As filed with the Securities and Exchange Commission on July 13, 2011
                                                     Registration No. 333-______
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM S-1
             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                                   PENOLA INC.
             (Exact name of registrant as specified in its charter)



                                                                     
           Nevada                               1000                             None
(State or Other Jurisdiction of      (Primary Standard Industrial            (IRS Employer
 Incorporation or Organization)         Classification Number)           Identification Number)


                                492 Gilbert Road
                           West Preston, Victoria 3072
                                    Australia
                                +61 (3) 9605 3907
    (Address, including zip code, and telephone number, including area code,
                  of registrant's principal executive offices)

                     State Agent & Transfer Syndicate, Inc.
                             112 North Curry Street
                            Carson City, Nevada 89703
                                 (800) 253-1013
    (Address, including zip code, and telephone number, including area code,
                              of agent for service)

                                   Copies to:

                              Thomas E. Puzzo, Esq.
                      Law Offices of Thomas E. Puzzo, PLLC
                               4216 NE 70th Street
                            Seattle, Washington 98115
                          Telephone No.: (206) 522-2256
                          Facsimile No.: (206) 260-0111

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

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

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]

If this Form is a post-effective registration statement filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: [ ]

If this Form is a post-effective registration statement filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: [ ]

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

Large accelerated filer [ ]                        Accelerated filer [ ]
Non-accelerated filer [ ]                          Smaller reporting company [X]
(Do not check if a smaller reporting company)

                         CALCULATION OF REGISTRATION FEE


                                                                                  
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  Title of Each                             Proposed Maximum      Proposed Maximum        Amount of
Class of Securities       Amount to be       Offering Price      Aggregate Offering     Registration
 to be Registered        Registered (1)        per Share               Price                 Fee
------------------------------------------------------------------------------------------------------
Common Stock, par value
$0.001 per share           1,160,000 (2)         $ .10 (3)           $116,000               $13.47
------------------------------------------------------------------------------------------------------
TOTAL                      1,160,000             $  --               $116,000               $13.47
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(1)  In the event of a stock split, stock dividend or similar transaction
     involving our common stock, the number of shares registered shall
     automatically be increased to cover the additional shares of common stock
     issuable pursuant to Rule 416 under the Securities Act of 1933, as amended.
(2)  Represents the number of shares of common stock currently outstanding to be
     sold by the selling security holders.
(3)  Estimated solely for the purpose of calculating the registration fee
     pursuant to Rule 457(a) and (o) of the Securities Act.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED JULY 13, 2011 PENOLA INC. 1,160,000 SHARES OF COMMON STOCK This prospectus relates to the resale by certain selling security holders of Penola Inc. of up to 1,160,000 shares of common stock held by selling security holders of Penola Inc. We will not receive any of the proceeds from the sale of the shares by the selling stockholders. The selling security holders will be offering our shares of common stock at a fixed price of $0.10 per share until our shares are quoted on the OTC Bulletin Board and thereafter at prevailing market prices or privately negotiated prices. Each of the selling stockholders may be deemed to be an "underwriter" as such term is defined in the Securities Act of 1933, as amended (the "Securities Act"). There has been no market for our securities and a public market may never develop, or, if any market does develop, it may not be sustained. Our common stock is not traded on any exchange or on the over-the-counter market. After the effective date of the registration statement relating to this prospectus, we hope to have a market maker file an application with the Financial Industry Regulatory Authority for our common stock to be eligible for trading on the Over-the-Counter Bulletin Board. We do not yet have a market maker who has agreed to file such application. There can be no assurance that our common stock will ever be quoted on a stock exchange or a quotation service or that any market for our stock will develop. OUR BUSINESS IS SUBJECT TO MANY RISKS AND AN INVESTMENT IN OUR SHARES OF COMMON STOCK WILL ALSO INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING "RISK FACTORS" BEGINNING ON PAGE 4 BEFORE INVESTING IN OUR SHARES OF COMMON STOCK. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The information in this prospectus is not complete and may be changed. This prospectus is included in the registration statement that was filed by us with the Securities and Exchange Commission. The selling security holders may not sell these securities until the registration statement becomes effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. The date of this prospectus is July __, 2011.
The following table of contents has been designed to help you find information contained in this prospectus. We encourage you to read the entire prospectus. TABLE OF CONTENTS Page ---- Prospectus Summary 3 Risk Factors 4 Risk Factors Relating to Our Company 4 Risk Factors Relating to Our Common Stock 8 Use of Proceeds 10 Determination of Offering Price 10 Selling Security Holders 10 Description of Securities 11 Plan of Distribution 13 Description of Business 16 Our Executive Offices 22 Legal Proceedings 22 Market for Common Equity and Related Stockholder Matters 22 Management's Discussion and Analysis of Financial Condition and Results of Operations 23 Directors, Executive Officers, Promoters and Control Persons 28 Executive Compensation 29 Security Ownership of Certain Beneficial Owners and Management 30 Certain Relationships and Related Transactions 31 Disclosure of Commission Position on Indemnification for Securities Act Liabilities 31 Where You Can Find More Information 31 Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 31 Financial Statements F-1 Until ____________, 2011 (90 business days after the effective date of this prospectus) all dealers that effect transactions in these securities whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. 2
A CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors," that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. PROSPECTUS SUMMARY As used in this prospectus, references to the "Company," "we," "our", "us" or "Penola Inc." refer to Penola Inc. unless the context otherwise indicates. The following summary highlights selected information contained in this prospectus. Before making an investment decision, you should read the entire prospectus carefully, including the "Risk Factors" section, the financial statements, and the notes to the financial statements. OUR COMPANY Penola Inc. was incorporated on May 7, 2010, under the laws of the State of Nevada, for the purpose of conducting mineral exploration activities. We are an exploration stage company formed for the purposes of acquiring, exploring, and if warranted and feasible, developing natural resource property. We raised an aggregate of $31,000 through private placements of our securities. Proceeds from these placements were used for working capital. On July 6, 2010 we entered into a Mineral Property Option Agreement whereby we have the right to acquire a 100% interest in Exploration License E 80/3757 located in Halls Creek Shire, in the Kimberly region of Western Australia and known as the Halls Creek Property. The option agreement requires us to make an initial cash payment of AUD$7,000 (US$7,703), which we paid on July 6, 2010. The option agreement has an exercise price of approximately AUD$200,000 ($208,840) cash to be paid, if exercised by the Company, and the option expires July 6, 2012. We retained a consulting geologist to prepare an evaluation report on the Halls Creek Property. We intend to conduct exploratory activities on the claim and if feasible, develop the Halls Creek Property. The Company's principal offices are located at 492 Gilbert Road, West Preston, Victoria 3072, Australia, and our telephone number is +61 (3) 9605 3907. THE OFFERING Securities offered: The selling stockholders are offering hereby up to 1,160,000 shares of common stock. Offering price: The selling stockholders will offer and sell their shares of common stock at a fixed price of $0.10 per share until our shares are quoted on the OTC Bulletin Board, if our shares of common stock are ever quoted on the OTC Bulletin Board, and thereafter at prevailing market prices or privately negotiated prices. 3
Shares outstanding prior to offering: 3,160,000 Shares outstanding after offering: 3,160,000 Market for the common shares: There is no public market for our shares. Our common stock is not traded on any exchange or on the over-the-counter market. After the effective date of the registration statement relating to this prospectus, we hope to have a market maker file an application with the Financial Industry Regulatory Authority ("FINRA") for our common stock to eligible for trading on the Over The Counter Bulletin Board. We do not yet have a market maker who has agreed to file such application. There is no assurance that a trading market will develop, or, if developed, that it will be sustained. Consequently, a purchaser of our common stock may find it difficult to resell the securities offered herein should the purchaser desire to do so when eligible for public resale. Use of proceeds: We will not receive any proceeds from the sale of shares by the selling security holders SUMMARY FINANCIAL INFORMATION The tables and information below are derived from our audited financial statements for the period from May 7, 2010 (Inception) to February 28, 2011. Our working capital as at July 11, 2011 was $20,564. February 28, 2011 ($) --------------------- FINANCIAL SUMMARY Cash and Deposits 21,737 Total Assets 21,737 Total Liabilities 519 Total Stockholder's Equity 21,218 Accumulated From May 7, 2010 (Inception) to February 28, 2011 ($) --------------------- STATEMENT OF OPERATIONS Total Expenses 9,782 Net Loss for the Period 9,782 Net Loss per Share -- RISK FACTORS An investment in our common stock involves a number of very significant risks. You should carefully consider the following known material risks and uncertainties in addition to other information in this prospectus in evaluating our company and its business before purchasing shares of our company's common stock. You could lose all or part of your investment due to any of these risks. RISKS RELATING TO OUR COMPANY OUR AUDITORS HAVE EXPRESSED SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN. 4
