1A.Risk Factors.)


Although management believes that it is in the best interest of the Company to acquire or participate in a business enterprise, there is no assurance that the Company will be able to locate a business enterprise which management believes is suitable for acquisition or participation



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by the Company or that if an enterprise is located, it can be acquired on terms acceptable to the Company.  Similarly, there can be no assurance that if any business opportunity is acquired, it will perform in accordance with managements expectations or result in any profit to the Company or appreciation in the market price for the Companys shares.


If business opportunities become available, the selection of an opportunity in which to participate will be complex and extremely risky and may be made on managements analysis of the quality of the other companys management and personnel, the anticipated acceptability of new products or marketing concepts, the merit of technological changes, and numerous other factors which are difficult, if not impossible to analyze through the application of any objective criteria.  There is no assurance that the Company will be able to identify and acquire any business opportunity which will ultimately prove to be beneficial to the Company and its stockholders.


It is anticipated that business opportunities may be introduced to the Company from a variety of sources, including its sole officer and director, and his business and social contacts, professional advisors such as attorneys and accountants, securities broker-dealers, venture capitalists, members of the franchise community, and others who may present unsolicited proposals.  


The Company will not restrict its search to any particular business, industry, or geographical location.  The Company may enter into a business or opportunity involving a start-up or new company or an established business.  It is impossible to predict the status of any business in which the Company may become engaged.


The period within which the Company may participate in a business opportunity cannot be predicted and will depend on circumstances beyond the Companys control, including the availability of business opportunities, the time required for the Company to complete its investigation and analysis of prospective business opportunities, the time required to prepare the appropriate documents and agreements providing for the Companys participation, and other circumstances.  


It is impossible to predict the manner in which the Company may participate in a business opportunity.  Specific business opportunities will be reviewed and, on the basis of that review, the legal structure or method deemed by management to be most suitable will be selected.  The structure may include, but is not limited to, mergers, reorganizations, leases, purchase and sale agreements, licenses, joint ventures, and other contractual arrangements.  The Company may act directly or indirectly through an interest in a partnership, corporation, or other form of organization.  Implementing the structure may require the merger, consolidation, or reorganization of the Company with other corporations or forms of business organization, and there is no assurance that the Company would be the surviving entity.  In addition, the current stockholders of the Company may not have control of a majority of the voting shares of the Company following a reorganization transaction.  As part of the transaction, all or a majority of the Companys directors may resign and new directors may be appointed without any vote by the stockholders.


The Company will most likely acquire a business opportunity by issuing shares of the Companys common stock to the owners of the business opportunity.  Although the terms of the transaction cannot be predicted, in many instances the business opportunity entity will require that the transaction by which the Company acquires its participation be tax-free under Sections 351 or 368 of the Internal Revenue Code of 1986 (the Code).  It is anticipated that any business opportunity acquisition will result in substantial additional dilution to the equity of those who were stockholders of the Company prior to the acquisition.


Notwithstanding the fact that the Company is technically the acquiring entity in the foregoing circumstances, generally accepted accounting principles will ordinarily require that the transaction be accounted for as if the Company had been acquired by the other entity owning the business venture or opportunity and, therefore, will not permit a write up in the carrying value of the assets of the other company.


It is anticipated that securities issued in a transaction of this type would be issued in reliance on exemptions from registration under applicable federal and state securities laws.  In some circumstances, however, as a negotiated element of the transaction, the Company may agree to register such securities either at the time the transaction is consummated or under certain conditions or at specified times thereafter.  The issuance of a substantial number of additional securities and their potential sale into any trading market which may develop in the Companys common stock may have a depressive effect on the market price for the Companys common stock.


The Company will participate in a business opportunity only after the negotiation and execution of a written agreement. Although the terms of the agreement cannot be predicted, generally the agreement would require specific representations and warranties by all of the parties thereto, specify certain events of default, detail the terms of closing and the conditions which must be satisfied by each of the parties thereto prior to the closing, set forth remedies on default, and include miscellaneous other terms.


It is emphasized that management of the Company has broad discretion in determining the manner by which the Company will participate in a prospective business opportunity and may enter into transactions having a potentially adverse impact on the current stockholders in that their percentage ownership in the Company may be reduced without any increase in the value of their investment or that the business opportunity in which the Company acquires an interest may ultimately prove to be unprofitable.  The transaction may be consummated without being submitted to the stockholders of the Company for their consideration.  In some instances, however, the proposed participation in a business opportunity may be submitted to the stockholders for their consideration, either voluntarily by the board of directors to seek the stockholders advice or consent or because of a requirement to do so by state law.


The investigation of specific business opportunities and the negotiation, drafting, and execution of relevant agreements, disclosure documents, and other instruments may require substantial management time and attention and substantial costs for accountants, attorneys, and others.  If a decision is made not to participate in a specific business opportunity, the costs previously incurred in the related investigation would not be recoverable.  Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in the loss to the Company of the related costs incurred.


The Companys operations following its acquisition of an interest in a business opportunity will be dependent on the nature of the opportunity and interest acquired.  The specific risks of a given business opportunity cannot be predicted at the present time.


The Company is not registered and does not propose to register as an investment company under the Investment Company Act of 1940 (the Investment Act).  The Company intends to conduct its activities so as to avoid being classified as an investment company under the Investment Act and, therefore to avoid application of the registration and other provisions of the Investment Company Act and the related regulations.


