UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the Fiscal Year Ended December 31, 2016

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

For the transition period from ________ to ________

BLACK STALLION OIL AND GAS INC.

(Exact name of registrant as specified in its charter)

Delaware	333-180230	99-0373017
(State or other jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification Number)

633 W. 5th Street, 26th floor
Los Angeles, CA 90071

(Address of principal executive offices)

(213) 223-2071

(Registrant’s Telephone Number)

Securities registered under Section 12(b) of the Exchange Act:

Title of each class	Name of each exchange on which registered
None	Not Applicable

Securities registered under Section 12(g) of the Exchange Act:

Title of class

Common Stock, Par Value $0.0001

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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. x

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

Large accelerated filer	o		Accelerated filer	o
Non-accelerated filer	o	(Do not check if a 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 o No x

On June 30, 2016, the last business day of the registrants most recently completed second quarter, the aggregate market value of the Common Stock held by non-affiliates of the registrant was $865,524, based upon the closing price on that date of the Common Stock of the registrant of $0.04. For purposes of this response, the registrant has assumed that its directors, executive officers and beneficial owners of 5% or more of its Common Stock are deemed affiliates of the registrant.

As of March 31, 2017, there were 249,879,538 shares of the registrant’s $0.0001 par value common stock issued and outstanding.

Documents incorporated by reference: None

TABLE OF CONTENTS

		Page
PART I
Item 1	Business	4
Item 1A	Risk Factors	9
Item 1B	Unresolved Staff Comments	13
Item 2	Properties	13
Item 3	Legal Proceedings	20
Item 4	Mine Safety Disclosures	20
PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
Item 6	Selected Financial Data	25
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	28
Item 8	Financial Statements and Supplementary Data	29
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	52
Item 9A	Controls and Procedures	52
Item 9B	Other Information	52
PART III
Item 10	Directors and Executive Officers and Corporate Governance	53
Item 11	Executive Compensation	55
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	57
Item 13	Certain Relationships and Related Transactions	57
Item 14	Principal Accountant Fees and Services	58
PART IV
Item 15	Exhibits	59

 

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FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors”, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.

As used in this annual report, the terms “Black Stallion”, “we”, “us”, “our” and “our company” refer to Black Stallion Oil and Gas, Inc., unless otherwise indicated.

 

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PART I

ITEM 1. BUSINESS

General Overview

We were incorporated in the state of Delaware on September 14, 2011. Our original business plan was to sell high end vinyl car wraps though the internet to garages and car accessories shops on-line and to eventually sell to the retail consumer, specific car wraps for customized to different cars and models.

Our principal business address is 633 W. 5th Street, 26th Floor, Los Angeles, CA 90071. Our headquarters are located in Buffalo, New York. We have established a fiscal year end of December 31.

On September 3, 2013, our board of directors and a majority of our shareholders approved a change of name of our company from Secure It Corp. to Black Stallion Oil and Gas, Inc.

A Certificate of Amendment to effect the change of name was filed and became effective with the Delaware Secretary of State on September 12, 2013.

In addition to the name change, our board of directors and a majority of our shareholders approved a 60 new for 1 old forward split of our issued and outstanding shares of common stock. Consequently, our issued and outstanding common stock increased from 731,200 to 43,872,000 shares, all with a par value of $0.0001.

These amendments were approved by the Financial Industry Regulatory Authority (FINRA). The forward split and name change became effective on the OTC Markets at the opening of trading on September 18, 2013. Our trading symbol is “BLKG”. Our CUSIP number is 09225H 102.

In connection with a change of management, our company changed our business plan to that of exploration and development of oil and gas properties.

Our company’s new focus is to engage in oil and gas exploration, acquire and develop oil and gas properties, and sell oil and gas produced by these efforts.

We plan to locate and lease existing wells for reactivation for the production of oil and gas that we will then sell, through an operator, to oil and gas brokers and gatherers. The gas sometimes may be sold directly to public utility companies.

During the year ending 2015, our company consolidated a 100% working interest in 12,233.93 acres in oil and gas leases in Teton County, Montana. It also engaged an independent geological firm to identify the most prospective zones and recommendations for additional detailed analysis for these leases.

 

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Our Current Business

Effective February 23, 2014, the Company entered into a lease assignment agreement with West Bakken Energy Holdings, Ltd. Pursuant to the terms of the lease assignment agreement, we have acquired an undivided 100% interest in West Bakken’s interest (a net 50% working interest) in certain oil and gas properties comprising of 12,233.93 acres in Montana, owned by Hillcrest Resources Ltd.

As consideration, the Company agreed to issue 1,100,000 shares of our common stock to West Bakken and to issue one share of common stock at a cost basis of $0.50 per share for the $550,000 paid by West Bakken to Hillcrest. On August 17, 2015, we issued 1,100,000 shares of our common stock to West Bakken pursuant to the lease assignment agreement.

On October 17, 2014, our company entered into and closed a private placement for proceeds of $150,000. Pursuant to the private placement subscription agreement, we issued an aggregate of 300,000 units (each a “Unit”) to one investor at a subscription price of $0.50 per Unit, with each Unit consisting of one common share and one non-transferable share purchase warrant. Each a Warrant is exercisable at $1.00 until January 1, 2017. As of the date of this annual report the shares have not yet been issued by our company.

On September 18, 2015, the company entered into a Master Services Consulting Agreement with Sproule International Limited, a petroleum consulting firm. In accordance with the terms of the agreement, Sproule will conduct a work program on our Woodrow prospect.

On October 2, 2015, we entered into a lease assignment agreement to acquire the remaining 50% working interest in certain oil and gas properties comprising of 12,233.93 acres in Montana, owned by Hillcrest Resources Ltd. As consideration, we agreed to issue pay Hillcrest Resources Ltd. $50,000 in cash, 250,000 shares of our common stock on the closing date, and 250,000 shares of our common stock on the date on which Black Stallion spuds its first well on the property.

Effective October 15, 2015, we closed a private placement by issuing 300,000 units at a price of $0.50 per unit, for gross proceeds of $150,000. Each unit consists of one share of common stock and one non-transferable common stock purchase warrant. As of the date of this annual report the shares have not yet been issued by our company.

Effective October 15, 2015, we closed a private placement by issuing 50,000 units at a price of $1.00 per unit, for gross proceeds of $50,000. Each unit consists of one share of common stock and one non-transferable common stock purchase warrant. Each warrant is exercisable until January 1, 2017 at an exercise price of $1.50 per unit. As of the date of this annual report the shares have not yet been issued by our company.

Effective October 15, 2015, we closed a private placement by issuing 39,063 units at a price of $1.28 per unit, for gross proceeds of $50,000. Each unit consists of one share of common stock and one non-transferable common stock purchase warrant. Each warrant is exercisable until January 1, 2017 at an exercise price of $1.50 per unit. As of the date of this annual report the shares have not yet been issued by our company.

Effective October 15, 2015, we closed a private placement by issuing 27,027 units at a price of $1.85 per unit, for gross proceeds of $50,000. Each unit consists of one share of common stock and one non-transferable common stock purchase warrant. Each warrant is exercisable until January 1, 2017 at an exercise price of $2.00 per unit. As of the date of this annual report the shares have not yet been issued by our company.

Effective October 15, 2015, we closed a Purchase and Sale Agreement by issuing 250,000 units at a price of $1.00 per unit, for deemed proceeds of $250,000. Each unit consists of one share of common stock.

 

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On February 9, 2016, the Company entered into a contractor agreement with Rancho Capital Management Inc. Pursuant to the agreement, Rancho shall serve as a technical consultant in the field of petroleum based activities. Rancho Capital will be compensated $180,000 annually, for a term of five years.

On February 12, 2016, George Drazenovic resigned as president, secretary, treasurer and as a director of our company. Mr. Drazenovic’s resignation was not the result of any disagreements with our company regarding our operations, policies, practices or otherwise. Concurrently with the resignation of Mr. Drazenovic, Ira Morris was appointed as our president, secretary, treasurer and as the sole director of our board of directors.

On February 12, 2016, the Company entered into a twelve-month contracting arrangement with Ira Morris. As compensation for services the Company will pay fees of $5,000 a month, payable $3,400 in cash and $1,600 with common stock of the company valued at 50% of market at the date of conversion. Mr. Morris was entitled to cash compensation of $50,000 upon signing.

On April 8, 2016, the Company entered into a contractor agreement with Rancho Capital Management Inc. Pursuant to the agreement, Rancho will provide the company with financial filings, strategy and advice regarding debt and equity financings, PIPEs and technical knowledge on financings. Rancho Capital will be compensated $120,000 annually, for a term of five years.

On July 15, 2016, the Company entered into a contractor arrangement with Rancho Capital Management Inc. Pursuant to the agreement, Rancho Capital shall provide services related to expertise and experience in raising finance. Rancho Capital will be compensated $120,000 annually, for a term of five years.

On August 1, 2016, the Company entered into a one year contracting arrangement with an unrelated party for contracting services related to expertise and experience in raising finance. As compensation for services the Company will pay fees of $50,000 annually.

On December 21, 2016, the Company announced it has finalized a Memo of Understanding for the acquis ion of certain assets and intellectual property utilized for the establishment of a special purpose operating subsidiary collecting, analyzing and integrating Big Data Microservices information useful to assist in algorithmic development for the financial industry.

Details of Work Program & Sproule’s Involvement

Phase I: Initial Regional Review of Prospect

Regional compilation and synthesis of information on the study area, including a review of the following potential materials:

· Any existing studies or databases such as the June 30, 2014 evaluation of prospective resources undertaken by B. Whelan

· The Hydrodynamic Atlas of the Williston Basin

· Land sale data

· Well locations, tops, shows, production history

· The Exshaw Resource Play Microstudy

· Discovery Digest and Spark publications

· Internet search materials

· Montana State publicly available files

· Public ally available satellite imagery and digital elevation data

· A basemap from seismic vendors of available 2D & 3D seismic data for purchase

· Available data from nearby analogue fields along with their well test and production data

· Any available DST test reports, production test results, production logging interpretations, monthly production volumes by well and pressure histories obtained from the areas of interest

· Any available reservoir fluid property test reports as well as laboratory PVT test reports

  

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Phase II: Enhanced Technical Studies

Phase II will summarize prospect identification and drilling recommendations. These studies may include:

· QC review of potentially purchased 2D or 3D seismic trade data from third party vendors

· Interpretation of the purchased seismic data and integration with available or purchased well data

· Identification of prospects and leads

· Prepare a seismic acquisition program to compliment industry trade seismic data if required

· Interpret potentially acquired seismic

· Finalize geophysical interpretation and synthesis on analogue petrophysical, geophysical, geological, and engineering data

· Identify and recommend a drilling location

· Develop prognosis for exploration well target

· Canvas drilling and completion service providers for indicative costs

· Preliminary economics to determine if drilling warranted

· Present report on drilling prospect including summary of actions for Phase III

· At the Company’s discretion, an NI51-101 compliant Prospective Resource report could be provided at the end of Phase II, summarizing the low, best, and high estimates of petroleum initially-in-place and the undiscovered prospective resources for any prospects identified during Phase II.

Phase III: Drilling and Completion Recommendations

Phase III would involve work on finalizing plans for drilling and completions. These studies may include:

· Finalize geophysical and geological interpretation

· Finalize recommendations on drilling and completions programs

· Final pre-drill economic evaluation

· Establish development plan

· Present report on above recommendations

Phase IV: Drilling and Completion of the Well

Should our company wish to proceed after review of the findings of the Phase III drilling and completion recommendations, Sproule will provide technical assistance to the Company’s drilling, completions and testing contractors as required.

Competition

We are engaged in the acquisition and exploration of oil and gas properties. We compete with other companies for both the acquisition of prospective properties and the financing necessary to develop such properties.

We conduct our business in an environment that is highly competitive and unpredictable. In seeking out prospective properties, we have encountered intense competition in all aspects of our proposed business as we compete directly with other development stage companies as well as established international companies. Many of our competitors are national or international companies with far greater resources, capital and access to information than us. Accordingly, these competitors may be able to spend greater amounts on the acquisition of prospective properties and on the exploration and development of such properties. In addition, they may be able to afford greater geological expertise in the exploration and exploitation of oil and gas properties. This competition could result in our competitors having resource properties of greater quality and attracting prospective investors to finance the development of such properties on more favorable terms. As a result of this competition, we may become involved in an acquisition with more risk or obtain financing on less favorable terms.

 

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Compliance with Government Regulation

Oil and gas operations are subject to various national, state and local governmental regulations. Matters subject to regulation include discharge permits for drilling operations, drilling and abandonment bonds, reports concerning operations, the spacing of wells, and pooling of properties and taxation. From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil and gas wells below actual production capacity in order to conserve supplies of oil and gas. The production, handling, storage, transportation and disposal of oil and gas, by-products thereof, and other substances and materials produced or used in connection with oil and gas operations are also subject to regulation under federal, state and local laws and regulations relating primarily to the protection of human health and the environment. To date, expenditures related to complying with these laws, and for remediation of existing environmental contamination, have not been significant in relation to the results of operations of our company. The requirements imposed by such laws and regulations are frequently changed and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations.

Subsidiaries

We do not have any subsidiaries.

