-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SODY4IRHTNbo7oQzzJzvT7gbVJjozQa5r2nLO80Gn0Oq7qCFZYVmLkOQjnhgUlUd bhnkrTrIJOqj4oL7qNfxHQ== 0001004878-09-000029.txt : 20090129 0001004878-09-000029.hdr.sgml : 20090129 20090129144726 ACCESSION NUMBER: 0001004878-09-000029 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20081031 FILED AS OF DATE: 20090129 DATE AS OF CHANGE: 20090129 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Gas Salvage Corp. CENTRAL INDEX KEY: 0001422295 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 364613360 STATE OF INCORPORATION: NV FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-148447 FILM NUMBER: 09554199 BUSINESS ADDRESS: STREET 1: 333 RIVERFRONT AVE., S.E. STREET 2: SUITE 153 CITY: CALGARY STATE: A0 ZIP: T2G 5R1 BUSINESS PHONE: 866-822-0325 MAIL ADDRESS: STREET 1: 333 RIVERFRONT AVE., S.E. STREET 2: SUITE 153 CITY: CALGARY STATE: A0 ZIP: T2G 5R1 10-K 1 oct0810k1-09.txt OCT 08 10-K FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended October 31, 2008. OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________. Commission file number None PINNACLE ENERGY CORP. (Exact name of registrant as specified in its charter) Nevada 36-4613360 - --------------------------------- ----------------------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) Suite 153, 333 River Front Ave., S.E. Calgary, Alberta, Canada T2G 5R1 --------------------------------------------- --------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (866) 822-0325 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ] Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of 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 the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): [ ] Yes [X] No The aggregate market value of the voting stock held by non-affiliates of the Registrant, based upon the closing sale price of the common stock on April 30, 2008, was $ -0- . As of January 20, 2009, the Registrant had 15,840,000 issued and outstanding shares of common stock. Documents Incorporated by Reference: None PART I ITEM 1. BUSINESS Pinnacle was incorporated in Nevada on June 5, 2007 and plans to be involved in the exploration and development of oil and gas. Pinnacle plans to evaluate undeveloped oil and gas prospects and participate in drilling activities on those prospects which in the opinion of management are favorable for the production of oil or gas. If, through its review, a geographical area indicates geological and economic potential, Pinnacle will attempt to acquire leases or other interests in the area. Pinnacle will then attempt to sell portions of its leasehold interests in a prospect to unrelated third parties, thus sharing risks and rewards of the exploration and development of the prospect with the joint owners pursuant to an operating agreement. One or more exploratory wells may be drilled on a prospect, and if the results indicate the presence of sufficient oil and gas reserves, additional wells may be drilled on the prospect. Pinnacle may also: o acquire a working interest in one or more prospects from others and participate with the other working interest owners in drilling, and if warranted, completing oil or gas wells on a prospect, and o purchase producing oil or gas properties. Pinnacle's activities will primarily be dependent upon available financing. In September 2007 Pinnacle acquired a 44.5% working interest (35.6% net revenue interest) in an oil and gas lease covering 40 acres in Lincoln County, Oklahoma. In November 2007 the gas well drilled on the lease was placed into production. As of January 20, 2009 the well was shut in and awaiting repairs. At the time it acquired its interest in the oil and gas lease, Pinnacle also acquired, for $100,000, a 50% interest in a portable nitrogen rejection unit. The unit removes excessive nitrogen and oxygen from the gas produced from the well and allows the gas to be sold to buyers who will not always purchase gas with a high level of contaminants. On August 27, 2008 Pinnacle acquired working interests in six oil and gas wells located in Pawnee County, Oklahoma. Pinnacle has a 25.5% working interest (20.4% net revenue interest) in two wells, a 20% working interest (16% net revenue interest) in three wells , and a 17% working interest (13.6% net revenue interest) in the remaining well. As of January 20, 2009 five wells were producing ten barrels of oil and eight MCF of gas per day, net to Pinnacle's interest. The sixth well is being used as a salt water disposal well. 2 The price for Pinnacle's interest in the six wells was $1,000,000. The purchase price requires monthly interest payments at 8% per year until September 1, 2013, at which time the entire $1,000,000 is due. The following table shows, as of January 20, 2009, by state or region, Pinnacle's producing wells, Developed Acreage and Undeveloped Acreage, excluding service (injection and disposal) wells: Region Productive Wells (1) Developed Acreage Undeveloped Acreage (1) - ------ -------------------- ----------------- ----------------------- Gross Net Gross Net Gross Net ----- --- ----- --- ----- --- Lincoln County, Oklahoma 1 44.5 40 17.8 -- -- Pawnee County, Oklahoma 5 1.47 200 46 1,520 347
(1) "Undeveloped Acreage" includes leasehold interests on which wells have not been drilled or completed to the point that would permit the production of commercial quantities of natural gas and oil regardless of whether the leasehold interest is classified as containing proved undeveloped reserves. The following table shows, as of January 20, 2009 the status of Pinnacle's gross developed and undeveloped acreage. Held by Not Held by Region Gross Acreage Production Production - ------ ------------- ---------- -------------- Lincoln County, Oklahoma 40 40 -- Pawnee County, Oklahoma 1,720 1,720 -- Acres Held By Production remain in force so long as oil or gas is produced from the well on the particular lease. Leased acres which are not Held By Production require annual rental payments to maintain the lease until the first to occur of the following: the expiration of the lease or the time oil or gas is produced from one or more wells drilled on the lease acreage. At the time oil or gas is produced from wells drilled on the leased acreage the lease is considered to be Held By Production. Pinnacle has not drilled, or participated in the drilling of, any oil or gas wells. Pinnacle does not own any Overriding Royalty Interests. Title to properties is subject to royalty, overriding royalty, carried, net profits, working and other similar interests and contractual arrangements customary in the oil and gas industry, to liens for current taxes not yet due 3 and to other encumbrances. As is customary in the industry in the case of undeveloped properties, little investigation of record title is made at the time of acquisition (other than a preliminary review of local records). However, drilling title opinions are normally prepared before commencement of drilling operations. GOVERNMENT REGULATION Various state and federal agencies regulate the production and sale of oil and natural gas. All states in which Pinnacle plans to operate impose restrictions on the drilling, production, transportation and sale of oil and natural gas. The Federal Energy Regulatory Commission (the "FERC") regulates the interstate transportation and the sale in interstate commerce for resale of natural gas. The FERC's jurisdiction over interstate natural gas sales has been substantially modified by the Natural Gas Policy Act under which the FERC continued to regulate the maximum selling prices of certain categories of gas sold in "first sales" in interstate and intrastate commerce. FERC has pursued policy initiatives that have affected natural gas marketing. Most notable are (1) the large-scale divestiture of interstate pipeline-owned gas gathering facilities to affiliated or non-affiliated companies; (2) further development of rules governing the relationship of the pipelines with their marketing affiliates; (3) the publication of standards relating to the use of electronic bulletin boards and electronic data exchange by the pipelines to make available transportation information on a timely basis and to enable transactions to occur on a purely electronic basis; (4) further review of the role of the secondary market for released pipeline capacity and its relationship to open access service in the primary market; and (5) development of policy and promulgation of orders pertaining to its authorization of market-based rates (rather than traditional cost-of-service based rates) for transportation or transportation-related services upon the pipeline's demonstration of lack of market control in the relevant service market. Pinnacle does not know what effect the FERC's other activities will have on the access to markets, the fostering of competition and the cost of doing business. Pinnacle's sales of oil and natural gas liquids will not be regulated and will be at market prices. The price received from the sale of these products will be affected by the cost of transporting the products to market. Much of that transportation is through interstate common carrier pipelines. Federal, state, and local agencies have promulgated extensive rules and regulations applicable to Pinnacle's oil and natural gas exploration, production and related operations. Most states require permits for drilling operations, drilling bonds and the filing of reports concerning operations and impose other requirements relating to the exploration of oil and natural gas. Many states also have statutes or regulations addressing conservation matters including provisions for the unitization or pooling of oil and natural gas properties, the establishment of maximum rates of production from oil and natural gas wells and the regulation of spacing, plugging and abandonment of such wells. The statutes and regulations of some states limit the rate at which oil and natural gas is produced from Pinnacle's properties. The federal and state regulatory burden on the oil and natural gas industry increases Pinnacle's cost of doing business and 4 affects its profitability. Because these rules and regulations are amended or reinterpreted frequently, Pinnacle is unable to predict the future cost or impact of complying with those laws. COMPETITION AND MARKETING Pinnacle will be faced with strong competition from many other companies and individuals engaged in the oil and gas business, many are very large, well established energy companies with substantial capabilities and established earnings records. Pinnacle may be at a competitive disadvantage in acquiring oil and gas prospects since it must compete with these individuals and companies, many of which have greater financial resources and larger technical staffs. It is nearly impossible to estimate the number of competitors; however, it is known that there are a large number of companies and individuals in the oil and gas business. Exploration for and production of oil and gas are affected by the availability of pipe, casing and other tubular goods and certain other oil field equipment including drilling rigs and tools. Pinnacle depends upon independent drilling contractors to furnish rigs, equipment and tools to drill its wells. Higher prices for oil and gas may result in competition among operators for drilling equipment, tubular goods and drilling crews which may affect Pinnacle's ability expeditiously to drill, complete, recomplete and work-over its wells. However, Pinnacle has not experienced and does not anticipate difficulty in obtaining supplies, materials, drilling rigs, equipment or tools. Pinnacle does not refine or otherwise process crude oil and condensate production. Substantially all of the crude oil and condensate production from Pinnacle's well is sold at posted prices under short-term contracts, which is customary in the industry. The market for oil and gas is dependent upon a number of factors beyond Pinnacle's control, which at times cannot be accurately predicted. These factors include the proximity of wells to, and the capacity of, natural gas pipelines, the extent of competitive domestic production and imports of oil and gas, the availability of other sources of energy, fluctuations in seasonal supply and demand, and governmental regulation. In addition, there is always the possibility that new legislation may be enacted which would impose price controls or additional excise taxes upon crude oil or natural gas, or both. Oversupplies of natural gas can be expected to recur from time to time and may result in the gas producing wells being shut-in. Increased imports of natural gas, primarily from Canada, have occurred and are expected to continue. Such imports may adversely affect the market for domestic natural gas. The market price for crude oil is significantly affected by policies adopted by the member nations of Organization of Petroleum Exporting Countries ("OPEC"). Members of OPEC establish prices and production quotas among themselves for petroleum products from time to time with the intent of controlling the current global supply and consequently price levels. Pinnacle is unable to predict the effect, if any, that OPEC or other countries will have on the amount of, or the prices received for, crude oil and natural gas produced and sold from Pinnacle's wells. 