Our financial statements for the year ended February 28, 2011 were prepared assuming that we will continue our operations as a going concern. We were incorporated on May 7, 2010 and do not have a history of earnings. As a result, our independent accountants in their audit report have expressed substantial doubt about our ability to continue as a going concern. Continued operations are dependent on our ability to complete equity or debt financings or generate profitable operations. Such financings may not be available or may not be available on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. WE MAY REQUIRE ADDITIONAL FUNDS WHICH WE PLAN TO RAISE THROUGH THE SALE OF OUR COMMON STOCK, WHICH REQUIRES FAVORABLE MARKET CONDITIONS AND INTEREST IN OUR ACTIVITIES BY INVESTORS. IF WE ARE NOT BE ABLE TO SELL OUR COMMON STOCK, FUNDING WILL NOT BE AVAILABLE FOR CONTINUED OPERATIONS, AND OUR BUSINESS WILL FAIL. We anticipate that our current cash of $21,737 will be sufficient to complete the first phase of any initial exploration program of any mining claim. Subsequent exploration activities will require additional funding. Our only present means of funding is through the sale of our common stock. The sale of common stock requires favorable market conditions for exploration companies like ours, as well as specific interest in our stock, neither of which may exist if and when additional funding is required by us. If we are unable to raise additional funds in the future, our business will fail. WE HAVE A VERY LIMITED HISTORY OF OPERATIONS AND ACCORDINGLY THERE IS NO TRACK RECORD THAT WOULD PROVIDE A BASIS FOR ASSESSING OUR ABILITY TO CONDUCT SUCCESSFUL MINERAL EXPLORATION ACTIVITIES. WE MAY NOT BE SUCCESSFUL IN CARRYING OUT OUR BUSINESS OBJECTIVES. We were incorporated on May 7, 2010 and to date, have been involved primarily in organizational activities and obtaining financing. Accordingly we have no track record of successful exploration activities, strategic decision making by management, fund-raising ability, and other factors that would allow an investor to assess the likelihood that we will be successful as a junior resource exploration company. Junior exploration companies often fail to achieve or maintain successful operations, even in favorable market conditions. There is a substantial risk that we will not be successful in our exploration activities, or if initially successful, in thereafter generating any operating revenues or in achieving profitable operations. IF WE ARE UNABLE TO PAY THE EXERCISE PRICE UNDER OUR MINERAL PROPERTY OPTION AGREEMENT, OUR BUSINESS WILL FAIL. We are a party to a Mineral Property Option Agreement whereby we have the right to acquire a 100% interest in Exploration License E 80/3757 located in the Murchison Mineral-field Halls Creek Shire, in the Kimberly region of Western Australia and known as the Halls Creek Property. It is only under this option agreement that we potentially have any right to explore for mineralized material. This option agreement requires us to pay an exercise price of AUD$200,000 (approximately $208,840) cash, in order for us to have the right to explore for mineralized materials in the area covered by Exploration License E 80/3757. Our option expires July 6, 2012. If we fail to pay the exercise price, we will not have the right to conduct exploration activities at all. Currently, we do not have sufficient funds to pay the exercise price. If we fail to raise sufficient funds to pay the exercise price, you will lose your entire investment. DUE TO THE SPECULATIVE NATURE OF MINERAL PROPERTY EXPLORATION, THERE IS SUBSTANTIAL RISK THAT NO COMMERCIALLY VIABLE MINERAL DEPOSITS WILL BE FOUND ON OUR HALLS CREEK PROPERTY OR OTHER MINERAL PROPERTIES THAT WE ACQUIRE. In order for us to even commence mining operations we face a number of challenges which include finding mining claims, qualified professionals to conduct exploration programs, obtaining adequate financing to continue exploration programs, locating viable mineral bodies, partnering with senior mining companies, obtaining mining permits, and ultimately selling minerals in order to generate revenue. Moreover, exploration for commercially viable mineral deposits is highly speculative in nature and involves substantial risk that no viable mineral deposits will be located on any future mineral properties. There is a substantial risk that any exploration program that we conduct on future claims may not result in the discovery of any significant mineralization, and 5
therefore no commercial viable mineral deposit. There are numerous geological features that we may encounter that would limit our ability to locate mineralization or that could interfere with our exploration programs as planned, resulting in unsuccessful exploration efforts. In such a case, we may incur significant costs associated with an exploration program, without any benefit. This would likely result in a decrease in the value of our common stock. DUE TO THE INHERENT DANGERS INVOLVED IN MINERAL EXPLORATION, THERE IS A RISK THAT WE MAY INCUR LIABILITY OR DAMAGES AS WE CONDUCT OUR BUSINESS. The search for minerals involves numerous hazards. As a result, we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which we cannot insure or may elect not to insure. We currently have no such insurance nor do we expect to obtain such insurance for the foreseeable future. If a hazard were to occur, the costs of rectifying the hazard may exceed our asset value and cause us to liquidate all our assets and cease operations, resulting in the loss of your entire investment. AS WE UNDERTAKE EXPLORATION OF OUR MINERAL CLAIMS, WE WILL BE SUBJECT TO COMPLIANCE WITH GOVERNMENT REGULATION THAT MAY INCREASE THE ANTICIPATED COST OF OUR EXPLORATION PROGRAM. There are several governmental regulations that materially restrict mineral exploration. We will be subject to the laws of the Western Australia as administered by the Department of Industry and Resources as we carry out our exploration program. We may be required to obtain work permits, negotiate with Aboriginal groups holding Native Title Rights for access to our leases, obtain land access agreements from pastoral lease holders, post bonds and perform remediation work for any physical disturbance to the land in order to comply with these laws. If we enter the production phase, the cost of complying with permit and regulatory environment laws will be greater because the impact on the project area is greater. Permits and regulations will control all aspects of the production program if the project continues to that stage. Examples of regulatory requirements include: * Water discharge will have to meet drinking water standards; * Dust generation will have to be minimal or otherwise re-mediated; * Dumping of material on the surface will have to be re-contoured and re-vegetated with natural vegetation; * An assessment of all material to be left on the surface will need to be environmentally benign; * Ground water will have to be monitored for any potential contaminants; * The socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be remediated; and * There will have to be an impact report of the work on the local fauna and flora including a study of potentially endangered species. There is a risk that new regulations could increase our costs of doing business and prevent us from carrying out our exploration program. We will also have to sustain the cost of reclamation and environmental remediation for all exploration work undertaken. Both reclamation and environmental remediation refer to putting disturbed ground back as close to its original state as possible. Other potential pollution or damage must be cleaned-up and renewed along standard guidelines outlined in the usual permits. Reclamation is the process of bringing the land back to its natural state after completion of exploration activities. Environmental remediation refers to the physical activity of taking steps to remediate, or remedy, any environmental damage caused. The amount of these costs is not known at this time as we do not know the extent of the exploration program that will be undertaken beyond completion of the recommended work program. If remediation costs exceed our cash reserves we may be unable to complete our exploration program and have to abandon our operations. THE MARKET PRICE FOR PRECIOUS METALS IS BASED ON NUMEROUS FACTORS OUTSIDE OF OUR CONTROL. THERE IS A RISK THAT THE MARKET PRICE FOR PRECIOUS METALS WILL SIGNIFICANTLY DECREASE, WHICH WILL MAKE IT DIFFICULT FOR US TO FUND FURTHER MINERAL EXPLORATION ACTIVITIES, AND WOULD DECREASE THE PROBABILITY THAT ANY SIGNIFICANT MINERALIZATION THAT WE LOCATE CAN BE ECONOMICALLY EXTRACTED. Numerous factors beyond our control may affect the marketability of minerals. These factors include market fluctuations, the proximity and capacity of natural resource markets and processing equipment, government regulations, including 6
regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in our not receiving an adequate return on invested capital and you may lose your entire investment in this offering by existing investors. OUR SOLE OFFICER AND DIRECTOR MAY HAVE A CONFLICT OF INTEREST WITH THE MINORITY SHAREHOLDERS AT SOME TIME IN THE FUTURE. SINCE THE MAJORITY OF OUR SHARES OF COMMON STOCK ARE OWNED BY OUR SOLE OFFICER AND DIRECTOR, OUR OTHER STOCKHOLDERS MAY NOT BE ABLE TO INFLUENCE CONTROL OF THE COMPANY OR DECISION MAKING BY MANAGEMENT OF THE COMPANY. Our sole officer and director beneficially owns 63.2% of our outstanding common stock. The interests of our sole officer and director may not be, at all times, the same as that of our other shareholders. Our sole officer and director is not simply a passive investor but is also executive officer of the Company, her interest as executive may, at times be adverse to those of passive investors. Where those conflicts exist, our shareholders will be dependent upon our director exercising, in a manner fair to all of our shareholders, her fiduciary duties as officer or as member of the Company's Board of Directors. Also, our sole officer and director will have the ability to control the outcome of most corporate actions requiring shareholder approval, including the sale of all or substantially all of our assets and amendments to our articles of incorporation. This concentration of ownership may also have the effect of delaying, deferring or preventing a change of control of us, which may be disadvantageous to minority shareholders. SINCE OUR SOLE OFFICER AND DIRECTOR HAS THE ABILITY TO BE EMPLOYED BY OR CONSULT FOR OTHER COMPANIES, HER OTHER ACTIVITIES COULD SLOW DOWN OUR OPERATIONS. Our sole officer and director is not required to work exclusively for us and does not devote all of her time to our operations. Therefore, it is possible that a conflict of interest with regard to her time may arise based on her employment by other companies. Her other activities may prevent him from devoting full-time to our operations which could slow our operations and may reduce our financial results because of the slowdown in operations. It is expected that our officer and director will devote between 5 and 10 hours per week to our operations on an ongoing basis, and when required will devote whole days and even multiple days at a stretch when property visits are required or when extensive analysis of information is needed. We do not have any written procedures in place to address conflicts of interest that may arise between our business and the business activities of our director. IF THE SELLING SHAREHOLDERS SELL A LARGE NUMBER OF SHARES ALL AT ONCE OR IN BLOCKS, THE MARKET PRICE OF OUR SHARES WOULD MOST LIKELY DECLINE. The selling shareholders are offering up to 1,160,000 shares of our common stock through this prospectus. Our common stock is presently not traded or quoted on any market or securities exchange, but should a market develop, shares sold at a price below the current market price at which the common stock is quoted will cause that market price to decline. Moreover, the offer or sale of a large number of shares at any price may cause the market price to fall. The outstanding shares of common stock covered by this prospectus represent 31.6% of the common shares outstanding as of the date of this prospectus. WE OPERATE OUR BUSINESS AND MAINTAIN OUR BANK ACCOUNTS IN AUSTRALIA, A NON-UNITED STATES JURISDICTION, WHICH MEANS THAT IT MAY BE DIFFICULT OR IMPOSSIBLE FOR STOCKHOLDERS TO ENFORCE A JUDGMENT OBTAINED IN THE UNITED STATES AGAINST THE COMPANY TO OBTAIN CASH FROM THE COMPANY'S BANK ACCOUNTS IN AUSTRALIA. Our operations are conducted in Australia, a foreign country where we maintain our bank accounts and the legal system of which is based on the common law. Nevertheless, a judgment obtained by a stockholder against the Company in the United States will be difficult and costly, if not impossible, to enforce in Australia. Additionally, there is no guarantee that Australia will not change its laws or policies to reverse policy choices in the past with respect to the enforceability of judgments obtained from courts in the United States in Australia. Accordingly, an investor may lose his entire investment if he or she cannot enforce a judgment from a court in the United States against the Company in Australia. 7