Bankruptcy or Similar Proceedings

We have not been subject to any bankruptcy, receivership or similar proceeding.

Research and Development Costs During the Last Two Years

We have expended $7,000 in research and development costs related to website creation and development during the last two fiscal years.

Intellectual Property

We do not own, either legally or beneficially, any patent or trademark. We own the domain name for our website, www.blackstallionoil.com.

Employees

We are a development stage company and currently have no employees, other than our officers and directors. Mr. Morris, our president, secretary and treasurer, currently devotes 25 hours per week to company matters.

REPORTS TO SECURITY HOLDERS

We are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission and our filings are available to the public over the internet at the Securities and Exchange Commission’s website at http://www.sec.gov. The public may read and copy any materials filed by us with the Securities and Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at 100 F Street N.E. Washington D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-732-0330. The SEC also maintains an Internet site that contains reports, proxy and formation statements, and other information regarding issuers that file electronically with the SEC, at http://www.sec.gov.

 

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ITEM 1A. RISK FACTORS

Much of the information included in this annual report includes or is based upon estimates, projections or other “forward looking statements”. Such forward looking statements include any projections and estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.

Such estimates, projections or other “forward looking statements” involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other “forward looking statements”.

Risks Related to Our Business

We have a history of losses and no revenues, which raise substantial doubt about our ability to continue as a going concern.

As of December 31, 2016, we have incurred accumulated net losses of $1,963,406. We can offer no assurance that we will ever operate profitably or that we will generate positive cash flow in the future. In addition, our operating results in the future may be subject to significant fluctuations due to many factors not within our control. Our profitability will require the successful commercialization of our oil and gas properties. We may not be able to successfully commercialize our properties or ever become profitable.

Our company’s operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. No assurance can be given that we may be able to operate on a profitable basis.

Due to the nature of our business and the early stage of our development, our securities must be considered highly speculative. We have not realized a profit from our operations to date and there is little likelihood that we will realize any profits in the short or medium term.

We will depend almost exclusively on outside capital to pay for the continued operations, exploration, and development of our properties. Such outside capital may include the sale of additional stock and/or commercial borrowing. Capital may not continue to be available if necessary to meet these continuing development costs or, if the capital is available, that it will be on terms acceptable to us. The issuance of additional equity securities by us would result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be unable to continue our business and as a result may be required to scale back or cease operations for our business, the result of which would be that our stockholders would lose some or all of their investment.

 

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A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our operations.

A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because our operations have been primarily financed through the sale of equity securities, a decline in the price of our common stock could be especially detrimental to our liquidity and our continued operations. Any reduction in our ability to raise equity capital in the future would force us to reallocate funds from other planned uses and would have a significant negative effect on our business plans and operations, including our ability to develop new products and continue our current operations. If our stock price declines, we may not be able to raise additional capital or generate funds from operations sufficient to meet our obligations.

We have a history of losses and fluctuating operating results. We expect to continue to incur operating losses and negative cash flow until we receive significant commercial production from our properties

Our loss from operations for the twelve months ended December 31, 2016 was $1,561,189. There is no assurance that we will operate profitably or will generate positive cash flow in the future. In addition, our operating results in the future may be subject to significant fluctuations due to many factors not within our control, such as the unpredictability of when customers will purchase our production and/or services, the size of customers’ purchases, the demand for our production and/or services, and the level of competition and general economic conditions. If we cannot generate positive cash flows in the future, or raise sufficient financing to continue our normal operations, then we may be forced to scale down or even close our operations. Until such time as we generate significant revenues, we expect an increase in development costs and operating costs. Consequently, we expect to continue to incur operating losses and negative cash flow until we receive significant commercial production from our properties.

We have a limited operating history and if we are not successful in continuing to grow our business, then we may have to scale back or even cease our ongoing business operations.

We have limited history of revenues from operations and have limited significant tangible assets. We have yet to generate positive earnings and there can be no assurance that we will ever operate profitably. Our company has a limited operating history and must be considered in the development stage. The success of our company is significantly dependent on a successful acquisition, drilling, completion and production program. Our company’s operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. We may be unable to locate recoverable reserves, extract the reserves economically, and/or operate on a profitable basis. We are in the development stage and potential investors should be aware of the difficulties normally encountered by enterprises in the development stage. If our business plan is not successful, and we are not able to operate profitably, investors may lose some or all of their investment in our company.

Trading of our stock may be restricted by the SEC’s “Penny Stock” regulations, which may limit a stockholder’s ability to buy and sell our stock.

The U.S. Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors.” The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must 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. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of, our common stock.

 

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The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

Trading in our common shares on the OTC Bulletin Board is limited and sporadic making it difficult for our shareholders to sell their shares or liquidate their investments.

Our common shares are currently listed for public trading on the OTC Bulletin Board. The trading price of our common shares has been subject to wide fluctuations. Trading prices of our common shares may fluctuate in response to a number of factors, many of which will be beyond our control. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with no current business operation. There can be no assurance that trading prices and price earnings ratios previously experienced by our common shares will be matched or maintained. These broad market and industry factors may adversely affect the market price of our common shares, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management’s attention and resources.

Because of the early stage of development and the nature of our business, our securities are considered highly speculative.

Our securities must be considered highly speculative, generally because of the nature of our business and the early stage of its development. Accordingly, we have not generated significant revenues nor have we realized a profit from our operations to date and there is little likelihood that we will generate significant revenues or realize any profits in the short term. Any profitability in the future from our business will be dependent upon attaining adequate levels of internally generated revenues through locating and developing economic reserves of oil and gas, which itself is subject to numerous risk factors as set forth herein. Since we have not generated significant revenues, we will have to raise additional monies through either securing industry reserve based debt financing, or the sale of our equity securities or debt, or combinations of the above in order to continue our business operations.

The potential profitability of oil and gas ventures depends upon factors beyond the control of our company.

The potential profitability of oil and gas properties is dependent upon many factors beyond our control. For instance, world prices and markets for oil and gas are unpredictable, highly volatile, potentially subject to governmental fixing, pegging, controls, or any combination of these and other factors, and respond to changes in domestic, international, political, social, and economic environments. Additionally, due to worldwide economic uncertainty, the availability and cost of funds for production and other expenses have become increasingly difficult, if not impossible, to project. These changes and events may materially affect our financial performance.

 

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Adverse weather conditions can also hinder drilling operations. A productive well may become uneconomic in the event water or other deleterious substances are encountered which impair or prevent the production of oil and/or gas from the well. In addition, production from any well may be unmarketable if it is impregnated with water or other deleterious substances. The marketability of oil and gas, which may be acquired or discovered, will be affected by numerous factors beyond our control. These factors include the proximity and capacity of oil and gas pipelines and processing equipment, market fluctuations of prices, taxes, royalties, land tenure, allowable production and environmental protection. These factors cannot be accurately predicted and the combination of these factors may result in our company not receiving an adequate return on invested capital.

Competition in the oil and gas industry is highly competitive and there is no assurance that we will be successful in acquiring the leases.

The oil and gas industry is intensely competitive. We compete with numerous individuals and companies, including many major oil and gas companies, which have substantially greater technical, financial and operational resources and staff. Accordingly, there is a high degree of competition for desirable oil and gas leases, suitable properties for drilling operations and necessary drilling equipment, as well as for access to funds. We cannot predict if the necessary funds can be raised or that any projected work will be completed. Our budget does not anticipate the potential acquisition of acreage although this may change at any time without notice. This acreage may not become available or if it is available for leasing, that we may not be successful in acquiring the leases. There are other competitors that have operations in these areas and the presence of these competitors could adversely affect our ability to acquire additional leases.

The marketability of natural resources will be affected by numerous factors beyond our control, which may result in us not receiving an adequate return on invested capital to be profitable or viable.

The marketability of natural resources, which may be acquired or discovered by us, will be affected by numerous factors beyond our control. These factors include market fluctuations in oil and gas pricing and demand, the proximity and capacity of natural resource markets and processing equipment, governmental regulations, land tenure, land use, regulation concerning the importing and exporting of oil and gas and environmental protection regulations. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an adequate return on invested capital to be profitable or viable.

Oil and gas operations are subject to comprehensive regulation, which may cause substantial delays or require capital outlays in excess of those anticipated causing an adverse effect on our company.

Oil and gas operations are subject to federal, state, and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Oil and gas operations are also subject to federal, state, and local laws and regulations, which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment. Various permits from government bodies are required for drilling operations to be conducted; no assurance can be given that such permits will be received. Environmental standards imposed by federal, provincial, or local authorities may be changed and any such changes may have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages, which it may elect not to insure against due to prohibitive premium costs and other reasons. To date we have not been required to spend any material amount on compliance with environmental regulations. However, we may be required to do so in future and this may affect our ability to expand or maintain our operations.

Exploration and production activities are subject to certain environmental regulations, which may prevent or delay the commencement or continuance of our operations.

In general, our exploration and production activities are subject to certain federal, state and local laws and regulations relating to environmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuance of a given operation. Compliance with these laws and regulations has not had a material effect on our operations or financial condition to date. Specifically, we are subject to legislation regarding emissions into the environment, water discharges and storage and disposition of hazardous wastes. In addition, legislation has been enacted which requires well and facility sites to be abandoned and reclaimed to the satisfaction of state authorities. However, such laws and regulations are frequently changed and we are unable to predict the ultimate cost of compliance. Generally, environmental requirements do not appear to affect us any differently or to any greater or lesser extent than other companies in the industry.

 

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Exploratory and development drilling involves many risks and we may become liable for pollution or other liabilities, which may have an adverse effect on our financial position.

Drilling operations generally involve a high degree of risk. Hazards such as unusual or unexpected geological formations, power outages, labor disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labor, and other risks are involved. We may become subject to liability for pollution or hazards against which it cannot adequately insure or which it may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position and operations.

Any change to government regulation/administrative practices may have a negative impact on our ability to operate and our profitability.

The laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the United States or any other jurisdiction, may be changed, applied or interpreted in a manner which will fundamentally alter the ability of our company to carry on our business.

The actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect on us. Any or all of these situations may have a negative impact on our ability to operate and/or our profitably.

ITEM 1B. UNRESOLVED STAFF COMMENTS

As a “smaller reporting company” we are not required to provide the information required by this Item.

ITEM 2. PROPERTIES

Principal Executive Offices

We do not own any real property. We currently maintain our executive offices at 633 W. 5th Street, 26th Floor, Los Angeles, CA 90071. Our company pays rent of $259.00 per month for this space. Our headquarters are located in Buffalo, New York.

Woodrow Prospect - Teton County, Montana

Effective February 23, 2014, we entered into a lease assignment agreement with West Bakken Energy Holdings, Ltd. Pursuant to the terms of the lease assignment agreement, we have acquired an undivided one-hundred percent interest in West Bakken’s interest (a net 50% working interest) in certain oil and gas properties comprising of 12,233.93 acres in Montana, owned by Hillcrest Resources Ltd.

On October 2, 2015, we entered into a lease assignment agreement to acquire the remaining 50% working interest in certain oil and gas properties comprising of 12,233.93 acres in Montana, owned by Hillcrest Resources Ltd. As a result of these two lease assignment agreements, our company owns a net 100% working interest in certain oil and gas properties comprising 12,233.93 acres in Teton County, Montana.

Our company’s Canadian National Instrument 51-101 Report (June 2014) estimates the Woodrow Prospect to represent net recoverable prospective resources for Black Stallion of 80.8 million barrels of oil (MMBO) and 16.9 billion cubic feet of natural gas (Bcf).¹

____________________

¹ Woodrow Prospect 51-101 report, B.L. Whelan, P. Geo., June 30, 2014.

 

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Located due west of Williston Basin’s prolific Montana-North Dakota Bakken, the Alberta Basin Bakken is expected to deliver approximately 2 to 3 billion barrels of recoverable oil.²

The province surrounding the Woodrow Prospect, meanwhile, may contain as much as 1 billion barrels of oil recoverable (Sandomierski et al., 2002).¹

Advances in horizontal drilling and other modern techniques are being applied within the Alberta Basin Bakken, which features 20-30’ of pay in its critical Middle Member (Sappington) compared to an average pay of 10’ in the Williston Basin.³

Proximity to Production & Activity

Over 280 MMBO has been produced to date from 3 large fields between 12 to 40 miles from the Woodrow Prospect within the Alberta Basin Bakken.⁴

Interest in the Alberta Basin Bakken over the past few years has resulted in major industry players investing in excess of $180 million to acquire land in the fairway’s southern region,⁵ close to the Woodrow Prospect. Among the companies that have invested in the play are ExxonMobil (NYSE:XOM|Market Cap: $405.57B), Shell (NYSE:RDS.A|$228.06B), Occidental (NYSE:OXY|$68.72B), Encana (NYSE:ECA|$13.58B), and Crescent Point Energy (TSX:CPG|$16.38B), who is currently conducting high-impact exploration for conventional and unconventional oil opportunities.⁶

Exploration activity nearby the Woodrow Prospect has included a $41M exploration program on an adjoining acreage, consisting of 3-D seismic, a 7 vertical well program, and a 3 horizontal well drilling program.⁷

The Woodrow Prospect is approximately 6 miles from good pipeline infrastructure, which has served Canadian production and the once prolific Cut Bank oil and gas field;⁸ within 12 miles from the Pondera Field (30 MMBO); and 40 miles from a refinery at Great Falls, Montana.¹

____________________

² Hillcrest Resources Corporate Presentation, Jan. 2012.