5 Gas prices, which were once effectively determined by government regulations, are now largely influenced by competition. Competitors in this market include producers, gas pipelines and their affiliated marketing companies, independent marketers, and providers of alternate energy supplies, such as residual fuel oil. Changes in government regulations relating to the production, transportation and marketing of natural gas have also resulted in significant changes in the historical marketing patterns of the industry. Generally, these changes have resulted in the abandonment by many pipelines of long-term contracts for the purchase of natural gas, the development by gas producers of their own marketing programs to take advantage of new regulations requiring pipelines to transport gas for regulated fees, and an increasing tendency to rely on short-term contracts priced at spot market prices. GENERAL Pinnacle has never been a party to any bankruptcy, receivership, reorganization, readjustment or similar proceedings. Since Pinnacle is engaged in the oil and gas business, it does not allocate funds to product research and development in the conventional sense. Pinnacle does not have any patents, trade-marks, or labor contracts. With the exception of Pinnacle's oil and gas leases, Pinnacle does not have any licenses, franchises, concessions or royalty agreements. Backlog is not material to an understanding of Pinnacle's business. Pinnacle's business is not subject to renegotiation of profits or termination of contracts or subcontracts at the election of federal government. As of January 20, 2009 Pinnacle did not have any full time employees. ITEM 1A. RISK FACTORS Not applicable. ITEM 1B. UNRESOLVED SEC COMMENTS Not applicable. ITEM 2. PROPERTIES See Item 1 of this report for information concerning Pinnacle's oil and gas properties. Pinnacle's offices are located at Suite 153, 333 River Front Ave., S.E., Calgary, Alberta, Canada T2G 5R1. The 500 square feet of office space is occupied under a lease requiring rental payments of $500 per month until July 1, 2009. ITEM 3. LEGAL PROCEEDINGS Pinnacle is not involved in any legal proceedings and Pinnacle does not know of any legal proceedings which are threatened or contemplated. 6 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY On August 28, 2008, Pinnacle's common stock began trading on the OTC Bulletin Board under the symbol "GSVG." Prior to that date, there was no established trading market for Pinnacle's common stock. In July 2008 the shareholders of Pinnacle approved a 3-for-1 forward split of Pinnacle's common stock and approved changing the corporate name to Pinnacle Energy Corp. On August 14, 2008 the forward split and name change became effective on the OTC Bulletin Board and Pinnacle's trading symbol was changed to "PENC." Shown below are the range of high and low closing prices for Pinnacle's common stock for the periods indicated as reported by the NASD. The market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions. Month Ended High Low ----------- ---- --- August 2008 $1.29 $0.70 September 2008 $1.40 $0.94 October 2008 $1.20 $1.01 As of January 20, 2009, Pinnacle had 15,840,000 outstanding shares of common stock and 63 shareholders. Pinnacle does not have any outstanding options, warrants or other arrangements providing for the issuance of additional shares of its capital stock. All of Pinnacle's outstanding shares are restricted securities and may be sold in accordance with Rule 144 of the Securities and Exchange Commission. Holders of common stock are entitled to receive dividends as may be declared by the Board of Directors. Pinnacle's Board of Directors is not restricted from paying any dividends but is not obligated to declare a dividend. No dividends have ever been declared and it is not anticipated that dividends will ever be paid. Pinnacle's Articles of Incorporation authorize its Board of Directors to issue up to 5,000,000 shares of preferred stock. The provisions in the Articles of Incorporation relating to the preferred stock allow Pinnacle's directors to issue preferred stock with multiple votes per share and dividend rights which would have priority over any dividends paid with respect to the holders of Pinnacle's common stock. The issuance of preferred stock with these rights may make the removal of management difficult even if the removal would be considered 7 beneficial to shareholders generally, and will have the effect of limiting shareholder participation in certain transactions such as mergers or tender offers if these transactions are not favored by Pinnacle's management. ITEM 6. SELECTED FINANCIAL DATA Not applicable. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes to the consolidated financial statements, which are included elsewhere in this report. Pinnacle was incorporated on June 5, 2007. In September 2007 Pinnacle acquired a 44.5% working interest (35.6% net revenue interest) in a gas well located in Lincoln County, Oklahoma for $100,000 in cash and 900,000 shares of its restricted common stock. At the time it acquired its interest in the gas well, Pinnacle also acquired, for $100,000, a 50% interest in a portable unit which reduces the amount of nitrogen and oxygen from the gas produced by the well. The gas well was put into production in November 2007. As of January 20, 2009 the well was shut in and awaiting repairs. On August 27, 2008 Pinnacle acquired working interests in six oil and gas wells located in Pawnee County, Oklahoma. Pinnacle has a 25.5% working interest (20.4% net revenue interest) in two wells, a 20% working interest (16% net revenue interest) in three wells , and a 17% working interest (13.6% net revenue interest) in the remaining well. As of January 20, 2009 five wells were producing ten barrels of oil and eight MCF of gas per day, net to Pinnacle's interest. The sixth well is being used as a salt water disposal well. The price for Pinnacle's interest in the six wells was $1,000,000. The purchase price requires monthly interest payments at 8% per year until September 1, 2013, at which time the entire $1,000,000 is due. RESULTS OF OPERATIONS The factors that most significantly affect Pinnacle's results of operations will be (i) the sale prices of crude oil and natural gas, (ii) the amount of production from oil or gas wells in which Pinnacle has an interest, and (iii) and lease operating expenses. Pinnacle's revenues will also be significantly impacted by its ability to maintain or increase oil or gas production through exploration and development activities. Prices received by Pinnacle for sales of crude oil and natural gas may fluctuate significantly from period to period. The fluctuations in oil prices during these periods reflect market uncertainty regarding the inability of the Organization of Petroleum Exporting Countries ("OPEC") to control the production 8 of its member countries, as well as concerns related to the global supply and demand for crude oil. Gas prices received by Pinnacle will fluctuate with changes in the spot market price for gas. Changes in natural gas and crude oil prices will significantly affect the revenues and cash flow of the wells and the value of the oil and gas properties. Declines in the prices of crude oil and natural gas could have a material adverse effect on the success of Pinnacle's operations and activities, recoupment of the costs of acquiring, developing and producing its wells and profitability. Pinnacle is unable to predict whether the prices of crude oil and natural gas will rise, stabilize or decline in the future. Other than the foregoing, Pinnacle does not know of any trends, events or uncertainties that have had or are reasonably expected to have a material impact on Pinnacle's net sales, revenues or expenses. LIQUIDITY AND CAPITAL RESOURCES It is expected that Pinnacle's principal source of cash flow will be from the production and sale of crude oil and natural gas reserves which are depleting assets. Cash flow from the sale of oil and gas production depends upon the quantity of production and the price obtained for the production. An increase in prices will permit Pinnacle to finance its operations to a greater extent with internally generated funds, may allow Pinnacle to obtain equity financing more easily or on better terms, and lessens the difficulty of obtaining financing. However, price increases heighten the competition for oil and gas prospects, increase the costs of exploration and development, and, because of potential price declines, increase the risks associated with the purchase of producing properties during times that prices are at higher levels. A decline in oil and gas prices (i) will reduce the cash flow internally generated by Pinnacle which in turn will reduce the funds available for exploring for and replacing oil and gas reserves, (ii) will increase the difficulty of obtaining equity and debt financing and worsen the terms on which such financing may be obtained, (iii) will reduce the number of oil and gas prospects which have reasonable economic terms, (iv) may cause Pinnacle to permit leases to expire based upon the value of potential oil and gas reserves in relation to the costs of exploration, (v) may result in marginally productive oil and gas wells being abandoned as non-commercial, and (vi) may increase the difficulty of obtaining financing. However, price declines reduce the competition for oil and gas properties and correspondingly reduce the prices paid for leases and prospects. Between June and September 2007 Pinnacle sold 2,580,000 shares of its common stock at a price of $0.10 CDN per share to a group of private investors. Pinnacle's material sources and (uses) of cash during the year ended October 30, 2008, and the period from its inception (June 5, 2007) to October 31, 2007 were: 9 2008 2007 ---- ---- Cash used in operations $(44,803) $(12,132) Sale of common stock -- 284,301 Purchase of oil and gas property -- (190,000) Purchase of equipment -- (100,000) Cash on hand at beginning of period 26,803 -- As of January 20, 2009 Pinnacle had cash on hand of approximately $11,500. Pinnacle's plan of operation is described in more detail in Item 1 of this report. Pinnacle does not anticipate that it will need to hire any employees during the twelve month period ending January 31, 2010. Pinnacle's future plans will be dependent upon the amount of capital Pinnacle is able to raise. Pinnacle may attempt to raise additional capital through the private sale of its equity securities or borrowings from third party lenders. Pinnacle does not have any commitments or arrangements from any person to provide Pinnacle with any additional capital. If additional financing is not available when needed, Pinnacle may continue to operate in its present mode or Pinnacle may need to cease operations. Pinnacle does not have any plans, arrangements or agreements to sell its assets or to merge with another entity. Pinnacle plans to generate profits by drilling productive oil or gas wells. However, Pinnacle will need to raise the funds required to drill new wells from third parties willing to pay Pinnacle's share of drilling and completing the wells. Pinnacle may also attempt to raise needed capital through the private sale of its securities or by borrowing from third parties. Pinnacle may not be successful in raising the capital needed to drill oil or gas wells. In addition, any future wells which may be drilled by Pinnacle may not be productive of oil or gas. The inability of Pinnacle to generate profits may force Pinnacle to curtail or cease operations. Contractual Obligations As of January 20, 2009 Pinnacle did not have any material capital commitments, other than funding its operating losses. It is anticipated that any capital commitments that may occur will be financed principally through the sale of shares of Pinnacle's common stock or other equity securities. However, there can be no assurance that additional capital resources and financings will be available to Pinnacle on a timely basis, or if available, on acceptable terms. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS Not applicable. 10 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See the financial statements included with this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable ITEM 9A and 9A(T). CONTROLS AND PROCEDURES Nolan Weir, Pinnacle's President and Principal Financial Officer, has evaluated the effectiveness of Pinnacle's disclosure controls and procedures as of October 31, 2008 and in his opinion Pinnacle's disclosure controls and procedures ensure that material information is made known to him by others, particularly during the period in which this report is being prepared, so as to allow timely decisions regarding required disclosure. Mr. Weir has determined that these controls and procedures are effective as of October 31, 2008. To the knowledge of Mr. Weir there have been no significant changes in Pinnacle's internal controls or in other factors that could significantly affect Pinnacle's internal controls during the year ended October 31, 2008, and as a result, no corrective actions with regard to significant deficiencies or material weakness in Pinnacle's internal controls were required. ITEM 9B. OTHER INFORMATION Not applicable. ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Pinnacle's officers and directors are listed below. Pinnacle's directors are generally elected at the annual shareholders' meeting and hold office until the next annual shareholders' meeting or until their successors are elected and qualified. Pinnacle's executive officers are elected by its board of directors and serve at its discretion. Name Age Position - ---- --- --------- Nolan Weir 35 President, Chief Executive Officer, Secretary and a Director The following is a brief description of Mr. Weir's business background: Nolan Weir. Mr. Weir has been an officer and director of Pinnacle since June 2007. Since December 2002 Mr. Weir has been the President of Makin Rain Irrigation Corp., a Company involved with residential landscaping and irrigation in the Alberta area. 11 Pinnacle does not have a compensation committee. Pinnacle's Directors serve as its Audit Committee. Pinnacle does not have a financial expert. Mr. Weir is not independent as that term is defined in Section 803 of the NYSE Alternext U.S. Company Guide. ITEM 11. EXECUTIVE COMPENSATION The following table shows the compensation paid or accrued to Pinnacle's officer during the year ended October 31, 2008 and for the period from Pinnacle's inception (June 5, 2007) to October 31, 2007: All Other Annual Stock Option Compen- Name and Principal Fiscal Salary Bonus Awards Awards sation Position Year (1) (2) (3) (4) (5) Total - ------------------ ------ ------ ----- ------ ------ ------- ----- Nolan Weir, 2008 $30,000 -- -- -- -- $30,000 President, Chief 2007 -- -- -- -- -- -- Executive Officer and Secretary (1) The dollar value of base salary (cash and non-cash) earned. (2) The dollar value of bonus (cash and non-cash) earned. (3) During the periods covered by the table, the value of Pinnacle's shares issued as compensation for services to the persons listed in the table. (4) The value of all stock options granted during the periods covered by the table. (5) All other compensation received that Pinnacle could not properly report in any other column of the table. Stock Options. Pinnacle has not granted any stock options and does not have any stock option plans in effect as of January 20, 2009. In the future, Pinnacle may grant stock options to its officers, directors, employees or consultants. Long-Term Incentive Plans. Pinnacle does not provide its officers or employees with pension, stock appreciation rights, long-term incentive or other plans and has no intention of implementing any of these plans for the foreseeable future. Employee Pension, Profit Sharing or other Retirement Plans. Pinnacle does not have a defined benefit, pension plan, profit sharing or other retirement plan, although it may adopt one or more of such plans in the future. Compensation of Directors. Pinnacle's directors do not receive any compensation pursuant to any standard arrangement for their services as directors. 