U. S. Securities and Exchange Commission

 

Washington, D. C. 20549

 

FORM 10-KSB

 

x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

 

For the fiscal year ended December 31, 2006

 

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

 

For the transition period from __________________ to __________________

 

Commission File No. - 000-30955

 

Kentex Petroleum, Inc.

 

(Name of Small Business Issuer in its Charter)

 

 

4685 S. Highland Drive, Suite #202

Salt Lake City, Utah 84117

(Address of Principal Executive Offices)

 

Issuer’s Telephone Number: (801) 278-9424

 

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

Name of Each Exchange on Which Registered: None

 

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

 

$0.001 par value common stock

Title of Class

 

Check whether the Issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. o

 

Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  (1) Yes x No (2) Yes x No

 

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of Issuer’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. o

 

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

 

1

State Issuer’s revenues for its most recent fiscal year: December 31, 2006 - $0.

 

State the aggregate market value of the voting and non-voting common stock held by non-affiliates computed by reference to the price at which the common stock was sold, or the average bid and asked price of such common stock, as of a specified date within the past 60 days.

 

December 31, 2006 - $181. There are approximately 181,035 shares of common voting stock of the Issuer not held by affiliates. Because there has been no “established public market” for the Issuer’s common stock during the past five years, the Issuer has arbitrarily valued these shares at par value of $0.001 per share.

 

(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

 

None; not applicable.

 

Check whether the Issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes o No o

 

(APPLICABLE ONLY TO CORPORATE ISSUERS)

 

State the number of shares outstanding of each of the Issuer’s classes of common equity, as of the latest practicable date:

 

January 31, 2007: Common – 2,361,675

 

DOCUMENTS INCORPORATED BY REFERENCE

 

A description of “Documents Incorporated by Reference” is contained in Part III, Item 13 of this Report.

 

Transitional Small Business Issuer Format Yes o No x

 

PART I

 

Item 1. Description of Business

 

Business Development

 

Organization

 

Kentex Petroleum, Inc., (our “Company,” “we,” “us,” “our” and words of similar import) was organized under the laws of the State of Nevada on February 10, 1983. Copies of our Articles of Incorporation and Bylaws were filed as exhibits to the Company’s 10-SB Registration Statement filed with the Securities and Exchange Commission on July 6, 2000, and are incorporated herein by reference. See Part III, Item 13.

 

Our Company was organized by the directors principally for the purpose of engaging in any lawful activity. In March of 1983, we completed a merger. The Company then began pursuing opportunities in the development and production of oil well facilities including entering into leases and partnerships and acting as general partner of ventures. These operations proved to be unsuccessful and ended over ten years ago, and since there have been no further operations

 

We were reactivated with the State of Nevada on May 8, 1999.

 

2

On October 5, 1999 we reverse split our common stock on a basis of 1 for 250.

 

On September 28, 1999, James Doolin was elected President, Luke Bradley was elected Vice President and Shane Thueson was elected Secretary. The Company’s officers were elected by the entire membership of the directors.

 

On September 30, 1999, the officers and directors were issued 13,500,000 shares of our common stock resulting in control of our Company. Subsequent to the issuance of these shares, on October 5, 1999, we reverse split our common stock on a basis of 1 for 250.

 

On or about June 2, 2000, the Company issued approximately 2,200,000 or 93.5% of its outstanding common stock to Outback Capital, Inc., Camisado Ventures, Ltd., New York New York, Ltd. and Jenson Services, Inc., for expenses of approximately $20,000, paid in connection with the termination of previous oil and gas operation.

 

On December 31, 2002, James Doolin, President and Director, Luke Bradley, Vice President and Director and Shane Thueson, Secretary and Director accepted the appointment of Sarah Jenson as President and Director, Victoria Jenson as Vice President and Director and Lisa Howells as Secretary/Treasurer and Director, and in seriatum, resigned from their respective positions with the Company.

 

On or about June 22, 2004, control of the Company was obtained by Duane S. Jenson and Jenson Services, a Utah corporation owned by Duane S. Jenson, through the acquisition of 1,404,000 shares resulting in a total of 1,634,640 shares or 69.3% of our outstanding common which stock beneficially owned by Mr. Jenson. These shares were acquired from existing shareholders and had nominal value as a result of our lack of trading market and no operations and assets at the time of original issuance and are subject to a Registration Agreement restricting the resale of these securities. See the caption, “Security Ownership of Certain Beneficial Owners and Management,” Part III, Item 11.

 

On or about January 18, 2006, the Company received notification that the NASD had approved the Form 211 application for addition to the OTC Bulletin Board under the ticker symbol “KNTX”, effective January 19, 2006. See Part III, Item 13: Exhibits and Reports on Form 8-K.

 

On December 19, 2006, the Company filed with the Securities and Exchange Commission a Current Report on Form 8-K disclosing that the Company executed a Letter of Intent to acquire Northern Oil and Gas, Inc., a Nevada corporation, and issued a Press Release in that respect on December 19, 2006. See Part III, Item 13: Exhibits and Reports on Form 8-K. The closing is subject to the execution and delivery of a definitive agreement and various other conditions. No assurance can be given that this acquisition will be completed. The information contained herein does not assume that this acquisition will be completed. The Company will file a Current Report on form 8-K12G3 subsequent to any such event. See the caption herein titled, “Effect of Existing or Probable Governmental Regulations on Business.”

 

The Company is filing this Annual Report reflecting the Employer Identification Number that has been utilized for tax reporting purposes and will no longer reflect the supplemental number obtained at reactivation, as shown on previous reports that have been filed with the Securities and Exchange Commission.

 

Business

 

We are currently seeking and investigating potential assets, property or businesses to acquire, the Company has had no material business operations for over ten years. Our Company’s plan of operation for the next 12 months is to:(i) consider guidelines of industries in which we may have an interest; (ii) adopt a business plan regarding engaging in the business of any selected industry; and (iii) to commence such operations through funding and/or the acquisition of a “going concern” engaged in any industry selected. The Company is unable to predict the time as to when and if it may actually participate in any specific business endeavor, and will be unable to do so until it determines the particular industries.

 

3

Our Company is not currently engaged in any substantive business activity, and we have no plans to engage in any such activity in the foreseeable future. In our present form, we may be deemed to be a vehicle to acquire or merge with a business or company. Regardless, the commencement of any business opportunity will be preceded by the consideration and adoption of a business plan by our Board of Directors. We do not intend to restrict our search for business opportunities to any particular business or industry, and the areas in which we will seek out business opportunities or acquisitions, reorganizations or mergers may include, but will not be limited to, the fields of high technology, manufacturing, natural resources, service, research and development, communications, transportation, insurance, brokerage, finance and all medically related fields, among others. We recognize that the number of suitable potential business ventures that may be available to us may be extremely limited, and may be restricted to entities who desire to avoid what such entities may deem to be the adverse factors related to an initial public offering (“IPO”). The most prevalent of these factors include substantial time requirements, legal and accounting costs, the inability to obtain an underwriter who is willing to publicly offer and sell shares, the lack of or the inability to obtain the required financial statements for such an undertaking, limitations on the amount of dilution to public investors in comparison to the stockholders of any such entities, along with other conditions or requirements imposed by various federal and state securities laws, rules and regulations and federal and state agencies that implement such laws, rules and regulations. Any of these types of transactions, regardless of the particular prospect, would require us to issue a substantial number of shares of our common stock, that could amount to as much as 95% of our outstanding securities following the completion of any such transaction; accordingly, investments in any such private enterprise, if available, would be much more favorable than any investment in our Company.