RISKS RELATING TO OUR COMMON STOCK THERE IS NO LIQUIDITY AND NO ESTABLISHED PUBLIC MARKET FOR OUR COMMON STOCK AND WE MAY NOT BE SUCCESSFUL AT OBTAINING A QUOTATION ON A RECOGNIZED QUOTATION SERVICE. IN SUCH EVENT IT MAY BE DIFFICULT TO SELL YOUR SHARES. There is presently no public market in our shares. There can be no assurance that we will be successful at developing a public market or in having our common stock quoted on a quotation facility such as the OTC Bulletin Board. There are risks associated with obtaining a quotation, including that broker dealers will not be willing to make a market in our shares, or to request that our shares be quoted on a quotation service. In addition, even if a quotation is obtained, the OTC Bulletin Board and similar quotation services are often characterized by low trading volumes, and price volatility, which may make it difficult for an investor to sell our common stock on acceptable terms. If trades in our common stock are not quoted on a quotation facility, it may be very difficult for an investor to find a buyer for their shares in our Company. OUR COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC AND THE TRADING MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK. Under U.S. federal securities legislation, our common stock will constitute "penny stock". Penny stock is any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a potential investor's account for transactions in penny stocks, and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve an investor's account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person, and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination. Brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. WE MAY, IN THE FUTURE, ISSUE ADDITIONAL COMMON SHARES, WHICH WOULD REDUCE INVESTORS' PERCENT OF OWNERSHIP AND MAY DILUTE OUR SHARE VALUE. Our Articles of Incorporation authorize the issuance of 100,000,000 shares of common stock and 25,000,000 shares of "blank check" preferred stock. As of July 11, 2011, the Company had 3,160,000 shares of common stock outstanding. Accordingly, we may issue up to an additional 96,840,000 shares of common stock and 25,000,000 shares of preferred stock with terms and preferences determined by our board of directors. The future issuance of common stock and/or preferred stock may result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock or preferred stock issued in the future on an arbitrary basis. The issuance of common stock or preferred stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock. THERE IS NO CURRENT TRADING MARKET FOR OUR SECURITIES AND IF A TRADING MARKET DOES NOT DEVELOP, PURCHASERS OF OUR SECURITIES MAY HAVE DIFFICULTY SELLING THEIR SHARES. There is currently no established public trading market for our securities and an active trading market in our securities may not develop or, if developed, may not be sustained. We intend to have an application filed for admission to 8
quotation of our securities on the OTC Bulletin Board after this prospectus is declared effective by the SEC. If for any reason our common stock is not quoted on the OTC Bulletin Board or a public trading market does not otherwise develop, purchasers of the shares may have difficulty selling their common stock should they desire to do so. No market makers have committed to becoming market makers for our common stock and none may do so. ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF NEVADA STATE LAW HINDER A POTENTIAL TAKEOVER OF PENOLA INC. Though not now, in the future we may become subject to Nevada's control share law. A corporation is subject to Nevada's control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and it does business in Nevada or through an affiliated corporation. The law focuses on the acquisition of a "controlling interest" which means the ownership of outstanding voting shares sufficient, but for the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the corporation in the election of directors: (i) one-fifth or more but less than one-third, (ii) one-third or more but less than a majority, or (iii) a majority or more. The ability to exercise such voting power may be direct or indirect, as well as individual or in association with others. The effect of the control share law is that the acquiring person, and those acting in association with it, obtains only such voting rights in the control shares as are conferred by a resolution of the stockholders of the corporation, approved at a special or annual meeting of stockholders. The control share law contemplates that voting rights will be considered only once by the other stockholders. T hus, there is no authority to strip voting rights from the control shares of an acquiring person once those rights have been approved. If the stockholders do not grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non-voting shares. The acquiring person is free to sell its shares to others. If the buyers of those shares themselves do not acquire a controlling interest, their shares do not become governed by the control share law. If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of the voting power, any stockholder of record, other than an acquiring person, who has not voted in favor of approval of voting rights is entitled to demand fair value for such stockholder's shares. Nevada's control share law may have the effect of discouraging takeovers of the corporation. In addition to the control share law, Nevada has a business combination law which prohibits certain business combinations between Nevada corporations and "interested stockholders" for three years after the "interested stockholder" first becomes an "interested stockholder," unless the corporation's board of directors approves the combination in advance. For purposes of Nevada law, an "interested stockholder" is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (ii) an affiliate or associate of the corporation and at any time within the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term "business combination" is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquiror to use the corporation's assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders. The effect of Nevada's business combination law is to potentially discourage parties interested in taking control of Penola Inc. from doing so if it cannot obtain the approval of our board of directors. BECAUSE WE DO NOT INTEND TO PAY ANY CASH DIVIDENDS ON OUR COMMON STOCK, OUR STOCKHOLDERS WILL NOT BE ABLE TO RECEIVE A RETURN ON THEIR SHARES UNLESS THEY SELL THEM. We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. There is no assurance that stockholders will be able to sell shares when desired. 9
USE OF PROCEEDS This prospectus relates to shares of our common stock that may be offered and sold from time to time by the selling stockholders. We will not receive any of the proceeds from the sale of the common shares being offered for sale by the selling security holders. DETERMINATION OF THE OFFERING PRICE The selling shareholders will sell our shares at $0.10 per share until our shares are quoted on the OTCBB, and thereafter at prevailing market prices or privately negotiated prices. This price was arbitrarily determined by us. SELLING SECURITY HOLDERS The following table sets forth the shares beneficially owned, as of July 11, 2011, by the selling security holders prior to the offering by existing shareholders contemplated by this prospectus, the number of shares each selling security holder is offering by this prospectus and the number of shares which each would own beneficially if all such offered shares are sold. Beneficial ownership is determined in accordance with Securities and Exchange Commission rules. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power. Each of the selling security holders acquired their shares of common stock being resold hereunder directly from the Company for a purchase price of $0.025 per share. The percentages below are calculated based on 3,160,000 shares of our common stock issued and outstanding as of July 11, 2011. We do not have any outstanding options, warrants or other securities exercisable for or convertible into shares of our common stock. Total Number of Percentage of Shares hares to be Total Shares Shares owned Owned Offered for Owned After After the Name of Before the Security the Offering Offering is Selling Shareholder the Offering Holder's Account is Complete Complete ------------------- ------------ ---------------- ----------- -------- Christina Byamis 40,000 40,000 0 0 Evangelos Byamis 40,000 40,000 0 0 Melissa Briggs 40,000 40,000 0 0 Fabial Fulgione 40,000 40,000 0 0 Melissa De Stratis 40,000 40,000 0 0 Jeanette Gatto 40,000 40,000 0 0 Kathy Gatto 40,000 40,000 0 0 Nikola Kotevski 40,000 40,000 0 0 Jose Archer 40,000 40,000 0 0 Maree Carazzolo 40,000 40,000 0 0 Cindy Hodgson 40,000 40,000 0 0 Jake Smith 40,000 40,000 0 0 Kim Head 40,000 40,000 0 0 10
Rebecca Popple 40,000 40,000 0 0 Joanne Portelli 40,000 40,000 0 0 Danielle Soliman 40,000 40,000 0 0 Samir Lahibi 40,000 40,000 0 0 Robert Tapping 40,000 40,000 0 0 Alisha Thomas 40,000 40,000 0 0 Sofia Ward 40,000 40,000 0 0 Marian Daoud 40,000 40,000 0 0 James Pink 40,000 40,000 0 0 Hana Taouk 40,000 40,000 0 0 Crystal Portelli 40,000 40,000 0 0 Nina Naddaf 40,000 40,000 0 0 Hanan Taouk 40,000 40,000 0 0 Louise Keeran 40,000 40,000 0 0 S Kay 40,000 40,000 0 0 Giulia Gencarelli 40,000 40,000 0 0 Total 1,160,000 1,160,000 0 0 None of the selling shareholders has a relationship with us other than as a shareholder, has ever been one of our officers or directors, or is a broker-dealer registered under the Securities Exchange Act of 1934, as amended, or an affiliate of such a broker-dealer. We may require the selling stockholders to suspend the sales of the securities offered by this prospectus upon the occurrence of any event that makes any statement in this prospectus, or the related registration statement, untrue in any material respect, or that requires the changing of the statements in these documents in order to make statements in those documents not misleading. We will file a post-effective amendment to the registration statement to reflect any such material changes to this prospectus. DESCRIPTION OF SECURITIES GENERAL There is no established public trading market for our common stock. Our authorized capital stock consists of 100,000,000 shares of common stock, with $0.001 par value per share, and 25,000,000 shares of "blank check" preferred stock, with no par value. As of July 11, 2011, there were 3,160,000 shares of our common stock issued and outstanding that were held by 30 stockholders of record, and no shares of preferred stock issued and outstanding. COMMON STOCK The following is a summary of the material rights and restrictions associated with our common stock. This description does not purport to be a complete description of all of the rights of our stockholders and is subject to, and qualified in its entirety by, the provisions of our most current Articles of Incorporation and Bylaws, which are included as exhibits to this Registration Statement. The holders of our common stock currently have (i) equal ratable rights to dividends from funds legally available therefore, when, as and if declared by the Board of Directors of the Company; (ii) are entitled to share ratably in all of the assets of the Company available for distribution to holders of common stock upon liquidation, dissolution or winding up of the affairs of the Company (iii) do not have preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights applicable thereto; and (iv) are entitled to one non-cumulative vote per share on all matters on which stock holders may vote. 11