³ Norstra Energy website, Oct. 29, 2014.

⁴ Primary Petroleum presentation, May 2013.

⁵ DeeThree Exploration Annual Report, 2010.

⁶ Crescent Point Energy website, Oct. 28, 2014.

⁷ Hillcrest Resources website, Oct. 30, 2013.

⁸ American Association of Petroleum Geologists website, June 2011.

 

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Horizons & Exploration Potential

In June 2014, our company received a Canadian National Instrument 51-101 Report from B.L. Whelan, P. Geo. on the 12-lease Woodrow Prospect.¹ The author reviewed the available technical data, reports derived from the public domain, and information from wells within the leases and currently producing wells in adjacent fields.

The Whelan report concludes the Woodrow Prospect offers multiple opportunities for success in oil and gas production across multiple potential targets at shallow depths. The report also recommends an exploration program be carried out on the leases to determine the potential hydrocarbon content of the various formations.¹ Our company is currently developing an exploration program to better determine the Woodrow Prospect’s production potential.

The initial phase of the exploration program is expected to include 3-D seismic procedures and computer treatment of geological and geophysical data.

Geology & Targets

The multi-reservoir Woodrow Prospect lies along the eastern flank of the productive Sweetgrass Arch and at the western end of a province of heavy oil shows in the Jurassic Swift sandstone. The area is considered to be of high potential due to the possibility of traps in multiple zones. The prospect’s shallow-depth targets include both heavy oil in the Jurassic Swift Formation (estimated at 1,500’), conventional oil in the Sun River (approximately 1,800’), Devonian Duperow and Nisku (estimated at 3,000’ to 3,200’), and the Mississippian Bakken (estimated below 2,000’). The prospect also represents potential gas production from the Duperow as well as the Cretaceous Blackleaf, Cretaceous Bow Island, Dakota, and Cutbank Sands that are found at depths of less than 1,000’.¹

 

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Nearby Production & Prospect Shows

A major target of the Woodrow Prospect is the prolific Sun River Dolomite, which produces oil (30+ MMBO from approximately 350 wells) and gas at depths between 1,900’ to 2,000’ roughly 12 miles to the northwest in the Pondera Oilfield. A recent New Miami horizontal well to the northwest was successfully completed in the Sun River Dolomite with oil production tests in excess of 150 barrels of oil per day (bopd) next to vertical offsets producing 10 bopd, which indicates the economics of the Swift can be enhanced by horizontal drilling and completions.

Within the Woodrow Prospect leases, oil and gas have been produced from the Sun River in 4 wells. The Swift Formation has produced 1.5 MMBO in 2 fields 15 miles to the prospect’s northeast. Within the Woodrow Prospect leases, the Swift is well developed with a section that is typically 25 to 53’ thick, saturated with oil throughout, and possessing excellent porosity (14-30%) over large areas of the prospect. Reports of oil in the Swift have come from 3 wells drilled on the prospect.

Other hydrocarbon shows within the prospect have been associated with the Bow Island, Nisku and Duperow targets for a total of 12 wells within the Woodrow Prospect having hydrocarbon shows with 6 of those being vertical producers.¹ The Bakken Formation continues to attract active leasing from various companies,¹ including Anadarko Petroleum (NYSE: APC|$44.85B) taking 7 new Alberta Bakken permits and assuming ownership of 3 others in Toole County, Montana, in June 2014.⁹

Dee Three Exploration (TSX: DTX|$591.62M), meanwhile, has discovered an oil pool in the play running 14 miles long and 4 miles wide; had drilled 28 horizontal wells in the play as of year-end 2013 with reported production of approximately 4,000 barrels per day of light oil; and planned on drilling 18 more wells in the Alberta Bakken in 2014.¹⁰

Exploration & Development Program

Our company’s initial exploration phase includes plans for a new 3-D seismic program and computer manipulation of data to determine the hydrocarbon potential of the leases. Following the seismic survey, a vertical well will be drilled to test the section. Depending upon the results discovered in the vertical well, a horizontal well program could be initiated to develop the various potential productive zones.

In particular, the Duperow should be considered for a horizontal drilling program to maximize the production potential.

Region - Alberta Basin Bakken

According to the American Association of Petroleum Geologists (AAPG), the Alberta Basin Bakken, which stretches from northwest Montana into Alberta, is a significant new Bakken Shale oil play.¹¹ While estimates vary, the consensus is that the Alberta Basin Bakken is expected to deliver approximately 2 to 3 billion barrels (BBO) of recoverable oil.¹²

The Alberta Basin Bakken is a proven hydrocarbon system,¹³ with its first wells coming on stream in late 2010.¹⁴

____________________

⁹ Oil and Gas Investor website, Aug. 18, 2014.

¹⁰ Oil and Gas Enquirer website, Apr. 30, 2014.

¹¹ American Association of Petroleum Geologists website, June 2011.

¹² Hillcrest Resources Corporate Presentation, Jan. 2012 & Jan. 2014.

¹³ BMO Technical Update: The Alberta Bakken Petroleum System, Apr. 2011

¹⁴ Primary Petroleum presentation, May 2013.

 

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Analog to Williston Basin Bakken

According to industry leaders, what makes the Alberta Bakken attractive is the potential and similarities it shares with the Williston Basin.¹⁵ The Williston Basin’s prolific Montana-North Dakota Bakken has become one of the most significant onshore oil developments in North America in decades.²

The US Geological Survey’s (USGS) assessment of the Williston Basin region in 2013 concluded it contains an estimated mean of 6.7 trillion cubic feet (TCF) of recoverable natural gas and 7.5 BBO of recoverable oil (a twofold increase over the USGS’s 2008 assessment).¹⁶ Since the time of the 2008 USGS assessment, the Williston Basin has produced approximately 450 million barrels of oil (MMBO).¹⁷

Located due west of the Williston Basin is the Alberta Basin Bakken, which the AAPG considers to be an analog to existing Devonian shale oil production.¹¹ While sharing many characteristics with the Williston Basin, the Alberta Basin Bakken features 20-30’ of pay compared to an average of only 10’ in the Williston Basin,¹⁸ and lower drilling costs due to shallower burial depths and a different class of rig being required.¹²

Region Investment & Activity

Industry investment in the Alberta Basin Bakken to date, including investments in land, joint ventures, exploration and drilling, is estimated at approximately $500 million,¹⁵ with experienced companies largely tying up the region’s lands at different times.¹⁹

In June 2014, Anadarko Petroleum (NYSE: APC|Market Cap: $44.85B) took 7 new Alberta Bakken permits and assumed ownership of 3 others in Toole County, Montana, for horizontal wildcats seeking Bakken pay. Included in the 10 permits is Bill Barret Corp.’s 2012 horizontal well, which found the Bakken at 3,200 feet in Rattlesnake Coulee Field. Anadarko’s well completion plans filed with the state include 22 packers and 19 sleeves.²⁰

DeeThree Exploration (TSX: DTX|$591.62M), meanwhile, has discovered an oil pool in the play running 14 miles long and 4 miles wide; had drilled 28 horizontal wells in the play as of year-end 2013 with reported production of approximately 4,000 barrels per day of light oil; and planned on drilling 18 more wells in the Alberta Bakken in 2014.²¹

While minimal news is available on the region’s wells due to most of them being classified as confidential,¹⁵ as of 2011, Montana’s most active driller, Newfield Exploration (NYSE:NFX|$4.01B), had drilled 7 vertical wells, completed and placed on production 2 horizontal wells, and announced that all of its Alberta Bakken wells to date had encountered oil.¹¹

Other major players’ activities in the Alberta Basin Bakken have included Murphy Oil (NYSE:MUR|$9.35B) drilling 2 appraisal wells of a 6-well program in 2011, and later announcing it hit oil in the region’s Three Forks zone.¹⁵ As of early 2013, Murphy’s initial well in the Three Forks zone had been on production for over 300 days and was still achieving rates near 200 barrels a day.²² As of mid-2012, Shell (NYSE:RDS.A|$228.06B) had licensed 4 new wildcat horizontal wells in the Del Bonita area just north of the Montana border, with 1 well drilled.¹⁵

____________________

¹⁵ Petroleum News, May 6, 2012.

¹⁶ US Geological Survey (USGS) website, May 2, 2013.

¹⁷ USGS Assessment of Undiscovered Oil Resources in the Bakken and Three Forks Formations, 2013.

¹⁸ Norstra Energy website, Oct. 29, 2014.

¹⁹ Petroleum News, March 31, 2013.

²⁰ Oil and Gas Investor website, Aug. 18, 2014.

²¹ Oil and Gas Enquirer website, Apr. 30, 2014.

²² Oil and Gas Inquirer website, Mar. 17, 2013.

 

17

Other exploration plans by companies or their joint venture partners have included ExxonMobil (NYSE:XOM|$405.57B), Occidental (NYSE:OXY|$68.72B), Encana (NYSE:ECA|$13.58B), Rosetta Resources (NASDAQ:ROSE|$2.33B), and Crescent Point Energy (TSX:CPG|$16.38B), who is currently conducting high impact exploration on its Alberta Basin Bakken properties for both conventional and unconventional oil opportunities.²³

____________________

²³ Crescent Point Energy website, Oct. 29, 2014.

 

18

Region Estimates & Production

Contributing to the overall consensus that the Alberta Basin Bakken will deliver approximately 2 to 3 BBO of recoverable oil is the estimate from global energy research firm, Wood Mackenzie, that 2.6 BBO may be recovered from the region.¹⁸

According to the AAPG, meanwhile, estimates of the total resource in place vary from 10 to 15 MMBO equivalent per square mile.¹¹

Of the 130+ wells drilled in the Alberta Basin Bakken to test various reservoirs, most have used the modern technique of horizontal drilling,¹⁴ while 1 shale well in particular has been producing in northwest Montana for 35+ years.¹¹

Region Exploration Details

While overall industry investment in the Alberta Basin Bakken is estimated at approximately $500 million,¹⁵ major industry players have invested in excess of $180 million in the region’s southern area,²⁴ close to our company’s Woodrow Prospect.

In particular, Occidental Petroleum (NYSE:OXY|$68.72B) held a 32.5% interest in a property that directly adjoins Black Stallion’s Woodrow Prospect,²⁵ where a $41-million exploration program for 2011/12 included 3-D seismic, a 7 vertical well program and 3 horizontal well drilling program.¹⁴

____________________

²⁴ Dee Three Exploration Annual Report, 2010.

²⁵ Fairfield Sun Times website, Jan. 22, 2013.

 

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Region & Geology

The Alberta Basin Bakken stretches for roughly 175 miles north-to-south by 50 miles east-to-west in northern Montana and southern Alberta.¹³

In Montana, the potential play area includes Glacier, Toole, Pondera and Teton counties. Where it extends across the border into Canada, the Bakken equivalent is known as the Exshaw.¹¹ The region’s dark, organic-rich shale is recognized as an excellent source rock that has produced much of the oil found in conventional reservoirs in Alberta.¹⁹

According to BMO Capital Markets, the Alberta Basin Bakken is interpreted as a Deep Basin Light Tight Oil resource play, with characteristics including pervasive petroleum saturation, upper and lower carbonate reservoir units, and proven production and hydrocarbon recoveries.¹³

The AAPG indicates that, as with the Williston Basin’s Bakken to the east, the Alberta Basin Bakken represents attractive shale oil features, including multiple prospective zones – the Nisku, Bakken-Three Forks and Lodgepole formations – as well as other secondary targets.

The area also represents good pipeline infrastructure, which has served Canadian production and the once prolific Cut Bank oil and gas field.¹¹

ITEM 3. LEGAL PROCEEDINGS

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

 

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for our Common Stock

Our common shares are quoted on the OTC Markets under the symbol “BLKG.” Because we are quoted on the OTC Markets, our securities may be less liquid, receive less coverage by security analysts and news media, and generate lower prices than might otherwise be obtained if they were listed on a national securities exchange.

The following table sets forth the high and low bid prices for our Common Stock per quarter as reported by the OTCQB for the period from January 1, 2016 through December 31, 2016, and January 1, 2015 through December 31, 2015, based on our fiscal year end December 31. These prices represent quotations between dealers without adjustment for retail mark-up, markdown or commission and may not represent actual transactions.

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
2016 - High	$	0.1000	$	0.0878	$	0.0800	$	0.0400
2016 - Low		0.0220		0.0445		0.0299		0.0024
2015 - High		5.0000		2.0000		2.3900		1.2500
2015 - Low		0.5000		0.5000		0.8150		0.0750

Record Holders

As of December 31, 2016, we had outstanding 145,163,921 shares of common stock, which were held by 8 shareholders of record.

Dividends

Since our inception, we have not declared nor paid any cash dividends on our capital stock and we do not anticipate paying any cash dividends in the foreseeable future. Our current policy is to retain any earnings in order to finance our operations. Our board of directors will determine future declarations and payments of dividends, if any, in light of the then-current conditions it deems relevant and in accordance with applicable corporate law.