Regulation


It is impossible to predict what government regulation the Company may be subject to until it has acquired an interest in a business opportunity.  The use of assets and/or conduct of businesses which the Company may acquire could subject it to environmental, public health and safety, land use, trade, or other governmental regulations and state or local taxation. In selecting a business opportunity to acquire, management will endeavor to ascertain, to the extent of the limited resources of the Company, the effects of government regulation on the prospective business of the Company.  In certain circumstances, however, such as the acquisition of an interest in a new or start-up business activity, it may not be possible to predict with any degree of accuracy the impact of government regulation.


Competition


The Company encounters substantial competition in its efforts to locate a business opportunity.  The primary competition for desirable investments comes from investment bankers, business development companies, venture capital partnerships and corporations, venture capital affiliates of large industrial and financial companies, small business investment companies, other shell companies, and wealthy individuals.  Most of these entities have significantly greater experience, resources, and managerial capabilities than the Company and are in a better position than the Company to obtain access to attractive business opportunities.


Facilities


The Companys offices are located at 1661 Lakeview Circle, Ogden, UT 84403. Such space is provided to the Company without charge.  


Employees


The Company has no employees and its business and affairs are handled by its president who provides services to the Company on an as needed basis, without compensation.  Management of the Company may engage consultants, attorneys, and accountants on an as needed basis, and does not anticipate a need to engage any full-time employees so long as it is seeking and evaluating business opportunities.  




ITEM 1A

RISK FACTORS

 

Factors Affecting Future Operating Results

 

This Annual Report on Form 10-K contains forward-looking statements concerning our future programs, expenses, revenue, liquidity and cash needs as well as our plans and strategies. These forward-looking statements are based on current expectations and we assume no obligation to update this information, except as required by applicable laws and regulations. Numerous factors could cause actual results to differ significantly from the results described in these forward-looking statements, including the following risk factors.

  

Because our auditors have issued a going concern opinion, there is substantial uncertainty we will continue activities in which case you could lose your investment.

 

Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an ongoing business for the next twelve months. As such we may have to cease activities and you could lose your investment. We will continue to look for a merger

candidate for our business.



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We currently do not have adequate funds to cover the costs associated with maintaining our status as a Reporting Company.


As of December 31, 2016 the Company had approximately $93 cash available.  


We lack an operating history and have losses which we expect to continue into the future. As a result, we may have to suspend or cease activities, which would result in a complete loss of any investment made into the Company.

 

We were incorporated on October 18, 2005 and we have not started any business activities or realized any revenues. We have no operating history upon which an evaluation of our future success or failure can be made. As of December 31, 2016 our net loss since inception was $355,221.  Based upon current plans, we expect to incur operating losses in future periods.


 As a result, we may not generate revenues in the future.

 

If we are able to complete financing through the sale of additional shares of our common stock in the future, then shareholders will experience dilution.

 

The most likely source of future financing presently available to us is through the sale of shares of our common stock. Any sale of common stock will result in dilution of equity ownership to existing shareholders. This means that if we sell shares of our common stock, more shares will be outstanding and each existing shareholder will own a smaller percentage of the shares then outstanding. To raise additional capital we may have to issue additional shares, which may substantially dilute the interests of existing shareholders. Alternatively, we may have to borrow large sums, and assume debt obligations that require us to make substantial interest and capital payments.

 

Because there is currently limited public trading market for our common stock, you may not be able to resell your stock.

 

Our common stock is quoted on the OTC Pink Marketplace, under the symbol SRSG.  We have limited trading.

 

Because our securities are subject to penny stock rules, you may have difficulty reselling your shares.

 

Our shares are penny stocks are covered by section 15(g) of the Securities Exchange Act of 1934 which imposes additional sales practice requirements on broker/dealers who sell the Company's securities including the delivery of a standardized disclosure document; disclosure and confirmation of quotation prices; disclosure of compensation the broker/dealer receives; and, furnishing monthly account statements. For sales of our securities, the broker/dealer must make a special suitability determination and receive from its customer a written agreement prior to making a sale. The imposition of the foregoing additional sales practices could adversely affect a shareholder's ability to dispose of his stock and as a result the investor may lose his entire investment made into the Company. 

 

We are subject to the requirements of section 404 of the Sarbanes-Oxley Act. If we are unable to timely comply with section 404 or if the costs related to compliance are significant, our profitability, stock price and results of operations and financial condition could be materially adversely affected.


We are required to comply with the provisions of Section 404 of the Sarbanes-Oxley Act of 2002, which require us to maintain an ongoing evaluation and integration of the internal controls of our business. We were required to document and test our internal controls and certify that we are responsible for maintaining an adequate system of internal control procedures for the year ended December 31, 2016.


 We evaluated our existing controls for the year ended December 31, 2016. Our Chief Executive Officer and Chief Financial Officer identified material weaknesses in our internal control over financial reporting and determined that we did not maintain effective internal control over financial reporting as of December 31, 2016. The identified material weaknesses did not result in material audit adjustments to our 2016 financial statements; however, uncured material weaknesses could negatively impact our financial statements for subsequent years.

 

We cannot be certain that we will be able to successfully complete the procedures, certification and attestation requirements of Section 404 or that our auditors will not have to report a material weakness in connection with the presentation of our financial statements. If we fail to comply with the requirements of Section 404 or if our auditors report such material weakness, the accuracy and timeliness of the filing of our annual report may be materially adversely affected and could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock. In addition, a material weakness in the effectiveness of our internal controls over financial reporting could result in an increased chance of fraud and the loss of customers, reduce our ability to obtain financing and require additional expenditures to comply with these requirements, each of which could have a material adverse effect on our business, results of operations and financial condition.