Our Bylaws provide that at all meetings of the stockholders for the election of directors, a plurality of the votes cast shall be sufficient to elect. On all other matters, except as otherwise required by Nevada law or the Articles of Incorporation, a majority of the votes cast at a meeting of the stockholders shall be necessary to authorize any corporate action to be taken by vote of the stockholders. A "plurality" means the excess of the votes cast for one candidate over any other. When there are more than two competitors for the same office, the person who receives the greatest number of votes has a plurality. Please refer to the Company's Articles of Incorporation, Bylaws and the applicable statutes of the State of Nevada for a more complete description of the rights and liabilities of holders of the Company's securities. BLANK CHECK PREFERRED STOCK The following is a summary of the material rights and restrictions associated with our preferred stock. This description does not purport to be a complete description of all of the rights of our stockholders and is subject to, and qualified in its entirety by, the provisions of our most current Articles of Incorporation and Bylaws, which are included as exhibits to this Registration Statement. Our Board of Directors is authorized to determine or alter any or all of the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of preferred stock and, within the limitations or restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, to increase or decrease (but not below the number of shares of any such series then outstanding) the number of shares comprising any such series subsequent to the issue of shares of that series, to set the designation of any series, and to provide for rights and terms of redemption, conversion, dividends, voting rights, and liquidation preferences of the shares of any such series. NEVADA ANTI-TAKEOVER LAWS The Nevada Business Corporation Law contains a provision governing "Acquisition of Controlling Interest." This law provides generally that any person or entity that acquires 20% or more of the outstanding voting shares of a publicly-held Nevada corporation in the secondary public or private market may be denied voting rights with respect to the acquired shares, unless a majority of the disinterested stockholders of the corporation elects to restore such voting rights in whole or in part. The control share acquisition act provides that a person or entity acquires "control shares" whenever it acquires shares that, but for the operation of the control share acquisition act, would bring its voting power within any of the following three ranges: (1) 20 to 33 1/3%, (2) 33 1/3 to 50%, or (3) more than 50%. A "control share acquisition" is generally defined as the direct or indirect acquisition of either ownership or voting power associated with issued and outstanding control shares. The stockholders or board of directors of a corporation may elect to exempt the stock of the corporation from the provisions of the control share acquisition act through adoption of a provision to that effect in the Articles of Incorporation or Bylaws of the corporation. Our Articles of Incorporation and Bylaws do not exempt our common stock from the control share acquisition act. The control share acquisition act is applicable only to shares of "Issuing Corporations" as defined by the act. An Issuing Corporation is a Nevada corporation, which; (1) has 200 or more stockholders, with at least 100 of such stockholders being both stockholders of record and residents of Nevada; and (2) does business in Nevada directly or through an affiliated corporation. At this time, we do not have 100 stockholders of record resident of Nevada. Therefore, the provisions of the control share acquisition act do not apply to acquisitions of our shares and will not until such time as these requirements have been met. At such time as they may apply to us, the provisions of the control share acquisition act may discourage companies or persons interested in acquiring a significant interest in or control of the Company, regardless of whether such acquisition may be in the interest of our stockholders. The Nevada "Combination with Interested Stockholders Statute" may also have an effect of delaying or making it more difficult to effect a change in control of the Company. This statute prevents an "interested stockholder" and a resident domestic Nevada corporation from entering into a "combination," unless certain conditions are met. The statute defines "combination" to include any merger or consolidation with an "interested stockholder," or any sale, lease, exchange, 12
mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions with an "interested stockholder" having; (1) an aggregate market value equal to 5 percent or more of the aggregate market value of the assets of the corporation; (2) an aggregate market value equal to 5 percent or more of the aggregate market value of all outstanding shares of the corporation; or (3) representing 10 percent or more of the earning power or net income of the corporation. An "interested stockholder" means the beneficial owner of 10 percent or more of the voting shares of a resident domestic corporation, or an affiliate or associate thereof. A corporation affected by the statute may not engage in a "combination" within three years after the interested stockholder acquires its shares unless the combination or purchase is approved by the board of directors before the interested stockholder acquired such shares. If approval is not obtained, then after the expiration of the three-year period, the business combination may be consummated with the approval of the board of directors or a majority of the voting power held by disinterested stockholders, or if the consideration to be paid by the interested stockholder is at least equal to the highest of: (1) the highest price per share paid by the interested stockholder within the three years immediately preceding the date of the announcement of the combination or in the transaction in which he became an interested stockholder, whichever is higher; (2) the market value per common share on the date of announcement of the combination or the date the interested stockholder acquired the shares, whichever is higher; or (3) if higher for the holders of preferred stock, the highest liquidation value of the preferred stock. The effect of Nevada's business combination law is to potentially discourage parties interested in taking control of Omega Water Corp. from doing so if it cannot obtain the approval of our board of directors. RULE 144 All 3,160,000 shares of our issued and outstanding shares of our common stock are "restricted securities" under Rule 144, promulgated pursuant to the Securities Act of 1933, as amended, but none of those 3,160,000 shares can be resold under Rule 144. DIVIDEND POLICY We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future. PLAN OF DISTRIBUTION As of the date of this prospectus, there is no market for our securities. After the date of this prospectus, we expect to have an application filed with the Financial Industry Regulatory Authority for our common stock to be eligible for trading on the OTC Bulletin Board. Until our common stock becomes eligible for trading on the OTC Bulletin Board, the selling security holders will be offering our shares of common stock at a fixed price of $0.10 per common share. After our common stock becomes eligible for trading on the OTC Bulletin Board, the selling security holders may, from time to time, sell all or a portion of the shares of common stock on OTC Bulletin Board, in privately negotiated transactions or otherwise. After our common stock becomes eligible for trading on the OTC Bulletin Board, such sales may be at fixed prices prevailing at the time of sale, at prices related to the market prices or at negotiated prices. After our common stock becomes eligible for trading on the OTC Bulletin Board, the shares of common stock being offered for resale by this prospectus may be sold by the selling security holders by one or more of the following methods, without limitation: * ordinary brokerage transactions and transactions in which the broker solicits purchasers; * privately negotiated transactions; * market sales (both long and short to the extent permitted under the federal securities laws); * at the market to or through market makers or into an existing market for the shares; * through transactions in options, swaps or other derivatives (whether exchange listed or otherwise); and * a combination of any of the aforementioned methods of sale. 13
In the event of the transfer by any of the selling security holders of its shares of common stock to any pledgee, donee or other transferee, we will amend this prospectus and the registration statement of which this prospectus forms a part by the filing of a post-effective amendment in order to have the pledgee, donee or other transferee in place of the selling security holder who has transferred his, her or its shares. In effecting sales, brokers and dealers engaged by the selling security holders may arrange for other brokers or dealers to participate. Brokers or dealers may receive commissions or discounts from a selling security holder or, if any of the broker-dealers act as an agent for the purchaser of such shares, from a purchaser in amounts to be negotiated which are not expected to exceed those customary in the types of transactions involved. Before our common stock becomes eligible for trading on the OTC Bulletin Board, broker-dealers may agree with a selling security holder to sell a specified number of the shares of common stock at a price per share of $0.10. After our common stock becomes eligible for trading on the OTC Bulletin Board, broker-dealers may agree with a selling security holder to sell a specified number of the shares of common stock at a stipulated price per share. Such an agreement may also require the broker-dealer to purchase as principal any unsold shares of common stock at the price required to fulfill the broker-dealer commitment to the selling security holder if such broker-dealer is unable to sell the shares on behalf of the selling security holder. Broker-dealers who acquire shares of common stock as principal may thereafter resell the shares of common stock from time to time in transactions which may involve block transactions and sales to and through other broker-dealers, including transactions of the nature described above. After our common stock becomes eligible for trading on the OTC Bulletin Board, such sales by a broker-dealer could be at prices and on terms then prevailing at the time of sale, at prices related to the then-current market price or in negotiated transactions. In connection with such re-sales, the broker-dealer may pay to or receive from the purchasers of the shares commissions as described above. The selling security holders and any broker-dealers or agents that participate with the selling security holders in the sale of the shares of common stock may be deemed to be "underwriters" within the meaning of the Securities Act in connection with these sales. In that event, any commissions received by the broker-dealers or agents and any profit on the resale of the shares of common stock purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. From time to time, any of the selling security holders may pledge shares of common stock pursuant to the margin provisions of customer agreements with brokers. Upon a default by a selling security holder, their broker may offer and sell the pledged shares of common stock from time to time. After our common stock becomes eligible for trading on the OTC Bulletin Board, upon a sale of the shares of common stock, the selling security holders intend to comply with the prospectus delivery requirements under the Securities Act by delivering a prospectus to each purchaser in the transaction. We intend to file any amendments or other necessary documents in compliance with the Securities Act that may be required in the event any of the selling security holders defaults under any customer agreement with brokers. To the extent required under the Securities Act, a post effective amendment to this registration statement will be filed disclosing the name of any broker-dealers, the number of shares of common stock involved, the price at which the shares of common stock is to be sold, the commissions paid or discounts or concessions allowed to such broker-dealers, where applicable, that such broker-dealers did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus and other facts material to the transaction. We and the selling security holders will be subject to applicable provisions of the Exchange Act and the rules and regulations under it, including, without limitation, Rule 10b-5 and, insofar as a selling security holder is a distribution participant and we, under certain circumstances, may be a distribution participant, under Regulation M. All of the foregoing may affect the marketability of the shares of common stock. All expenses of the registration statement including, but not limited to, legal, accounting, printing and mailing fees are and will be borne by us. Any commissions, discounts or other fees payable to brokers or dealers in connection with any sale of the shares of common stock will be borne by the selling security holders, the purchasers participating in such transaction, or both. Any shares of common stock covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act, as amended, may be sold under Rule 144 rather than pursuant to this prospectus. 14