 

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Securities Authorized for Issuance under Equity Compensation Plans

We have no existing equity compensation plan.

Performance graph

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Recent Sales of Unregistered Securities

On August 4, 2016, the Company issued 50,000,000 shares of common stock at a price of $0.001, pursuant to a debt settlement agreement.

On August 24, 2016, the holder of a convertible note converted a total of $10,000 of principal and $412 of interest into 370,470 shares of our common stock.

On September 8, 2016, the holder of a convertible note converted a total of $10,000 of principal and $436 of interest into 323,251 shares of our common stock.

On September 13, 2016, the holder of a convertible note converted a total of $8,850 of principal and $4 of interest into 315,646 shares of our common stock.

On September 14, 2016, the holder of a convertible note converted a total of $10,000 of principal into 356,506 shares of our common stock.

On September 16, 2016, the holder of a convertible note converted a total of $10,000 of principal and $462 of interest into 380,453 shares of our common stock.

On September 22, 2016, the holder of a convertible note converted a total of $10,000 of principal into 377,529 shares of our common stock.

On September 26, 2016, the holder of a convertible note converted a total of $10,000 of principal and $28 of interest into 379,340 shares of our common stock.

On September 28, 2016, the holder of a convertible note converted a total of $10,000 of principal and $489 of interest into 515,419 shares of our common stock.

On September 29, 2016, the holder of a convertible note converted a total of $10,000 of principal and $44 of interest into 482,683 shares of our common stock.

 

22

On October 10, 2016, the holder of a convertible note converted a total of $10,000 of principal and $508 of interest into 764,254 shares of our common stock.

On October 11, 2016, the holder of a convertible note converted a total of $10,000 of principal and $61 of interest into 654,114 shares of our common stock.

On October 27, 2016, the holder of a convertible note converted a total of $10,000 of principal into 891,265 shares of our common stock.

On October 31, 2016, the holder of a convertible note converted a total of $5,000 of principal and $278 of interest into 465,875 shares of our common stock.

On November 7, 2016, the holder of a convertible note converted a total of $5,000 of principal into 473,485 shares of our common stock.

On November 9, 2016, the holder of a convertible note converted a total of $5,000 of principal and $290 of interest into 582,965 shares of our common stock.

On November 9, 2016, the holder of a convertible note converted a total of $20,000 of principal into 2,217,294 shares of our common stock.

On November 15, 2016, the holder of a convertible note converted a total of $5,000 of principal and $295 of interest into 992,463 shares of our common stock.

On November 15, 2016, the holder of a convertible note converted a total of $5,000 of principal and $26 of interest into 1,128,180 shares of our common stock.

On December 8, 2016, the holder of a convertible note converted a total of $5,000 of principal into 909,091 shares of our common stock.

On December 12, 2016, the holder of a convertible note converted a total of $10,000 of principal and $651 of interest into 2,727,519 shares of our common stock.

On December 12, 2016, the holder of a convertible note converted a total of $8,850 of principal into 1,835,490 shares of our common stock.

On December 15, 2016, the holder of a convertible note converted a total of $5,000 of principal into 1,280,410 shares of our common stock.

On December 16, 2016, the holder of a convertible note converted a total of $5,000 of principal into 2,217,295 shares of our common stock.

On December 20, 2016, the holder of a convertible note converted a total of $10,000 of principal and $664 of interest into 4,729,095 shares of our common stock.

On December 21, 2016, the holder of a convertible note converted a total of $7,000 of principal into 3,636,364 shares of our common stock.

On December 23, 2016, the holder of a convertible note converted a total of $7,500 of principal and $510 of interest into 4,550,903 shares of our common stock.

On December 27, 2016, the holder of a convertible note converted a total of $6,650 of principal into 4,105,572 shares of our common stock.

On December 28, 2016, the holder of a convertible note converted a total of $10,150 of principal into 6,158,358 shares of our common stock.

 

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On December 30, 2016, the holder of a convertible note converted a total of $1,200 of principal and $409 of interest into 1,148,968 shares of our common stock.

On December 30, 2016, the holder of a convertible note converted a total of $7,500 of principal and $518 of interest into 4,555,574 shares of our common stock.

Subsequent Issuances

On January 6, 2017, the holder of a convertible note converted a total of $7,500 of principal and $84 of interest into 5,995,130 shares of our common stock.

On January 19, 2017, the holder of a convertible note converted a total of $6,000 of principal and $84 of interest into 5,531,055 shares of our common stock.

On January 31, 2017, the holder of a convertible note converted a total of $5,000 of principal and $85 of interest into 4,843,314 shares of our common stock.

On February 13, 2017, the holder of a convertible note converted a total of $5,000 of principal and $94 of interest into 5,660,278 shares of our common stock.

On February 16, 2017, the holder of a convertible note converted a total of $7,000 of principal and $141 of interest into 7,934,611 shares of our common stock.

On February 22, 2017, the holder of a convertible note converted a total of $5,000 of principal and $104 of interest into 6,004,835 shares of our common stock.

On February 28, 2017, the holder of a convertible note converted a total of $5,000 of principal and $111 of interest into 6,814,247 shares of our common stock.

On March 8, 2017, the holder of a convertible note converted a total of $5,000 of principal and $119 of interest into 8,532,420 shares of our common stock.

On March 14, 2017, the holder of a convertible note converted a total of $5,250 of principal and $132 of interest into 8,970,548 shares of our common stock.

On March 16, 2017, the holder of a convertible note converted a total of $5,000 of principal and $130 of interest into 8,550,685 shares of our common stock.

On March 22, 2017, the holder of a convertible note converted a total of $5,000 of principal and $196 of interest into 8,660,274 shares of our common stock.

On March 22, 2017, the holder of a convertible note converted a total of $3,750 of principal and $104 of interest into 6,442,603 shares of our common stock.

On March 21, 2017, the holder of a convertible note converted a total of $6,000 of principal and $237 of interest into 10,394,521 shares of our common stock.

On March 29, 2017, the holder of a convertible note converted a total of $6,000 of principal and $241 of interest into 10,401,096 shares of our common stock.

Issuer Repurchases of Equity Securities

None.

 

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ITEM 6. SELECTED FINANCIAL DATA

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our audited financial statements and the related notes for the years ended December 31, 2016 and December 31, 2015 that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this annual report, particularly in the section entitled “Risk Factors” beginning on page 8 of this annual report.

Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Results of Operations

The following summary of our results of operations should be read in conjunction with our audited financial statements for the years ended December 31, 2016 and 2015 which are included herein.

Our operating results for the years ended December 31, 2016 and 2015 are summarized as follows:

	For the years ended
	December 31,			December 31,
	2016			2015
Revenue	$	-		$	-
Operating expenses
Amortization		2,317			2,317
Consulting		415,900			81,000
Filing		17,357			20,857
Finder’s fee		20,590			-
Other G&A expenses		12,937			22,947
Professional fees		55,431			53,770
Rent expenses		4,190			14,078
Website expenses		-			7,000
Total operating expenses		528,721			201,969
Loss from operations		(528,721	)		(201,969	)
Other income/ (expense)
Change in derivative liability		198,106			-
Interest on convertible notes		(1,222,574	)		-
Total other income/expenses		(1,024,468	)		-
Net Profit (Loss)	$	(1,561,189	)	$	(201,969	)

 

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We had no revenue for the years ended December 31, 2016 and 2015. For the year ended December 31, 2016, we had total operating expenses of $528,721 compared to $201,969 for the year ended December 31, 2015. The $321,053 increase in operating expenses in primarily due to consulting fees.

Other income (expense) consisted of gain or loss on derivative valuation, interest expense and uncollectible debt. The gain or loss on derivative valuation is directly attributable to the change in fair value of the derivative liability. Interest expense is primarily attributable the initial interest expense associated with the valuation of derivative instruments at issuance and the accretion of the convertible debentures over their respective terms.

Liquidity and Capital Resources

Working Capital

	At December 31,			At December 31,
	2016			2015
Current Assets	$	160,441		$	28,842
Current Liabilities	$	610,816		$	12,855
Working Capital (Deficit)	$	(450,405	)	$	15,987

Cash Flows

	Year Ended December 31,			Year Ended December 31,
	2016			2015
Net Cash provided by (used in) Operating Activities	$	(1,374,002	)	$	(223,894	)
Net Cash provided by (used in) Investing Activities	$	0		$	(50,000	)
Net Cash provided by (used in) Financing Activities	$	1,373,786		$	250,000
Increase (decrease) in cash and cash equivalents	$	(216	)	$	(23,894	)

As of December 31, 2016, we had total assets of $1,011,599, total liabilities of $618,816, and stockholders’ equity of $392,782, as compared to total assets of $882,317, total liabilities of $12,855 and stockholders’ equity of $869,462 as of December 31, 2015.

We had cash and cash equivalents as of December 31, 2016, of $0 compared to $216 as of December 31, 2015. Our working capital was $(450,405) as at December 31, 2016 compared to a working capital of $15,987 as at December 31, 2015.

Net cash used in our operating activities during the year ended December 31, 2016 was $(1,374,002), as compared to net cash used in operating activities of $(223,894) for the year ended December 31, 2015.

Net cash used in investing activities in the year ended December 31, 2016 was $0, compared to $50,000 used in investing activities during the year ended December 31, 2015.

Net cash provided by financing activities in the year ended December 31, 2016 was $1,373,786, compared to $250,000 provided by financing activities in year ended December 31, 2015.

Going Concern

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.

 

26

Limited Operating History; Need for Additional Capital

There is no historical financial information about us upon which to base an evaluation of our performance. We are an exploration stage corporation and have not generated revenues from operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources. To become profitable and competitive, we will need to realize revenue from our oil and gas sales.

Plan of Operation

We are an exploration stage company with no revenues and a short operating history. Our independent auditor has issued an audit opinion which includes a statement expressing substantial doubt as to our ability to continue as a going concern. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we generate sufficient revenues.

There is no assurance we will ever reach that point. In the meantime, the continuation of our company is dependent upon the continued financial support from our shareholders, our ability to obtain necessary equity financing to continue operations and the attainment of profitable operations.

Our cash balance as of December 31, 2016, is $0. We will require further capital to cover the expenses we will incur during the next twelve months.

Our plan of operation for the next twelve months is to pursue acquisition of leases and/or oil and gas wells which have potential for production, if revenues warrant.

We anticipate spending $150,000 on consulting fees, $50,000 on professional fees, which includes legal costs and fees payable for complying with our reporting obligations, $10,000 in general administrative costs and $15,000 in filing fees. Total expenditures over the next 12 months are therefore expected to be approximately $225,000.

Estimated Net Expenditures During the Next Twelve Months

Description	Amount
Consulting fees	$	150,000
Filing fees	$	15,000
Professional fees	$	50,000
Other costs	$	10,000
Total	$	225,000

We have suffered recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed.

The continuation of our business is dependent upon obtaining further financing, a successful program of development, and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

There are no assurances that we will be able to obtain further funds required for our continued operations. We are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.

 

27

We are not aware of any known trends, demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or decreasing in any material way.

Future Financings

We anticipate continuing to rely on equity sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.

We presently do not have any arrangements for additional financing for the expansion of our exploration operations, and no potential lines of credit or sources of financing are currently available for the purpose of proceeding with our plan of operations.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Recently Issued Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

Contractual Obligations

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLIMENTAL DATA

BLACK STALLION OIL AND GAS INC.

Index to Financial Statements

CONTENTS	PAGE
Report of Independent Registered Public Accounting Firm	30
Balance Sheets as of December 31, 2016 and 2015	31
Statement of Operations for the year ended December 31, 2016 and 2015	32
Statements of Stockholders’ Equity for the year ended December 31, 2016	33
Statements of Cash Flows for the year ended December 31, 2016 and 2015	34
Notes to the Financial Statements	35

 

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REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Black Stallion Oil and Gas Inc.

We have audited the accompanying balance sheets of Black Stallion Oil and Gas Inc. (“the Company”) as of December 31, 2016 and 2015 and the related statements of operations, changes in stockholders’ deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

We were unable to obtain audited financial statements supporting the Company’s working interest in oil and gas leases stated at $850,000, due to the fact that the company couldn’t perform an updated evaluation.