12 Mr. Weir plans to spend approximately 50% of his time on the business of Pinnacle. During the year ending October 31, 2009 Pinnacle plans to pay approximately $30,000 to Mr. Weir for his services. Pinnacle does not have any employment agreements with its officers or employees. Pinnacle does not maintain any keyman insurance on the life or in the event of disability of any of its officers. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table shows the ownership of Pinnacle's common stock as of January 20, 2009 by each shareholder known by Pinnacle to be the beneficial owner of more than 5% of Pinnacle's outstanding shares, each director and executive officer and all directors and executive officers as a group. Except as otherwise indicated, each shareholder has sole voting and investment power with respect to the shares they beneficially own. Name and Address Number of Shares Percent of Class - ---------------- ---------------- ---------------- Nolan Weir 1,800,000 34% Suite 153 333 River Front Ave., S.E. Calgary, Alberta Canada T2G 5R1 Futures Investment Corp. 900,000 17% 31 Tusslewood View, N.W. Calgary, Alberta Canada T3L 2Y3 All officers and directors 1,800,000 34% as a group (one person) ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE The following lists all shares of Pinnacle's common stock since its incorporation: Consideration Shareholder Date of Sale Shares Issued Paid for Shares ----------- ------------ ------------- --------------- Nolan Weir 6-06-07 1,800,000 $18,000 Futures Investment Corp. 9-01-07 900,000 Assignment of interest in oil and gas prospect Private Investors 6/07 - 9/07 2,580,000 CDN$0.10 per share ---------- 5,280,000 ========== 13 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES -------------------------------------- John Kinross-Kennedy served as Pinnacle's auditor for the year ended October 31, 2008 and the period from Pinnacle's inception (June 5, 2007) to October 31, 2007. The following table shows the aggregate fees billed to Pinnacle for these periods by Mr. Kinross-Kennedy: 2008 2007 ---- ---- Audit Fees $5,000 $4,800 Audit-Related Fees -- -- Tax Fees -- -- All Other Fees -- -- Audit fees represent amounts billed for professional services rendered for the audit of Pinnacle's annual financial statements included as part of this report, as well as the audit of Pinnacle's financial statements and the review of its interim financial statements which were included as part of Pinnacle's registration statement on Form S-1. Before Mr. Kinross-Kennedy was engaged to render audit or non-audit services, the engagement was approved by Pinnacle's director. Pinnacle's director is of the opinion that the audit related fees charged by Mr. Kinross-Kennedy are consistent with Mr. Kinross-Kennedy maintaining his independence. ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES The following exhibits are filed with this Registration Statement: Exhibit Number Exhibit Name - ------- ------------ 3.1 Articles of Incorporation, as amended 3.2 Bylaws * 10.1 Agreement pertaining to acquisition of interest in oil and gas lease in Lincoln County, Oklahoma. * 10.2 Agreement pertaining to acquisition of interest in oil and gas property in Pawnee County, Oklahoma * Incorporated by reference to the same exhibit filed with the Company's registration statement on Form SB-2 (SEC File #333-148447). 14 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To: The Board of Directors and Shareholders Pinnacle Energy Corp. 333 Riverfront Avenue S.E., Suite 153 Calgary, Alberta CANADA I have audited the accompanying balance sheet of Pinnacle Energy Corp. as of October 31, 2008 and the related statements of operations and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 31, 2008, and the results of its operations and its cash flows for year then ended, in conformity with United States generally accepted accounting principles. 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 suffered a loss of $61,262 since inception June 5, 2007 and has not yet commenced operations. This raises substantive doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company has determined that it is not required to have, nor was I engaged to perform, an audit of the effectiveness of its documented internal controls over financial reporting. John Kinross-Kennedy Certified Public Accountant Irvine, California January 21, 2008 PINNACLE ENERGY CORP. (A Development Stage Company) Balance Sheet October 31, October 31, 2008 2007 ------------ ------------ ASSETS (Restated) Current Assets Cash at bank $ 9,366 $ 36,169 Accounts Receivable 19,006 - Subscriptions Receivable 18,000 ------------ ------------ Total Current Assets 28,372 54,169 ------------ ------------ Property and Equipment Equipment 100,000 100,000 Accumulated Depreciation 10,000 - ------------ ------------ 90,000 100,000 ------------ ------------ Other Assets Oil & Gas Leasehold Interest 1,190,000 1,190,000 ------------ ------------ TOTAL ASSETS $ 1,308,372 $ 1,344,169 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Current Liabilities Accounts Payable $ - $ 1,231 Accrued Interest Payable 13,333 $ - ------------ ------------ 13,333 1,231 ------------ ------------ Notes Payable 1,000,000 - ------------ ------------ TOTAL LIABILITIES 1,013,333 2,462 ------------ ------------ Shareholders' Equity (Deficit) Common Stock, par value $0.001, authorized 150,000,000 shares; issued and outstanding: 15,840,000 shares as at October 31, 2007 15,840,000 shares ast at October 31, 2008 15,840 15,840 Additional Paid-In Capital 340,461 340,461 Deficit accumulated during the development stage (61,262) (13,363) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 295,039 342,938 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,308,372 $ 345,400 ============ ============ The accompanying Notes are an integral part of these financial statements 1 PINNACLE ENERGY CORP. (A Development Stage Company) Statement of Operations For the Period For the three For the three For the For the five of Inception months ended months ended year ended months ended from June 5, October 31, October 31, 2007, through ------------------------------- -------------------------- October 31, 2008 2007 2008 2007 2008 ---- ---- ---- ---- -------------- (Restated) (Restated) Revenue Natural Gas Production $ 29,993 $ - $ 50,651 $ - $ 50,651 Cost of Sales - - - - - Operating Income 29,993 - 50,651 - 50,651 General and Administrative Expenses Professional Fees 1,165 11,500 17,965 11,500 29,465 Consulting Fees 21,470 - 36,334 - 36,334 Occupancy Costs 476 - 9,905 - 9,905 Repairs & Maintenance - 1,231 - 1,231 1,231 Depreciation 7,500 10,000 - 10,000 Interest 13,333 13,333 13,333 Other General and Administrative Expenses 176 632 11,013 632 11,645 ------------ ------------ ------------ ------------ ------------ Total General and Administrative Expenses 44,120 13,363 98,550 13,363 111,913 ------------ ------------ ------------ ------------ ------------ Net Loss $ (14,127) $ (13,363) $ (47,899) $ (13,363) $ (61,262) ============ ============ ============ ============ ============ Loss Per Common Share: Basic and Diluted $ (0.001) $ (0.002) $ (0.003) $ (0.002) ============ ============ ============ ============ Weighted Average Shares, Outstanding, Basic and Diluted: 15,840,000 9,641,739 15,840,000 7,653,649 ============ ============ ============ ============
The accompanying Notes are an integral part of these financial statements 2 PINNACLE ENERGY CORP. (A Development Stage Company) Statement of Cash Flows - -------------------------------------------------------------------------------- For the Period of Inception For the three For the three For the For the five from June 5, months ended months ended year ended mo. ended 2007, through Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, 2008 2007 2008 2007 2008 ------------- ------------- ---------- ------------- -------------- Cash flows from operating activities: Net (Loss) $ (14,127) $ (13,363) $ (47,899) $ (13,363) $ (61,262) Adjustments to reconcile net loss to net cash used by operating activities: Non-cash depreciation 7,500 - 10,000 - 10,000 Change in operating assets and liabilities: (Increase) Decrease in Accts Receivable (5,014) - (19,006) - (19,006) Increase (Decrease) in Accounts Payable (1,231) 1,231 (1,231) 1,231 - Increase (Decrease) in Accrued Interest 13,333 - 13,333 - 13,333 ------------- ------------- ------------- ------------- ------------- Net cash (used by) operating activities 461 (12,132) (44,803) (12,132) (56,935) ------------- ------------- ------------- ------------- ------------- Cash flows from investing activities Acquisition of equipment - (100,000) - (100,000) (100,000) Acquisition of oil & gas working interest (1,000,000) (190,000) (1,000,000) (190,000) (1,190,000) ------------- ------------- ------------- ------------- ------------- Net cash (used by) investing activities (1,000,000) (290,000) (1,000,000) (290,000) (1,290,000) ------------- ------------- ------------- ------------- ------------- Cash flows from financing activities: Decrease Subscriptions Receivable - (18,000) 18,000 (18,000) - Proceeds of Note Payable 1,000,000 - 1,000,000 - 1,000,000 Common stock issued for assets - 90,000 - 90,000 90,000 Common stock issued for cash - 266,301 - 266,301 266,301 ------------- ------------- ------------- ------------- ------------- Net cash (used) provided by financing activities 1,000,000 338,301 1,018,000 338,301 1,356,301 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in cash 461 36,169 (26,803) 36,169 9,366 Cash, beginning of the period 8,905 - 36,169 - - ------------- ------------- ------------- ------------- ------------- Cash, end of the period $ 9,366 $ 36,169 $ 9,366 $ 36,169 $ 9,366 ============= ============= ============= ============= ============= Supplemental cash flow disclosure: Interest paid $ - $ - $ - $ - $ - ============= ============= ============= ============= ============= Taxes Paid $ - $ - $ - $ - $ - ============= ============= ============= ============= =============
The accompanying Notes are an integral part of these financial statements 3 PINNACLE ENERGY CORP. (A Development Stage Company) Statement of Shareholders' Equity (Unaudited) - -------------------------------------------------------------------------------- Deficit Common Stock Accumulated Total ------------------- Additional during the Shareholders' Number of Paid-In Development Equity Shares Amount Capital Stage (Deficit) --------- ------ ----------- ----------- ------------- Inception, June 5, 2007 - $ - $ - $ - $ - Common stock issued for cash at $0.096 per share September 5, 2007 2,580,000 2,580 245,721 248,301 Common stock issued for cash at $0.01 per share September 5, 2007 1,800,000 1,800 16,200 18,000 Common stock issued for oil and gas working interest at $0.10 per share September 5, 2007 900,000 900 89,100 90,000 Net loss for the period ended Oct. 31, 2007 (13,363) (13,363) ----------- --------- ----------- ---------- ---------- Balances, October 31, 2007 5,280,000 $ 5,280 $ 351,021 $ (13,363) $ 342,938 Forward stock split 3 for 1 July 27, 2008 10,560,000 10,560 (10,560) - Net loss for the year ended October 31, 2008 (47,899) (47,899) ----------- --------- ----------- ---------- ---------- Balances, October 31, 2008 15,840,000 $ 15,840 $ 340,461 $ (61,262) $ 295,039 =========== ========= =========== ========== ==========