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Further, we believe that the out-of-pocket costs, the diversion of managements attention from running the day-to-day operations and operational changes caused by the need to comply with the requirements of Section 404 of the Sarbanes-Oxley Act could be significant. If the time and costs associated with such compliance exceed our current expectations, our results of operations could be adversely affected.

 

ITEM 1B

UNRESOLVED STAFF COMMENTS.


None

 

ITEM 2

PROPERTIES.

 

We do not own any property. The principal offices are located at 1661 Lakeview Circle, Ogden, Utah 84403


ITEM 3 

LEGAL PROCEEDINGS.

 

Sears Oil and Gas is not currently a party to any legal proceedings.


 ITEM 4

MINE SAFETY DISCLOSURES.


 None.


PART II

 

ITEM 5 

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

The Companys common stock is included on the OTC Pink Marketplace under the symbol SRSG.  On March 14, 2017, the published closing price was $2.25 for the Companys common stock on the OTC Pink Marketplace.


At December 31, 2016, there were approximately 35 holders of record of the Companys common stock, as reported by the Companys transfer agent.  In computing the number of holders of record, each broker-dealer and clearing corporation holding shares on behalf of its customers is counted as a single stockholder.


The Following represents trading ranges per quarter.


Quarter Ending

3/31/2015

High   $ NA  Low $ NA

Quarter Ending

6/30/2015  

High   $1.85 Low $1.75

Quarter Ending

9/30/2015

High   $1.85 Low $1.75

Quarter Ending

12/31/2015

High   $1.85 Low $1.75

Quarter Ending

3/31/2016

High   $1.99  Low $1.99

Quarter Ending

6/30/2016  

High   $1.80 Low $1.80

Quarter Ending

9/30/2016

High   $1.80 Low $2.09

Quarter Ending

12/31/2016

High   $2.10 Low $2.93



No dividends have ever been paid on the Companys securities, and the Company has no current plans to pay dividends in the foreseeable future.  


Equity Compensation Plans


We do not have in effect any compensation plans under which our equity securities are authorized for issuance and we do not have any outstanding stock options.


Transfer Agent


Presidents Stock Transfer, Suite 215-515 West Pender Street, Vancouver, B.C., V6B 6H5, Canada, serves as the transfer agent and registrar for our common stock.


Recent Sales of Unregistered Securities




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None.


Issuer Purchases of Equity Securities


We have not adopted a stock repurchase plan and we did not purchase any shares of our equity securities during the 2016 fiscal year.

 

   

ITEM 6

SELECTED FINANCIAL DATA.

 

Not Applicable.  The Company is a smaller reporting company.

 

ITEM 7 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion is intended to assist in the understanding and assessment of significant changes and trends related to the results of operations and financial condition of Sears Oil and Gas Corporation for the years ended December 31, 2016 and 2015.


The Company is a shell company that conducts no active business operations and is seeking business opportunities for acquisition or participation by the Company.


The Report of Independent Registered Public Accounting Firm on the Companys 2016 audited financial statements addresses an uncertainty about the Companys ability to continue as a going concern, indicating that the Company has incurred losses since its inception and has no on-going operations.  The report further indicates that these factors raise substantial doubt about the Companys ability to continue as a going concern.  At December 31, 2016, the Company had a working capital deficit of $253,221 and a stockholders deficit of $253,221.  The Company incurred net losses of $63,591 and $54,760 for its fiscal years ended December 31, 2016 and 2015, respectively.  The Company has not entered into any agreements or arrangements for the provision of additional debt or equity financing and there can be no assurance that it will be able to obtain the additional debt or equity capital required to continue its operations.  


Critical Accounting Policies

 

The preparation of our financial statements and notes thereto requires management to make estimates and assumptions that affect the amounts and disclosures reported within those financial statements. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, contingencies, litigation and income taxes. Management bases its estimates and judgments on historical experiences and on various other factors believed to be reasonable under the circumstances. Actual results under circumstances and conditions different than those assumed could result in differences from the estimated amounts in the financial statements. There have been no material changes to these policies during fiscal 2016 and 2015.  As of December 31, 2016 the Company has not identified any critical estimates that are used in the preparation of the financial statements.

 

Liquidity and Capital Resources. As of December 31, 2016 we had cash of $93 and a negative working capital of $253,221.  This compares with cash of $1,119 and negative working capital of $189,630 as of December 31, 2015.


Net cash used by operating activities totaled $28,751 for the year-ended December 31, 2016 consisting of a loss from operations of $63,591 and a change in accounts payable and accrued expenses of $24,012 and a change in accrued interest related parties of $10,828. This compares with net cash used in operating activities of $37,749 for the year-ended December 31, 2015 consisting of a loss from operations of $54,760 and a change in accounts payable and accrued expenses of $6,233 and a change in accrued interest related parties of $10,778.


There were no investing activities in either the year-ended December 31, 2016 or 2015.


Net cash provided by financing activities totaled $27,725 for the year-ended December 31, 2016 consisting of loans and advances from related parties.  This compares with net cash provided by financing activities of $38,492 for the year-ended December 31, 2015 consisting of loans and advances from related parties of $39,288 which were offset by payments made against those loans of $796.  