 

Management intends to consider a number of factors prior to making any decision as to whether to participate in any specific business endeavor, none of which may be determinative or provide any assurance of success. These may include, but will not be limited to, as applicable, an analysis of the quality of the particular entity’s management personnel; the anticipated acceptability of any new products or marketing concepts that it may have; the merit of its technological changes; its present financial condition, projected growth potential and available technical, financial and managerial resources; its working capital, history of operations and future prospects; the nature of its present and expected competition; the quality and experience of its management services and the depth of its management; its potential for further research, development or exploration; risk factors specifically related to its business operations; its potential for growth, expansion and profit; the perceived public recognition or acceptance of its products, services, trademarks and name identification; and numerous other factors which are difficult, if not impossible, to properly or accurately analyze, let alone describe or identify, without referring to specific objective criteria.

 

Regardless, the results of operations of any specific entity may not necessarily be indicative of what may occur in the future, by reason of changing market strategies, plant or product expansion, changes in product emphasis, future management personnel and changes in innumerable other factors. Further, in the case of a new business venture or one that is in a research and development mode, the risks will be substantial, and there will be no objective criteria to examine the effectiveness or the abilities of its management or its business objectives. Also, a firm market for its products or services may yet need to be established, and with no past track record, the profitability of any such entity will be unproven and cannot be predicted with any certainty.

Management will attempt to meet personally with management and key personnel of the entity providing any potential business opportunity afforded to our Company, visit and inspect material facilities, obtain independent analysis or verification of information provided and gathered, check references of management and key personnel and conduct other reasonably prudent measures calculated to ensure a reasonably thorough review of any particular business opportunity; however, due to time constraints of management, these activities may be limited. See the heading “Business Experience,” Part III, Item 9.

 

4

We are unable to predict the time as to when and if we may actually participate in any specific business endeavor. Our Company anticipates that proposed business ventures will be made available to us through personal contacts of directors, executive officers and principal stockholders, professional advisors, broker dealers in securities, venture capital personnel, members of the financial community and others who may present unsolicited proposals. In certain cases, we may agree to pay a finder’s fee or to otherwise compensate the persons who submit a potential business endeavor in which our Company eventually participates. Such persons may include our directors, executive officers and beneficial owners our securities or their affiliates. In this event, such fees may become a factor in negotiations regarding any potential venture and, accordingly, may present a conflict of interest for such individuals. Management does not presently intend to acquire or merge with any business enterprise in which any member has a prior ownership interest.

 

Our Company’s directors and executive officers have not used any particular consultants, advisors or finders on a regular basis.

 

Although we currently have no plans to do so, depending on the nature and extent of services rendered, we may compensate members of management in the future for services that they may perform for our Company. Because we currently have extremely limited resources, and we are unlikely to have any significant resources until we have determined a business or enterprise to engage in or have completed a merger or acquisition, management expects that any such compensation would take the form of an issuance of our Company’s common stock to these persons; this would have the effect of further diluting the holdings of our other stockholders. There are presently no preliminary agreements or understandings between us and members of management respecting such compensation.

 

Substantial fees are often paid in connection with the completion of all types of acquisitions, reorganizations or mergers, ranging from a small amount to as much as $400,000. These fees are usually divided among promoters or founders, after deduction of legal, accounting and other related expenses, and it is not unusual for a portion of these fees to be paid to members of management or to principal stockholders as consideration for their agreement to retire a portion of the shares of common stock owned by them. Management may actively negotiate or otherwise consent to the purchase of all or any portion of their common stock as a condition to, or in connection with, a proposed reorganization, merger or acquisition. It is not anticipated that any such opportunity will be afforded to other stockholders or that such other stockholders will be afforded the opportunity to approve or consent to any particular stock buy-out transaction. In the event that any such fees are paid, they may become a factor in negotiations regarding any potential acquisition or merger by our Company and, accordingly, may also present a conflict of interest for such individuals. We have no present arrangements or understandings respecting any of these types of fees or opportunities.

 

None of our directors, executive officers, founders or their affiliates or associates has had any negotiations with any representatives of the owners of any business or company regarding the possibility of an acquisition, reorganization, merger or other business opportunity for our Company; nor are there any similar arrangements with us.

 

Risk Factors

 

In any business venture, there are substantial risks specific to the particular enterprise which cannot be ascertained until a potential acquisition, reorganization or merger candidate has been identified; however, at a minimum, the Company’s present and proposed business operations will be highly speculative and be subject to the same types of risks inherent in any new or unproven venture, and will include those types of risk factors outlined below.

 

5

Extremely Limited Assets; No Source of Revenue

 

The Company has virtually no assets and has had no revenue for over the past ten years or to the date hereof. Nor will the Company receive any revenues until it completes an acquisition, reorganization or merger, at the earliest. The Company can provide no assurance that any acquired business will produce any material revenues for the Company or its stockholders or that any such business will operate on a profitable basis. Although management intends to apply any proceeds it may receive through the issuance of stock or debt to a suitable acquisition, subject to the criteria identified above, such proceeds will not otherwise be designated for any more specific purpose. The Company can provide no assurance that any use or allocation of such proceeds will allow it to achieve its business objectives.

 

Our Company May Be Deemed to Be a “Blank Check” Company Until We Adopt a Business Plan

 

The limited business operations of our Company, as now contemplated, involve those of a “blank check” company. The only activities to be conducted by our Company are winding down the business and to manage our current limited assets and to seek out and investigate the commencement or the acquisition of any viable business opportunity by purchase and exchange for securities of our Company or pursuant to a reorganization or merger through which securities of our Company will be issued or exchanged.

 

Discretionary Use of Proceeds; “Blank Check” Company

 

Because our Company is not currently engaged in any substantive business activities, as well as management’s broad discretion with respect to selecting a business or industry for commencement of operations or completing an acquisition of assets, property or business, our Company may be deemed to be a “blank check” company. Although management intends to apply any proceeds we may receive through the issuance of stock or debt to a suitable business enterprise, subject to the criteria identified above, such proceeds will not otherwise be designated for any more specific purpose. Our Company can provide no assurance that any use or allocation of such proceeds will allow us to achieve our business objectives.

 

Our Company Will Seek Out Business Opportunities

 

Management will seek out and investigate business opportunities through every reasonably available fashion, including personal contacts, professionals, securities broker dealers, venture capital personnel, members of the financial community and others who may present unsolicited proposals; our Company may also advertise our availability as a vehicle to bring a company to the public market through a “reverse” reorganization or merger.

 

Absence of Substantive Disclosure Relating to Prospective Acquisitions

 

Because the Company has not yet identified any assets, property or business that it may acquire, potential investors in the Company will have virtually no substantive information upon which to base a decision whether to invest in the Company. Potential investors would have access to significantly more information if the Company had already identified a potential acquisition or if the acquisition target had made an offering of its securities directly to the public. The Company can provide no assurance that any investment in the Company will not ultimately prove to be less favorable than such a direct investment.

 

 

6

Unspecified Industry and Acquired Business; Unascertainable Risks

 

To date, the Company has not identified any particular industry or business in which to concentrate its acquisition efforts. Accordingly, prospective investors currently have no basis to evaluate the comparative risks and merits of investing in the industry or business in which the Company may acquire. To the extent that the Company may acquire a business in a high risk industry, the Company will become subject to those risks. Similarly, if the Company acquires a financially unstable business or a business that is in the early stages of development, the Company will become subject to the numerous risks to which such businesses are subject. Although management intends to consider the risks inherent in any industry and business in which it may become involved, there can be no assurance that it will correctly assess such risks.