PENNY STOCK RULES The Securities Exchange Commission has also adopted rules that regulate broker-dealer practices in connection with transactions in "penny stocks" as such term is defined by Rule 15g-9. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The shares offered by this prospectus constitute penny stock under the Securities and Exchange Act. The shares will remain penny stock for the foreseeable future. The classification of penny stock makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his or her investment. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares in our company will be subject to the penny stock rules. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver a standardized risk disclosure document prepared by the Commission, which: (i) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (ii) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of Securities' laws; (iii) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and significance of the spread between the bid and ask price; (iv) contains a toll-free telephone number for inquiries on disciplinary actions; (v) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (vi) contains such other information and is in such form as the Commission shall require by rule or regulation. The broker-dealer also must provide to the customer, prior to effecting any transaction in a penny stock, (i) bid and offer quotations for the penny stock; (ii) the compensation of the broker-dealer and its salesperson in the transaction; (iii) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (iv) monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders may have difficulty selling those securities. REGULATION M During such time as we may be engaged in a distribution of any of the shares we are registering by this registration statement, we are required to comply with Regulation M. In general, Regulation M precludes any selling security holder, any affiliated purchasers and any broker-dealer or other person who participates in a distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase, any security which is the subject of the distribution until the entire distribution is complete. Regulation M defines a "distribution" as an offering of securities that is distinguished from ordinary trading activities by the magnitude of the offering and the presence of special selling efforts and selling methods. Regulation M also defines a "distribution participant" as an underwriter, prospective underwriter, broker, dealer, or other person who has agreed to participate or who is participating in a distribution. Regulation M under the Exchange Act prohibits, with certain exceptions, participants in a distribution from bidding for or purchasing, for an account in which the participant has a beneficial interest, any of the securities that are the subject of the distribution. Regulation M also governs bids and purchases made in order to stabilize the price of a security in connection with a distribution of the security. We have informed the selling shareholders that the anti-manipulation provisions of Regulation M may apply to the sales of their shares offered by this prospectus, and we have also advised the selling 15
shareholders of the requirements for delivery of this prospectus in connection with any sales of the common stock offered by this prospectus. DESCRIPTION OF BUSINESS ORGANIZATION WITHIN THE LAST FIVE YEARS On May 7, 2010, the Company was incorporated under the laws of the State of Nevada. We are engaged in the business of acquisition, exploration and development of natural resource properties. Filomena Gencarelli has served as our President and Chief Executive Officer, Secretary and Treasurer, from May 7, 2010, until the current date. Our board of directors is comprised of one person: Filomena Gencarelli. We are authorized to issue 100,000,000 shares of common stock, par value $.001 per share, and 25,000,000 shares of blank check preferred stock. On September 30, 2010, we issued 2,000,000 shares of common stock to our sole officer and director. The issuance was paid at a purchase price of the par value per share or a total of $2,000. We hold our cash in bank accounts located in Australia. On July 6, 2010 we entered into a Mineral Property Option Agreement whereby we have the right to acquire a 100% interest in Exploration License E 80/3757, located in Halls Creek Shire, in the Kimberly region of Western Australia and known as the Halls Creek Property. The option agreement requires us to make an initial cash payment of AUD$7,000 (US$7,703), which we paid on July 6, 2010. The option agreement has an exercise price of approximately fifty thousand AUD$200,000 (US$208,840) cash to be paid if exercised by the Company. We retained a consulting geologist to prepare an evaluation report on the prospects. We intend to conduct exploratory activities on the claim and if feasible, develop the prospects. IN GENERAL We are an exploration stage company engaged in the acquisition and exploration of mineral properties. We currently hold an option to acquire for AUS$50,000 (US$208,840) a 100% undivided interest Exploration License E 80/3757 located in Halls Creek Shire, in the Kimberly region of Western Australia and known as the Halls Creek Property. We are currently conducting mineral exploration activities on the Halls Creek Property in order to assess whether it contains any commercially exploitable mineral reserves. Currently there are no known mineral reserves on the Halls Creek Property. We have not earned any revenues to date. Our independent auditor has issued an audit opinion which includes a statement expressing substantial doubt as to our ability to continue as a going concern. The source of information contained in this discussion is our geology report prepared by Gregory Curnow, B. SC (Geology), M AusIMM, dated October 7, 2010. There is the likelihood of our mineral claim containing little or no economic mineralization or reserves of gold and other minerals. We are presently in the exploration stage of our business and we can provide no assurance that any commercially viable mineral deposits exist on our mineral claims, that we will discover commercially exploitable levels of mineral resources on our property, or, if such deposits are discovered, that we will enter into further substantial exploration programs. Further exploration is required before a final determination can be made as to whether our mineral claims possess commercially exploitable mineral deposits. If our claim does not contain any reserves all funds that we spend on exploration will be lost. We have no current plans, proposals or arrangements, written or otherwise, to seek a business combination with another entity in the near future. POTENTIAL ACQUISITION OF THE HALLS CREEK PROPERTY On July 6, 2010, we purchased an option to acquire a 100% undivided interest in a mineral claim known as Exploration License E 80/3757 located in Halls Creek Shire, in the Kimberly region of Western Australia and known as the Halls Creek 16
Property, for a price of AUD$7,000 (US$7,703). The mineral claim underlying the option was granted by the Department of Mines and Petroleum, Western Australia, on July 16, 2010. We engaged Gregory Curnow, B. SC (Geology). M AusIMM, to prepare a geological evaluation report on the Halls Creek Property. Mr. Curnow is a consulting professional geologist and Member of the Australasian Institute of Mining & Metallurgy. Mr. Curnow attended Monash University, Melbourne, Australia and graduated in 1986 with a Bachelor of Science degree in geology. The work completed by Mr. Curnow in preparing the geological report consisted of a review of geological data from previous exploration within the region. The acquisition of this data involved the research and investigation of historical files to locate and retrieve data information acquired by previous exploration companies in the area of the mineral claims. We received the geological evaluation report on the Halls Creek Property entitled "Evaluation Report, E 80/3757, Western Australia" prepared by Mr. Curnow on October 7, 2010. The geological report summarizes the results of the history of the exploration of the mineral claims, the regional and local geology of the mineral claims and the mineralization and the geological formations identified as a result of the prior exploration. The geological report also gives conclusions regarding potential mineralization of the mineral claims and recommends a further geological exploration program on the mineral claims. The description of the Halls Creek Property provided below is based on Ms. Curnow's report. DESCRIPTION OF PROPERTY The property on which the Company has an option is the Halls Creek Property which is comprised of one located mineral claim, Exploration License E 80/3757. The Halls Creek Property is in the Day Dawn district of the Murchison Mineral Fields approximately 550 kilometers north north-east of Perth. The nearest towns are the mining centers of Cue 25 kilometers to the north and Mt. Magnet 50 kilometers to the south. PHYSIOGRAPHY, CLIMATE, VEGETATION & WATER The nearest town is the mining and pastoral centre of Halls Creek 83 kilometers to the north-east (see Fig 1). The Kimberley region is a semi-arid region with a monsoonal climate with the wet season running from November to mid April. Temperatures in summer average 37(degree)C (99(degree)F) and the humidity is commonly over 90%. The the Halls Creek Property is located 30 kilometers south of the Great Northern Highway, the major road of the Kimberley region, and is serviced by unsealed minor roads. The terrain is open scrubland criss-crossed by a number of perennial streams that only flow in the wet season and the main land use is cattle farming. Fieldwork in the Kimberley is usually scheduled for the dry season between April and December. The license was granted to George Lee on August 8, 2007 for a period of five years and covers approximately 324 hectares. Mr. Lee is the third party with whom we have entered into our Mineral Property Option Agreement. [remainder of page intentionally left blank] 17
[MAP SHOWING THE LOCATION PLAN] Figure 1: Location Plan PROPERTY HISTORY There is no prior mining exploration activity for the property to which our Mineral Property Option Agreement relates. REGIONAL GEOLOGY The region falls within the Halls Creek Proterozoic Mobile Zone that is folded about the edge of the Kimberly craton, which is also Proterozoic in age (see Fig 2). The Halls Creek Zone consists of moderately to highly deformed rocks of the Halls Creek Group which is broken up into: * Olympio Formation * Biscay Formation * Saunders Creek Formation * Ding Dong Downs Volcanics Deformation of the Hall Creek Zone has included tight sub-isoclinal to isoclinals folding with associated regional faulting. Both the folding and faulting is parallel to the Kimberley craton edge and generally trending to the north north-east. Only the Olympio and Biscay Formation occur in the area. 18
OLYMPIO FORMATION The Olympio Formation consists mainly of a sequence of turbidite and deep water sediments with a basal sequence of acid to intermediate volcanic interbedded with tuffaceous and lithic sediments. Metamorphism is generally greenschist to amphibolite facies. BISCAY FORMATION The Biscay Formation is a sequence of basic volcanics rocks generally basalts, dolerites and gabbroic intrusives interbedded with turbiditic sediments. Metamorphism is generally greenschist to amphibolite facies. [MAP SHOWING THE REGIONAL GEOLOGY OF THE KIMBERLEY] Figure 2: Regional Geology of the Kimberley (Tyler 02) LOCAL GEOLOGY Locally the area of the Mt. Dockrell goldfield is made up of a sequence of basic volcanics, felsic volcanics and sediments which are part of the Halls Creek Group. E 80/3757 consists of both the Olympio and Biscay Formations with the contact between the two trending north north-east suggesting it is fault related. MINERALIZATION Gold mineralization in the Mt. Dockrell area is generally associated with both copper and lead, and there are 5 known types of mineralization, as follows: 1. Gold-galena in quartz filled axial plane shears and fractures. 2. Gold-arsenopyrite-chalcopyrite stratabound deposits. 19
3. Gold-tourmaline quartz veins. 4. Chalcopyrite-galena quartz veins. 5. Copper in quartz-calcite-epidote altered zones. Both disseminated and vein hosted tin-tungsten mineralization is known in the area and is associated with a quartzite unit in the Butchers Gully member (part of the Biscay Formation) and is exposed by a large south plunging anticline. The quartzite unit is lithologically mixed and consists of bands of magnetite, epidote, tourmaline, and manganese rich quartzite with minor bands of amphibolite and pelite. The scheelite appears to be formed through preferential metasomatism of psammitic horizons in the quartzite and is associated with secondary epidote and less generally with fluorite, tourmaline, apatite and zircon. [MAP SHOWING THE GEOLOGY PLAN OF THE MT. DOCKRELL GOLDFIELD] Figure 3: Geology Plan of the Mt. Dockrell Goldfield EXPLORATION POTENTIAL Though there are no known occurrences of mineralization on E 80/3757, we believe that the exploration potential of project area will contain occurrences of mineralization, based on the substantial past exploration and the known, widespread occurrence of gold and tin-tungsten mineralization in the area and the local geology. With a major fault splay passing through the license and a large portion of the contact between the Biscay volcanics and the Olympio Formation also being included in the license and the lack of modern exploration techniques, especially geophysics, being carried out in the area the potential for discovery in the area is high. 20