We must secure additional funds in order to continue our business. We will be required to secure a loan to pay expenses relating to filing this report including legal, accounting and filing fees.  We believe that we will be able to obtain this loan from a current shareholder of the Company; however we cannot provide any assurance that we will be able to raise additional proceeds or secure additional loans in the future to cover our expenses related to maintaining our reporting company status.  Furthermore, there is no guarantee we will receive the required financing to complete our business strategies; we cannot provide any assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations.  If we are unable to accomplish raising adequate funds then any it would be likely that any investment made into the Company would be lost in its entirety.


Results of Operations . We did not have revenue for either the year-ended December 31, 2016 or 2015. For the year-ended December 31, 2016, we incurred $34,971 of administrative expenses compared to $32,379 for the year-ended December 31, 2015.  For the year-ended December 31, 2016 we incurred $28,620 of interest expense on a note payable. This compares with $22,381 of interest expense for the year-ended December 31, 2015.


As a result of the foregoing, we incurred a loss of $63,591 for the year-ended December 31, 2016 compared to a loss of $54,760 for the year-ended December 31, 2015. Since incorporation we have incurred a loss of $355,221.

  

Off-Balance Sheet Arrangements. None

 

Contractual Obligations.  None


Recent Accounting Pronouncements


Except as otherwise disclosed herein, the Company has not adopted any new accounting policies that would have a material impact on the Companys financial condition, changes in financial condition or results of operations.


On June 10, 2014, the Financial Accounting Standards Board ("FASB") issued update ASU 2014-10, Development Stage Entities (Topic 915).   Amongst other things, the amendments in this update removed the definition of development stage entity from Topic 915, thereby removing the distinction between development stage entities and other reporting entities from US GAAP.  In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information on the statements of income, cash flows and shareholders equity, (2) label the financial statements as those of a development stage entity;  (3) disclose a description of the development stage activities in which the entity is engaged and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.  The amendments are effective for annual reporting periods beginning after December 31, 2014 and interim reporting periods beginning after December 15, 2015, however entities are permitted to early adopt for any annual or interim reporting period for which the financial statements have yet to be issued.  The Company has elected to early adopt these amendments and accordingly have not labeled the financial statements as those of a development stage entity and have not presented inception-to-date information on the respective financial statements. 


 

ITEM 7A

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

We do not currently hold any market risk sensitive instruments entered into for hedging transaction risks related to foreign currencies. In addition, we have not entered into any transactions with derivative financial instruments for trading purposes.


ITEM 8 

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

Our financial statements appear beginning on page F-1, immediately following the signature page of this report.


 ITEM 9 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None

 

ITEM 9A

CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2016, these disclosure controls and procedures were ineffective to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commissions rule and forms; and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.



8

8

8


 There have been no material changes in internal control over financial reporting that occurred during the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect the Companys internal control over financial reporting.

Managements Annual Report on Internal Control over Financial Reporting


Our management is responsible for establishing and maintaining adequate internal control over financial reporting.   Internal control over financial reporting is a process designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our evaluation of internal control over financial reporting includes using the COSO framework, an integrated framework for the evaluation of internal controls issued by the Committee of Sponsoring Organizations of the Treadway Commission, to identify the risks and control objectives related to the evaluation of our control environment.

Our management conducted an evaluation of the effectiveness of our internal control over financial reporting.  Based on our evaluation, management concluded that our internal control over financial reporting was ineffective for both of our fiscal years ended December 31, 2016 and December 31, 2015, in which there was no material weakness.  A material weakness in internal control over financial reporting is defined by the Public Company Accounting Oversight Boards Audit Standard No. 5 as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.  A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting. 

This annual report does not include an attestation report of the Companys registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation requirements by the companys registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only managements report in this annual report.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls.  Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Controls


There have been no changes in our internal control over financial reporting that occurred during our fiscal year ended December 31, 2016 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

 

ITEM 9B

OTHER INFORMATION.


NONE





9


PART III

 

ITEM 10

DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.


Sears Oil and Gas Corporations executive officer and director and his respective age as of December 31, 2016 are as follows:



Directors:

 

Name of Director

Age

 

Mark A. Scharmann

 58

 

Executive Officers:

  

Name of Officer

Age

Office

 

Mark A. Scharmann

 58

President, Chief Executive Officer

 

 

 

 

 



Chief Financial Officer, Secretary and Treasurer


The term of office for each director is one year, or until the next annual meeting of the shareholders.


Biographical Information


Set forth below is a brief description of the background and business experience of our executive officer and director for the past five years


Mark A. Scharmann President and Director    For the past several years Mr. Scharmann has been a private investor in residential real estate and private and public companies.  Mr. Scharmann became interested in investing in emerging growth companies in December 1979 while attending Weber State College. He compiled and edited a publication titled Digest of Stocks Listed on the Intermountain Stock Exchange (Library of Congress Cat. No. 80-82407). In 1981, he compiled and edited an industry directory called the OTC Penny Stock Digest (Library of Congress Cat. No. 80-82471). For the past several years Mr. Scharmann has also consulted with both public and privately held companies relating to management, mergers and acquisitions, debt and equity financing, capital market access, and introductions to investor relations groups. In addition to being and officer and director of the Company, Mr. Scharmann is an officer and director of Bioethics, LTD., a shell company listed on the OTC Markets under the symbol (BOTH). He is an officer of Roycemore Corporation, a private firm specializing in the development and acquisition of self-storage facilities. Mr. Scharmann is a co-founder of wffl.com and wasatchbasketballleague.com, both youth sports information web sites. He graduated from Weber State University, Ogden, UT in 1997 with a Bachelors of Integrated Studies Degree in Business, Psychology and Health Education.