 

Uncertain Structure of Acquisition

 

On December 19, 2006, the Company filed with the Securities and Exchange Commission a Current Report on Form 8-K disclosing that the Company executed a Letter of Intent to acquire Northern Oil and Gas, Inc., a Nevada corporation, and issued a Press Release in that respect on December 19, 2006. See Part III, Item 13: Exhibits and Reports on Form 8-K. The closing is subject to the execution and delivery of a definitive agreement and various other conditions. No assurance can be given that this acquisition will be completed. The information contained herein does not assume that this acquisition will be completed. The Company will file a Current Report on form 8-K12G3 subsequent to any such event.

 

Management has had no preliminary contact or discussions regarding, and there are no present plans, proposals or arrangements to engage in or acquire any specific business, assets, property or business. Accordingly, it is unclear whether such an acquisition would take the form of an exchange of capital stock, a merger or an asset acquisition. However, because our Company has virtually no resources as of the date of this Annual Report, management expects that any such acquisition would take the form of an exchange of capital stock.

 

Auditor’s ‘Going Concern’ Opinion

 

The Independent Auditor’s Report issued in connection with the audited financial statements of our Company for the calendar years ended December 31, 2006, 2005, 2004, 2003 and 2002, expresses “substantial doubt about its ability to continue as a going concern,” due to our Company’s status as a start up and our lack of profitable operations. See Part II, Item 7, of this Annual Report.

 

Losses Associated With Startup

 

Our Company has not had a profitable operating history. We cannot guarantee that we will become profitable.

 

 

7

Federal and State Restrictions on “Blank Check” Companies

 

Federal Restrictions

 

Recent amendments to Form 8-K by the Securities and Exchange Commission regarding shell companies and transactions with shell companies require the filing of all information about an acquired company that would have been required to have been filed had any such company filed a Form 10 or 10-SB Registration Statement with the Securities and Exchange Commission, along with required audited, interim and proforma financial statements, within four business days of the closing of any such transaction. These new regulations also deny the use of Form S-8 for the registration of securities of a shell company, and limit the use of this Form to a reorganized shell company until the expiration of 60 days from when any such entity is no longer considered to be a shell company. This prohibition could further restrict opportunities for us to acquire companies that may already have stock option plans in place that cover numerous employees. In such an instance, there may be no exemption from registration for the issuance of securities in any business combination to these employees, thereby necessitating the filing of a registration statement with the Securities and Exchange Commission to complete any such reorganization, and incurring the time and expense costs normally avoided by reverse reorganizations.

 

The Wulff Letter, as discussed below under Part II, Item 5, under the heading “Restrictions on Sales of Certain Restricted Securities,” can restrict the free tradeability of certain shares issued to our promoters or founders or affiliates in any transaction with us to resales pursuant to an effective registration statement filed with the Securities and Exchange Commission. We would expect the definition of these applicable persons to be liberally construed to promote the findings set out in the Wulff Letter. The shares of common stock in our Company held by Messrs. Thomas Howells, Travis Jenson, Duane S. Jenson and Jenson Services are subject to resale under a Registration Agreement that is discussed below under this heading.

 

If we publicly offer any securities as a condition to the closing of any acquisition, merger or reorganization while we are a blank check or shell company, we will have to fully comply with Rule 419 of the Securities and Exchange Commission and deposit all funds in escrow pending advice about the proposed transaction to our stockholder fully disclosing all information required by Regulation 14 of the Securities and Exchange Commission and seeking the vote and agreement of investment of those stockholders to whom such securities were offered; if no response is received from these stockholders within 45 days thereafter or if any elect not to invest following advice about the proposed transaction, all funds held in escrow must be promptly returned to any such stockholder. All securities issued in any such offering will likewise be deposited in escrow, pending satisfaction of the foregoing conditions. The foregoing is only a brief summary of Rule 419. We do not anticipate making any public offerings of our securities that would come within the context of an offering described in Rule 419.

 

All of these laws, rules and regulations could severely restrict us from completing the acquisition of any business or any merger or reorganization for the following reasons, among others:

 

* The time and expense in complying with any of the foregoing could be prohibitive and eliminate the reasons for a reverse reorganization.

 

* Management or others who own or are to receive shares that may be covered by the Wulff Letter may demand registration rights for these shares, and the acquisition candidate may refuse to grant them by reason of the time, cost and expense; or because the filing any such registration statement may be integrated with planned financing options that could prohibit or interfere with such options or such registration statement.

 

* Demands for cash in lieu of securities could be too high a cost of dilution to the acquisition candidate, especially when taking into account the dilution that results from the shareholdings that are retained by our shareholders.

 

* These costs and expenses, if agreed upon, would no doubt further dilute our shareholders, as any acquisition candidate may not be willing to leave as many shares with our shareholders in any such transaction.

 

8

* An acquisition candidate may demand that outstanding Wulff Letter shares be cancelled, and the holders of these shares could refuse to do so without just compensation, including our current sole director.

 

* Finder’s and parties who may introduce acquisition candidates would no doubt be unwilling to introduce any such candidates to us if shares issued to them came within the Wulff Letter interpretations and no registration rights were granted, which would substantially restrict our ability to attract such potential candidates.

 

State Restrictions

 

A total of 36 states prohibit or substantially restrict the registration and sale of “blank check” companies within their borders. Additionally, 36 states use “merit review powers” to exclude securities offerings from their borders in an effort to screen out offerings of highly dubious quality. See paragraph 8221, NASAA Reports, CCH Topical Law Reports, 1990. Our Company intends to comply fully with all state securities laws, and plans to take the steps necessary to ensure that any future offering of our securities is limited to those states in which such offerings are allowed. However, while our Company has no substantive business operations and is deemed to a “blank check” Company, these legal restrictions may have a material adverse impact on the Company’s ability to raise capital because potential purchasers of the Company’s securities must be residents of states that permit the purchase of such securities. These restrictions may also limit or prohibit stockholders from reselling shares of our Company’s common stock within the borders of regulating states.

 

By regulation or policy statement, eight states (Idaho, Maryland, Missouri, Nevada, New Mexico, Pennsylvania, Utah and Washington), some of which are included in the group of 36 states mentioned above, place various restrictions on the sale or resale of equity securities of “blank check” or “blind pool” companies. These restrictions include, but are not limited to, heightened disclosure requirements, exclusion from “manual listing” registration exemptions for secondary trading privileges and outright prohibition of public offerings of such companies. Because our Company does not intend to make any offering of our securities in the foreseeable future, management does not believe that any state restriction on “blank check” offerings will have any effect on our Company.

 

In most jurisdictions, “blank check” and “blind pool” companies are not eligible for participation in the Small Corporate Offering Registration (“SCOR”) program, which permits an issuer to notify the Securities and Exchange Commission of certain offerings registered in such states by filing a Form D under Regulation D of the Securities and Exchange Commission. All states (with the exception of Alabama, Delaware, Florida, Hawaii, Minnesota, Nebraska and New York) have adopted some form of SCOR. States participating in the SCOR program also allow applications for registration of securities by qualification by filing a Form U-7 with the states’ securities commissions. Nevertheless, our Company does not anticipate making any SCOR offering or other public offering in the foreseeable future, even in any jurisdiction where it may be eligible for participation in SCOR, despite our status as a “blank check” or “blind pool” company.

 

The net effect of the above-referenced laws, rules and regulations will be to place significant restrictions on our Company’s ability to register, offer and sell and/or to develop a secondary market for shares of our Company’s common stock in virtually every jurisdiction in the United States. These restrictions should cease once and if our Company acquires a venture by purchase, reorganization or merger, so long as the business operations succeeded to involve sufficient activities of a specific nature.