In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to examine evidence regarding the working interest, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of April 30, 2016 and the results of its operations and cash flows for the period described above 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. As discussed in Note 2 to the financial statements, the Company has not established any source of revenue to cover its operating costs. As of December 31, 2016, the Company does not have sufficient working capital and cash resources to meet its planned business objectives. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan regarding these matters is also described in Note 2 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Dov Weinstein & Co. C.P.A. (Isr)

www.wcpa.co.il

Jerusalem, Israel

May 3, 2017

 

30

BLACK STALLION OIL AND GAS INC.
BALANCE SHEETS
	December 31,			December 31,
	2016			2015
ASSETS
Current Assets
Cash and cash equivalents	$	-		$	216
Prepaid expenses		118,788			2,458
Loan to related party		41,465			26,168
Total Current Assets		160,441			28,842
Working interest in oil and gas leases		850,000			850,000
Intangible assets, net		1,158			3,475
TOTAL ASSETS	$	1,011,599		$	882,317
LIABILITIES
Current Liabilities:
Bank overdraft	$	276		$	-
Accounts payable and accrued liabilities		18,554			12,855
Accrued expenses		71,900			-
Notes payable, net of discount		115,477			-
Notes payable, interest		6,680			-
Derivative liabilities		405,929			-
Total Current Liabilities		618,816			12,855
STOCKHOLDERS’ EQUITY
Common stock, $0.0001 par value 6,000,000,000 authorized 145,163,921 shares issued and outstanding at December 31, 2016 45,638,090 shares issued and outstanding at December 31, 2015		14,516			4,564
Additional paid in capital		2,191,672			1,117,115
Common stock subscribed but unissued		150,000			150,000
Accumulated deficit		(1,963,406	)		(402,217	)
Total Stockholders’ Equity		392,782			869,462
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,011,599		$	882,317

The accompanying notes are an integral part of these financial statements

31

BLACK STALLION OIL AND GAS INC.
STATEMENT OF OPERATIONS
	For the years ended
	December 31,			December 31,
	2016			2015
Revenue	$	-		$	-
Operating expenses
Amortization		2,317			2,317
Consulting		415,900			81,000
Filing		17,357			20,857
Finder’s fee		20,590			-
Other G&A expenses		12,937			22,947
Professional fees
Accounting		1,500			4,000
Auditor fees		12,000			8,000
Legal fees		38,932			16,287
Investor relations		860			12,583
Set-up		2,139			12,900
Rent expenses		4,190			14,078
Website expenses		-			7,000
Total operating expenses		528,721			201,969
Loss from operations		(528,721	)		(201,969	)
Other income/ (expense)
Change in derivative liability		198,106			-
Interest on convertible notes		(1,222,574	)		-
Total other income/expenses		(1,024,468	)		-
Net loss before income taxes		(1,561,189	)		(201,969	)
Income tax expense		-			-
Net Profit (Loss)	$	(1,561,189	)	$	(201,969	)
Per share information
Basic, weighted number of common shares outstanding		69,170,507			4,563,890
Net profit (loss) per common share		(0.0226	)		(0.0443	)

The accompanying notes are an integral part of these financial statements

32

BLACK STALLION OIL AND GAS INC.
STATEMENT OF STOCKHOLDERS’ EQUITY
					Additional		Common					Total
	Common Stock				Paid-In		Stock		Accumulated			Shareholders’
	Shares		Amount		Capital		Subscribed		Deficit			Equity
Balances at January 1, 2014		43,872,000		4,387		67,292		-		(108,011	)		(36,332	)
Proceeds from stock subscription -
private placement		-		-		-		150,000		-			150,000
Loss for the year		-		-		-		-		(92,237	)		(92,237	)
Balances at December 31, 2014		43,872,000		4,387		67,292		150,000		(200,248	)		21,431
Common stock subscribed		1,766,090		177		1,049,823		-		-			1,050,000
Loss for the year		-		-		-		-		(201,969	)		(201,969	)
Balances at December 31, 2015		45,638,090		4,564		1,117,115		150,000		(402,217	)		869,462
Shares issued for contractor fees August 3, 2016 @ $0.001		50,000,000		5,000		45,000		-		-			50,000
Conversion of promissory notes to stock July 1, 2016 - September 30, 2016		3,501,297		350		90,376		-		-			90,726
Conversion of promissory notes to stock October 1, 2016 - December 31, 2016		46,024,534		4,602		159,510		-		-			164,113
Reclassification of derivative liabilities to APIC		-		-		779,671		-		-			779,671
Net (loss) for the year		-		-		-		-		(1,561,189	)		(1,561,189	)
Balances at December 31, 2016		145,163,921		14,516		2,191,672		150,000		(1,963,406	)		392,782

The accompanying notes are an integral part of these financial statements

33

BLACK STALLION OIL AND GAS INC.
STATEMENTS OF CASH FLOWS
	For the years ended
	December 31,
	2016			2015
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net profit (loss)		(1,561,189	)		(201,969	)
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of debt discount/note premium		(173,523	)		-
Depreciation and amortization		2,317			2,317
Change in derivative liabilities		405,929			-
Changes in assets and liabilities:
Decrease (increase) in prepaid expenses		(116,330	)
Decrease (increase) in due from related party		(15,486	)		(27,247	)
Increase (decrease) in accounts payable		5,699			3,005
Increase (decrease) in accrued expenses		71,900			-
Increase (decrease) in interest payable		6,680			-
Net cash (used in) provided by operating activities		(1,374,002	)		(223,894	)
Cash flows from investing activities:
Purchase of capital assets		-			(50,000	)
Purchase of intangible assets		-			-
Net cash (used in) provided by investment activities		-			(50,000	)
Cash flows provided by financing activities:
Bank overdraft		276			-
Proceeds from notes payable		289,000			-
Proceeds from the sale of common stock and warrants		-			250,000
Issuance of common stock		1,084,509			-
Net cash (used in) provided by financing activities		1,373,786			250,000
Increase (decrease) in cash		(216	)		(23,894	)
Cash and cash equivalents, beg of year		216			24,110
Cash and cash equivalents, end of year		(0	)		216
Supplemental schedule of noncash investing & financing activities:
Shares issued to settle debt		50,000

The accompanying notes are an integral part of these financial statements

34

BLACK STALLION OIL AND GAS INC.

NOTES TO THE FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

Black Stallion Oil and Gas Inc. (the “Company”) is a Delaware corporation. The Company’s business plan involves exploration and development of oil and gas properties.

On September 10, 2013, the Company changed its name to Black Stallion Oil and Gas Inc (formerly Secure IT Corp) and changed its business plan to that of exploration and development of oil and gas properties.

Basis of Presentation

The Company maintains its accounting records on an accrual basis in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).

These financial statements are presented in US dollars.

Fiscal Year End

The Corporation has adopted a fiscal year end of December 31.

2. GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of December 31, 2016, the Company has insufficient working capital, has accumulated losses from operations of $1,963,406 and has earned no revenues since inception. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements.

To carry out further planned operations, the Company must raise additional funds through additional equity and/or debt issuances. There can be no assurance that this capital will be available, and if it is not, the Company may be forced to curtail or cease exploration and development activities. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the accompanying financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of unproved oil and gas properties, deferred tax assets, asset retirement obligations and legal contingencies. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity, foreign currency, and energy markets have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

 

35

Oil and natural gas properties

The Company follows the full-cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs, are capitalized.

All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is included in loss from continuing operations before income taxes and the adjusted carrying amount of the unproved properties is amortized on the unit-of-production method.

The Company’s oil and gas property represents an investment in unproved properties. These costs are excluded from the amortized cost pool until proved reserves are found or until it is determined that the costs are impaired. All costs excluded are reviewed at least quarterly to determine if impairment has occurred. The amount of any impairment is charged to expense since a reserve base has not yet been established. Impairment requiring a charge to expense may be indicated through evaluation of drilling results, relinquishing drilling rights or other information.

Currently, the Company has no economically recoverable reserves and no amortization base. As of December 31, 2016, the Company’s unproved oil and gas properties consist of capitalized exploration costs of caring value of $850,000.

Limitation on Capitalized Costs

Under the full-cost method of accounting, we are required, at the end of each fiscal quarter, to perform a test to determine the limit on the book value of our oil and natural gas properties (the “Ceiling Test”). If the capitalized costs of our oil and natural gas properties, net of accumulated amortization and related deferred income taxes, exceed the “Ceiling”, this excess or impairment is charged to expense and reflected as additional accumulated depreciation, depletion and amortization or as a credit to oil and natural gas properties. The expense may not be reversed in future periods, even though higher oil and natural gas prices may subsequently increase the Ceiling. The Ceiling is defined as the sum of: (a) the present value, discounted at 10 percent, and assuming continuation of existing economic conditions, of 1) estimated future gross revenues from proved reserves, which is computed using oil and natural gas prices determined as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period (with consideration of price changes only to the extent provided by contractual arrangements including hedging arrangements pursuant to SAB 103), less 2) estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves; plus (b) the cost of properties not being amortized (pursuant to Reg. S-X Rule 4-10 (c)(3)(ii)); plus (c) the lower of cost or estimated fair value of unproven properties included in the costs being amortized; net of (d) the related tax effects related to the difference between the book and tax basis of our oil and natural gas properties.

Cash and Cash Equivalents

Cash and equivalents include investments with initial maturities of three months or less. The Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.

 

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Accounts Receivable and Uncollectible Receivables

Accounts Receivable are recorded at the invoiced amount to the customer and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business, but mitigates associated risks by actively pursuing past due accounts. Receivables that are over 180 days past due are deemed uncollectible and are written off to the statement of operations.

Property, Plant and Equipment

The Company does not own any property, plant and equipment.

Intellectual Properties

The Company has adopted the provisions of ASC 350-50, Website Development Costs. All costs incurred during the planning phase of a website are expensed as research and development.

Costs incurred in the development stage, including the purchase of a domain name, are capitalized and reviewed annually for impairment.

Expenses subsequent to the launch will be expensed as research and development expenses. The Company will expense upgrades and revisions to its website as incurred.

Once the website is available for use, the asset will be amortized over its useful life on a straight line basis, estimated to be 3 years, and is tested for impairment annually.

Oil and Gas Properties and Impairment

The Company follows the full-cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs, are capitalized.

All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is included in loss from continuing operations before income taxes and the adjusted carrying amount of the unproved properties is amortized on the unit-of-production method.

Impairment of Long Lived Assets

The Company reviews and evaluates long-term assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17 if events or circumstances indicate that their carrying amount might not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using the rules of ASC 930-360-35 Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Term Assets.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses are carried at amortized cost and represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.

Earnings per share

Our company computes loss per share in accordance with “ASC-260”, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. In periods of losses, basic and diluted loss per share are the same, as the effect of stock warrants and convertible debt on loss per share is anti-dilutive.

 

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Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive potential shares consist of dilutive shares issuable upon the exercise of outstanding stock warrants using the treasury-stock method and convertible debt computed using as-if converted method. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.

Long Lived Assets Including Goodwill and Other Acquired Intangible Assets

The Company amortizes its intangible assets with definite useful lives over their estimated useful lives and reviews these assets for impairment. The Company typically amortizes its acquired intangible assets with definite useful lives over periods from three to seven years.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs is expanded. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels and which is determined by the lowest level input that is significant to the fair value measurement in its entirety.

These levels are:

Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3- inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

Financial assets and liabilities measured at fair value on a recurring basis:

	Fair Value	December 31, 2016				December 31, 2015
	Input	Carrying Estimated				Carrying Estimated
	Level	Amount		Fair Value		Amount		Fair Value
Derivative Liability	3		405,929		405,929		--		--
Total Financial Liabilities		$	405,929	$	405,929	$	--	$	--

In managements opinion, the fair value of convertible notes payable and advances payable is approximate to carrying value as the interest rates and other features of these instruments approximate those obtainable for similar instruments in the current market. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments.

 

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Income Taxes

The Company records deferred taxes in accordance with FASB ASC No. 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and loss carry-forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

Recent Accounting Pronouncements

The Company has reviewed recently issued accounting pronouncements and noted no new pronouncements that would have a material impact on its results of operations or financial position.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation.

4. WORKING INTEREST IN OIL AND GAS LEASES

On February 23, 2014, the Company entered into a Lease Assignment Agreement with West Bakken Energy Holdings Ltd to acquire from an unaffiliated oil and gas company, an undivided 100% interests (a 50% working interest) in certain oil and gas properties, comprising approximately 12,233.93 acres of land located in Montana, United States.

- As consideration, the Company has agreed to issue 1,100,000 shares of common stock to West Bakken Energy Holdings Ltd at a purchase price of $0.50 per share of common stock, a total of $550,000. The shares were issued to West Bakken Energy Holdings Ltd on August 19, 2015.

On October 2, 2015, the Company entered into a Lease Assignment Agreement with Hillcrest Exploration Ltd to acquire from an unaffiliated oil and gas company, the remaining 50% working interest in certain oil and gas properties, comprising approximately 12,233.93 acres of land located in Montana, United States.

- As consideration, the Company agreed to issue 500,000 shares of common stock to Hillcrest Exploration Ltd at a purchase price of $1 per share and $50,000 cash for total proceeds of $550,000.

- Of the total consideration, $50,000 cash and 250,000 common shares were paid on the date of closing which occurred on October 27, 2015. The remaining 250,000 common shares are contingent and are to be paid on the date that Black Stallion spuds its first oil well on the property. Due to the uncertain nature of oil drilling, management is unable to state that this event is more likely that not to occur. Therefore, the total cost capitalized and payable is excluding this amount and will be reassessed at a future date.

5. INTANGIBLE ASSETS

	December 31, 2016
								Weighted
	Gross							Average
	Carrying		Accumulated			Net Carrying		Useful Life
	Amount		Amortization			Amount		(in Years)
Intellectual property - website	$	6,950	$	(5,712	)	$	1,158		3
Total finite-lived intangible assets	$	6,950	$	(5,712	)	$	1,158

Intangible assets consist of capitalized website development costs. The website entered its operating stage during July 2014. Amortization expenses of $2,317 have been recorded for the year ended December 31, 2016.