The accompanying Notes are an integral part of these financial statements 4 Pinnacle Energy Corp. (A Developmental Stage Company) Notes to Financial Statements October 31, 2008 1. Organization Gas Salvage Inc. (the "Company") was incorporated under the laws of the State of Nevada June 5, 2007. The Company was organized for the purpose of engaging in any activity or business not in conflict with the laws of the State of Nevada or of the United States of America. The Company became engaged in the oil and gas industry. In July, 2008 the Company changed its name from Gas Salvage Corporation to Pinnacle Energy Corp. Current Business of the Company The Company purchased a 44.5% working interest (35.6% net revenue interest) in a producing gas well on 40 acres in Lincoln County, Oklahoma, known as Holmes #1. The well was initially shut in awaiting repairs to its Nitrogen Rejection Unit. The well was put into production in November, 2007. A geologist's report on December 18, 2007 indicated that the lease is selling between 85 and 100 MCF per day, however volumetric calculations of the Holmes Lease reservoir have not yet been performed. An examination as to whether the well warrants impairment based on expected revenue was not done at October 31, 20008 pending volumetric calculations. On September 1, 2008 the Company acquired working interests in six oil and gas wells located in Pawnee County, Oklahoma for $1,000,000, payable September 1, 2013. Interest at an annual rate of 8% is due monthly. The Company has a 25.5% working interest (20.4% net revenue interest) in two wells, a 20% working interest (16% net revenue interest) in three wells and a 17% working interest (13.6% net revenue interest) in the remaining well. Property Acquisition Costs: Unproved Holmes Lease $ 190,000 Pawnee County Lease $ 1,000,000 --------- $ 1,190,000 ========= 2. Summary of Significant Accounting Policies Basis of Presentation The financial statements of the Company have been prepared using the accrual basis of accounting in accordance with generally accepted accounting principles in the United States. 5 Pinnacle Energy Corp. (A Developmental Stage Company) Notes to Financial Statements October 31, 2008 Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. Significant estimates made by management are, among others, realizability of long-lived assets, deferred taxes and stock option valuation. The financial statements presented include all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the period presented in accordance with the accounting principles generally accepted in the United States of America. All adjustments are of a normal recurring nature. Cash and equivalents Cash and equivalents include investments with initial maturities of three months or less. Fair Value of Financial Instruments The Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures About Fair Value of Financial Instruments." SFAS No. 107 requires disclosure of fair value information about financial instruments when it is practicable to estimate that value. The carrying amounts of the Company's financial instruments as of July 31, 2008 approximate their respective fair values because of the short-term nature of these instruments. Such instruments consist of cash, accounts payable and accrued expenses. The fair value of related party payables is not determinable. Income Taxes The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company generated a deferred tax credit through net operating loss carryforward. However, a valuation allowance of 100% has been established, as the realization of the deferred tax credits is not reasonably certain, based on going concern considerations outlined as follows. 6 Pinnacle Energy Corp. (A Developmental Stage Company) Notes to Financial Statements October 31, 2008 Going Concern The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. The company experienced a loss of $47,899 and a negative cash flow of $26,803 from operations in the year ended October 31, 2008. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease development of operations. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish its plans to generate revenue from well head machinery and oil and gas leases. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classifications or liabilities or other adjustments that might be necessary should the Company be unable to continue as a going concern. Development-Stage Company The Company is considered a development-stage company, with limited operating revenues during the periods presented, as defined by Statement of Financial Accounting Standards ("SFAS") No. 7. SFAS. No. 7 requires companies to report their operations, shareholders deficit and cash flows since inception through the date that revenues are generated from management's intended operations, among other things. Management has defined inception as June 5, 2007. Since inception, the Company has incurred an operating loss of $64,262. The Company's working capital has been generated through the sales of common stock. Management has provided financial data since June 5, 2007, "Inception", in the financial statements, as a means to provide readers of the Company's financial information to make informed investment decisions. Basic and Diluted Net Loss Per Share Net loss per share is calculated in accordance with SFAS 128, Earnings Per Share for the period presented. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilative convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby we used to purchase common stock at the average market price during the period. 7 Pinnacle Energy Corp. (A Developmental Stage Company) Notes to Financial Statements October 31, 2008 The Company has no potentially dilutive securities outstanding as of April 30, 2008. The following is a reconciliation of the numerator and denominator of the basic and diluted earnings per share computations for the year ended October 31, 2008 and 2007. 2007 has been restated to reflect the 3 for 1 forward stock split of July, 2008 2008 2007 ---- ---- Numerator: Basic and diluted net loss per share: Net Loss $ (47,899) $ (13,363) Denominator Basic and diluted weighted average number of shares outstanding 15,840,000 7,653,649 Basic and Diluted Net Loss Per Share $ (0.003) $ (0.002) ------------------------------------- Accounting for Oil and Gas Producing Activities ----------------------------------------------- The company uses the successful efforts method of accounting for oil and gas producing activities. Under this method, acquisition costs for proved and unproved properties are capitalized when incurred. Acquisition costs are capitalized when incurred pending the determination of whether a well has found proved reserves. A determination of whether a well has found proved reserves is made within a year of acquisition. If after that year has passed, a determination that proved reserves exist cannot be made, the well is assumed to be impaired, and its costs are charged to expense. It's costs can however, continue to be capitalized if a sufficient quantity of reserves are discovered in the well to justify its completion as a producing well and sufficient progress is made assessing the reserves and the well's economic and operating feasibility. The impairment of unamortized capital costs is measured at a lease level and is reduced to fair value if it is determined that the sum of expected future net cash flows is less than the net book value. 8 Pinnacle Energy Corp. (A Developmental Stage Company) Notes to Financial Statements October 31, 2008 The company determines if impairment has occurred through either adverse changes or as a result of the annual review of all fields. During the fiscal year ended October 31, 2008 the company did not record any impairment. Development costs of proved oil and gas properties, including estimated dismantlement, restoration and abandonment costs and acquisition costs, are depreciated and depleted on a field basis by the units-of-production method using proved reserves, respectively. The Costs of unproved oil and gas properties are generally combined and impaired over a period that is based on the average holding period for such properties and the company's experience of successful operations. Oil and Gas Revenue Recognition ------------------------------- The company applies the sales method of accounting for natural gas revenue. Under thus method, revenues are recognized based on the actual volume of natural gas sold to purchasers. Revenue from the sale of gas is reported by the gas gathering company monthly and paid two months in arrears. 3. Property and Equipment Equipment $100,000 The Company purchased a 50% interest in a skid mounted Nitrogen Rejection unit in October, 2005. The unit strips out excessive nitrogen and oxygen from gas wells to an acceptable level of contaminants in the gas stream. The unit is intended for use on the Company's gas wells. The unit commenced operations in November, 2007 under the control of the gas collection operator. 4. Note Payable The Company issued a promissory note to Futures Investment Corporation on September 1, 2008 for $1,000,000 in payment for an oil and gas working interest in Pawnee County, Oklahoma. The note is payable on September 1, 2013. Interest is payable monthly at the rate of 8% simple interest. 5. Commitments and Contingencies The company is committed to the following financial commitment over the next five years: Repayment of Note Payable September 1, 2013: $1,000,000. 9 Pinnacle Energy Corp. (A Developmental Stage Company) Notes to Financial Statements October 31, 2008 6. Capital Structure During the period from inception through July 31, the Company entered into the following equity transactions: September 5, 2007: Sold 2,580,000 shares of common stock at $.096 per share realizing $248,301. September 5, 2007: Sold 1,800,000 shares of common stock at $.01 per share realizing $18,000. September 5, 2007: Issued 900,000 shares of common stock at $.10 per share in payment of $90,000 toward 44.5% working interest in an oil and gas lease. In July, 2008 a three-for-one forward split of the company's common stock was executed. Par Value of common stock was elected to remain unchanged at $0.001. At the same time authorized capital was increased to 150,000,000 common shares. As at October 31, 2008, the Company was authorized to issue 150,000,000 shares of $0.001 par common stock, of which 15,840,000 shares were issued and outstanding. The Company was also authorized to issue 5,000,000 shares of preferred stock, of which nil shares were issued and outstanding at October 31, 2008. 7. Restated Financial Statements The Balance Sheet and Income Statement for the year ended October 31, 2007 were restated to reflect a retroactive change to issued and outstanding stock as a result of the 3 for 1 forward stock split of July, 2008. There was no affect on stockholders' equity. 8. Legal Proceedings There were no legal proceedings against the Company with respect to matters arising in the ordinary course of business. Neither the Company nor any of its officers or directors is involved in any other litigation either as plaintiffs or defendants, and have no knowledge of any threatened or pending litigation against them or any of the officers or directors. 10 SIGNATURES In accordance with Section 13 or 15(a) of the Exchange Act, the Registrant has caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on the 26th day of January 2009. PINNACLE ENERGY CORP. By: /s/ Nolan Weir ------------------------------------------- Nolan Weir, President, Principal Financial Officer and Principal Accounting Officer Pursuant to the requirements of the Securities Exchange Act of l934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Nolan Weir Director January 26, 2009 - ------------------------ Nolan Weir PINNACLE ENERGY CORP. FORM 10-K EXHIBITS EX-3 2 oct0810k1-09ex3i.txt EXH 3.1 EXHIBIT 3.1 DEAN HELLER Entity # Secretary of State E0414912007-0 206 North Carson St. Document Number: Carson City, Nevada 89701-4299 20070393603-63 (775) 884-5706 Website: secretaryofstate.biz Date Filed: 06/05/2007 7:13 AM Articles of Incorporation In the office of Dean Heller Secretary of State 1. Name of Corporation: Gas Salvage Corp. 2. Resident Agent Name and Street Address: Business Filings Incorporated 6100 Neil Road, Suite 500 Reno, NV 89511 3. Shares: Number of shares Number of shares with par value 2,000 Par value: $0.01 without par value ______ --------- ------- 4. Names and Addresses of Board of Directors/Trustees: Nolan Weir 41890 Enterprise Circle South Suite 280 Temecula, CA 92590 5. Purpose: All lawful purposes. 6. Names, Address and Signature of incorporator: The Nevada Company Terese Coulthard, Asst. Sec. 8025 Excelsior Drive, Suite 200 Madison, WI 53717 7. Certificate of Acceptance of Appointment of Resident Agent: I hereby accept appointment as Resident Agent for the above named corporation. /s/ Terese Coulthard 06/04/2007 -------------------------------- ---------- Authorized Signature of R.A. or On Behalf of R.A. Company Date DEAN HELLER Secretary of State 206 North Carson St. Carson City, Nevada 89701-4299 (775) 884-5706 Website: secretaryofstate.biz Filed in the Office of Document Number Ross Miller 20070677071-47 Secretary of State Filing Date and Time State of Nevada 10/03/2007 12:30 P.M. Entity Number E0414912007-0 CERTIFICATE OF AMENDMENT Certificate of Amendment to the Articles of Incorporation For Nevada Profit Corporations (Pursuant to NRS 78.380 - Before Issuance of Stock) 1. Name of Corporation: GAS SALVAGE CORP. 2. The articles have been amended as follows (provide article numbers, if available): Article 3 is amended to read as follows: The authorized capital stock of the Corporation shall be divided into 50,000,000 shares of common stock, $0.001 par value and 5,000,000 shares of preferred stock, $0.001 par value. The text of other amendments are attached. 3. The undersigned declare that they constitute at least two-thirds of the incorporators [ ], or of the board of directors [X] (check one box only) 4. Effective date of filing (optional): 5. The undersigned affirmatively declare that to the date of this certificate, no stock of the corporation has been issued. 6. Signatures*: /s/ Nolan Weir ------------------------ Signature CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF GAS SALVAGE CORP. A. The period of duration of the Corporation shall be perpetual. B. The authorized capital stock of the Corporation shall be divided into 50,000,000 shares of common stock and 5,000,000 shares of preferred stock. Subject to the laws of the state of Nevada, the directors of the Corporation have the authority to issue the preferred shares in one or more series and to designate the rights, preferences and limitations of each series. C. No share of common stock shall have any preference over or limitation in respect to any other share of common stock. All shares of the common stock shall have equal rights and privileges. D. Each outstanding share of common stock shall be entitled to one vote at stockholders' meetings, either in person or by proxy. E. Cumulative voting shall not be allowed in elections of directors or for any other purpose. F. No holders of shares of the common stock of the Corporation shall be entitled, as such, to any preemptive or preferential right to subscribe to any unissued stock or any other securities which the Corporation may now or hereafter be authorized to issue. The Board of Directors of the Corporation, however, in its discretion by resolution, may determine that any unissued securities of the Corporation shall be offered for subscription solely to the holders of the common stock of the Corporation, or solely to the holders of any class or classes of such stock, which the Corporation may now or hereafter be authorized to issue, in such proportions based on stock ownership as said board in its discretion may determine. G. The Board of Directors may restrict the transfer of any of the Corporation's stock issued by giving the Corporation or any stockholder "first right of refusal to purchase" the stock, by making the stock redeemable, or by restricting the transfer of the stock under such terms and in such manner as the directors may deem necessary and as are not inconsistent with the laws of Nevada. Any stock so restricted must carry a conspicuous legend noting the restriction and the place where such restriction may be