 

Management to Devote Insignificant Time to Activities of Our Company

 

Members of our Company’s management are not required to devote their full time to the affairs of our Company. Because of their time commitments, as well as the fact that our Company has no business operations, the members of management currently devote one hour a week to the activities of our Company, until such time as our Company has identified a suitable acquisition target.

 

 

9

No Established Market for Common Stock; No Market for Shares

 

On January 18, 2006, our common stock was approved for trading on the OTC Bulletin Board of the NASD under the symbol “KNTX”. There is currently no established trading market for such shares; there can be no assurance that such a market will ever develop or be maintained. Any market price for shares of common stock of our Company is likely to be very volatile, and numerous factors beyond the control of our Company may have a significant effect. In addition, the stock markets generally have experienced, and continue to experience, extreme price and volume fluctuations which have affected the market price of many small capital companies and which have often been unrelated to the operating performance of these companies. These broad market fluctuations, as well as general economic and political conditions, may adversely affect the market price of our Company’s common stock in any market that may develop. Sales of “restricted securities” under Rule 144 may also have an adverse effect on any market that may develop. See Part II, Item 5.

 

Risks of “Penny Stock”

 

Our Company’s common stock may be deemed to be “penny stock” as that term is defined in Reg. Section 240.3a51-1 of the Securities and Exchange Commission. Penny stocks are stocks (i) with a price of less than five dollars per share; (ii) that are not traded on a “recognized” national exchange; (iii) whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ-listed stocks must still meet requirement (i) above); or (iv) in issuers with net tangible assets less than $2,000,000 (if the issuer has been in continuous operation for at least three years) or $5,000,000 (if in continuous operation for less than three years), or with average revenues of less than $6,000,000 for the last three years.

 

Section 15(g) of the Exchange Act and Rule 15g-2 of the Securities and Exchange Commission require broker- dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account. Potential investors in our Company’s common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be “penny stock.”

 

Moreover, Rule 15g-9 of the Securities and Exchange Commission requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for investors in our Company’s common stock to resell their shares to third parties or to otherwise dispose of them.

 

There has been no “established public market” for the Company’s common stock. On January 19, 2006, our Company obtained a trading symbol “KNTX” on the OTC Bulletin Board of the NASD. At such time as the Company completes a merger or acquisition transaction, if at all, it may attempt to qualify for quotation on either NASDAQ or a national securities exchange. However, at least initially, any trading in its common stock will most likely be conducted in the over-the-counter market in the “pink sheets” or the OTC Bulletin Board of the NASD.

 

Principal Products or Services and their Markets

 

None; not applicable.

 

Distribution Methods of the Products or Services

 

None; not applicable.

 

 

10

Status of any Publicly Announced New Product or Service

 

None; not applicable.

 

Competitive Business Conditions and the Small Business Issuer’s Competitive Position in the Industry and Methods of Competition

 

Management believes that there are literally thousands of “blank check” companies engaged in endeavors similar to those engaged in by the Company; many of these companies have substantial current assets and cash reserves. Competitors also include thousands of other publicly-held companies whose business operations have proven unsuccessful, and whose only viable business opportunity is that of providing a publicly-held vehicle through which a private entity may have access to the public capital markets. There is no reasonable way to predict the competitive position of the Company or any other entity in the strata of these endeavors; however, the Company, having limited assets and cash reserves, will no doubt be at a competitive disadvantage in competing with entities which have recently completed IPO’s, have significant cash resources and have recent operating histories when compared with the complete lack of any substantive operations by the Company for the past several years.

 

Sources and Availability of Raw Materials and Names of Principal Suppliers

 

None; not applicable.

 

Dependence on One or a Few Major Customers

 

None; not applicable.

 

Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements of Labor Contracts, including Duration

 

None; not applicable.

 

Need for any Governmental Approval of Principal Products of Services

 

Because our Company currently produces no products or services, we are not presently subject to any governmental regulation in this regard. However, in the event that our Company engages in a merger or acquisition transaction with an entity that engages in such activities, we will become subject to all governmental approval requirements to which the merged or acquired entity is subject.

 

Effect of Existing or Probable Governmental Regulations on Business

 

The integrated disclosure system for small business issuers adopted by the Securities and Exchange Commission in Release No. 34-30968 and effective as of August 13, 1992, substantially modified the information and financial requirements of a “Small Business Issuer,” defined to be an issuer that has revenues of less than $25 million; is a U.S. or Canadian issuer, is not an investment company, and if a majority-owned subsidiary, the parent is also a small business issuer, provided, however, an entity is not a small business issuer if it has a public float (the aggregate market value of the issuer’s outstanding securities held by non-affiliates) of $25 million or more.

 

The Securities and Exchange Commission, state securities commissions and the North American Securities Administrators Association, Inc. (“NASAA”) have expressed an interest in adopting policies that will streamline the registration process and make it easier for a small business issuer to have access to the public capital markets. The present laws, rules and regulations designed to promote availability to the small business issuer of these capital markets and similar laws, rules and regulations that may be adopted in the future will substantially limit the demand for “blank check” companies like our Company, and may make the use of these companies obsolete.

 

11

We are also subject to the Sarbanes-Oxley Act of 2002. This Act creates a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and strengthens auditor independence. It also requires steps to enhance the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members’ appointment, compensation and oversight of the work of public companies’ auditors; prohibits certain insider trading during pension bund blackout periods; and establishes a federal crime of securities fraud, among other provisions.

 

Section 14(a) of the Exchange Act requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act to comply with the rules and regulations of the Securities and Exchange Commission regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to stockholders of our Company at a special or annual meeting thereof or pursuant to a written consent will require our Company to provide our stockholders with the information outlined in Schedules 14A or 14C of Regulation 14; preliminary copies of this information must be submitted to the Securities and Exchange Commission at least 10 days prior to the date that definitive copies of this information are forwarded to our stockholders.

 

We are also required to file annual reports on Form 10-KSB and quarterly reports on Form 10-QSB with the Securities Exchange Commission on a regular basis, and will be required to timely disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; and bankruptcy) in a Current Report on Form 8-K12G3.

 

If we are acquired by a non-”reporting issuer” under the Exchange Act, we will be subject to the “back-door registration” requirements of the Securities and Exchange Commission that will require us to file a Current Report on Form 8-K12G3 that will include all information about such non-”reporting issuer” as would have been required to be filed by that entity had it filed a Form 10 or Form 10SB Registration Statement with the Securities and Exchange Commission. The Securities and Exchange Commission proposed on April 13, 2004, that any acquisition that will result in our Company no longer being a “blank check” or “blind pool” company will require us to include all information about the acquired company as would have been required to be filed by that entity had it filed a Form 10 or Form 10SB Registration Statement with the Securities and Exchange Commission.

 

Research and Development Costs During the Last Two Fiscal Years

 

None; not applicable.

 

Cost and Effects of Compliance with Environmental Laws

 

None; not applicable. However, environmental laws, rules and regulations may have an adverse effect on any business venture viewed by our Company as an attractive acquisition, reorganization or merger candidate, and these factors may further limit the number of potential candidates available to our Company for acquisition, reorganization or merger.

 

Number of Total Employees and Number of Full Time Employees

 

None; not applicable.

 

Reports to Security Holders

 

You may read and copy any materials that we file with the Securities and Exchange Commission at its Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may also find all of the reports that we have filed electronically with the Securities and Exchange Commission at their internet site www.sec.gov.