The tin-tungsten mineralization highlights the presence of a granitoid body that does not outcrop in the area suggesting that it is located at a shallow depth increasing the potential for more tin-tungsten mineralization to be found below the surface. CONDITIONS TO RETAIN TITLE TO THE CLAIM State and local regulations will require a yearly maintenance fee to keep the claim to Halls Creek Property in good standing. Yearly maintenance fees of AUD$10,000 (US$10,605) payable to the Department of Mines and Petroleum Western Australia, are on or payable prior to the anniversary of the claim to keep the claim in good standing for an additional year. COMPETITIVE CONDITIONS The mineral exploration business is an extremely competitive industry. We are competing with many other exploration companies looking for minerals. We are a very early stage mineral exploration company and a very small participant in the mineral exploration business. Being a junior mineral exploration company, we compete with other companies like ours for financing and joint venture partners. Additionally, we compete for resources such as professional geologists, camp staff, helicopters and mineral exploration supplies. GOVERNMENT APPROVALS AND RECOMMENDATIONS We will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in Australia and the state of Western Australia. COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS We currently have no costs to comply with environmental laws concerning our exploration program. We will also have to sustain the cost of reclamation and environmental remediation for all work undertaken which causes sufficient surface disturbance to necessitate reclamation work. Both reclamation and environmental remediation refer to putting disturbed ground back as close to its original state as possible. Other potential pollution or damage must be cleaned-up and renewed along standard guidelines outlined in the usual permits. Reclamation is the process of bringing the land back to a natural state after completion of exploration activities. Environmental remediation refers to the physical activity of taking steps to remediate, or remedy, any environmental damage caused, i.e. refilling trenches after sampling or cleaning up fuel spills. Our initial programs do not require any reclamation or remediation other than minor clean up and removal of supplies because of minimal disturbance to the ground. The amount of these costs is not known at this time as we do not know the extent of the exploration program we will undertake, beyond completion of the recommended three phases described in the chart below. Because there is presently no information on the size, tenor, or quality of any resource or reserve at this time, it is impossible to assess the impact of any capital expenditures on our earnings or competitive position in the event a potentially economic deposit is discovered. Proposed Work Amount Cost ($AUD) ------------- ------ ----------- PHASE 1 Data Collection $ 5,000.00 Re-Interpretation of Geophysical Data $ 10,000.00 Field Mapping 5 days @ $500 $ 2,500.00 Sampling 50 samples @ $30 $ 1,500.00 Travel & Accommodation 5 days @ $300 $ 1,500.00 Report 1.5 days @ $1,000 $ 1,500.00 Administration 15 % of costs $ 3,300.00 $ 25,300.00 21
PHASE 2 Soil Sampling 5 days @ $750 $ 3,750.00 Assaying 150 samples @ $20 $ 3,000.00 Ground Geophysics $ 65,000.00 Report 1.5 days @ $1,000 $ 1,500.00 Administration 15 % of costs $ 10,987.50 $ 84,237.50 PHASE 2 Drilling 1,000 meters @ $50 $ 50,000.00 Assaying 1,000 meters @ $30 $ 30,000.00 Supervision 7 days @ $600 $ 4,200.00 Travel & Accommodation 7 days @ $300 $ 2,100.00 Report 1.5 days @ $1,000 $ 1,500.00 Administration 15 % of costs $ 13,170.00 $100,970.00 TOTAL $210,507.50 EMPLOYEES We currently have no employees other than our sole officer and director. We intend to retain the services of geologists, prospectors and consultants on a contract basis to conduct the exploration programs on our mineral claims and to assist with regulatory compliance and preparation of financial statements. OUR EXECUTIVE OFFICES Our executive offices are located at 492 Gilbert Road, West Preston, Victoria 3072, Australia. LEGAL PROCEEDINGS There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company's mineral claim is not the subject of any pending legal proceedings. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION ADMISSION TO QUOTATION ON THE OTC BULLETIN BOARD We intend to have our common stock be quoted on the OTC Bulletin Board. If our securities are not quoted on the OTC Bulletin Board, a security holder may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of our securities. The OTC Bulletin Board differs from national and regional stock exchanges in that it: (1) is not situated in a single location but operates through communication of bids, offers and confirmations between broker-dealers, and (2) securities admitted to quotation are offered by one or more Broker-dealers rather than the "specialist" common to stock exchanges. 22
To qualify for quotation on the OTC Bulletin Board, an equity security must have one registered broker-dealer, known as the market maker, willing to list bid or sale quotations and to sponsor the company listing. We do not yet have an agreement with a registered broker-dealer, as the market maker, willing to list bid or sale quotations and to sponsor the Company listing. If the Company meets the qualifications for trading securities on the OTC Bulletin Board our securities will trade on the OTC Bulletin Board until a future time, if at all. We may not now and it may never qualify for quotation on the OTC Bulletin Board. TRANSFER AGENT We have not retained a transfer agent to serve as transfer agent for shares of our common stock. Until we engage such a transfer agent, we will be responsible for all record-keeping and administrative functions in connection with the shares of our common stock. HOLDERS As of July 11, 2011, the Company had 3,360,000 shares of our common stock issued and outstanding held by 30 holders of record. The selling stockholders are offering hereby up to 1,160,000 shares of common stock at fixed price of $0.10 per share. DIVIDEND POLICY We have not declared or paid dividends on our common stock since our formation, and we do not anticipate paying dividends in the foreseeable future. Declaration or payment of dividends, if any, in the future, will be at the discretion of our Board of Directors and will depend on our then current financial condition, results of operations, capital requirements and other factors deemed relevant by the Board of Directors. There are no contractual restrictions on our ability to declare or pay dividends. See the Risk Factor entitled " BECAUSE WE DO NOT INTEND TO PAY ANY CASH DIVIDENDS ON OUR COMMON STOCK, OUR STOCKHOLDERS WILL NOT BE ABLE TO RECEIVE A RETURN ON THEIR SHARES UNLESS THEY SELL THEM." SECURITIES AUTHORIZED UNDER EQUITY COMPENSATION PLANS We have no equity compensation or stock option plans. We may in the future adopt a stock option plan as our mineral exploration activities progress. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Certain statements contained in this prospectus, including statements regarding the anticipated development and expansion of our business, our intent, belief or current expectations, primarily with respect to the future operating performance of the Company and the products we expect to offer and other statements contained herein regarding matters that are not historical facts, are "forward-looking" statements. Future filings with the Securities and Exchange Commission, future press releases and future oral or written statements made by us or with our approval, which are not statements of historical fact, may contain forward-looking statements, because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made. PLAN OF OPERATION Our plan of operation for the twelve months following the date of this prospectus is to complete the first and second of the three phases of the exploration program on our prospects. In addition to the $210,508 we anticipate spending for the first two phases of the exploration program as outlined below, we anticipate spending an additional $12,508 on general and administration 23
expenses including fees payable in connection with the filing of our registration statement and complying with reporting obligations, and general administrative costs. Total expenditures over the next 12 months are therefore expected to be approximately $223,016. We will experience a shortage of funds prior to funding and we may utilize funds from our president, however they have no formal commitment, arrangement or legal obligation to advance or loan funds to the company. Phase 1 * Collection, purchase and collation of all relevant geological, geophysical and mining data available; * Re-interpretation of available geophysics to determine location of possible mineralized shears and faults; and * Field mapping and rock chip sampling of the license. Phase 2 * Soil sampling of any significant areas highlighted in Phase 1; and * Ground geophysics of targets generated by the re-interpretation of available geophysical data. Phase 3 * Drilling of any significant targets generated during Phase 2 work. Proposed Work Amount Cost ($AUD) ------------- ------ ----------- PHASE 1 Data Collection $ 5,000.00 Re-Interpretation of Geophysical Data $ 10,000.00 Field Mapping 5 days @ $500 $ 2,500.00 Sampling 50 samples @ $30 $ 1,500.00 Travel & Accommodation 5 days @ $300 $ 1,500.00 Report 1.5 days @ $1,000 $ 1,500.00 Administration 15 % of costs $ 3,300.00 $ 25,300.00 PHASE 2 Soil Sampling 5 days @ $750 $ 3,750.00 Assaying 150 samples @ $20 $ 3,000.00 Ground Geophysics $ 65,000.00 Report 1.5 days @ $1,000 $ 1,500.00 Administration 15 % of costs $ 10,987.50 $ 84,237.50 PHASE 2 Drilling 1,000 meters @ $50 $ 50,000.00 Assaying 1,000 meters @ $30 $ 30,000.00 Supervision 7 days @ $600 $ 4,200.00 Travel & Accommodation 7 days @ $300 $ 2,100.00 Report 1.5 days @ $1,000 $ 1,500.00 Administration 15 % of costs $ 13,170.00 $100,970.00 TOTAL $210,507.50 We plan to commence Phase 1 of the exploration program on the prospects in the fall of 2011. We expect this phase to take 7 days to complete and an additional one to two months for the geologist to prepare his report. 24
The above program costs are management's estimates based upon the recommendations of the consulting geologist's report and the actual project costs may exceed our estimates. To date, we have not commenced exploration. Following Phase 1 of the exploration program, if it proves successful in identifying mineral deposits, we intend to proceed with Phase 2 of our exploration program. Management will rely on the consulting geologist's recommendations in making a decision to proceed with Phase 2. Subject to the results of Phase 1, we anticipate commencing with Phase 2 in the winter of 2012. We will require additional funding to commence with Phase 1 work on the prospects; we have no current plans on how to raise the additional funding. We cannot provide any assurance that we will be able to raise sufficient funds to proceed with any work after the first phase of the exploration program. We are a party to a Mineral Property Option Agreement whereby we have the right to acquire a 100% interest in Exploration License E 80/3757 located in the Murchison Mineral field Halls Creek Shire, in the Kimberly region of Western Australia and known as the Halls Creek Property. It is only under this option agreement that we potentially have any right to explore for mineralized material. This option agreement requires us to pay an exercise price of AUD$200,000 (approximately US$208,840) cash, in order for us to have the right to explore for mineralized materials in the area covered by Exploration License E 80/3757. Our option expires July 6, 2012. If we fail to pay the exercise price, we will not have the right to conduct exploration activities at all. Currently, we do not have sufficient funds to pay the exercise price. We cannot provide investors with any assurance that we will be able to raise sufficient funds pay the $208,840 exercise price, and we have no current plans on how to raise the additional funding. In terms of exploratory work we will be able to conduct before we exercise the option, we anticipate completing Phases 1 and 2 of our Plan of Operation, subject to our ability to raise sufficient funds to complete Phases 1 and 2, and depending on the results of Phases 1 and 2, commencement of drilling of any significant targets generated during Phase 2 work. BUDGET ACCOUNTING AND AUDIT PLAN We intend to continue to have our Chief Financial Officer prepare our quarterly and annual financial statements and have these financial statements reviewed or audited by our independent auditor. Our independent auditor is expected to charge us approximately $1,500 to review our quarterly financial statements and approximately $3,000 to audit our annual financial statements. In the next twelve months, we anticipate spending approximately $11,000 to pay for our accounting and audit requirements. SEC FILING PLAN We intend to become a reporting company in 2011 after our registration statement on Form S-1 is declared effective. This means that we will file documents with the United States Securities and Exchange Commission on a quarterly basis. We expect to incur filing costs of approximately $1,000 per quarter to support our quarterly and annual filings. In the next twelve months, we anticipate spending approximately $10,000 for legal costs in connection with our three quarterly filings, annual filing, and costs associated with filing the registration statement to register our common stock. RESULTS OF OPERATIONS We have had no operating revenues since our inception on May 7, 2010, through February 28, 2011. Our activities have been financed from the proceeds of share subscriptions. From our inception to February 28, 2011 we have raised a total of 25