found in the records of the Corporation. H. The judgment of the Board of Directors as to the adequacy of any consideration received or to be received for any shares, options, or any other securities which the Corporation at any time may be authorized to issue or sell or otherwise dispose of shall be conclusive in the absence of fraud and any applicable law. I. The number of directors shall be fixed by or in the manner provided in the By-laws of the Corporation, as may be amended from time to time, except as to the number constituting the initial board which number shall be one. J. No contract or other transaction between the Corporation and any other corporation, whether or not a majority of the shares of the capital stock of such other corporation is owned by the Corporation, and no act of the Corporation shall in any way be affected or invalidated by the fact that any of the directors of the Corporation are pecuniarily or otherwise interested in, or are directors or officers of, such other corporation. Any director of the corporation, individually, or any firm with which such director is affiliated may be a party to or may be pecuniarily or otherwise interested in any contract or transaction of the Corporation; provided, however, that the fact that he or such firm is so interested shall be disclosed or shall have been known to the Board of Directors of the Corporation, or a majority thereof, at or before the entering into such contract or transaction; and any director of the Corporation who is also a director or officer of such other corporation, or who is so interested, may be counted in determining the existence of a quorum at any meeting of the Board of Directors of the Corporation which shall authorize such contract or transaction, with like force and effect as if he were not such director or officer of such other corporation or not so interested. K. No director of the Corporation shall have liability to the Corporation or to its stockholders or to other security holders for monetary damages for breach of fiduciary duty as a director; provided, however, that such provisions shall not eliminate or limit the liability of a director to the Corporation or to its shareholders or other security holders for monetary damages for: (i) any breach of the director's duty of loyalty to the Corporation or to its shareholders or other security holders; (ii) acts or omissions of the director not in good faith or which involve intentional misconduct or a knowing violation of the law by such director; (iii) acts by such director as specified by Nevada law; or (iv) any transaction from which such director derived an improper personal benefit. No officer or director shall be personally liable for any injury to person or property arising out of a tort committed by an employee of the Corporation unless such officer or director was personally involved in the situation giving rise to the injury or unless such officer or director committed a criminal offense. The protection afforded in the preceding sentence shall not restrict other common law protections and rights that an officer or director may have. The word "director" shall include at least the following, unless limited by Nevada law: an individual who is or was a director of the Corporation and an individual who, while a director of a Corporation is or was serving at the Corporation's request as a director, officer, partner, trustee, employee or agent of any other foreign or domestic corporation or of any partnership, joint venture, trust, other enterprise or employee benefit plan. A director shall be considered to be serving an employee benefit plan at the Corporation's request if his duties to the Corporation also impose duties on or otherwise involve services by him to the plan or to participants in or beneficiaries of the plan. To the extent allowed by Nevada law, the word "director" shall also include the heirs and personal representatives of all directors. This Corporation shall be empowered to indemnify its officers and directors to the fullest extent provided by law. 2 ROSS MILLER Secretary of State 204 North Carson St., Suite 1 Carson City, Nevada 89701-4299 (775) 684-5708 Website: secretaryofstate.biz Filed in the Office of Document Number Ross Miller 20080494410-92 Secretary of State Filing Date and Time State of Nevada 7/25/2008 9:30 a.m. Entity Number E0414912007-0 CERTIFICATE OF CHANGE PURSUANT TO NRS 78.209 Certificate of Change filed Pursuant to NRS 78.209 For Nevada Profit Corporations 1. Name of Corporation: GAS SALVAGE CORP. 2. The Board of Directors have adopted a resolution pursuant to NRS 78.209 and have obtained any required approval of the stockholders. 3. The current number of authorized shares and the par value, if any, of each class or series, if any, of shares before the change (i.e. 3-for-1 forward stock split): 50,000,000 shares of common stock, $0.01 par value. 4. The number of authorized shares and the par value, if any, of each class or series, if any, of shares after the change (i.e. 3-for-1 forward stock split): 150,000,000 shares of common stock, $0.01 par value. 5. The number of shares of each affected class or series, if any, to be issued after the change (i.e. 3-for-1 forward stock split) in exchange for each issued share of the same class or series: 15,840,000 shares of common stock, $0.01 par value. 6. The provisions, if any, for the issuance of fractional shares, or for the payment of money or the issuance of scrip to stockholders otherwise entitled to a fraction of a share and the percentage of outstanding shares affec ted thereby: No fractional shares will result from the change. 7. Effective date of filing: (optional) 8. Signatures: /s/ Nolan Weir ----------------------------- Signature ROSS MILLER Secretary of State 204 North Carson St., Suite 1 Carson City, Nevada 89701-4299 (775) 684-5708 Website: secretaryofstate.biz Filed in the Office of Document Number Ross Miller 20080509353-25 Secretary of State Filing Date and Time State of Nevada 7/31/2008 8:00 a.m. Entity Number E0414912007-0 CERTIFICATE OF AMENDMENT Certificate of Amendment to the Articles of Incorporation For Nevada Profit Corporations (Pursuant to NRS 78.380 - Before Issuance of Stock) 1. Name of Corporation: GAS SALVAGE CORP. 2. The articles have been amended as follows (provide article numbers, if available): Article 1 is amended to read as follows: The name of the Corporation is Pinnacle Energy Corp. 3. The vote by which the stockholders holding shares in the Corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the Articles of Incorporation, have voted in favor of the amendment is: 2,700,000 4. Effective date of filing (optional): 5. Signatures: /s/ Nolan Weir ------------------------ Signature EX-10 3 octo0810k1-09ex102.txt EXH. 10.2 EXHIBIT 10.2 PURCHASE AND SALE AGREEMENT THIS AGREEMENT made and entered into this 11th day of August, 2008, between Pinnacle Energy Corp. ("PEC") and Futures Investment Corp. ("Futures"). W I T N E S S E T H: - - - - - - - - - - 1. PURCHASE AND SALE. On the Closing Date (as hereinafter defined), but effective for all purposes as of 12:01 a.m. Mountain Time September 1, 2008 (the "Effective Date") subject to the terms and conditions of this Agreement, Futures hereby agrees to sell, convey, and deliver to PEC, and PEC hereby agrees to purchase and accept delivery from Futures, the following: (a) The oil, gas, and leasehold interests described in Exhibit A, which are attached hereto and incorporated by reference; (b) all of Futures rights under the operating agreements, unitization agreements, pooling agreements, declarations of pooling or unitization, farmout agreements, assignments, gas sale contracts, gas processing contracts, and other instruments and agreements described or referred to in Exhibit A (all of which are hereinafter collectively referred to as the "Existing Contracts"); (c) All right, title and interest of Futures in all equipment, pipelines, accounts, wells, tanks, pipeline easements, surface easements, production in tanks, and appurtenances used or held for use or related to the aforesaid interests described in Exhibit A or operations conducted in connection therewith; (d) All right, title, and interest of Futures in or derived from all unitization and pooling agreements concerning the properties covered and the units created thereby which accrue or are attributable to the interests described in Exhibit A, and including not less than those percentages of interests in the units set forth in Exhibit A; (e) Without limitation by the foregoing, all of Futures right, title, and interest in and to oil, gas, and mineral interests and oil, gas, and mineral leasehold interests and overriding royalty interests in the lands described or referred to in Exhibit A or to which the interests in Exhibit A relate; (f) without limitation all of Futures interest in and to the wells described in Exhibit A (the "Wells"); all of which interests, are hereinafter collectively referred to as the "Subject Interests". 2. PURCHASE PRICE. The total purchase price (the "Purchase Price") to be paid by PEC to Futures for the Subject Interests is $1,000,000 in the form of a Promissory Note bearing interest at 8% per annum. The Purchase Price shall be paid by monthly interest only payments for a period of 5 years from the Closing Date, with the entire principal due and payable on September 1, 2013, pending the adjustments for title matters described in Article 7 and the adjustments for taxes, production, and operating costs described in Article 8. 3. DISTRIBUTION OF BENEFITS AND ASSUMPTION OF CERTAIN OBLIGATIONS. PEC shall be entitled to any amount realized from and accruing to the Subject Interests subsequent to the Effective Date and shall be responsible for all expenses for the development and operation of the Subject Interests subsequent to that date. Futures shall be entitled to all the amounts realized from and accruing to the Subject Interests prior to the Effective Date and shall be responsible for and hold PEC harmless from any liability arising out of all expenses for the development and operation of the Subject Interests incurred prior to the Effective Date and also, any litigation expenses incurred by Futures prior to the Closing Date. 4. REPRESENTATIONS AND WARRANTIES OF SELLER. Futures represents and warrants to PEC that: 4.1 Due Organization. Futures is a duly organized and validly existing corporation under the laws of the State of Nevada and has the corporate power to carry on its business as it is now being conducted and is duly qualified to do business in Oklahoma. 4.2 Power and Authority; No Conflict. Futures has full legal power and authority to enter into and perform this Agreement, and the consummation of the transactions contemplated herein will not result in the breach of any provision of, or constitute a default under, Futures' articles of incorporation or bylaws or, as of the Closing Date, any indenture, mortgage, deed of trust, credit agreement or any other agreement or instrument by which Futures is bound or to which the Subject Interests are subject, except for agreements or instruments with respect to which Futures will have obtained by the Closing Date the consents set forth in Exhibit A. This Agreement has been duly authorized by all necessary corporate action of Futures and its shareholders and this Agreement constitutes a legal, valid and binding agreement of Futures enforceable against Futures in accordance with its terms. 4.3 No Defaults. Futures has not received any notice of default and is not in default under any lease or extension thereof, operating agreement or other agreement or obligation to which it is a party or by which it is bound or to which it may be subject affecting the Subject Interests or Futures' right to enter into this Agreement and carry out the transactions contemplated hereby, and Futures is not subject to any order, writ, injunction, or decree of any court or commission or other administrative agency affecting the Subject Interests or its right to enter into this Agreement and carry out the transactions contemplated hereby. 2 4.4 No Finders Fee. Futures has not incurred any obligation or liability, contingent or otherwise, for brokers' or finders' fee in respect to the matters provided for in this Agreement. 4.5 No Encumbrances. Futures has good and marketable title to the Subject Interests and, except for the obligations, encumbrances, depth limitations, and burdens set forth on Exhibit A the Subject Interests are free and clear of all liens, claims, clouds, burdens, depth limitations, or encumbrances. In addition, Exhibit A reflects the names, addresses, and phone numbers of all contractors, service companies, materialmen, and vendors that have provided services or material on the Subject Interests within the last six months or who could claim a lien for services or materials provided to the Subject Interests under applicable law in a cumulative amount of $500.00 or more. The oil, gas, and leasehold interests described in Exhibit A, are not subject to being reduced by virtue of any reversionary or back-in interests or reassignments or payments required of Futures. The oil, gas, and leasehold interests described in Exhibit A, are not subject to any joint venture agreements, farmout agreements, operating agreements, oil and or gas sales or processing contracts, preferential rights of purchase, consents to assignment, drilling and or development obligations or other burden, restriction or limitation with respect to the ownership interest of Futures, the operation thereof, or the disposition and processing of production attributable thereto which are not ordinary and customary in the oil and gas industry, or which contain any terms, provisions, conditions or agreements which are not ordinary and customary in the oil and gas industry. 4.6 No Litigation. There is no action at law or equity and no proceeding before any governmental agency, pending or threatened, that in any way relates to or affects the Subject Interests or Futures' ability to enter into, and perform its obligations under, this Agreement. 