 

12

Item 2. Description of Property  

 

The Company has no assets, property or business; its principal executive office address and telephone number are the business office address and telephone number of a shareholder, Duane S. Jenson, and are currently provided at no cost. Because the Company has had no business, its activities have been limited to keeping itself in good standing in the State of Nevada. These activities have consumed an insignificant amount of management’s time; accordingly, the costs to Mr. Jenson of providing the use of his office and telephone have been minimal.

 

Item 3. Legal Proceedings

 

The Company is not a party to any pending legal proceeding. To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against the Company. No director, executive officer or affiliate of the Company or owner of record or beneficially of more than five percent of the Company’s common stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.

 

Item 4. Submission of Matters to a Vote of Security Holders

 

Except as set forth below, no matter was submitted to a vote of our Company’s security holders during the fourth quarter of the period covered by this Annual Report or during the previous two fiscal years.

 

During the year ended December 31, 2006, no matter was submitted to a vote of the Company’s securities holders, whether through the solicitation of proxies or otherwise.

 

PART II

 

Item 5. Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities

 

Market Information

 

The Company’s common stock was listed on the OTC Bulletin Board of the National Association of Securities Dealers (“NASD”) on January 19, 2006 under the symbol “KNTX”. There is currently no established “public market” for shares of common stock of the Company. Management does not expect any public market to develop unless and until the Company completes an acquisition or merger. In any event, no assurance can be given that any market for the Company’s common stock will develop or be maintained.

 

For any market that develops for our Company’s common stock, the sale of “restricted securities” (common stock) pursuant to Rule 144 of the Securities and Exchange Commission by members of management or any other person to whom any such securities may be issued in the future may have a substantial adverse impact on any such public market. Present members of management have already satisfied the one year holding period of Rule 144 for public sales of their respective holdings in our Company in accordance with Rule 144. See the caption “Recent Sales of Unregistered Securities,” of this Item, below. Also see the caption “Restrictions on Sales of Certain Restricted Securities” for a discussion on shares subject to a registration agreement.

 

 

13

A minimum holding period of one year is required for resales under Rule 144, along with other pertinent provisions, including publicly available information concerning our Company; limitations on the volume of restricted securities which can be sold in any ninety (90) day period; the requirement of unsolicited broker’s transactions; and the filing of a Notice of Sale on Form 144.

 

The bid and offer price for the shares of common stock of our Company for the quarterly periods from January 19, 2006 through December 31, 2006 are as follows:

 

 

These prices were obtained from the National Quotation Bureau, Inc. ("NQB") and do not necessarily reflect actual transactions, retail markups, mark downs or commissions.

 

Holders

 

The number of record holders of the Company’s common stock as of the date of this Annual Report is approximately 384, not including an indeterminate number who may hold shares in “street name.”

 

Dividends

 

Our Company has not declared any cash dividends with respect to our common stock, and does not intend to declare dividends in the foreseeable future. The future dividend policy of our Company cannot be ascertained with any certainty, and if and until our Company completes any acquisition, reorganization or merger, no such policy will be formulated. There are no material restrictions limiting, or that are likely to limit, our Company’s ability to pay dividends on our securities.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

Our Company does not have any Equity Compensation Plans.

 

Recent Sales of Unregistered Securities

 

We have had no recent sales of restricted securities.

 

Sales of Restricted Securities

 

There have been no sales of the Company’s unregistered securities in the past five years or since November 1999, other than the shares issued to DTC on October 11, 2006, in the amount of 3,478 shares, in reconciliation of rounding on the 1999 reverse split.

 

14

Restrictions on Sales of Certain “Restricted Securities”

 

Generally, “restricted securities” can be resold under Rule 144 once they have been held for at least one year (subparagraph (d) thereof), provided that the issuer of the securities satisfies the “current public information” requirements (subparagraph (c)) of the Rule; no more than 1% of the outstanding securities of the issuer are sold in any three month period (subparagraph (e)); the seller does not arrange or solicit the solicitation of buyers for the securities in anticipation of or in connection with the sale transactions or does not make any payment to anyone in connection with the sales transactions except the broker dealer who executes the trade or trades in these securities (subparagraph (f)); the shares are sold in “broker’s transactions” only (subparagraph (g)); the seller files a Notice on Form 144 with the Securities and Exchange Commission at or prior to the sales transactions (subparagraph (h)); and the seller has a bona fide intent to sell the securities within a reasonable time of the filing. Once two years have lapsed, assuming the holder of the securities is not an “affiliate” of the issuer, unlimited sales can be made without further compliance with the terms and provisions of Rule 144. All “restricted securities” of the Company have been held for in excess of one year.

 

In January, 2000, Richard K. Wulff, the Chief of the Securities and Exchange Commission’s Office of Small Business, wrote a letter to Ken Worm, the Assistant Director of the OTC Compliance Unit of NASD Regulation, Inc. Many members of the securities community have come to refer to that letter as the “Wulff letter.”

 

The Wulff letter was written in response to a request for guidance from Mr. Worm. In his request, Mr. Worm had referred to several situations in which non-affiliate stockholders of “blank check” issuers had sought to treat their shares as “free-trading” or unrestricted securities. As defined in the Wulff letter, a blank check company is “a development stage company that has no specific business plan or purpose or has indicated its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person.”

 

Citing the concerns of the United States Congress and the Securities and Exchange Commission over potential fraud and market manipulations involving blank check companies, the Wulff letter stated that affiliates of blank check issuers, as well as transferees of their securities, are “underwriters” with respect to such securities. Accordingly, transactions in these companies’ securities by promoters, affiliates or their transferees do not fall within the scope of the Rule 144 “safe harbor” resales for securities that have been beneficially owned for at least one year and that satisfy informational and certain other requirements of the Rule, or the Section 4(1) exemption from registration for resales under the Securities Act of 1933, as amended (the “Securities Act”), that exempts sales by persons other than “an issuer, underwriter or a dealer.” As a result, it is the position of the Securities and Exchange Commission that these securities may be resold by these persons only pursuant to registration under the Securities Act. According to the Wulff letter, this restriction would continue to apply even after the blank check company completes a merger or acquisition transaction with an operating entity.

 

The securities of the Company that are owned by Duane S. Jenson, Jenson Services, Travis T. Jenson, and Thomas J. Howells, collectively amounting to 2,180,640 shares or approximately 92% of our outstanding voting securities, these persons have agreed not to publicly resell these securities (in any private sale, the purchaser would be required to acknowledge the following restrictions) without registration under the Securities Act; or the receipt of a “no action” letter from the Securities and Exchange Commission indicating that registration is not required and that there is an available exemption from registration under the Securities Act for the resale of these securities; or there is a declaratory judgment by a federal or state court indicating that registration is not required for resale of these securities and that there is an available exemption from registration under the Securities Act for the resale of these securities.

 

Use of Proceeds of Registered Securities

 

There were no proceeds received during the calendar year ended December 31, 2006, from the sale of registered securities.

 

 

15

Purchases of Equity Securities by Us and Affiliated Purchasers

 

There were no purchases of our equity securities by us or any affiliated purchasers during the calendar year ended December 31, 2006.

 

Item 6. Management’s Discussion and Analysis or Plan of Operation  

 

Plan of Operation

 

On December 19, 2006, the Company filed with the Securities and Exchange Commission a Current Report on Form 8-K disclosing that the Company executed a Letter of Intent to acquire Northern Oil and Gas, Inc., a Nevada corporation, and issued a Press Release in that respect on December 19, 2006. See Part III, Item 13: Exhibits and Reports on Form 8-K. The closing is subject to the execution and delivery of a definitive agreement and various other conditions. No assurance can be given that this acquisition will be completed. The information contained herein does not assume that this acquisition will be completed. The Company will file a Current Report on Form 8-K12G3 subsequent to any such event.