 

39

The following table reflects the estimated future amortization expense for the Company’s finite-lived website development costs as of December 31, 2016:

2017	1,158
Total	1,158

6. CONVERTIBLE NOTES PAYABLE

As of December 31, 2016 and 2015, notes payable comprised as the following:

	December 31,			December 31,
	2016			2015
Promissory Note #1		-			-
Promissory Note #2		-			-
Promissory Note #3		-			-
Promissory Note #4		-			-
Promissory Note #5		-			-
Promissory Note #6		46,000			-
Promissory Note #7		44,250			-
Promissory Note #8		44,250			-
Promissory Note #9		-			-
Promissory Note #10		-			-
Promissory Note #11		50,000			-
Promissory Note #12		-			-
Promissory Note #13		25,000			-
Promissory Note #14		20,000			-
Promissory Note #15		59,500			-
Notes payable, principal	$	289,000		$	-
Debt discount/premium		(173,523	)		-
Notes payable, net of discount		115,477			-
Accrued interest		6,680			-
Total notes payable	$	122,157		$	-

Promissory Note #1

On February 5, 2016, the Company received funding pursuant to a convertible promissory note in the amount of $100,000. The note is unsecured, bears interest at 8% per annum and matures on February 5, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. During the years ended December 31, 2016 and 2015, the Company accrued $5,514 and $0, respectively, in interest expense.

Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $183,933, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the years ended December 31, 2016 and 2015, the Company recorded a gain of $13,176 and $0, respectively, due to the change in value of the derivative liability during the period. During the years ended December 31, 2016 and 2015, the debt discount of $100,000 and $0, respectively, was accreted to the statement of operations.

 

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During the year ended December 31, 2016, the Company issued an aggregate of 20,958,241 common shares upon the conversion of principal amount of $100,000 and interest of $5,514. The derivative liability amounting to $172,757 was re-classified to additional paid in capital.

Promissory Note #2

On March 7, 2016, the Company received funding pursuant to a convertible promissory note in the amount of $75,000. The note is unsecured, bears interest at 8% per annum and matures on March 7, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. During the years ended December 31, 2016 and 2015, the Company accrued $1,891 and $0, respectively, in interest expense.

Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $124,730, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the years ended December 31, 2016 and 2015, the Company recorded a loss of $11,967 and $0, respectively, due to the change in value of the derivative liability during the period. During the years ended December 31, 2016 and 2015, the debt discount of $75,000 and $0, respectively, was accreted to the statement of operations.

On September 7, 2016, the principal balance of $75,000 was reassigned (see Promissory Note #9 and #10). The accrued interest of $1,891 was credited to the statement of operations, and the derivative liability amounting to $136,697 was re-classified to additional paid in capital.

Promissory Note #3

On April 15, 2016, the Company entered into a debt settlement agreement with an unrelated party to settle a portion of an outstanding contractual obligation for a convertible promissory note in the amount of $50,000. The note is unsecured, bears interest at 8% annum, and matures on April 15, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. During the years ended December 31, 2016 and 2015, the Company accrued $0 and $0, respectively, in interest expense.

Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $94,863, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the years ended December 31, 2016 and 2015, the Company recorded a gain of $1,507 and $0, respectively, due to the change in value of the derivative liability during the period. During the years ended December 31, 2016 and 2015, the debt discount of $50,000 and $0, respectively, was accreted to the statement of operations.

On April 18, 2016, the principal balance of $50,000 was reassigned (see Promissory Note #4), and the derivative liability amounting to $93,356 was re-classified to additional paid in capital.

Promissory Note #4

On April 18, 2016, the Company executed a convertible promissory note in the amount of $50,000. The note is unsecured, bears interest at 8% per annum and matures on April 18, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. During the years ended December 31, 2016 and 2015, the Company accrued $1,808 and $0, respectively, in interest expense.

 

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Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $93,356, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the years ended December 31, 2016 and 2015, the Company recorded a gain of $21,130 and $0, respectively, due to the change in value of the derivative liability during the period. During the years ended December 31, 2016 and 2015, the debt discount of $50,000 and $0, respectively, was accreted to the statement of operations.

On October 31, 2016, the principal balance of $50,000 was reassigned (see Promissory Note #12). The accrued interest of $1,808 was credited to the statement of operations, and the derivative liability amounting to $72,226 was re-classified to additional paid in capital.

Promissory Note #5

On May 4, 2016, the Company received funding pursuant to a convertible promissory note in the amount of $75,000. The note is unsecured, bears interest at 12% per annum and matures on May 4, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the lowest closing bid price of the Company’s common stock for the ten prior trading days including the day upon which a Notice of Conversion is received by the Company. During the years ended December 31, 2016 and 2015, the Company accrued $4,500 and $0, respectively, in interest expense.

Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $131,210, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the years ended December 31, 2016 and 2015, the Company recorded a gain of $38,785 and $0, respectively, due to the change in value of the derivative liability during the period. During the years ended December 31, 2016 and 2015, the debt discount of $75,000 and $0, respectively, was accreted to the statement of operations.

During the year ended December 31, 2016, the Company issued an aggregate of 2,217,294 common shares upon the conversion of principal amount of $20,000. The derivative liability amounting to $25,687 was re-classified to additional paid in capital.

On November 10, 2016, the principal balance of $55,000 and accrued interest of $4,500 was reassigned (see Promissory Note #15), and the derivative liability amounting to $66,738 was re-classified to additional paid in capital.

Promissory Note #6

On July 12, 2016, the Company received funding pursuant to a convertible promissory note in the amount of $46,000. The note is unsecured, bears interest at 8% per annum, and matures on July 12, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days. During the years ended December 31, 2016 and 2015, the Company accrued $1,735 and $0, respectively, in interest expense.

Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $98,234, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

 

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During the years ended December 31, 2016 and 2015, the Company recorded a gain of $31,008 and $0, respectively, due to the change in value of the derivative liability during the period. During the years ended December 31, 2016 and 2015, the debt discount of $27,008 and $0, respectively, was accreted to the statement of operations.

As of December 31, 2016, principal balance of $46,000, accrued interest of $1,735, debt discount of $18,992 and a derivative liability of $67,226, was recorded.

Promissory Note #7

On August 12, 2016, the Company received funding pursuant to a convertible promissory note in the amount of $44,250. The note is unsecured, bears interest at 8% per annum, and matures on August 12, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the average of the three lowest closing bid price of the Company’s common stock for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company. During the years ended December 31, 2016 and 2015, the Company accrued $1,309 and $0, respectively, in interest expense.

Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $101,457, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the years ended December 31, 2016 and 2015, the Company recorded a gain of $46,908 and $0, respectively, due to the change in value of the derivative liability during the period. During the years ended December 31, 2016 and 2015, the debt discount of $20,739 and $0, respectively, was accreted to the statement of operations.

As of December 31, 2016, principal balance of $44,250, accrued interest of $1,309, debt discount of $23,511 and a derivative liability of $54,549, was recorded.

Promissory Note #8

On August 12, 2016, the Company received funding pursuant to a convertible promissory note in the amount of $44,250. The note is unsecured, bears interest at 8% per annum, and matures on August 12, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the average of the three lowest closing bid price of the Company’s common stock for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company. During the years ended December 31, 2016 and 2015, the Company accrued $1,309 and $0, respectively, in interest expense.

Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $101,457, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the years ended December 31, 2016 and 2015, the Company recorded a gain of $46,908 and $0, respectively, due to the change in value of the derivative liability during the period. During the years ended December 31, 2016 and 2015, the debt discount of $20,739 and $0, respectively, was accreted to the statement of operations.

As of December 31, 2016, principal balance of $44,250, accrued interest of $1,309, debt discount of $23,511 and a derivative liability of $54,549, was recorded.

Promissory Note #9

On September 7, 2016, the Company executed a convertible promissory note in the amount of $38,850. The note is unsecured, bears interest at 8% per annum and matures on September 7, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the average of the three lowest closing bid price of the Company’s common stock for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company. During the years ended December 31, 2016 and 2015, the Company accrued $137 and $0, respectively, in interest expense.

 

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Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $70,769, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the years ended December 31, 2016 and 2015, the Company recorded a gain of $2,334 and $0, respectively, due to the change in value of the derivative liability during the period. During the years ended December 31, 2016 and 2015, the debt discount of $38,850 and $0, respectively, was accreted to the statement of operations.

During the year ended December 31, 2016, the Company issued an aggregate of 1,831,783 common shares upon the conversion of principal amount of $38,850 and $137 in interest. The derivative liability amounting to $68,435 was re-classified to additional paid in capital.

Promissory Note #10

On September 7, 2016, the Company executed a convertible promissory note in the amount of $38,850. The note is unsecured, bears interest at 8% per annum and matures on September 7, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the average of the three lowest closing bid price of the Company’s common stock for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company. During the years ended December 31, 2016 and 2015, the Company accrued $299 and $0, respectively, in interest expense.

Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $70,769, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the years ended December 31, 2016 and 2015, the Company recorded a gain of $1,247 and $0, respectively, due to the change in value of the derivative liability during the period. During the years ended December 31, 2016 and 2015, the debt discount of $38,850 and $0, respectively, was accreted to the statement of operations.

During the year ended December 31, 2016, the Company issued an aggregate of 3,460,790 common shares upon the conversion of principal amount of $38,850, and the derivative liability amounting to $69,522 was re-classified to additional paid in capital. As November 30, 2016, the note was fully paid per the noteholder, and therefore the accrued interest amount of $299 was credited to the statement of operations.

Promissory Note #11

On September 22, 2016, the Company received funding pursuant to a convertible promissory note in the amount of $50,000. The note is unsecured, bears interest at 8% per annum, and matures on September 22, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. During the years ended December 31, 2016 and 2015, the Company accrued $1,096 and $0, respectively, in interest expense.

Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $86,941, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

 

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During the years ended December 31, 2016 and 2015, the Company recorded a gain of $13,869 and $0, respectively, due to the change in value of the derivative liability during the period. During the years ended December 31, 2016 and 2015, the debt discount of $14,494 and $0, respectively, was accreted to the statement of operations.

As of December 31, 2016, principal balance of $50,000, accrued interest of $1,096, debt discount of $35,506 and a derivative liability of $73,072, was recorded.

Promissory Note #12

On October 31, 2016, the Company executed a convertible promissory note in the amount of $50,000. The note is unsecured, bears interest at 8% per annum and matures on October 31, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the average of the three lowest closing bid price of the Company’s common stock for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company. During the years ended December 31, 2016 and 2015, the Company accrued $435 and $0, respectively, in interest expense.

Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $71,267, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the years ended December 31, 2016 and 2015, the Company recorded a loss of $2,986 and $0, respectively, due to the change in value of the derivative liability during the period. During the years ended December 31, 2016 and 2015, the debt discount of $50,000 and $0, respectively, was accreted to the statement of operations.

During the year ended December 31, 2016, the Company issued an aggregate of 21,057,723 common shares upon the conversion of principal amount of $50,000 and interest of $435. The derivative liability amounting to $74,253 was re-classified to additional paid in capital.

Promissory Note #13

On October 31, 2016, the Company received funding pursuant to a convertible promissory note in the amount of $25,000. The note is unsecured, bears interest at 8% per annum and matures on October 31, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the average of the three lowest closing bid price of the Company’s common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. During the years ended December 31, 2016 and 2015, the Company accrued $334 and $0, respectively, in interest expense.

Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $36,113, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the years ended December 31, 2016 and 2015, the Company recorded a loss of $423 and $0, respectively, due to the change in value of the derivative liability during the period. During the years ended December 31, 2016 and 2015, the debt discount of $4,178 and $0, respectively, was accreted to the statement of operations.

As of December 31, 2016, principal balance of $25,000, accrued interest of $334, debt discount of $20,822 and a derivative liability of $36,536, was recorded.

Promissory Note #14

On November 8, 2016, the Company received funding pursuant to a convertible promissory note in the amount of $20,000. The note is unsecured, bears interest at 8% per annum, and matures on November 8, 2017. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. During the years ended December 31, 2016 and 2015, the Company accrued $232 and $0, respectively, in interest expense.

 

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Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $32,730, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the years ended December 31, 2016 and 2015, the Company recorded a loss of $312 and $0, respectively, due to the change in value of the derivative liability during the period. During the years ended December 31, 2016 and 2015, the debt discount of $2,904 and $0, respectively, was accreted to the statement of operations.

As of December 31, 2016, principal balance of $20,000, accrued interest of $232, debt discount of $17,096 and a derivative liability of $33,042, was recorded.

Promissory Note #15

On November 10, 2016, the Company executed a convertible promissory note in the amount of $59,500. The note is unsecured, bears interest at 8% per annum, and matures on November 10, 2017. The Company received a premium amount of $19,878, which will be amortized over the life of the note. This note is convertible into the Company’s common stock at a variable conversion price equal to 55% of the lowest closing bid price of the Company’s common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. During the years ended December 31, 2016 and 2015, the Company accrued $665 and $0, respectively, in interest expense.

Upon the holder’s option to convert becoming active, the Company recorded a debt discount and derivative liability of $83,877, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the years ended December 31, 2016 and 2015, the Company recorded a loss of $3,078 and $0, respectively, due to the change in value of the derivative liability during the period. During the years ended December 31, 2016 and 2015, the debt discount of $8,314 and note premium of $2,777, respectively, was accreted to the statement of operations.