$31,000 from private offerings of our common stock. All such private offerings were made in reliance on the exemption from registration afforded by Rule 903(b)(3) of Regulation S, promulgated pursuant to the Securities Act of 1933, as amended. The Company made all offers and sales offshore of the US, to non-US persons, with no directed selling efforts in the US, and where offering restrictions were implemented. For the period from inception to February 28, 2011, we incurred total expenses of $9,782, consisting of impairment of mining costs of $7,703, professional fees of $1,687, general and administrative expenses of $363 and a foreign currency gain of $29. LIQUIDITY AND CAPITAL RESOURCES At February 28, 2011, we had a cash balance of $21,737. At July 11, we had a cash balance of $20,564. Our expenditures over the next 12 months are expected to be approximately $431,856, consisting of approximately $223,016 for the work program under our plan of operation, and approximately $208,840 for the exercise of our option to acquire a 100% interest in Exploration License E 80/3757 prior to July 6, 2012. We must raise approximately $411,292, to complete our plan of operation for the next 12 months. Additional funding will likely come from equity financing from the sale of our common stock, if we are able to sell such stock. If we are successful in completing an equity financing, existing shareholders will experience dilution of their interest in our Company. We do not have any financing arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our exploration activities. In the absence of such financing, our business will fail. There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing. If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue our exploration of the Halls Creek Property and our business will fail. GOING CONCERN CONSIDERATION We have not generated any revenues since inception. As of February 28, 2011, the Company had accumulated losses of $9,782. Our independent auditors included an explanatory paragraph in their report on the accompanying financial statements regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors. Our financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. OFF BALANCE SHEET ARRANGEMENTS. We have no off-balance sheet arrangements including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Company's year end is February 28. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. 26
USE OF ESTIMATES AND ASSUMPTIONS The preparation of financial statements in conformity with 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 period. Actual results could differ from those estimates. FOREIGN CURRENCY TRANSLATION The financial statements are presented in United States dollars. In accordance with ASC 830, "Foreign Currency Matters", foreign denominated monetary assets and liabilities are translated into their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the year. Gains or losses resulting from foreign currency transactions are included in results of operations. EXPLORATION STAGE COMPANY The Company complies with Financial Accounting Standards Codification ("ASC") 915 and Securities and Exchange Commission Act Guide 7 for its characterization of the Company as an exploration stage enterprise. MINERAL INTERESTS The Company's management has considered the conditions outlined in ASC 360, "Property, Plant and Equipment," and has concluded an impairment of $7,703 mining claim acquisition costs on the Property has taken place for the year ended February 28, 2011. Mineral property acquisition costs are capitalized in accordance with ASC 930. Mineral property exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are capitalized. To date the Company has not established any reserves on its mineral properties IMPAIRMENT OF LONG-LIVED ASSETS The Company reviews long-lived assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the review indicates that the carrying amount of the asset may not be recoverable, the potential impairment is measured based on a projected discounted cash flow method using a discount rate that is considered to be commensurate with the risk inherent in the Company's current business model. For purposes of recognition and measurement of an impairment loss, a long-lived asset is grouped with other assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. FAIR VALUE OF FINANCIAL INSTRUMENT The Company's financial instruments consisted of cash and accounts payable. Unless otherwise noted, it is management's opinion the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. Because of the short maturity of such assets and liabilities the fair value of these financial instruments approximate their carrying values, unless otherwise noted. INCOME TAXES The Company follows the accrual method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on the deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. At February 28, 2011, a full deferred tax asset valuation allowance has been provided and no deferred tax asset has been recorded. BASIC AND DILUTED NET INCOME (LOSS) PER SHARE The Company computes net income (loss) per share in accordance with ASC 260, "Earnings per Share" which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, 27
using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. RECENT ACCOUNTING PRONOUNCEMENTS In February 2010, the FASB issued ASU No. 2010-09, which is included in the Codification under ASC 855, SUBSEQUENT EVENTS ("ASC 855"). This update removes the requirement for an SEC filer to disclose the date through which subsequent events have been evaluated and become effective for interim and annual reporting periods beginning January 1, 2010. The adoption of this guidance did not have a material impact on the Company's financial statements. In January 2010, the FASB issued ASU No. 2010-06, which is included in the Codification under ASC 820, FAIR VALUE MEASUREMENTS AND DISCLOSURES ("ASC 820"). This update requires the disclosure of transfers between the observable input categories and activity in the unobservable input category for fair value measurements. The guidance also requires disclosures about the inputs and valuation techniques used to measure fair value and become effective for interim and annual reporting periods beginning January 1, 2010. The adoption of this guidance did not have a material impact on the Company's financial statements. The Company does not expect the adoption of recently issued accounting pronouncements to have any significant impact on the Company's results of operations, financial position or cash flow. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS The Directors and Officers currently serving our Company is as follows: Name Age Positions and Offices ---- --- --------------------- Filomena Gencarelli (1) 49 President, Chief Executive Officer, Secretary, Treasurer and Director (1) c/o Penola Inc., 492 Gilbert Road, West Preston, Victoria 3072. The director named above will serve until the next annual meeting of the stockholders or until her respective resignation or removal from office. Thereafter, directors are anticipated to be elected for one-year terms at the annual stockholders' meeting. Officers will hold their positions at the pleasure of the Board of Directors, absent any employment agreement, of which none currently exists or is contemplated. FILOMENA GENCARELLI, AGE 52 Ms. Gencarelli has served as our President, Chief Executive Officer, Secretary and sole Director since our formation on May 7, 2010. Since 2001, Ms. Gencarelli has owned and operated Illura Corporate Services Limited, a company which provides corporate administrative and commercial services to various companies. As Principal of Illura, Ms. Gencarelli has been instrumental in working with local government and staff to restructure and multi-skill a number of private companies as well as providing advisory services for the structuring of mining resource companies. Ms. Gencarelli has had over 30 years experience in implementing motivational inductions and training programs, administration management and community development projects for companies. Ms. Gencarelli is a graduate of St Josephs Convent, Bunbury, Western Australia, where she earned a Leaving Certificate (tertiary entrance exam) 1965. In 1966, Ms. Gencarelli graduated from Bunbury Technical College, Western Australia, where she earned a Diploma in Administration and Business Practices in 1966. Ms. Gencarelli's background providing advisory services for the structuring of mining resource companies and what we believe to be her an excellent understanding of commercial imperatives have led to our conclusion that she should be serving as a member of our Board of Directors in light of our business and structure. 28
DIRECTOR INDEPENDENCE Our board of directors is currently composed of one member, whom does not qualify as an independent director in accordance with the published listing requirements of the NASDAQ Global Market (the Company has no plans to list on the NASDAQ Global Market). The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of her family members has engaged in various types of business dealings with us. In addition, our board of directors has not made a subjective determination as to our director that no relationships exist which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. Had our board of directors made these determinations, our board of directors would have reviewed and discussed information provided by our director and us with regard to our director's business and personal activities and relationships as they may relate to us and our management. SIGNIFICANT EMPLOYEES AND CONSULTANTS We currently have no employees, other than our sole officer and director, Filomena Gencarelli. CONFLICTS OF INTEREST Since we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our director. The Board of Directors has not established an audit committee and does not have an audit committee financial expert, nor has the Board established a nominating committee. The Board is of the opinion that such committees are not necessary since the Company is an early exploration stage company and has only one director, and to date, such director has been performing the functions of such committees. Thus, there is a potential conflict of interest in that our director and officer has the authority to determine issues concerning management compensation, nominations, and audit issues that may affect management decisions. Other than as described above, we are not aware of any other conflicts of interest of our executive officer and director. INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS There are no legal proceedings that have occurred since our incorporation concerning our director, or control persons which involved a criminal conviction, a criminal proceeding, an administrative or civil proceeding limiting one's participation in the securities or banking industries, or a finding of securities or commodities law violations. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The table below summarizes all compensation awarded to, earned by, or paid to our Officers for all services rendered in all capacities to us for the fiscal periods indicated. Name and Non-Equity Nonqualified Principal Stock Option Incentive Plan Deferred All Other Position Year Salary($) Bonus($) Awards($) Awards($) Compensation($) Compensation($) Compensation($) Total($) -------- ---- --------- -------- --------- --------- --------------- --------------- --------------- -------- Filomena 2011 0 0 0 0 0 0 0 0 Gencarelli(1) 2010 0 0 0 0 0 0 0 0 ---------- (1) President and Chief Executive Officer, Secretary, Treasurer and Director. 29