4.7 Subject Interests. Exhibit A contains a correct and complete description of the Subject Interests owned by Futures and to be conveyed to PEC hereunder, and the Subject Interests are correctly described in Exhibit A. The only operating agreements or other agreements affecting the Subject Interests are those set forth and described in Exhibit A. The Subject Interests entitle Futures to receive not less than the undivided interests set forth in Exhibit A as "Net Revenue Interests" of all indicated hydrocarbons produced, saved, and marketed from the lands covered thereby and all wells located thereon through the plugging, abandonment, and salvage of such wells. Futures' proportionate obligation to bear costs and expenses relating to the development of and operations on the leases, land, and wells thereon is not, and, through the plugging, abandonment, and salvage of such wells, will not be, greater than the "Working Interests" set forth in Exhibit A. Exhibit A contains a correct and complete list of each person or entity who owns a working interest in any of the property covered by the Subject Interests, the extent of such working interest, the net revenue interest of such person or entity, each person who holds a royalty interest in such property, and the extent of such royalty interest. 4.8 Environmental Matters. As used in this Section 4.8: "CERCLA" means the Comprehensive Environmental Response, Compensation a Liability Act of 1980, as amended. "CERCUS" means the Comprehensive Environmental Response, Compensation an Liability Information System List. 3 "Environmental Laws" means any federal, state, local, or foreign statute, code, ordinance, rule, regulation, policy, guidelines, permit, consent, approval, license, judgment, order, writ, decree, injunction, or other authorization, including the requirement to register underground storage tanks, relating to (a) emissions, discharges, releases, or threatened releases of Hazardous Materials into the natural environment, including into ambient air, soil, sediments, land surface or subsurface, buildings or facilities, surface water, groundwater, pub1icly~~wned treatment works, septic systems, or land, (b) the generation, treatment, storage, disposal, use, handling, manufacturing, transportation, or shipment of Hazardous Materials, or (c) otherwise relating to the pollution of the environment, solid waste handling treatment, or disposal, or operation or reclamation of mines or oil and gas wells. "Hazardous Material" means (a) any "hazardous substance", as defined by CERCLA, (b) any "hazardous waste," as defined by the Resource Conservation and Recovery Act, as amended, (c) any hazardous, dangerous, or toxic chemical, material, waste, or substance within the meaning of and regulated by any Environmental Law, (d) any radioactive material, including any naturally occurring radioactive material, and any source, special, or byproduct material as defined in 42 U.S.C. ss.2011 et seq. and any amendments or authorizations thereof, (e) any asbestos-containing materials in any form or condition, or (f) any polychlorinated biphenyls in any form or condition. (a) Futures has conducted its business and operated the Subject Interests, and is conducting its business and operating the Subject Interests, in material compliance with all Environmental Laws; (b) Neither Futures nor the Subject Interests are the subject of any investigation or inquiry by any governmental authority evaluating whether any material remedial action is needed to respond to a release of any Hazardous Material or to the improper storage or disposal (including storage or disposal at offsite locations) of any Hazardous Material; (c) Futures (and to the best knowledge, information, and belief of Futures, no other person) has filed any notice under any federal, state, or local law indicating that it is responsible for the improper release into the environment, or the improper storage or disposal, of any Hazardous Material or that any Hazardous Material is improperly stored or disposed of upon any of the Subject Interests; (d) Futures does not have any material contingent liability in connection with the release into the environment or at or on any property now or previously owned or leased by Futures or the storage or disposal of any Hazardous Material; (e) Futures has not received any claim, complaint, notice, inquiry, or request for information, which remains unresolved as of the date hereof, with respect to any alleged violation of any Environmental Law or regarding potential liability under any Environmental Law or under any common law theories relating to operations or conditions of any facilities or property owned, leased, or operated by Futures; (f) No property now or previously owned, leased, or operated 4 by Futures is listed on the National Priorities List pursuant to CERCLA or on the CERCUS or on any other federal or state list as sites requiring investigation or cleanup; (g) Futures is not directly transporting, has directly transported or, is directly arranging for the transportation of any Hazardous Material to any location which is listed on the National Priorities List pursuant to CERCLA, on the CERCUS, or on any similar federal or state list or which is the subject of federal, state, or local enforcement actions or other investigations that may lead to material claims against Futures for remedial work, damage to natural resources, or personal injury, including claims under CERCLA; (h) There are no sites, locations, or operations at which Futures is currently undertaking, or has completed, any remedial or response action relating to any such disposal or release, as required by Environmental Laws; and (i) All underground storage tanks and solid waste disposal facilities owned or operated by Futures are used and operated in material compliance with Environmental Laws. 4.9 Consents and Approvals. Except as set forth in Exhibit A, no governmental, regulatory, or other third party approvals, waivers, consents, or waivers of preferential or similar rights of third parties to purchase any part of the Subject Interests are required to consummate the transactions contemplated by this Agreement and to fully vest in PEC all rights, title, and interests of Futures in and to the Subject Interests, and none of the leases, contracts or other agreements listed in Exhibit A and being assigned to PEC hereunder require the consent of another party to such assignment. Consummation of the transaction contemplated hereby by Futures will not violate any statute, ordinance, or regulation of any governmental or regulatory body. 4.10 Validity of Leases and Contracts. Each of the leases, operating agreements, and other agreements described in Exhibit A hereto relating to the Subject Interests is valid and subsisting; such leases will be maintained in effect as to the lands covered thereby by production from the Wells located on such leases or by timely meeting the drilling obligations thereunder; there is not under any such leases or contracts any existing breach or default or event that with notice or lapse of time, or both, would constitute a breach or default. Futures has fulfilled all requirements for filings, certificates, disclosures of parties in interest, and other similar matters contained in (or otherwise applicable thereto by law, rule or regulation) the leases or other documents applicable to Futures and is fully qualified to own and hold all such leases or other interests relating to the Subject Interests. There are no obligations (excluding implied covenants, if any) to engage in continuous development operations in order to maintain any such lease relating to the Subject Interests or other interest in force and effect for the areas and depths covered thereby; there are no provisions applicable to such leases or other documents which increase the royalty share of the lessor thereunder. Upon the establishment of production in commercial quantities, the leases and other interests will be in full force and effect over the economic life of the property involved and do not have terms fixed by a certain number of years. With respect to tangible personal property held by Futures under lease, all such agreements are valid, binding and in full force and effect and Futures is not in default under any such lease. The copies of the leases and agreements described in Exhibit A to this Agreement which have been heretofore delivered to PEC are true and complete copies thereof, with all amendments to date. 5 4.11 Compliance with Laws. To the best of Futures' knowledge, all of the Wells have been drilled, completed, and operated in compliance with all applicable laws and regulations. Futures holds (and is in compliance with the terns of) all permits, licenses, variances, exemptions, orders, franchises, approvals, and authorizations of all governmental agencies necessary for the lawful conduct of its business or the lawful ownership, use, and operation of its assets. As of the date of this Agreement, no investigation or review by any governmental agency with respect to Futures or its Subject Interests is pending or, to the best knowledge, information, and belief of Futures, is threatened. Futures is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, the Investment Company Act of 1940, or any state public utilities code. 4.12 Obligation Wells. A complete and accurate description of all drilling obligations and other material development obligations (and the penalties for the breach thereof) affecting the Subject Interests is set forth in Exhibit A. 4.13 Taxes. All ad valorem, property, production, severance, and similar taxes and assessments based on or measured by the ownership of property or the production of hydrocarbons or the receipt of proceeds therefrom with respect to the Subject Interests for all years prior to the year in which this Agreement is executed have been properly paid, and all such taxes and assessments which become due and payable prior to the Closing Date shall be paid in full by Futures, subject, however, to proration pursuant to Section 8.2. 4.14 Oil and Gas Reserve Information. All information in any reserve reports furnished to PEC and relating to the Subject Interests was (as of the date of the reserve report) true and correct in all material respects. Except for changes in classification or values of oil and gas reserve or property interests that occurred in the ordinary course of business since the date of such report and except for changes (including changes in commodity prices) generally affecting the oil and gas industry, there has been no material adverse change with respect to the matters addressed in the Reserve Report. 4.15 Oil and Gas Operations. Except as otherwise set forth in Exhibit A: ---------------------- (a) None of the Wells has been overproduced such that it is subject or liable to being shut-in or to any other overproduction penalty; (b) There have been no changes proposed in the production allowables for any Wells; (c) All Wells have been drilled and (if completed) completed, operated and produced in accordance with good oil and gas field practices and in compliance in all material respects with applicable oil and gas leases and applicable laws, rules, and regulations; (d) Futures has not agreed to, and is not obligated to, abandon any Well; (e) Proceeds from the sale of oil or gas produced from the Wells are being received by Futures in a timely manner and are not being held in suspense for any reason (except for amounts, individually or in the aggregate, not in excess of $100.00 and held in suspense in the ordinary course of business); and 6 (f) No person has any call on, option to purchase, or similar rights with respect any of the Subject Interests or any or to the production attributable thereto, and upon consummation of the transactions contemplated by this Agreement, PEC will have the right to market production from the Subject Interests on terms no less favorable than the terms upon which Futures is currently marketing such production. (g) Except as disclosed on Exhibit A no agreements relating to the Subject Interests will require as of or after the Closing Date, PEC to sell or deliver, oil or gas for a price materially less than the market value price that would have been, or would be, received pursuant to any arm's-length contract for a term of one month with an unaffiliated third party purchaser. (h) Each agreement relating to the Subject Interests is valid, binding, and in full force and effect, and no party is in material breach or default of any such agreement, and to the best knowledge, information, and belief of Futures, no event has occurred that with notice or lapse of time (or both) would constitute a material breach or default or permit termination, modification, or acceleration under any such agreement; (i) There have been no claims from any third party for any price reduction or increase or volume reduction or increase under any agreement relating to the Subject Interests and Futures has not made any claims for any price reduction or increase or volume reduction or increase under any such agreements; (j) Payments for oil or gas produced from the Wells have been made materially in accordance with prices or price setting mechanisms set forth in the agreement pertaining to the Wells; (k) No purchaser under any agreement has notified Futures (or, to the best knowledge, information, and belief of Futures, the operator of any property) of its intent to cancel, terminate, or renegotiate any agreement or otherwise to fail and refuse to take and pay for oil or gas in the quantities and at the price set out in any agreement, whether such failure or refusal was pursuant to any force majeure, market out, or similar provisions contained in the agreement or otherwise; (l) Futures is not obligated by any prepayment arrangement, "take-or-pay" or similar provision, production payment, or any other arrangements to deliver oil or gas produced from a Well at some future time without then or thereafter receiving payment therefor; (m) There are no gas balancing agreements or arrangements or similar situations by which Futures is required to allow another party or parties to produce quantities of gas with an aggregate market value of more than $1.00 which, in the absence of such balancing agreements, arrangements or similar situations, would have been produced by Futures, and (n) The agreements pertaining to the Subject Interests are of the type generally found in the oil and gas industry, do not (individually or in the aggregate) contain unusual or unduly burdensome provisions that may have a material adverse effect on Futures, and are in form and substance considered normal within the oil and gas industry. 