As of December 31, 2016, principal balance of $59,500, accrued interest of $665, debt discount of $51,186, note premium of $17,101 and a derivative liability of $86,955, was recorded.

7. DERIVATIVE LIABILITIES

The Company issued financial instruments in the form of convertible notes with embedded conversion features and uses the Black-Scholes model for valuation of the derivative instrument. Some of the convertible notes payable have conversion rates, which are indexed to the market value of the Company’s stock price. During the years ended December 31, 2016 and 2015, the Company recorded derivative liabilities for embedded conversion features related to convertible notes payable of face value $1,383,706 and $0, respectively. During the years ended December 31, 2016 and 2015, $254,837 and $0, respectively, of convertible notes payable principal and accrued interest was converted into common stock of the Company. For the years ended December 31, 2016 and 2015, the Company performed a final mark-to-market adjustment for the derivative liability related to the convertible notes of and the carrying amount of the derivative liability related to the conversion feature of $779,671 and $0, respectively, was re-classed to additional paid in capital on the date of conversion in the statement of shareholders’ equity. During the years ended December 31, 2016 and 2015, the Company recognized a gain of $198,106 and $0, respectively, based on the change in fair value (mark-to market adjustment) of the derivative liability associated with the embedded conversion features in the accompanying statement of operations. 

 

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These derivative liabilities have been measured in accordance with fair value measurements, as defined by ASC 820. The valuation assumptions are classified within Level 3 inputs.

The fair value of these derivatives was valued on the date of the issuances of the convertible notes using the Black-Scholes option pricing model with the following weighted average assumptions: (1) risk free interest rate 0.50% - 0.71%, (2) term of 0.50 – 1 year, (3) expected stock volatility of 297% - 672%, (4) expected dividend rate of 0%, and (5) common stock price of $0.011 - $0.08.

The fair value of these derivatives was valued on December 31, 2016 using the Black-Scholes option pricing model with the following weighted average assumptions: (1) risk free interest rate 0.81%, (2) term of 0.5 -1 year, (3) expected stock volatility of 199%, (4) expected dividend rate of 0%, and (4) common stock price of $0.0028.

The following table represents the Company’s derivative liability activity for the embedded conversion features discussed above for the years ending December 31, 2016 and 2015 respectively:

	December 31,			December 31,
	2016			2015
Balance, beginning of year	$	-		$	-
Initial recognition of derivative liability		1,383,706			-
Conversion of derivative instruments to Common Stock		(779,671	)		-
Mark-to-Market adjustment to fair value		(198,106	)		-
Balance, end of year	$	405,929		$	-

These instruments were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The instruments do not qualify for hedge accounting, and as such, all future changes in the fair value will be recognized in earnings until such time as the instruments are exercised, converted or expire. 

8. RELATED PARTY TRANSACTIONS

Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party in making financial and operating decisions. A related party transaction is considered to be a transfer of resources or obligations between related parties, regardless of whether or not a price is charged.

The following entities have been identified as related parties:

Ira Morris	- President, secretary, treasurer and director
George Drazenovic	- Greater than 10% stockholder
Rancho Capital Management Inc.	- Greater than 10% stockholder

 

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The following balances exist with related parties:

	December 31,		December 31,
	2016		2015
Loan to related party	$	41,654	$	26,168
During the year ended December 31, 2016, the amount of $26,168 advanced to the former President of the Company was deemed uncollectible and recorded as bad debt to the statement of operations. During the year ended December 31, 2016, the Company advanced Rancho Capital Management Inc. $15,486.
Accrued expenses		63,900		-
On February 12, 2016, the Company entered into a Contractor Agreement with the President of the Company for management services. Pursuant to the agreement the President would receive a signing bonus of $50,000 and $5,000 per month beginning February 2016, to be paid in cash and stock, for services rendered plus reimbursement of the Company’s expenses. As of December 31, 2016, the Company accrued fees totaling $87,400, of which $23,500 has been paid. As of the date of this report, the Company has not issued any stock pursuant to the agreement.
Prepaid expenses		116,330		-
During the year ended December 31, 2016 the company entered 3 contacts with Rancho capital for consulting services for total payment of $420,000, of which $303,670 has been paid.

The following transactions were carried out with related parties:

	December 31,		December 31,
	2016		2015
Contractors	$	391,070	$	-
During the year ended December 31, 2016 the company entered 3 contacts with Rancho capital for consulting services $303,670 has been paid. During the year ended December 31, 2016 the company entered a contact with Mr. Ira Morris for management services $87,400 has been accrued.
Interest accrued for convertible notes		44,863		-
During the year ended December 31, 2016 Rancho Capital bought convertible note of the company. During the year ended December 31, 2016 the company accrued and converted amount of $44,863 of interest expenses related to this convertible note.

9. PREPAID EXPENSES

Prepaid contracting expenses represent amounts paid in advance for future contractual benefits to be received. Contracting expenses paid in advance are recorded as a prepaid asset and then amortized to the statements of operations over the life of the contract using the straight-line method.

On February 9, 2016, the Company entered into a 5-year contracting arrangement with a related party for contracting services related to expertise in the petroleum industry. As compensation for contractor services the Company will pay the contractor fees of $180,000 annually in advance.

On April 8, 2016, the Company entered into a 5-year contracting arrangement with a related party for contracting services related to expertise and experience in raising finance. As compensation for contractor services the Company will pay the contractor fees of $120,000 annually in advance.

On July 15, 2016, the Company entered into a 5-year contracting arrangement with a related party for contracting services related to expertise and experience in raising finance. As compensation for contractor services the Company will pay the contractor fees of $120,000 annually in advance.

As of December 31, 2016, the Company recorded prepaid expenses of $420,000, of which $303,670 has been amortized to the statement of operations to consulting fees.

 

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10. STOCKHOLDER’S EQUITY

Common Stock

On September 30, 2011, the Company issued 132,000,000 shares of common stock to the directors of the Company at a price of $0.00017 per share, for $22,000.

On September 10, 2012, the Company issued 19,872,000 free trading shares of common stock at $0.0025 per share to a total of 46 stockholders for consideration of $49,680.

On September 9, 2013, the Director then approved a sixty new, for one old share in a forward split of the Company’s outstanding shares of common stock. All share and per share data in the accompanying financial statements and footnotes has been adjusted retrospectively for the effects of the stock split.

On September 9, 2013, the Company entered into a share cancellation/return to treasury agreement with Mr. George Drazenovic, the Company’s president; wherein Mr. Drazenovic agreed to the cancellation and return to treasury of 108,000,000 shares of common stock of our company for $1.

On September 27, 2014, the Company initiated a private placement for the sale of 300,000 units at $0.5 per unit. Each unit comprised of 1 share of common stock and 1 non-transferrable share purchase warrant. Each warrant have an exercise price of $1 per share and expire on January 1, 2017.

On July 22, 2015, the Company initiated a private placement for the sale of 50,000 units at $1 per unit. Each unit comprised of 1 share of common stock and 1 non-transferrable share purchase warrant. Each warrant has an exercise price of $1.50 per share and expire on January 1, 2017.

On August 13, 2015, the Company initiated a private placement for the sale of 27,027 units at $1.85 per unit. Each unit comprised of 1 share of common stock and 1 non-transferrable share purchase warrant. Each warrant has an exercise price of $2.00 per share and expire on January 1, 2017.

On September 1, 2015, the Company initiated a private placement for the sale of 39,063 units at $1.28 per unit. Each unit comprised of 1 share of common stock and 1 non-transferrable share purchase warrant. Each warrant has an exercise price of $1.50 per share and expire on January 1, 2017.

On October 1, 2015, the Company initiated a private placement for the sale of 103,000 units at $1.03 per unit. Each unit comprised of 1 share of common stock and 1 non-transferrable share purchase warrant. Each warrant has an exercise price of $1.50 per share and expire on January 1, 2017.

On October 15, 2015, the Company initiated a private placement for the sale of 250,000 units at $1 per unit. Each unit comprised of 1 share of common stock with no warrants attached.

On August 1, 2016, the Company entered into a debt settlement agreement with Rancho Capital Management Inc. Pursuant to this agreement, the Company issued an aggregate of 50,000,000 common shares at a price of $0.001 to settle $50,000 owed on the Contractor agreement dated April 15, 2016.

During the year ended December 31, 2016, the holders of convertible notes converted a total of $254,837 of principal and interest into 49,525,831 shares of our common stock.

As of December 31, 2016, 6,000,000,000 common shares, par value $0.0001, were authorized (6,000,000,000 shares as of December 31, 2015), of which 145,163,921 shares were issued and outstanding (45,638,090 shares as of December 31, 2015).

Treasury Stock

Retirement of Treasury Stock

On September 9, 2013, the Company retired 108,000,000 shares of common stock. These retired shares are now included in the Company’s pool of authorized but unissued shares.

 

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Warrants

The Company has reserved 519,090 shares of common stock as of December 31, 2016, for the exercise of warrants to non-employees, of which 519,090 are exercisable. These warrants could potentially dilute basic earnings per share in future years. The warrants exercise prices and expiration dates are as follows:

Exercise		Number
Price		of		Expiration
$		Shares		Date
	1.5		103,000	January 1, 2017
	1		300,000	January 1, 2017
	1.5		39,063	January 1, 2017
	2		27,027	January 1, 2017
	1.5		50,000	January 1, 2017
			519,090

11. INCOME TAXES

A reconciliation of income tax expense to the amount computed at the statutory rates is as follows:

	December 31,
	2016			2015
Operating profit (loss) for the years ended December 31	$	(1,561,189	)	$	(201,969	)
Average statutory tax rate		34	%		34	%
Expected income tax provisions	$	(530,804	)	$	(68,669	)
Unrecognized tax gains (loses)		(530,804	)		(68,669	)
Income tax expense	$	-		$	-

The Company has net operating losses carried forward of approximately $1,981,574 for tax purposes which will expire in 2026 if not utilized beforehand.

12. COMMITMENTS

On February 9, 2016, the Company entered into a contractor agreement with Rancho Capital Management Inc. Pursuant to the agreement, Rancho shall serve as a technical consultant in the field of petroleum based activities. Rancho Capital will be compensated $180,000 annually, for a term of five years.

On February 12, 2016, the Company entered into a twelve-month contracting arrangement with Ira Morris. As compensation for services, the Company will pay the contractor fees of $5,000 a month, payable $3,400 in cash and $1,600 with common stock of the company valued at 50% of market at the date of conversion. The contractor was entitled to cash compensation of $50,000 upon signing.

 

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On April 8, 2016, the Company entered into a contractor agreement with Rancho Capital Management Inc. Pursuant to the agreement, Rancho will provide the company with financial filings, strategy and advice regarding debt and equity financings, PIPEs and technical knowledge on financings. Rancho Capital will be compensated $120,000 annually, for a term of five years.

On July 15, 2016, the Company entered into a contractor arrangement with Rancho Capital Management Inc. Pursuant to the agreement, Rancho Capital shall provide services related to expertise and experience in raising finance. Rancho Capital will be compensated $120,000 annually, for a term of five years.

On August 1, 2016, the Company entered into a one year contracting arrangement with an unrelated party for contracting services related to expertise and experience in raising finance. As compensation for contractor services the Company will pay the contractor fees of $50,000 annually.

On December 21, 2016, the Company announced it has finalized a Memo of Understanding for the acquis ion of certain assets and intellectual property utilized for the establishment of a special purpose operating subsidiary collecting, analyzing and integrating Big Data Microservices information useful to assist in algorithmic development for the financial industry.

13. SUBSEQUENT EVENTS

On January 6, 2017, the Company entered into a Securities Purchase Agreement with Eagle Equities, LLC, whereby the Company has agreed to sell two 8% convertible promissory notes in the aggregate principal amount of $200,000.

On February 1, 2017, the Company entered into a twelve-month contracting arrangement with Ira Morris. As compensation for services, the Company will pay the contractor fees of $5,000 a month, payable $3,400 in cash and $1,600 with common stock of the company valued at 50% of market at the date of conversion. The contractor was entitled to cash compensation of $50,000 upon signing.

On February 9, 2017, the Company terminated all contractor agreements with Rancho Capital Management Inc, and therefore, the contracted annual fees of $420,000 were not prepaid to the contractor.

 

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUINTING AND FINANCIAL DISCLOSURES

There were no disagreements with our accountants related to accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure during the two fiscal years and subsequent interim periods.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are the controls and other procedures that are designed to provide reasonable assurance that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the principal executive and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

We have carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer, principal financial officer and principal accounting officer), of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of the end of the fiscal year covered by this annual report.

Based on that evaluation, our president (our principal executive officer, principal financial officer and principal accounting officer) has concluded that our company’s disclosure controls and procedures were effective as of the end of the fiscal year covered by this annual report on Form 10-K.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Securities Exchange Act Rule 13a-15(f). Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with U.S. GAAP. This annual report does not include a report of management’s assessment regarding internal control over financial reporting due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.

Change in Internal Control over Financial Reporting

During the period covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

 

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNACE

Identification of Directors and Executive Officers

The following table sets forth the names and ages of our current directors and executive officers:

Name	Age	Position with the Company	Position Held Since
Ira Morris	64	President, Secretary, Treasurer and Director	February 12, 2016

Term of Office

All directors of our company hold office until the next annual meeting of our shareholders or until their successors have been elected and qualified. The executive officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office.