 

Our Company’s plan of operation for the next 12 months is to: (i)consider guidelines of industries in which our Company may have an interest; (ii) adopt a business plan regarding engaging in the business of any selected industry; and (iii) to commence such operations through funding and/or the acquisition of a “going concern” engaged in any industry selected.

 

During the next 12 months, our Company’s only foreseeable cash requirements will relate to maintaining our Company in good standing or the payment of expenses associated with legal fees, accounting fees and reviewing or investigating any potential business venture, which may be advanced by management or principal stockholders as loans to our Company. Because we have not determined any business or industry in which our operations will be commenced, and we have not identified any prospective venture as of the date of this Annual Report, it is impossible to predict the amount of any such loan. Any such loan will be on terms no less favorable to our Company than would be available from a commercial lender in an arm’s length transaction. No advance or loan from any affiliate will be required to be repaid as a condition to any agreement with future acquisition partners.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Other than maintaining its good corporate standing in the State of Nevada, compromising and settling its debts and seeking the acquisition of assets, properties or businesses that may benefit the Company and its stockholders, the Company has had no material business operations in the two most recent calendar years.

 

At December 31, 2006, the Company had no assets. See the Index to Financial Statements, Item 7 of this Report.

 

During the period ended December 31, 2006, the Company had a net loss of $7,756, resulting from operations, of which approximately $1,095 is directly attributed to legal expenses arising out of the proposed Northern Oil and Gas transaction and has subsequently been satisfied by funds paid by Northern Oil and Gas as a condition of the Letter of Intent. During this same period ending December 31, 2005, we had a net income of $12,733, as a direct result of forgiveness of debt related to the VidRev transaction that was terminated. Except as described above, we have received no revenues in either of our two most recent calendar years. See the Index to Financial Statements, Item 7 of this Report.

 

Off-Balance Sheet Arrangements

 

We had no Off-Balance Sheet arrangements for the year ended December 31, 2006.

 

 

16

Forward-looking Statements

 

Statements made in this Annual Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and business of our Company, including, without limitation, (i) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words “may”, “would”, “could”, “should”, “expects”, “projects”, “anticipates”, “believes”, “estimates”, “plans”, “intends”, “targets” or similar expressions.

 

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our Company’s control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, general economic or industry conditions, nationally and/or in the communities in which our Company conducts business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our Company’s operations, products, services and prices.

 

Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. Our Company does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

 

Liquidity

 

The Company has no cash or cash equivalents on hand. If additional funds are required, such funds may be advanced by management or stockholders as loans to the Company. During calendar 2006, expenses were paid by a principal stockholder in the amount of $6,676; and during calendar 2005, additional expenses by a principal stockholder totaled $12,252. The aggregate amount of $37,472 outstanding as of December 31, 2006, is unsecured and is due on demand.

 

Item 7. Financial Statements

 

KENTEX PETROLEUM, INC.

(A Development Stage Company)

 

FINANCIAL STATEMENTS

December 31, 2006

 

TABLE OF CONTENTS

 

 

 

17

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Directors and Shareholders

Kentex Petroleum, Inc.[a development stage company]

 

We have audited the accompanying balance sheet of Kentex Petroleum, Inc. [a development stage company] as of December 31, 2006, and the related statements of operations, stockholders’ deficit, and cash flows for the years ended December 31, 2006 and 2005 and for the period from Reactivation [May 8, 1999] through December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

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

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Kentex Petroleum, Inc. [a development stage company] as of December 31, 2006, and the results of its operations and cash flows for the periods ended December 31, 2006 and 2005 and for the period from Reactivation [May 8, 1999] through December 31, 2006, in conformity with U.S. 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 accumulated losses from operations, no assets, and a net working capital deficiency that raise substantial doubt about its 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.

 

Mantyla McReynolds, LLC

Salt Lake City, Utah

January 31, 2007

 

18

KENTEX PETROLEUM, INC.

(A Development Stage Company)

BALANCE SHEET

December 31, 2006

 

 

 

 

See accompanying notes to financial statements.

 

19

KENTEX PETROLEUM, INC.

(A Development Stage Company)

STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2006 and 2005 and

for the Period from Reactivation (May 8, 1999) through December 31, 2006

 

 

 

 

See accompanying notes to financial statements.

 

 

20

KENTEX PETROLEUM, INC.

(A Development Stage Company)

STATEMENT OF STOCKHOLDERS’ DEFICIT

For the Period from Reactivation (May 8, 1999) through December 31, 2006

 

 

See accompanying notes to financial statements.

 

21

KENTEX PETROLEUM, INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2006 and 2005 and

for the Period from Reactivation (May 8, 1999) through December 31, 2006

 

 

 

 

See accompanying notes to financial statements.

 

22

KENTEX PETROLEUM, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

December 31, 2006

 

NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(a) Organization

 

Kentex Petroleum, Inc. (Company) was originally an oil and gas company incorporated under the laws of the State of Nevada in February, 1983. The Company engaged in various operations through 1990. These operating activities were unsuccessful and the Company became dormant. In May of 1999, the Company became active again as new directors and officers were elected. The Company is now in the development stage as it is seeking new business opportunities.

 

The financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles. The following summarizes the more significant of such policies:

 

(b) Income Taxes

 

The Company applies the provisions of Statement of Financial Accounting Standards No. 109 [the Statement], Accounting for Income Taxes. The Statement requires an asset and liability approach for financial accounting and reporting for income taxes, and the recognition of deferred tax assets and liabilities for the temporary differences between the financial reporting basis and tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled.

 

(c) Net Loss Per Common Share

 

In accordance with Statement of Financial Accounting Standards No. 128, “Earnings per Share,” basic loss per common share is based on the weighted-average number of shares outstanding. Diluted income or loss per share is computed using weighted average number of common shares plus dilutive common share equivalents outstanding during the period using the treasury stock method. There are no common stock equivalents outstanding, thus, basic and diluted income or loss per share calculations are the same.

 

(d) Statement of Cash Flows

 

For purposes of the statements of cash flows, the Company considers cash on deposit in the bank to be cash. The Company had $0 cash at December 31, 2006.

 

(e) Use of Estimates in Preparation of Financial Statements

 

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

 

 

23

(f) Impact of New Accounting Standards

 

In February 2006, the FASB issued SFAS 155, "Accounting for Certain Hybrid Financial Instruments," which amends SFAS 133, "Accounting for Derivative Instruments and Hedging Activities" and SFAS 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS 155 simplifies the accounting for certain derivatives embedded in other financial instruments by allowing them to be accounted for as a whole if the holder elects to account for the whole instrument on a fair value basis. SFA 155 also clarifies and amends certain other provisions of SFAS 133 and SFAS 140. SFAS 155 is effective for all financial instruments acquired, issued or subject to a remeasurement event occurring in fiscal years beginning after September 15, 2006 and is therefore required to be adopted by the Company as of October 1, 2006. The Company does not anticipate the adoption of SFAS 155 will have any impact on its financial statements.

 

In March 2006, the FASB issued SFAS 156, "Accounting for Servicing of Financial Assets," an amendment of SFAS 140. This clarifies when to separately account for servicing rights, requires servicing rights to be separately recognized initially at fair value, and provides the option of subsequent accounting for servicing rights at either fair value or under the amortization method. The standard is effective for fiscal years beginning after September 15, 2006 but can be adopted early. The Company does not anticipate the adoption of SFAS 156 will have a material impact of its financial statements.