Sear Oil and Gas Corporations Officer and sole Director has not been involved, during the past five years, in any bankruptcy, conviction or criminal proceedings; has not been subject to any order, judgment, or decree, not subsequently reversed or 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; and has not been found by a court of competent jurisdiction, the Commission or the Commodity Futures trading Commission to have violated a federal or state securities or commodities law.


Significant Employees. We do not employ any non-officers who are expected to make a significant contribution to its business.


Corporate Governance


Nominating Committee.   We have not established a Nominating Committee because of our limited operations; and because we have only one director and officer, we believe that we are able to effectively manage the issues normally considered by a Nominating Committee.


Audit Committee.   We have has not established an Audit Committee because of our limited operations; and because we have only one director and officer, we believe that we are able to effectively manage the issues normally considered by a Audit Committee.

 

Code of Ethics. We have adopted a Code of Ethics for our principal executive and financial officers.  Our Code of Ethics is filed as an Exhibit to our registration statement filed on May 30, 2008.


ITEM 11

EXECUTIVE COMPENSATION.

 

Summary Compensation Table

 

 

Annual Compensation

 

Long-Term Compensation

 

 

Name and

Principal Position

Year

Salary ($)

Bonus

Other Annual Compensation ($)

 

Restricted Stock Awards ($)

Securities Underlying Options (#)

LTIP Payouts ($)

All Other Compensation ($)

 

 

 

 

 

 

 

 

 

 

Mark A. Scharmann

2015

-

-

-


-

-

-

-

Officer and Director

2016

-

-

-


-

-

-

-

 

 

 

 

 

 

 

 

 

 


There has been no cash payment paid to the executive officer for services rendered in all capacities to us for the period ended December 31, 2016. There has been no compensation awarded to, earned by, or paid to the executive officer by any person for services rendered in all capacities to us for the fiscal period ended December 31, 2016.  No compensation is anticipated within the next six months to any officer or director of the Company.


Stock Option Grants

 

We did not grant any stock options to the executive officer during the most recent fiscal period ended December 31, 2016.  We have also not granted any stock options to the executive officer of the Company.


 ITEM 12 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.


 The following table provides the names and addresses of each person known to Sears Oil and Gas Corporation to own more than 5% of the outstanding common stock as of December 31, 2016, and by the Officers and Directors, individually and as a group. Except as otherwise indicated, all shares are owned directly.

 


Title Of Class

Name, Title and Address of Beneficial Owner of Shares

 

Amount of Beneficial Ownership

 

       

 

 

 

 

 

 

 

  

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common

Mark A. Scharmann, President and Director

1661 Lakeview Cir, Ogden, UT 84403

 

 

61,553

 

 

 

34.01

%

 

 

 

 















Common

Garrison Capital, LLC

8900 East Pinnacle Peak Road, STE E200

Scottsdale, AZ 85255

 

 

61,553

 

 

 

34.01

%

 

 

 

 















Common 

Max Kern

6018 South Lima Way

Englewood, CO 80111

 

 

12,500

 

 

 

6.91

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All Directors and Officers as a group

 

 

61,553

 

 

 

34.01

%

 

 

 

 


The percent of class is based on 181,005 shares of common stock issued and outstanding as of December 31, 2016.

 

ITEM 13

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.


During the year ended December 31, 2016, related parties of the company loaned a total of $27,725 to the Company in order to pay for expenses and continue the reporting requirements with the Securities and Exchange Commission.  The balance due to these related parties was $143,658 as of December 31, 2016.  There were no other material transactions between the Company and any Officer, Director or related party.  



11


Other than the foregoing, there has not, since the date of incorporation, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us.


 Any future transactions between us and our Officers, Directors, and Affiliates will be on terms no less favorable to us than can be obtained from unaffiliated third parties. Such transactions with such persons will be subject to approval of our Board of Directors.


ITEM 14

PRINCIPAL ACCOUNTANT FEES AND SERVICES.


The amounts paid to our independent auditing firm for each of the past two calendar years are as follows:

2016

2015

Auditing                         

$7,600

$8,600

Tax services

Other servicesi

________         __________

 Total                               

$7,600

$8,600

PART IV

 

ITEM 15

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)

The following documents have been filed as a part of this Annual Report on Form 10-K.


1.

Financial Statements


 

Page

Report of Independent Registered Public Accounting Firm

F-17

Balance Sheets

F-18

Statements of Operations

F-19

Statements of Stockholders' Equity

F-20

Statements of Cash Flows

F-21

Notes to Financial Statements

F-22-26


2.

Financial Statement Schedules.

All schedules are omitted because they are not applicable or not required or because the required information is included in the Financial Statements or the Notes thereto.


3.

Exhibits.