On July 31, 2013, George Drazenovic was appointed as President, Secretary, Treasurer and Director of the Company.

On February 12, 2016, George Drazenovic announced his resignation as President, Secretary, Treasurer and Director of the Company. There are no known disagreements with Mr. Drazenovic regarding such resignation or any claims the Company may have against him.

On February 12, 2016, Ira Morris was appointed President, Secretary, Treasurer and Director of the Company.

Background and Business Experience

The business experience during the past five years of the person presently listed above as an Officer or Director of the Company is as follows:

Ira Morris – President, Secretary, Treasurer and Director

Ira Morris was appointed as president, secretary, treasurer and director of our company on February 12, 2016. Mr. Morris brings several years of professional expertise to our company in the development and financing of emerging and junior resource companies. As a Consultant since 2010 at Glenwood Consulting Corporation located in Toronto, Canada, he has assisted with funding of various companies. Mr. Morris was previously a Senior Project Manager at Carpenter House Consulting Group Inc., of Whitby, Ontario from 2008 to 2010, assisting with the development and funding of companies in engaged in the emerging states of green related technologies.

Identification of Significant Employees

We have no significant employees.

Family Relationship

We currently do not have any officers or directors of our Company who are related to each other.

 

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Involvement in Certain Legal Proceedings

To the best of our knowledge, during the past ten years, no director, executive officer, promoter or control person of the Company has been involved in the following:

1.	been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
2.	had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
3.	been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
4.	been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange 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;
5.	been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
6.	been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Code of Ethics

As of December 31, 2016, the board of directors has not adopted a code of ethics due to the fact that we presently only have one director and we are in the development stage of our operations. We anticipate that we will adopt a code of ethics when we increase either the number of our directors and officers or the number of our employees.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Our common stock is not registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, our officers, directors, and principal stockholders are not subject to the beneficial ownership reporting requirements of Section 16(a) of the Exchange Act.

Committees of the Board of Directors

We do not presently have a separately constituted audit committee, compensation committee, nominating committee, executive committee or any other committees of our board of directors. As such, our entire board of directors acts as our audit committee.

 

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Audit Committee Financial Expert

Our board of directors does not currently have any member who qualifies as an audit committee financial expert. We believe that the cost related to retaining such a financial expert at this time is prohibitive. Further, because we are in the start-up stage of our business operations, we believe the services of an audit committee financial expert are not warranted at this time.

Potential Conflict of Interest

Since we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our board of directors. Thus, there is a potential conflict of interest in that our directors have the authority to determine issues concerning management compensation, in essence their own, and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our executives or directors.

Board’s Role in Risk Oversight

Our board assesses on an ongoing basis the risks faced by our company. These risks include financial, technological, competitive, and operational risks. Our board dedicates time at each of its meetings to review and consider the relevant risks faced by our company at that time. In addition, since our company does not have an audit committee, our board is also responsible for the assessment and oversight of our company’s financial risk exposures.

ITEM 11. EXECUTIVE COMPENSATION

The table below summarizes all compensation awarded to, earned by, or paid to our executive officers for all services rendered in all capacities to us: 

SUMMARY COMPENSATION TABLE

												Nonqualified
										Non-Equity		Deferred
						Stock		Option		Incentive Plan		Compensation		All Other
Name and		Salary		Bonus		Awards		Awards		Compensation		Earnings		Compensation		Total
principal position	Year	($)		($)		($)		($)		($)		($)		($)		($)
Ira Morris (1) President,	2016		0		0		0		0		0		0		87,400		87,400
Secretary, Treasurer and Director	2015		0		0		0		0		0		0		0		0
George Drazenovic (2) Former President,	2016		0		0		0		0		0		0		0		0
Secretary, Treasurer and Director	2015		0		0		0		0		0		0		65,000		65,000

_____________________

(1)	Ira Morris was appointed as president, secretary, treasurer and director of our company on February 12, 2016. Fees paid are for contractor services.
(2)	George Drazenovic was appointed as president, secretary, treasurer and director of our company on July 31, 2013 and resigned on February 12, 2016.

Narrative Disclosure to Summary of Compensation Table

On July 31, 2013, George Drazenovic was appointed as President, Secretary, Treasurer and Director of the Company

On February 12, 2016, George Drazenovic announced his resignation as President, Secretary, Treasurer and Director of the Company. There are no known disagreements with Mr. Drazenovic regarding such resignation or any claims the Company may have against him.

 

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On February 12, 2016, Ira Morris was appointed President, Secretary, Treasurer and Director of the Company. In connection with his appointment, the Company entered into Contractor Agreement (“Agreement”) with Mr. Morris for a term of twelve months. As compensation for services, the Company will pay fees of $5,000 per month, with $3,400 being paid in cash and $1,600 being paid in common stock of the Company. The stock conversion is calculated at 50% of market at the date of conversion having a floor of $0.001 per share. Mr. Morris was entitled to cash compensation of $50,000 upon signing. As of the date of this report, no shares of common stock have been issued for compensation.

Option/SAR Grants

We do not currently have a stock option plan. No individual grants of stock options, whether or not in tandem with stock appreciation rights known as SARs or freestanding SARs have been made to any executive officer or any director since our inception; accordingly, no stock options have been granted or exercised by any of the officers or directors since we were founded.

Outstanding Equity Awards at Fiscal Year-End

No executive officer received any equity awards, or holds exercisable options, as of the year ended December 31, 2016.

Long-Term Incentive Plans and Awards

We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance. No individual grants or agreements regarding future payouts under non-stock price-based plans have been made to any executive officer or any director or any employee or consultant since our inception; accordingly, no future payouts under non-stock price-based plans or agreements have been granted or entered into or exercised by any of the officers or directors or employees or consultants since we were founded.

Compensation of Directors

There are no current arrangements pursuant to which directors are or will be compensated in the future for any services provided as a director.

Compensation Committee

We currently do not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation. 

Employment contracts and termination of employment and change-in-control arrangements

There are no employment agreements between the Company and directors and executive officers.

 

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Beneficial Ownership of Holdings

The following table sets forth, as of December 31, 2016, certain information with respect to the beneficial ownership of our common shares by each shareholder known by us to be the beneficial owner of more than 5% of our common shares, as well as by each of our current directors and executive officers as a group. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.

		Amount and
		Nature of
Name and Address of Beneficial	Title of	Beneficial		% of Common
Owners of Common Stock	Class	Ownership (1)		Stock (1)
Ira Morris	Common		0		0.00	%
Toronto, Ontario	Stock
Total Officers and Directors			0		0.00	%
5% Shareholders
George Drazenovic (2)	Common		24,000,000		16.53	%
Calgary, Alberta	Stock
Rancho Capital Management	Common		50,000,000		34.44	%
Del Mar, CA	Stock
Total			74,000,000		50.98	%

____________________

(1)

Applicable percentage of ownership is based on 145,163,921 total shares comprised of our common stock outstanding (as defined below) as of December 31, 2016. Beneficial ownership is determined in accordance with rules of the Securities and Exchange Commission and means voting or investment power with respect to securities. Shares of our common stock issuable upon the exercise of stock options exercisable currently or within 60 days of December 31, 2016 are deemed outstanding and to be beneficially owned by the person holding such option for purposes of computing such person’s percentage ownership, but are not deemed outstanding for the purpose of computing the percentage ownership of any other person.

(2)

George Drazenovic acted as our president, secretary, treasurer and director of our company from July 31, 2013 to February 12, 2016.

Changes in Control

We are unaware of any contract or other arrangement or provisions of our Articles or Bylaws the operation of which may at a subsequent date result in a change of control of our company. There are not any provisions in our Articles or Bylaws, the operation of which would delay, defer, or prevent a change in control of our company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Related Party Transactions

None of the directors or executive officers of the Company, nor any person who owned of record or was known to own beneficially more than 5% of the Company’s outstanding shares of its Common Stock, nor any associate or affiliate of such persons or companies, has any material interest, direct or indirect, in any transaction that has occurred during the past fiscal year, or in any proposed transaction, which has materially affected or will affect the Company.

With regard to any future related party transaction, we plan to fully disclose any and all related party transactions in the following manor:

· Disclosing such transactions in reports where required;

· Disclosing in any and all filings with the SEC, where required;

· Obtaining disinterested directors consent; and

· Obtaining shareholder consent where required.

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The following related party transactions occurred during the most recent fiscal year:

On February 9, 2016, the Company entered into a contractor agreement with Rancho Capital Management Inc. Pursuant to the agreement, Rancho shall serve as a technical consultant in the field of petroleum based activities. Rancho Capital will be compensated $180,000 annually, for a term of five years.

On February 12, 2016, the Company entered into a twelve-month contracting arrangement with Ira Morris. As compensation for services, the Company will pay the contractor fees of $5,000 a month, payable $3,400 in cash and $1,600 with common stock of the company valued at 50% of market at the date of conversion. The contractor was entitled to cash compensation of $50,000 upon signing. As of December 31, 2016, the Company accrued fees totaling $87,400, of which $23,500 has been paid. As of the date of this report, the Company has not issued any stock pursuant to the agreement.

On April 8, 2016, the Company entered into a contractor agreement with Rancho Capital Management Inc. Pursuant to the agreement, Rancho will provide the company with financial filings, strategy and advice regarding debt and equity financings, PIPEs and technical knowledge on financings. Rancho Capital will be compensated $120,000 annually, for a term of five years.

On July 15, 2016, the Company entered into a contractor arrangement with Rancho Capital Management Inc. Pursuant to the agreement, Rancho Capital shall provide services related to expertise and experience in raising finance. Rancho Capital will be compensated $120,000 annually, for a term of five years.

On August 1, 2016, the Company entered into a debt settlement agreement with Rancho Capital Management Inc. Pursuant to this agreement, the Company issued an aggregate of 50,000,000 common shares at a price of $0.001 to settle $50,000 owed on the Contractor agreement dated April 15, 2016.

During the year ended December 31, 2016, the Company advanced Rancho Capital Management Inc. $15,486.

Director Independence

We are not subject to listing requirements of any national securities exchange or national securities association and, as a result, we are not at this time required to have our board comprised of a majority of “independent Directors.” We do not believe that either of our directors currently meets the definition of “independent” as promulgated by the rules and regulations of NASDAQ.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The aggregate fees billed for the most recently completed fiscal year ended December 31, 2016 and for fiscal year ended December 31, 2015 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:

	Year Ended
	December 31, 2016		December 31, 2015
Audit Fees	$	20,000	$	14,051
Audit Related Fees		0		0
Tax Fees		0		0
All Other Fees		0		0
Total	$	20,000	$	14,051

Our board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.

Our board of directors has considered the nature and amount of the fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence.

 

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PART IV

ITEM 15. EXHIBITS

Exhibit Number	Description
-3	Articles of Incorporation and Bylaws
3.1	Articles of Incorporation (incorporated by reference to our Registration Statement on Form S-1 filed on March 20, 2012)
3.2	Bylaws (incorporated by reference to our Registration Statement on Form S-1 filed on March 20, 2012)
3.3	Certificate of Amendment (incorporated by reference to our Current Report on Form 8-K filed on September 20, 2013)
-10	Material Contracts
10.1	Share Cancellation to Treasury Agreement (incorporated by reference to our Current Report on Form 8-K filed on September 20, 2013)
10.2	Lease Assignment Agreement between our company and West Bakken Energy Holdings, Ltd. (incorporated by reference to our Current Report on Form 8-K filed on March 5, 2014)
10.3	Master Services Consulting Agreement dated September 16, 2015 (incorporated by reference to our Current Report on Form 8-K filed on September 21, 2015)
10.4	Contractor Agreement between our company and Rancho Capital Management Inc. dated February 9, 2016 (incorporated by reference to our Current Report on Form 8-K filed on August 30, 2016)
10.5	Contractor Agreement between our company and Rancho Capital Management Inc. dated April 8, 2016 (incorporated by reference to our Current Report on Form 8-K filed on August 30, 2016)
10.6	Debt Settlement Agreement between our company and Rancho Capital Management Inc. dated April 15, 2016 (incorporated by reference to our Current Report on Form 8-K filed on August 30, 2016)
10.7	Debt Settlement Agreement between our company and Rancho Capital Management Inc. dated August 1, 2016 (incorporated by reference to our Current Report on Form 8-K filed on August 30, 2016)
-31	Rule 13a-14 (d)/15d-14d) Certifications
31.1*	Section 302 Certification pursuant to the Sarbanes-Oxley Act of 2001 of the Principal Executive Officer
31.2*	Section 302 Certification pursuant to the Sarbanes-Oxley Act of 2001 of the Principal Financial Officer
-32	Section 1350 Certifications
32.1*	Section 906 Certification pursuant to the Sarbanes-Oxley Act of 2001 of the Principal Executive Office, Principal Financial Officer and Principal Accounting Officer
(101)*	Interactive Data File
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 

	BLACK STALLION OIL AND GAS, INC.
	(Registrant)
Dated: May 4, 2017	By:	/s/ Ira Morris
		Ira Morris
		President, Secretary, Treasurer and Director
		(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

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