 

In July 2006, the FASB issued Interpretation No. 48 (FIN No. 48), "Accounting for Uncertainty in Income Taxes." This interpretation requires recognition and measurement of uncertain income tax positions using a "more-likely-than-not" approach. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. Management is still evaluating what effect this will have on the Company’s financial statements.

 

In September 2006, the FASB issued SFAS 157, “Fair Value Measurements." This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is encouraged. The adoption of SFAS 157 is not expected to have a material impact on the financial statements.

 

In September 2006, the FASB issued SFAS 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements 87, 88, 106 and 132(R)" ("SFAS 158"). SFAS 158 requires an employer to recognize the over-funded or under-funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. SFAS 158 also requires the measurement of defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end statement of financial position (with limited exceptions). Management does not expect adoption of SFAS 158 to have a material impact on the Company’s financial statements.

 

In September 2006, the United States Securities and Exchange Commission ("SEC") issued SAB 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements." This SAB provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 establishes an approach that requires quantification of financial statement errors based on the effects of each of the company's financial statements and the related financial statement disclosures. SAB 108 permits existing public companies to record the cumulative effect of initially applying this approach in the first year ending after November 15, 2006 by recording the necessary correcting adjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsetting adjustment recorded to the opening balance of retained earnings. Additionally, the use of the cumulative effect transition method requires detailed disclosure of the nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose. The Company does not anticipate that SAB 108 will have a material impact on its financial statements.

 

24

(g) Revenue Recognition

 

The Company shall recognize revenues in accordance with the Securities & Exchange Commission Staff Accounting Bulletin (SAB) number 104, “Revenue Recognition.” SAB 104 clarifies application of U.S. generally accepted accounting principles to revenue transactions. Accordingly the Company shall recognize revenues when earned which shall be as products or services are delivered to customers. The Company shall also record accounts receivable for revenue earned but not yet collected. An allowance for bad debts shall be provided based on estimated losses. For revenue received in advance of service the Company shall record a current liability as deferred revenue until the earnings process is complete.

 

NOTE 2 LIQUIDITY/GOING CONCERN

 

The Company has accumulated losses since Reactivation through December 31, 2006 amounting to $73,227, has no assets, and has a net working capital deficiency at December 31, 2006. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

Financing for the Company’s limited activities to date has been provided primarily by the issuance of stock and by advances from a stockholder (see NOTE 5). The Company’s ability to achieve a level of profitable operations and/or additional financing impacts the Company’s ability to continue as it is presently organized. Management continues to develop its planned principal operations or may find a well-capitalized merger candidate to commence its operations. Should management be unsuccessful in its operating activities, the Company may experience material adverse effects. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

NOTE 3 INCOME TAXES

 

Below is a summary of deferred tax asset calculations on net operating loss carry forward amounts. Loss carry forward amounts expire at various times through 2026. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized.

 

The valuation allowance for deferred tax assets increased by $1,939 from $11,368 as of December 31, 2006. Deferred tax assets recognized for deductible temporary difference and loss carry forwards total $0, net of a valuation allowance of $13,307, as detailed below.

 

 

 

25

The company has the following carryforwards available at December 31, 2006:

 

Operating Losses

 

 

The effective tax rate for continuing operations differs from the statutory tax rate as follows:

 

 

 

NOTE 4 COMMON STOCK/RELATED PARTY TRANSACTION

 

The Company issued shares of common stock during 1999 as compensation or as reimbursement for expenses paid on behalf of the Company. The table below summarizes the various transactions.

 

 

On October 5, 1999, the Company resolved to reverse split the then outstanding 25,333,368 shares of common stock on the basis of 1 for 250. With the reverse split, the Company retained the current authorized capital and par value, with appropriate adjustments in the stated capital and capital surplus accounts. However, the split provided that no stockholder of record owning 100 shares or more, computed on a per stock certificate basis, on the effective date should be reduced to less than 100 shares and no stockholder owning less than 100 shares on the effective date would be affected by the reverse split; additional shares were issued by the Company to provide the minimum 100 shares, all fractional shares to be rounded up to the nearest whole share. In 2000, the Company issued 56,664 shares of common stock to cover rounding in the reverse split.

 

During December 2005, the Company issued 200 shares of common stock when the transfer agent presented and honored a certificate that was not on the shareholder listing.

 

On or about October 11, 2006, the Company’s Board of Directors authorized 3,478 shares of common voting stock for issuance, resulting from the October 5, 1999, reverse split that had not been previously reconciled as the certificates had previously been issued through the Company’s previous transfer agent, Oxford Transfer, but were not reflected on the current shareholders list. These shares were delivered to DTC, all fully paid and nonassessable.

 

26

NOTE 5 RELATED PARTY TRANSACTIONS

 

A shareholder has paid general and administrative expenses on behalf of the Company, through December 31, 2006, of $37,472. The Company has recorded a liability for this amount which is payable on demand and is non-interest bearing.

 

NOTE 6 COMMITMENT

 

On December 19, 2006, the Company executed a Letter of Intent to acquire Northern Oil and Gas, Inc., a Nevada corporation ("Northern"), and issued a Press Release in that respect on December 19, 2006. In connection with this acquisition, Northern Oil and Gas, Inc. has deposited $25,000 in a trust account with the Company’s attorney. This deposit is in place to cover any attorney or other legal fees that arise because of the acquisition. The deposit is fully refundable if the acquisition is not completed. The Company holds no rights to the deposit and therefore has not recorded it in the financial statements.

 

 

27

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

None; not applicable.

 

Item 8(a)T. Controls and Procedures

 

Management’s Annual Report on Internal Control Over Financial Reporting

 

As of the end of the period covered by this Annual Report, we carried out an evaluation, under the supervision and with the participation of our President and Secretary, of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our President and Secretary concluded that information required to be disclosed is recorded, processed, summarized and reported within the specified periods and is accumulated and communicated to management, including our President and Secretary, to allow for timely decisions regarding required disclosure of material information required to be included in our periodic Securities and Exchange Commission reports. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and our President and Secretary have concluded that our disclosure controls and procedures are effective to a reasonable assurance level of achieving such objectives. However, it should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. In addition, we reviewed our internal controls over financial reporting, and there have been no changes in our internal controls or in other factors in the last fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

 

Changes in internal control over financial reporting

 

There have been no changes in internal control over financial reporting.

 

Item 8(b). Other Information

 

None.

 

PART III

 

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act  

 

Identification of Directors and Executive Officers

 

The following table sets forth the names of all current directors and executive officers of the Company. These persons will serve until the next annual meeting of the stockholders or until their successors are elected or appointed and qualified, or their prior resignation or termination.

 

 

* These persons presently serve in the capacities indicated.

 

 

28

Business Experience

 

Sarah E. Jenson, President and a director is 35 years of age. Mrs. Jenson graduated from the University of Utah, in Salt Lake City with a Bachelors of Science degree in 1995. Mrs. Jenson has been working as a Personal Trainer for the past 9 years.

 

Victoria Jenson, Vice President and director is 39 years of age. Until two year ago, Mrs. Jenson was an owner/operator of a model and talent services for Salt Lake City area events and corporations.

 

Lisa Howells, Secretary and director is 44 years of age. Mrs. Howells holds a B.S. degree in Marketing from the University of Phoenix. Until 6 years ago, she served as the Executive Assistant to the CEO of a large public refrigerated truck transport company in Salt Lake City, Utah. She also served in the finance department with the same company.

 

Significant Employees

 

The Company has no employees who are not executive officers, but who are expected to make a significant contribution to the Company’s business.