The following exhibits are filed as part of, or incorporated by reference into, this Annual Report:



Exhibit

Number


SEC Reference Number




Title of Document




Location








  3.1


3


Articles of  Incorporation


Incorporated by Reference(1)

  3.2


3


Bylaws


Incorporated by Reference(1)

31.1


31


Section 302 Certification of Chief Executive and Chief Financial Officer


This Filing

32.1


32


Section 1350 Certification of Chief Executive and Chief

Financial Officer


This Filing

101.INS(2)




XBRL Instance Document


This Filing

101.SCH(2)




XBRL Taxonomy Extension Schema


This Filing

101.CAL(2)




XBRL Taxonomy Extension Calculation Linkbase


This Filing

101.DEF(2)




XBRL Taxonomy Extension Definition Linkbase


This Filing

101.LAB(2)




XBRL Taxonomy Extension Label Linkbase


This Filing

101.PRE(2)




XBRL Taxonomy Extension Presentation Linkbase


This Filing








(1)Incorporated by reference to Exhibits 3(i) and 3(ii) of the Company 2003 Form 10-KSB report, filed March 30, 2004.

(2)XBRL information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and is not subject to liability under those sections, is not part of any registration statement or prospectus to which it relates and is not incorporated or deemed to be incorporated by reference into any registration statement, prospectus or other document.



 



SIGNATURE

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


 

SEARS OIL AND GAS CORPORATION

 

 

 

 

 

 

By:

/s/ Mark A. Scharmann

 

 

 

Mark A. Scharmann

 

 

 

President

 

 

 

Chief Executive Officer, Director

 

 

 

 

By: /s/ Mark A. Scharmann

 

 

 

 Mark A. Scharmann

Chief Financial Officer

 

 

 

  Treasurer, Secretary,

 

 

 

 

 

 

 

Date: April 13, 2017

 




13


PRITCHETT, SILER & HARDY, P.C.

CERTIFIED PUBLIC ACCOUNTANTS

A PROFESSIONAL CORPORATION

1438 NORTH HIGHWAY 89, SUITE 130

FARMINGTON, UTAH 84025

 (801) 447-9572     FAX (801) 447-9578


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders

Sears Oil and Gas Corporation

Salt Lake City, Utah


We have audited the accompanying balance sheets of Sears Oil and Gas Corporation as of December 31, 2016 and 2015 and the related statements of operations, stockholders deficit and cash flows for the years then ended. These financial statements are the responsibility of the Companys management.  Our responsibility is to express an opinion on these financial statements based on our audits.


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


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sears Oil and Gas Corporation as of December 31, 2016 and 2015 and the results of its operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  The Company has suffered recurring losses and has no operations which raise substantial doubt about its ability to continue as a going concern.  Managements plans in regard to these matters are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/s/ Pritchett, Siler & Hardy, P.C.



Pritchett, Siler & Hardy, P.C

Farmington, Utah

April 10, 2017


SEARS OIL AND GAS CORPORATION

Balance Sheets











ASSETS


















December 31,


December 31,








2016


2015











CURRENT ASSETS



















Cash and cash equivalents





$                 93


$            1,119













TOTAL ASSETS





$                 93


$            1,119





















LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)











CURRENT LIABILITIES



















Accounts payable





 $          14,105


 $            2,884


Accrued interest





             53,404


             40,613


Accrued interest - related parties





             27,147


             16,319


Loans payable - related parties





             88,658


             60,933


Convertible notes payable





             15,000


             15,000


Convertible notes payable - related parties




             55,000


             55,000













Total Current Liabilities





           253,314


           190,749













TOTAL LIABILITIES





           253,314


           190,749











STOCKHOLDERS' EQUITY (DEFICIT)



















Common stock, $0.001 par value; 100,000,000 shares








 authorized, 181,005 shares issued and outstanding




                  181


                  181


Additional paid-in capital





           101,819


           101,819


Accumulated deficit





         (355,221)


         (291,630)













Total Stockholders' Equity (Deficit)





         (253,221)


         (189,630)













TOTAL LIABILITIES AND STOCKHOLDERS'  EQUITY (DEFICIT)


 $                 93


 $            1,119











The accompanying notes are an integral part of these financial statements.


SEARS OIL AND GAS CORPORATION

Statements of Operations


















For the Years Ended








December 31,








2016


2015











NET REVENUES





 $                   -


 $                   -











OPERATING EXPENSES



















Selling, general and administrative





             34,971


             32,379













Total Operating Expenses





             34,971


             32,379











LOSS FROM OPERATIONS





           (34,971)


           (32,379)











OTHER INCOME (EXPENSES)



















Interest expense





           (28,620)


           (22,381)













Total Other Income (Expenses)





           (28,620)


           (22,381)











LOSS BEFORE INCOME TAXES





           (63,591)


           (54,760)











PROVISION FOR INCOME TAXES





                      -


                      -











NET LOSS





 $        (63,591)


 $        (54,760)











BASIC NET LOSS PER SHARE





 $            (0.35)


 $            (0.30)











WEIGHTED AVERAGE NUMBER OF








 SHARES OUTSTANDING





           181,005


           181,005











The accompanying notes are an integral part of these financial statements.


SEARS OIL AND GAS COMPANY

Statements of Stockholders' Equity (Deficit)

For the Period January 1, 2015 through December 31, 2016
















Additional




Total



Common Stock


Paid-In


Accumulated


Stockholders'



Shares


Amount


Capital


Deficit


Equity (Deficit)












Balance, January 1, 2015


            181,005


                  181


            101,819


          (236,870)


          (134,870)












Net loss for the year ended











 December 31, 2015


                      -


                      -


                      -


            (54,760)


            (54,760)












Balance, December 31, 2015


            181,005


                  181


            101,819


          (291,630)


          (189,630)












Net loss for the year ended











 December 31, 2016


                      -


                      -


                      -


            (63,591)


            (63,591)












Balance, December 31, 2016


            181,005


 $               181


 $         101,819


 $        (355,221)


 $        (253,221)












The accompanying notes are an integral part of these financial statements.