7 5. CERTAIN AGREEMENTS OF SELLER. 5.1 Access to Information. From and after the date of this Agreement until the Closing Date, Futures shall give to PEC and to its representatives full access at any time at a place reasonably convenient to PEC to all records, contracts, leases, documents, seismic, geological and geophysical data, and other information in Futures's possession or subject to its control pertaining to the Subject Interests and shall permit PEC and its representatives to examine all abstracts of title, title opinions, title files, ownership maps, division orders, records, surveys, reports filed with any federal or state agency as well as any Windfall Profit Tax returns which Futures may have relating to the Subject Interests. Until the Closing Date PEC shall hold confidential all such information not otherwise available to it and will return all such information to Futures in the event that the transaction contemplated hereby is not consummated. 5.2 Affirmative Covenants. From and after the date of this Agreement until Closing Date, Futures shall, except as otherwise agreed to in writing by PEC: (a) Use its best efforts to maintain and keep, or cause to be maintained and kept, the personal property which is a part of the Subject Interests in good condition and working order; (b) Preserve in full force and effect all of the oil and gas leases and other agreements which relate to the Subject Interests and perform all covenants and conditions imposed upon Futures thereunder; (c) Use its best efforts to operate or cause to be operated the Wells in a good and workmanlike manner and in compliance with all applicable laws and regulations; (d) Pay its share of all valid operating charges applicable to the Subject Interests and receive its share of all proceeds from the sale of production related thereto; and (e) Use its best efforts to assure that the conditions to closing set forth in Section 10 will be satisfied at the Closing Date. 5.3 Negative Covenants. From and after the date of this Agreement until Closing Date, Futures shall not, without the prior written consent of PEC: (a) Enter into any agreement or arrangement granting any preferential or other right to purchase any of the Subject Interests or any interest therein requiring the consent of any party to the transfer and assignment of same to PEC; (b) Enter into any sales or supply contract affecting the Subject Interests; (c) Waive any right or claim having material value affecting the Subject Interests; (d) Enter into any new agreements or commitments with respect to the Subject Interests which extend beyond the Closing Date make or authorize the operators to make any expenditures with respect to any of the Subject Interest in excess of $5,000, abandon any well located on the Subject Interests nor 8 release or abandon all or any portion of any of the leases covering the Lands, modify or terminate any of the agreements relating to the Subject Interests, apply for or otherwise seek any modification to the spacing requirements applicable to the Lands or encumber, sell, or otherwise dispose of any of the Subject Interests other than personal property which is replaced by equivalent property or consumed in the operation of the Subject Interests; or (e) Except as provided for herein, amend any oil and gas leases, operating agreements, gas purchase agreements, or other agreements which affect the Subject Interests. 5.4 Consents and Approvals. From and after the date of this Agreement until Closing Date, Futures shall use its best efforts to obtain all such permissions, approvals, waivers, and consents by governmental authorities and others as, in the opinion of PEC, may be required of Futures in connection with the sale and transfer of the Subject Interests, and the acquisition, use, and operation thereof by PEC. 5.5 Notice of Default. Futures shall give prompt notice to PEC of any notice of default received by Futures subsequent to the date of this Agreement under any instrument or agreement to which Futures is a party and relating to the Subject Interests or by which the Subject Interests may be affected. 6. REPRESENTATIONS AND WARRANTIES OF PEC PEC represents and warrants to Futures that; 6.1 Due Incorporation and Qualification. PEC is a corporation duly organized and validly existing under the laws of the State of Nevada, has corporate power to carry on its business as it is now being conducted, and is duly qualified to do business in Oklahoma. 6.2 Power and Authority. PEC has the full legal power and authority to enter into and perform this Agreement. The consummation of the transactions contemplated hereby will not result in the breach of, or constitute a default under, PEC's articles of incorporation or bylaws or any indenture, mortgage, deed of trust or other agreement or instrument to which PEC is a party or by which it or its properties may be bound. This Agreement has been duly authorized by all necessary corporate action of PEC and this Agreement constitutes a legal, valid, and binding agreement of PEC, enforceable against PEC in accordance with its terms. 6.3 Finders Fee. PEC has not incurred any obligation or liability, contingent or otherwise, for brokers' or finders' fee in respect to the matters provided for in this Agreement. 7. TITLES. 7.1 Title Opinion. Futures shall deliver to PEC, within five days of execution of this Agreement, such copies of oil and gas leases, rental receipts, agreements, contracts, assignments, attorneys' title opinions, current division order, abstracts, and all such other title information as Futures may have in its possession or subject to its control pertaining to the Subject Interests. There have been no changes to the Title Opinion dated January 31, 2007 which would adversely affect the Subject Interests. 9 8. ACCOUNTING FOR PRODUCTION AND OPERATING COSTS AND TAXES. 8.1 Production, Costs, and Expenses. As soon as practicable, and in any event not later than 10 days from the Closing Date, the parties agree to account for proceeds of production, costs, and expenses relating to the Subject Interests for the period from and after the Effective Date so that the benefit of production from and after the Effective Date and the obligation for all costs and expenses from and after the Effective Date with respect to the Subject Interests shall inure to PEC. To effect the foregoing: (i) Futures shall pay to PEC all proceeds of production which are received by Futures and attributable to production collected from the Subject Interests on or after the Effective Date, net of ad valorem, production, and excise taxes actually withheld (including, but not limited to, the Crude Oil Windfall Profits Tax) and all other taxes withheld against production, and (ii) PEC shall reimburse Futures for all costs and expenses paid by Futures on or after the Effective Date which are attributable to the Subject Interests for the period from and after the Effective Date. As used herein, costs and expenses (including capital expenditures) shall be limited to those billed by the Operators under the operating agreements set forth in Exhibit A and attributable to the Subject Interests for the period from and after the Effective Date in accordance with the terms of such operating agreements. 8.2 Proration of Taxes. To the extent not accounted for by the procedure set forth in Section 8.1, all ad valorem, property, production, severance, and similar taxes and assessments based upon or measured by the ownership of property or the production of hydrocarbons or the receipt of proceeds therefrom on the Subject Interests shall be prorated between Futures and PEC as of the Effective Date as soon as practicable after the necessary tax bills and other information become available so that Futures shall be responsible for all such taxes for the period prior to the Effective Date, and PEC shall be responsible for all such taxes for the period beginning on the Effective Date. If such taxes are not specifically identified as to one period or another, they shall be prorated on the basis of a year of 365 days. The proration shall be adjusted from time to time to rectify any errors and to reflect any modifications that are hereafter discovered or determined. 8.3 Expenses Prior to the Effective Date. Futures shall be responsible for the payment of all operating and development costs and expenses attributable to the Subject Interests for the period prior to the Effective Date. 8.4 Final Accounting Statement. Subsequent to the Closing Date, a final accounting statement will be prepared by PEC, subject to verification by Futures, based upon the actual income and expenses between the Effective Date and the Closing Date. PEC or Futures, as the case may be, shall pay to the other such sums as may be found to be due in said final account (the "Final Account Adjustment"). 9. CLOSING. 9.1 Closing Date. The closing of the transaction provided for herein shall take place at the offices of Futures Investment Corp., at 10:00 a.m., local time, on August 27, 2008, or on such earlier or later date or at such other place as shall be fixed by mutual written agreement of the parties hereto (such time being referred to in this Agreement as the "Closing Date"). 10 9.2 Assignments. On the Closing Date, Futures shall execute, acknowledge, and deliver to PEC appropriate conveyances, assignments, transfers, bills of sale, and other instruments conveying marketable title to the Subject Interests and the contracts set forth in Exhibit A to PEC, free and clear of all liens, encumbrances, and burdens except as specifically set forth in Exhibit A, or waived by PEC hereunder, which instruments shall be in proper and recordable form satisfactory to PEC, shall be effective as of the Effective Date, shall contain special warranties of title, by, through and under Futures, and shall include Futures assignment to PEC of all rights held by Futures by virtue of warranties with respect to the Subject Interests given by Futures predecessors in title. In addition, the parties shall execute and deliver good and sufficient transfer orders and division orders, and other documents and further assurances of title as may be reasonably required by PEC so as to fully effectuate the transfer and conveyance of the Subject Interests and the payment of the proceeds of production attributable thereto for the period from and after the Effective Date to PEC. 9.3 Geological Information. To the extent not heretofore delivered to PEC, Futures shall on the Closing Date deliver to PEC any and all files, geological and geophysical information and data, survey maps, drill hole logs, lease and production records, and all other reports or information in its possession or to which it has access pertaining to the Subject Interests. 10. CONDITIONS TO PEC'S CLOSING. The obligations of PEC under this Agreement are subject, at PEC's option, to the satisfaction on or prior to Closing Date of the following conditions: 10.1 Representations and Warranties True. All representations and warranties of Futures contained in this Agreement shall be true in all material respects at and as of the Closing Date as though such representations and warranties were made at and as of the Closing Date, and Futures shall have performed and satisfied all agreements, covenants, and conditions required by this Agreement to be performed and satisfied by it prior to or at the Closing Date; and PEC shall have received a certificate signed by the President or the Vice President of Futures dated as of the Closing Date to the foregoing effect. 10.2 No Restraint. At the Closing Date, no suit, action, or other proceeding shall be pending or threatened before any court or governmental agency seeking to restrain or prohibit the consummation of the transactions contemplated by this Agreement or to obtain damages in connection with this Agreement or the consummation of the transactions contemplated hereby. 10.3 Evidence of Authority. PEC shall have received a copy of resolutions of the Board of Directors of Futures and such other necessary documents which, in the opinion of PEC's counsel, indicate the authority of Futures to enter into and perform this Agreement and that the person executing this Agreement and the assignments and conveyances herein contemplated are fully authorized and directed to execute and deliver same unto PEC. 10.4 Consents. Futures shall have furnished to PEC copies of all consents, approvals, and waivers by third parties necessary to consummate the transactions contemplated hereby including, but not limited to, consents, waivers, and approvals described in Exhibit A. 11 10.5 Title Opinion. There will have been no changes to the Title Opinions which would adversely affect the Subject Interests. 10.6 No Casualty Loss. There shall not have occurred any casualty loss with respect to the Subject Interests for which PEC has not received proceeds of insurance in the amount of full replacement value of the property affected by such casualty loss, or with respect to which an appropriate deduction has not been made from the Purchase Price. 10.7 Operating Agreements and Tax Partnerships. Futures shall have caused the termination of any tax partnership associated with any agreement affecting the Subject Interests. Futures shall have obtained written approval from all of the working interest owners owning an interest in the leases described in Exhibit A of Futures resignation as operator and PEC's appointment as successor operator. 10.8 Inspection and Wells Tests. PEC shall have completed an inspection of the Producing Wells and shall have performed such well tests as it may determine necessary or appropriate and such test results shah be acceptable to PEC; provided, however, that PEC shall have completed such inspection and tests within three business days prior to the Closing Date hereof by PEC and Futures and, unless PEC shall have notified Futures on or before such date that such tests are not acceptable to PEC, this condition shall be deemed waived by PEC. All such tests shall be performed at PEC's sole risk and expense. 