 

Family Relationships

 

Sarah Jenson and Victoria Jenson are sister-in-laws. Other than the aforementioned, there are no family relationships between any of the officers and directors of the Company.

 

Involvement in Certain Legal Proceedings

 

Except as stated above, during the past five years, no director, person nominated to become a director, executive officer, promoter or control person of the Company:

 

(1) was a general partner or executive officer of any business against which any bankruptcy petition was filed, either at the time of the bankruptcy or two years prior to that time;

 

(2) was convicted in a criminal proceeding or named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

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

 

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

 

Compliance with Section 16(a) of the Exchange Act

 

Each of the Company’s directors and control persons has filed a Form 3, Statement of Beneficial Ownership, with the Securities and Exchange Commission, and each of the Company’s directors has subsequently filed a Form 4. There have been no changes in their beneficial ownership of shares of common stock of the Company since the filing of their Form 4.

 

Code of Ethics

 

The Company has not adopted a Code of Ethics for our executive officers as of the date of this Report. We expect that upon the successful acquisition of operation we anticipate that the new management will adopt a code of ethics appropriate to the new endeavor.

 

29

Corporate Governance

 

Director Independence

 

The Company does not have any directors that are independent. All of the directors also serve as officers.

 

Board Meetings and Committees; Annual Meeting Attendance

 

The Board of Directors held one special meeting with 100% attendance and no annual meeting during the year ended December 31, 2006.

 

Nominating Committee

 

There are no established committees because there are currently no material operations.

 

Audit Committee

 

There are no established committees because there are currently no material operations.

 

Audit Committee Financial Expert

 

The Company does not currently have a financial expert serving on an audit committee as one does not currently exist because there are currently no material operations.

 

30

Item 10. Executive Compensation

 

The following table sets forth the aggregate compensation paid by the Company for services rendered during the periods indicated:

 

SUMMARY COMPENSATION TABLE

 

 

No cash compensation, deferred compensation or long-term incentive plan awards were issued or granted to the Company’s management during the year ended December 31, 2006. Furthermore, no member of our Company’s management has been granted any option or stock appreciation rights; accordingly, no tables relating to such items have been included within this Item.

 

Outstanding Equity Awards

 

None, not applicable.

 

Compensation of Directors

 

There are no standard arrangements pursuant to which the Company’s directors are compensated for any services provided as director. No additional amounts are payable to the Company’s directors for committee participation or special assignments.

 

31

Item 11. Security Ownership of Certain Beneficial Owners and Management

 

Security Ownership of Certain Beneficial Owners

 

The following table sets forth the share holdings of those persons who own more than five percent of the Company’s common stock as of December 31, 2006 and to the date hereof:

 

Ownership of Principal Shareholders

 

 

* Includes shares held by Jenson Services of which Duane S. Jenson is the CEO of Jenson Services, Inc., and may be deemed the beneficial owner of Jenson Services, Inc. shares

 

Security Ownership of Management

 

The following table sets forth the share holdings of the Company’s directors and executive officers as of December 31, 2006 and to the date hereof:

 

Ownership of Management

 

 

* Shares are owned by Travis Jenson, Sarah’s husband and she may be deemed a beneficial owner of such shares.

 

**Shares are owned by Thomas Howells, Lisa’s husband and she may be deemed a beneficial owner of such shares.

 

 

32

Changes in Control

 

On December 19, 2006, the Company filed with the Securities and Exchange Commission a Current Report on Form 8-K disclosing that the Company executed a Letter of Intent to acquire Northern Oil and Gas, Inc., a Nevada corporation, and issued a Press Release in that respect on December 19, 2006. See Part III, Item 13: Exhibits and Reports on Form 8-K. The closing would result in a change in control however such closing is subject to the execution and delivery of a definitive agreement and various other conditions. No assurance can be given that this acquisition will be completed. The information contained herein does not assume that this acquisition will be completed. The Company will file a Current Report on Form 8-K12G3 subsequent to any such event.

 

There are no additional present arrangements or pledges of the Company’s securities which may result in a change in control of the Company.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

None, not applicable.

 

Item 12. Certain Relationships and Related Transactions

 

Transactions with Related Persons

 

There were no material transactions, or series of similar transactions, during our Company’s last four fiscal years, or any currently proposed transactions, or series of similar transactions, to which our Company or any of our subsidiaries was or is to be a party, in which the amount involved exceeded the lesser of $120,000 or one percent of the average of the small business issuer’s total assets at year-end for the last three completed fiscal years and in which any director, executive officer or any security holder who is known to us to own of record or beneficially more than five percent of any class of our common stock, or any member of the immediate family of any of the foregoing persons, had an interest.

 

Parents of the Issuer

 

There are no parents of the Issuer.

 

Transactions with Promoters and Control Persons

 

There were no material transactions, or series of similar transactions, during our Company’s last five fiscal years, or any currently proposed transactions, or series of similar transactions, to which we or any of our subsidiaries was or is to be a party, in which the amount involved exceeded $60,000 and in which any promoter or founder of ours or any member of the immediate family of any of the foregoing persons, had an interest.

 

 

33

Item 13. Exhibits

 

Exhibits  

 

Form 8-K as filed on January 19, 2006 disclosing under Item 8.01 the announcement of obtaining a trading symbol “KNTX” on the OTC Bulletin Board of the NASD. Incorporated herein by reference.

 

Form 8-K as filed on December 19, 2006, disclosing under Item 7.01 the execution of the Letter of Intent to acquire Northern Oil and Gas, Inc. Incorporated herein by reference.

 

3.1 Articles of Incorporation*

 

3.1(i) Certificate of Amendment of the Articles of Incorporation*

 

3.1(ii) Certificate of Amendment of the Articles of Incorporation*

 

3.2 Bylaws*

 

*See the Company’s 10-SB Registration Statement filed with the Securities and Exchange Commission on July 6, 2000, and are incorporated herein by reference.

 

EX 31.1 Certification of Sarah Jenson, the Company’s President, pursuant to section 302 of the Sarbanes-Oxley Act of 2002

 

EX 31.2 Certification of Lisa Howells, the Company’s Secretary, pursuant to section 302 of the Sarbanes-Oxley Act of 2002

 

EX 32 Certification of Sarah Jenson and Lisa Howells pursuant to section 906 of the Sarbanes-Oxley Act of 2002

 

34

Item 14. Principal Accounting Fees and Services

 

The Following is a summary of the fees billed to the Company by its principal accountants during the fiscal years ended December 31, 2006 and 2005:

 

 

Audit Fees - Consists of fees for professional services rendered by our principal accountants for the audit of the Company’s annual financial statements and review of the financial statements included in the Company’s Forms 10-KSB or services that are normally provided by our principal accountants in connection with statutory and regulatory filings or engagements.

 

Audit-related Fees - Consists of fees for assurance and related services by our principal accountants that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under “Audit fees.”

 

Tax Fees - Consists of fees for professional services rendered by our principal accountants for tax compliance, tax advice and tax planning.

 

All Other Fees - Consists of fees for products and services provided by our principal accountants, other than the services reported under “Audit fees,” “Audit-related fees,” and “Tax fees” above.

 

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

 

The Company has not adopted an Audit Committee, therefore, there is no Audit Committee policy in this regard. However, the Company does not require approval in advance of the performance of professional services to be provided to the Company by its principal accountant. Additionally, all services rendered by our principal accountant are performed pursuant to a written engagement letter between us and the principal accountant.

 

35

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Securities Exchange Act, the Company caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

KENTEX PETROLEUM, INC.

 

 

 

 

In accordance with the Securities Exchange Act this Report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated:

 

KENTEX PETROLEUM, INC.

 

 

 

36