SEARS OIL AND GAS CORPORATION

Statements of Cash Flows


















For the Years Ended








December 31,








2016


2015











CASH FLOWS FROM OPERATING ACTIVITIES

















Net loss





 $        (63,591)


 $        (54,760)

Adjustments to reconcile net loss to net cash







 used by operating activities:








Changes in operating assets and liabilities:










Accounts payable and accrued interest




             24,012


               6,233



Accrued interest - related parties





             10,828


             10,778













Net Cash Used by Operating Activities




           (28,751)


           (37,749)











CASH FLOWS FROM INVESTING ACTIVITIES




                      -


                      -











CASH FLOWS FROM FINANCING ACTIVITIES


















Proceeds from loans payable - related parties




             27,725


             39,288


Payments on loans payable - related parties




                      -


                (796)













Net Cash Provided by Financing Activities




             27,725


             38,492











INCREASE IN CASH AND CASH EQUIVALENTS




             (1,026)


                  743











CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD


               1,119


                  376











CASH AND CASH EQUIVALENTS AT END OF PERIOD




 $                 93


 $            1,119











SUPPLEMENTAL DISCLOSURES:



















Cash paid for interest





 $            5,000


 $            1,204


Cash paid for income taxes





 $                   -


 $                   -











The accompanying notes are an integral part of these financial statements.






SEARS OIL AND GAS CORPORATION

Notes to the Financial Statements

December 31, 2016 and 2015


NOTE 1 - ORGANIZATION AND HISTORY


Sears Oil and Gas Corporation (the Company) was incorporated on October 18, 2005 in the State of Nevada. The Company was formed to use a patented technology to produce crude oil from tar sands deposits. The Company will also conduct administrative, correlated transportation and delivery of product, financial management, and the marketing and sales programs of the operation. The Company has not commenced principle operations.


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES


Basic Loss Per Share - The computations of basic loss per share of common stock are based on the weighted average number of shares outstanding at the date of the financial statements. There are no common stock equivalents outstanding.


  

For the Year Ended

December 31, 2016

 

Loss

(Numerator)

Shares

(Denominator)

Per Share

Amount

$             (63,591)

181,005

$             (0.35)

 

For the Year Ended

December 31, 2015

 

Loss

(Numerator)

Shares

(Denominator)

Per Share

Amount

$             (54,760)

181,005

$             (0.30)


Income Taxes - The Financial Accounting Standards Board (FASB) has issued FASB ASC 740-10.  FASB ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements.  This standard requires a company to determine whether it is more likely than not that a tax position will be sustained will be sustained upon examination based upon the technical merits of the position.  If the more-likely-than- not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.  As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740-10.


Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.


At December 31, 2016 the Company had net operating loss carryforwards of approximately $355,000 that may be offset against future taxable income through 2036.  No tax benefits have been reported in the financial statements, because the potential tax benefits of the net operating loss carry forwards are offset by a valuation allowance of the same amount.


Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations.  Should a change in ownership occur, net operating loss carryforwards may be limited as to use in the future.


Net deferred tax assets consist of the following components as of December 31, 2016 and 2015:



          2016


            2015

Deferred tax assets:




NOL Carryover

$     138,534


$       113,733

Valuation allowance

     (138,534)


            (113,733)

Net deferred tax asset

$   -


$   -





 

SEARS OIL AND GAS CORPORATION

Notes to the Financial Statements

December 31, 2016 and 2015


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)


The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates to pretax income from continuing operations for the years ended December 31, 2016 and 2015 due to the following:



2016


2015

Current Federal Tax (34%)

$               21,621


$                 18,618

Current State Tax (5%)

                   3,180


                     2,738

Change in valuation allowance

(24,801)


(21,356)


$

-


$

-


A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:




Year ended December 31,



2016


2015

Beginning balance


$ -


$ -

Additions based on tax positions related to current year


-


-

Additions for tax positions of prior years


-


-

Reductions for tax positions of prior years


-


-

Reductions in benefit due to income tax expense


-


-

Ending balance


$ -


$ -


At December 31, 2016, the Company had no unrecognized tax benefits that, if recognized, would affect the effective tax rate.


The Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.


The Company includes interest and penalties arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income taxes.  As of December 31, 2016 and 2015, the Company had no accrued interest or penalties related to uncertain tax positions.


The tax years that remain subject to examination by major taxing jurisdictions are those for the years ended December 31, 2016, 2015 and 2014.


Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.


Fair Value of Financial Instruments - On January 1, 2008, the Company adopted FASB ASC 820-10-50, Fair Value Measurements.  This guidance defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures.  The three levels are defined as follows:


Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.


Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.







SEARS OIL AND GAS CORPORATION

Notes to the Financial Statements

December 31, 2016 and 2015


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)


The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.


In August 2014, FASB issued Accounting Standards Update (ASU) No. 2014-15 Preparation of Financial Statements Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern.    Under generally accepted accounting principles (GAAP), continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entitys liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entitys liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 205-30, Presentation of Financial StatementsLiquidation Basis of Accounting. Even when an entitys liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entitys ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this Update should be followed to determine whether to disclose information about the relevant conditions and events.  The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.  The Company will evaluate the going concern considerations in this ASU, however, at the current period, management does not believe that it has met conditions which would subject these financial statements for additional disclosure.