10.9 Contracts and Leases. The leases, contracts, and agreements listed on Exhibit A to this Agreement shall be in form and substance satisfactory to PEC. 10.10 Releases. PEC shall have received duly executed releases of the liens of all lien claimants holding liens, encumbrances, and burdens upon the Subject Interests. 10.11 Marketing of Hydrocarbons. At and as of the Closing Date, PEC shall be legally entitled to market all hydrocarbons produced from the Subject Interests upon price and other sale conditions no less favorable than those upon which Futures could market such production on the last sale day immediately preceding the Effective Date. No governmental order or regulation (whether final or proposed) shall have been published which PEC reasonably deems to materially and adversely affect the price at which production from the Subject Interests can be legally marketed at or after the Closing Date as compared to the price that Futures could receive for production on said last sale day. 10.12 Windfall Profits Tax. With respect to each producing oil and gas reservoir which constitutes part of the Subject Interests to be transferred to PEC pursuant to this Agreement, Futures shall have furnished to PEC a written statement, that Futures has complied with all provisions relating to the Windfall Profits tax. 11. CONDITIONS TO FUTURES'S CLOSING. The obligations of Futures under this Agreement are subject, at Futures option, to the satisfaction at or prior to the Closing Date of the following conditions: 12 11.1 Representations and Warranties True. All representations and warranties of PEC contained in this Agreement shall be true in all material respects at and as of the Closing Date as though such representations and warranties were made at and as of the Closing Date, and PEC shall have performed and satisfied all agreements, covenants, and conditions required by this Agreement to be performed and satisfied by it prior to or at the Closing Date; and Futures shall have received a certificate signed by the President or a vice president of PEC dated as of the Closing Date to the foregoing effect. 11.2 No Restraint. At the Closing Date, no suit, action, or other proceeding shall be pending or threatened before any court or governmental agency seeking to restrain or prohibit the consummation of the transactions contemplated by this Agreement or to obtain damages in connection with this Agreement or the consummation of the transactions contemplated hereby. 11.3 Evidence of Authority. Futures shall have received a certified copy of the resolutions of the Board of Directors of PEC and such other necessary documents which, in the opinion of Futures counsel, indicate the authority of PEC to enter into this Agreement and that the officers executing any of the documents herein contemplated are fully authorized and directed to execute and deliver same unto Futures. 12. TERMINATION OF AGREEMENT. In addition to the rights of termination by PEC as provided in Article 7 the parties hereto shall have further rights of termination of this Agreement as follows: 12.1 Termination by PEC. If all conditions set forth in Article 11 hereof are satisfied and Futures refuses to close this transaction, or if Futures fails to fully perform and satisfy all those conditions to PEC's closing set forth in Article 10 hereof, then, in either of such events, PEC shall have the right to terminate this Agreement without limitation upon or prejudice to the enforcement of any other legal remedy it may have against Futures for breach of this Agreement; or at PEC's option it may seek the remedy of specific performance of this Agreement, which remedy Futures agrees shall be available to PEC in such event. 12.2 Termination by Futures. If all conditions set forth in Article 10 hereof are satisfied and PEC refuses to close this transaction or if PEC fails to perform and satisfy all those conditions to Futures closing as set forth in Article 11 hereof, then, in either of such events, Futures shall have the right to terminate this Agreement without limitation upon or prejudice to the enforcement of any other legal remedy it may have against PEC for breach of this Agreement; or at Futures option, it may seek the remedy of specific performance of this Agreement, which remedy PEC agrees shall be available to Futures in such event. 12.3 Effectiveness. Termination of this Agreement by either party hereto pursuant to Article 7 or pursuant to Section 12.1 or 12.2 shall be effective upon the giving of written notice thereof to the other party hereto. 13. POST CLOSING COVENANTS. 13.1 Further Assurances. After the Closing Date Futures shall at any time upon request of PEC execute, acknowledge, and deliver to PEC such further instruments of conveyance, assignment, and transfer and take such other action 13 as the other party may reasonably request in order more effectively to perfect and cure, convey, assign, transfer, and deliver title to the Subject Interests, the proceeds of production attributable thereto, and personal property and well equipment in connection therewith, all as contemplated by this Agreement. Futures shall furnish to PEC (or cooperate in securing from any prior owners) all support information and documents required for PEC to compute and to make necessary returns pursuant to the Crude Oil Windfall Profit Tax Act and shall cooperate with PEC in furnishing such additional information as may be required to enable PEC to use Futures's base price in computing PEC's liability for Windfall Profit Tax on crude oil produced from the producing oil and gas reservoirs transferred to PEC pursuant to this Agreement. 14. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS; INDEMNIFICATION. 14.1 Survival of Representations, Warranties, and Agreements. The representations, warranties, covenants, and agreements made by Futures and PEC hereunder shall survive the execution and delivery of the transfers, conveyances, and assignments to be executed and delivered hereunder upon closing. 14.2 Indemnification. Futures hereby agrees to indemnify and hold PEC harmless from and against any and all losses, costs, expenses, damages, or liabilities (including, among other things, court costs and attorney's fees) incurred or suffered from time to time by PEC, arising out of, resulting from, or attributable to any breach of any covenant, representation, or warranty by Futures contained in or given pursuant to this Agreement, irrespective of the nature of claims or liabilities respecting any of the foregoing, or the manner in which any such claims or liabilities arise, whether the same are meritorious or not, and whether any such losses, costs, expenses, damages, or liabilities are incurred or suffered by PEC as a result of any investigation, proceeding, settlement, or otherwise. In case any claim is made, or any suit or action is commenced, against PEC in respect of which indemnity may be sought by PEC pursuant to this Section 14.2, Futures shall be given notice thereof promptly by PEC and shall be entitled to participate in (or if PEC does not desire to defend, to conduct) the defense thereof at its own expense. PEC may (but need not) defend or participate in the defense of any such claim, suit, or action, but PEC shall promptly notify Futures if PEC shall not desire to defend or participate in the defense of any of such claims, suits, or actions. PEC may settle or compromise any claim, suit, or action against PEC in respect of which payments may be sought by PEC pursuant to this Section 14.2, provided that Futures does not notify PEC in writing (within (15) days after PEC has given Futures written notice that it does not desire to defend or participate in the defense of any such claim, suit, or action) that Futures intends to conduct the defense of such claim, suit, or action. Any settlement or compromise made by PEC in accordance with this Section 14.2 or any final judgment or decree entered in any claim, suit, or action defended only by PEC (or with respect of which PEC participated in the defense), in accordance with this Section 14.2 shall be deemed to have been consented to by, and shall be obligatory and binding upon, Futures as fully as if Futures alone had assumed the defense thereof and a final judgment or decree had been entered in such suit or action, or with regard to such claim, by a court of competent jurisdiction of the amount of such settlement or compromise, satisfaction, judgment, or decree. The provisions of this Section 14.2 shall be effective only with respect to those losses, costs, expenses, damages, and liabilities set forth in the first sentence of this Section 14.2 of which PEC has notified Futures prior to the expiration of three years from the Closing Date; provided, however, that such limitation shall not 14 apply to Futures's indemnity with respect to the special warranty of title set forth in Section 4.5 or in any instrument of transfer delivered pursuant to Section 9.2 or to the indemnities provided for in Sections 7.1(c) and 7.2(d). 15. NOTICES. All notices that are required or authorized to be given herein, except as otherwise specifically provided, shall be given in writing by hand delivery, United States Certified Mail, postage and charges prepaid, and addressed to the party to whom such notice is to be given as follows: If to PEC: Pinnacle Energy Corp. President: Nolan Weir Suite 153, 333 Riverfront Ave, SE Calgary, Alberta Canada T2G 5R1 (866) 822-0325 (866) 822-0325 (fax) If to Futures: Futures Investment Corp. President: Cory Dosdall 31 Tusslewood View, NW Calgary, Alberta Canada T3L 2Y3 (403) 831-4565 (866) 566-5444 (fax) (or at such other address or in care of such other person as hereafter shall be designated in writing by either party to the other). Notices to be given under any provision hereof will be deemed given (i) 4 days after the date deposited with the United States post office postage prepaid, or (ii) on the date delivered and confirmed by an executed receipt. 16. MISCELLANEOUS. 16.1 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto. Prior to closing, neither party hereto shall assign its rights and obligations under this Agreement without the prior written consent of the other party hereto. 16.2 Entire Agreement. This Agreement contains the entire agreement of the parties hereto and there are no additional oral representations or conditions relating to this Agreement. Further, this Agreement supercedes and replaces all prior written contracts and memoranda relating to the transaction which is the subject of this Agreement. 16.3 Recordation. The parties hereto agree that memorandum of this Agreement in the form set forth on Exhibit B shall be filed in the real property records of the counties where the Subject Interests are located. Such memorandum shall not contain a recitation of the consideration paid by PEC to Futures 15 without the mutual agreement of the parties, except where such recitation is required by law or regulation of the United States or that of the States of Oklahoma. 16.4 Expenses of Transaction. The expenses (including, without limitation, fees and expenses of attorneys and consultants) incurred by the parties in connection with this Agreement or the consummation of the transactions contemplated herein shall be borne by the parties incurring the same. 16.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada. PINNACLE ENERGY CORP. By: /s/ Nolan Weir ------------------------------------ Nolan Weir, President FUTURES INVESTMENT CORP. By: /s/ Cory Dosdall ------------------------------------ Cory Dosdall, President 16 "Exhibit A" Description of Futures Investment Corp. Interest in the Glencoe Wells, Pawnee County, Oklahoma. Glencoe # 1-31 and 5-31, The SE/4 of NE/4 of section 31-T21N-R4E, containing 40 acres more or less, Pawnee, County Oklahoma Recorded: December 29, 2005, Book 610 at Page 135 in the Office of the County Clerk, Pawnee County, Oklahoma Twenty Five and a Half percent (25.5%) Working Interest/ Twenty and Four tenths percent (20.40%) Net Revenue Interest in the Glencoe #1-31 and # 5-31 well as described on the "Division Order Title Opinion" dated January 31, 2006, and which is located on the above described lands. Glencoe # 2-31 The SE/4 of Section 31-T21N-R4E, Pawnee County, Oklahoma Glencoe # 3-31 The E/2 SE/4 of Section 31-T21N-R4E, Pawnee County, Oklahoma Glencoe # 1-32 The N/2 NW/4 of Section 32-T21N-R4E, Pawnee County, Oklahoma Twenty percent (20.0%) Working Interest/ Sixteen percent (16.0%) Net Revenue Interest in the Glencoe #2-31, # 3-31 and # 1-32 well as described on the "Division Order Title Opinion" dated January 31, 2006, and which is located on the above described lands. Glencoe # 4-31 The W/2 NW/4 & the NW/4 SW/4 of Section 31-T21N-R4E, Pawnee County, Oklahoma Twenty percent (17.0%) Working Interest/ Thirteen and Six tenths percent (13.6%) Net Revenue Interest in the Glencoe #4-31 well as described on the "Division Order Title Opinion" dated January 31, 2006, and which is located on the above described lands. Operating Agreement pertaining to Glencoe #1-31, 2-31, 3-31, 4-31, 5-31 and 1-32. 17 EX-31 4 oct0810k1-09ex31.txt EXH. 31 EXHIBIT 31 CERTIFICATIONS I, Nolan Weir, certify that: 1. I have reviewed this annual report on Form 10-K of Pinnacle Energy Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have significant role in the registrant's internal control over financial reporting. January 26, 2009 /s/ Nolan Weir ------------------------------------ Nolan Weir, Principal Executive Officer CERTIFICATIONS I, Nolan Weir, certify that: 1. I have reviewed this annual report on Form 10-K of Pinnacle Energy Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have significant role in the registrant's internal control over financial reporting. January 26, 2009 /s/ Nolan Weir ------------------------------- Nolan Weir, Principal Financial Officer EX-32 5 oct0810k1-09ex32.txt EXH. 32 EXHIBIT 32 In connection with the Annual Report of Pinnacle Energy Corp. (the "Company") on Form 10-K for the period ending October 31, 2008 as filed with the Securities and Exchange Commission (the "Report"), Nolan Weir, the President and Principal Financial Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of the Company. January 26, 2009 PINNACLE ENERGY CORP. By: /s/ Nolan Weir ----------------------------------------- Nolan Weir, President, Principal Financial Officer and Principal Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----