We have reviewed accounting pronouncements issued during the past two years and have adopted any that are applicable to our company.  We have determined that none had a material impact on our financial position, results of operations, or cash flows for the years ended December 31, 2016 and 2015.


Long-lived Assets - The Companys long lived assets are recorded at its cost. The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.


Concentration of Risk - Cash - The Company at times may maintain a cash balance in excess of insured limits. At December 31, 2016, the Company has no cash in excess of insured limits.


SEARS OIL AND GAS CORPORATION

Notes to the Financial Statements

December 31, 2016 and 2015


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)


Revenue Recognition - The Company will determine its revenue recognition policy when it determines a business model and achieves successful operations.  


Accounts Receivable - Accounts receivable are carried at the expected net realizable value. The allowance for doubtful accounts is based on management's assessment of the collectability of specific customer accounts and the aging of the accounts receivables.  If there were a deterioration of a major customer's creditworthiness, or actual defaults were higher than historical experience, our estimates of the recoverability of the amounts due to us could be overstated, which could have a negative impact on operations.


Cash and Cash Equivalents - For purposes of the Statement of Cash Flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes.


Property and Equipment - Property and equipment are carried at cost, net of accumulated depreciation. Depreciation is computed straight-line over periods to be determined based on the nature of the assets.


Reclassification Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.


NOTE 3 -   GOING CONCERN

 

The Companys financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  However, the Company does not have significant cash or other current assets, nor does it have an established source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern.  The Company intends to raise additional capital when required to produce crude oil from tar sands.  When and if these activities provide sufficient revenues it would allow it to continue as a going concern. In the interim the Company is working toward raising operating capital through the private placement of its common stock or debt instruments.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations.  The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.


NOTE 4 LOANS AND ADVANCES FROM RELATED PARTIES


During the years ended December 31, 2016 and 2015, the sole officer and director of the company and another affiliated shareholder made loans to the Company in order to pay for expenses and continue the reporting requirements with the Securities and Exchange Commission.  These loans accrue interest at the rate of 12% per annum, are due on demand and are not convertible into common stock of the Company.


During the year ended December 31, 2016, these related parties loaned a total of $27,725 to the Company.  Interest in the amount of $9,228 accrued on these loans and interest in the amount of $5,000 was paid.


During the year ended December 31, 2015 these related parties loaned a total of $39,288 to the Company and the Company paid $796 back against these loans.  Interest in the amount of $5,382 accrued on these loans and interest in the amount of $1,204 was paid.


As of December 31, 2016 the balance due to these related parties for these loans was $88,658 principal and accrued interest of $8,866.


NOTE 5 ISSUANCE OF CONVERTIBLE PROMISSORY NOTES


During the year ended December 31, 2014, the Company issued a $40,000 convertible promissory note to the sole officer and director of the Company and a $15,000 convertible promissory note to another affiliated shareholder (the Convertible Notes). The Convertible Notes have a term of one year and accrue interest at the rate of 12% per annum. The holders of the Convertible Notes, may, at their option, convert all or any portion of the outstanding principal balance of, and all accrued interest on the Convertible Notes into shares of the Companys common stock, par value $0.001 per share, at a conversion rate of $1.00 per share. For the years ended December 31, 2016 and 2015 interest accrued on these Notes in the amounts of $6,600 and $6,600 respectively. No interest has been paid on these Notes.

SEARS OIL AND GAS CORPORATION

Notes to the Financial Statements

December 31, 2016 and 2015


NOTE 5 ISSUANCE OF CONVERTIBLE PROMISSORY NOTES (Continued)


As of December 31, 2016 the balance due to these related parties for these Notes was $55,000 principal and accrued interest of $18,281. (See Note 6)


During the year ended December 31, 2009, a shareholder of the Company loaned $15,000 to the Company. The note was later assigned to two non-affiliated entities. The Notes are accruing interest at the default rate of 23% per annum. The two holders of these Notes may each, at their option, convert all of the outstanding principal balance of, and all accrued interest on each Note into 1,500,000 shares of the Companys common stock, par value $0.001 per share. For the years ended December 31, 2016 and 2015 interest accrued on these Notes in the amounts of $12,792 and $10,399 respectively. As of December 31, 2016 the balance due for these Notes was $15,000 principal and accrued interest of $53,404.


NOTE 6  CONVERTIBLE NOTES AND LOANS PAYABLE RELATED PARTIES


Convertible notes and loans payable related parties consisted of the following:







December 31, 2016


December 31, 2015

Loans payable to related parties, interest at 12%  per annum, due on demand


           88,658


 60,933

Convertible notes payable to related parties, interest at 12% per annum, due on March 7, 2015 (in default), convertible into common stock at $1.00 per share


55,000


55,000

Total Convertible Notes and Loans Payable Related Parties


143,658


115,933

Less: Current Portion


 (143,658)


 (115,933)

Long-Term Convertible Notes and Loans Payable Related Parties


$

-


$

-


The Company did not record beneficial conversion feature elements on the convertible debt due to the conversion rate of $1.00 per share being greater than the estimated fair market value of the underlying shares on the date of issuance.  


NOTE 7 SUBSEQUENT EVENTS


The Company has evaluated subsequent events for the period of December 31, 2016 through the date the financial statements were issued, and concluded there were no other events or transactions occurring during this period that required recognition or disclosure in its financial statements.