Our director has not received monetary compensation since our inception to the date of this prospectus. We currently do not pay any compensation to our director serving on our board of directors. STOCK OPTION GRANTS We have not granted any stock options to our executive officer since our inception. Upon the further development of our business, we will likely grant options to directors and officers consistent with industry standards for junior mineral exploration companies. EMPLOYMENT AGREEMENTS The Company is not a party to any employment agreement and has no compensation agreement with its sole officer and director, Filomena Gencarelli. DIRECTOR COMPENSATION The following table sets forth director compensation as of July 11, 2011: Fees Nonqualified Earned Non-Equity Deferred Paid in Stock Option Incentive Plan Compensation All Other Name Cash($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Total($) ---- ------- --------- --------- --------------- ----------- --------------- -------- Filomena 0 0 0 0 0 0 0 Gencarelli SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table lists, as of July 11, 2011, the number of shares of common stock of our Company that are beneficially owned by (i) each person or entity known to our Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each officer and director of our Company; and (iii) all officers and directors as a group. Information relating to beneficial ownership of common stock by our principal shareholders and management is based upon information furnished by each person using "beneficial ownership" concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power. The percentages below are calculated based on 3,160,000 shares of our common stock issued and outstanding as of July 11, 2011. We do not have any outstanding warrant, options or other securities exercisable for or convertible into shares of our common stock. Name and Address of Number of Shares Percent of Title of Class Beneficial Owner Owned Beneficially Class Owned -------------- ---------------- ------------------ ----------- Common Stock: Mr. Filomena Gencarelli, 2,000,000 63.2% President, Chief Executive Officer, Secretary, Treasurer and Director (1) All executive officers and directors as a group 2,000,000 63.2% ---------- (1) c/o Penola Inc., 492 Gilbert Road, West Preston, Victoria 3072. 30
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On September 30, 2010, we issued 2,000,000 shares of common stock to our director, at a purchase price of $0.001 per share, for aggregate proceeds of $2,000. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES Our Bylaws provide to the fullest extent permitted by law that our directors or officers, former directors and officers, and persons who act at our request as a director or officer of a body corporate of which we are a shareholder or creditor shall be indemnified by us. We believe that the indemnification provisions in our By-laws are necessary to attract and retain qualified persons as directors and officers. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to provisions of the State of Nevada, the Company has been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. WHERE YOU CAN FIND MORE INFORMATION We have filed with the Commission a Registration Statement on Form S-1, under the Securities Act of 1933, as amended, with respect to the securities offered by this prospectus. This prospectus, which forms a part of the registration statement, does not contain all the information set forth in the registration statement, as permitted by the rules and regulations of the Commission. For further information with respect to us and the securities offered by this prospectus, reference is made to the registration statement. We do not file reports with the Securities and Exchange Commission, and we will not otherwise be subject to the proxy rules. The registration statement and other information may be read and copied at the Commission's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains a web site at http://www.sec.gov that contains reports and other information regarding issuers that file electronically with the Commission. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE M&K CPAS, PLLC, is our registered independent auditor. There have not been any changes in or disagreements with accountants on accounting and financial disclosure or any other matter. 31
PENOLA INC. INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm F-2 Financial Statements Balance Sheet F-3 Statement of Operations F-4 Statement of Stockholders' Equity F-5 Statement of Cash Flows F-6 Notes to Financial Statements F-7 F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors Penola Inc. (An Exploration Stage Company) We have audited the accompanying balance sheet of Penola Inc. (An Exploration Stage Company) (the "Company") as of February 28, 2011 and the related statement of operations, stockholders' equity and cash flows for the period from May 7, 2010 (inception) to February 28, 2011. 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 standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Penola Inc. (An Exploration Stage Company) as of February 28, 2011 and the results of its operations and cash flows for the period described above in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has not established a source of revenues sufficient to cover its operating costs, and as such, has incurred an operating loss since its inception. These matters raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern. See note 1 to the financial statements for further information regarding this uncertainty. /s/ M&K CPAS, PLLC ----------------------------- www.mkacpas.com Houston, Texas July 13, 2011 F-2
PENOLA INC. (An Exploration Stage Company) BALANCE SHEET February 28, 2011 -------- ASSETS CURRENT Cash $ 21,737 -------- TOTAL ASSETS $ 21,737 ======== LIABILITIES CURRENT Due to related party (Note 5) $ 519 -------- TOTAL LIABILITIES 519 STOCKHOLDERS' EQUITY Common stock Authorized: 125,000,000 common shares with a par value of $0.001 Issued and outstanding: 3,160,000 common shares 3,160 Additional paid in capital 27,840 Deficit accumulated during the exploration stage (9,782) -------- TOTAL STOCKHOLDERS' EQUITY 21,218 -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 21,737 ======== Contingency (Note 1) The accompanying notes are an integral part of these financial statements F-3
PENOLA INC. (An Exploration Stage Company) STATEMENT OF OPERATIONS May 7, 2010 (Inception) to February 28, 2011 ---------- EXPENSES Office and general $ 363 Professional fees 1,687 Impairment of mining costs 7,703 ---------- 9,753 ---------- OTHER EXPENSE Foreign currency gain 29 ---------- NET LOSS $ 9,782 ========== LOSS PER SHARE - BASIC AND DILUTED $ (0.00) ========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED 2,467,609 ========== The accompanying notes are an integral part of these financial statements F-4
PENOLA INC. (An Exploration Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM MAY 7, 2010 (INCEPTION) TO FEBRUARY 28, 2011 Deficit Common Stock Accumulated --------------------- Additional During Number of Paid in Exploration Shares Amount Capital Stage Total ------ ------ ------- ----- ----- Balance, May 7, 2010 -- $ -- $ -- $ -- $ -- Common stock issued for cash at $0.001 per share 2,000,000 2,000 -- -- 2,000 Common stock issued for cash at $0.025 per share 1,160,000 1,160 27,840 -- 29,000 Net Loss -- -- -- (9,782) (9,782) --------- ------- -------- -------- -------- Balance, February 28, 2011 3,160,000 $ 3,160 $ 27,840 $ (9,782) $ 21,218 ========= ======= ======== ======== ======== The accompanying notes are an integral part of these financial statements F-5
PENOLA INC. (An Exploration Stage Company) STATEMENT OF CASH FLOWS May 7, 2010 (Inception) to February 28, 2011 -------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (9,782) Impairment of mining costs 7,703 Adjustment for items not affecting cash: Change in non-cash working capital items: Accounts payable and accrued liabilities -- Due to related party 519 -------- NET CASH USED IN OPERATIONS (1,560) -------- CASH FLOWS FROM INVESTING ACTIVITIES Mineral property option (7,703) -------- NET CASH USED IN INVESTING ACTIVITIES (7,703) -------- CASH FLOWS FROM FINANCING ACTIVITIES Capital stock issued 31,000 -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 31,000 -------- INCREASE IN CASH 21,737 CASH, BEGINNING -- -------- CASH, ENDING $ 21,737 ======== SUPPLEMENTARY CASH FLOW INFORMATION Cash paid for: Interest $ -- Income taxes $ -- ======== The accompanying notes are an integral part of these financial statements F-6
PENOLA INC. (An Exploration Stage Company) NOTES TO THE FINANCIAL STATEMENTS February 28, 2011 NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION Penola Inc. (the "Company") was incorporated in the State of Nevada on May 7, 2010, and its year-end is February 28. The Company is an exploration stage company and is currently seeking new business opportunities. GOING CONCERN These financial statements have been prepared on a going concern basis. The Company has incurred losses since inception resulting in an accumulated deficit of $9,782 at February 28, 2011 and further losses are anticipated in the development of its business raising substantial doubt about the Company's ability to continue as a going concern. Its ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has plans to seek additional capital through a private placement of its common stock or further director loans as needed. These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Company's year end is February 28. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. USE OF ESTIMATES AND ASSUMPTIONS The preparation of financial statements in conformity with 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 period. Actual results could differ from those estimates. FOREIGN CURRENCY TRANSLATION The financial statements are presented in United States dollars. In accordance with ASC 830, "Foreign Currency Matters", foreign denominated monetary assets and liabilities are translated into their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the year. Gains or losses resulting from foreign currency transactions are included in results of operations. EXPLORATION STAGE COMPANY The Company complies with Financial Accounting Standards Codification ("ASC") 915 and Securities and Exchange Commission Act Guide 7 for its characterization of the Company as an exploration stage enterprise. MINERAL INTERESTS The Company's management has considered the conditions outlined in ASC 360, "Property, Plant and Equipment," and has concluded an impairment of $7,703 mining claim acquisition costs on the Property has taken place for the year ended February 28, 2011. Mineral property acquisition costs are capitalized in accordance with ASC 930. Mineral property exploration costs are expensed as F-7
PENOLA INC. (An Exploration Stage Company) NOTES TO THE FINANCIAL STATEMENTS February 28, 2011 incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are capitalized. To date the Company has not established any reserves on its mineral properties IMPAIRMENT OF LONG-LIVED ASSETS The Company reviews long-lived assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the review indicates that the carrying amount of the asset may not be recoverable, the potential impairment is measured based on a projected discounted cash flow method using a discount rate that is considered to be commensurate with the risk inherent in the Company's current business model. For purposes of recognition and measurement of an impairment loss, a long-lived asset is grouped with other assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. FAIR VALUE OF FINANCIAL INSTRUMENT The Company's financial instruments consisted of cash and accounts payable. Unless otherwise noted, it is management's opinion the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. Because of the short maturity of such assets and liabilities the fair value of these financial instruments approximate their carrying values, unless otherwise noted. INCOME TAXES The Company follows the accrual method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on the deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. At February 28, 2011, a full deferred tax asset valuation allowance has been provided and no deferred tax asset has been recorded. BASIC AND DILUTED NET INCOME (LOSS) PER SHARE The Company computes net income (loss) per share in accordance with ASC 260, "Earnings per Share" which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. RECENT ACCOUNTING PRONOUNCEMENTS In February 2010, the FASB issued ASU No. 2010-09, which is included in the Codification under ASC 855, SUBSEQUENT EVENTS ("ASC 855"). This update removes the requirement for an SEC filer to disclose the date through which subsequent events have been evaluated and become effective for interim and annual reporting periods beginning January 1, 2010. The adoption of this guidance did not have a material impact on the Company's financial statements. F-8
PENOLA INC. (An Exploration Stage Company) NOTES TO THE FINANCIAL STATEMENTS February 28, 2011 In January 2010, the FASB issued ASU No. 2010-06, which is included in the Codification under ASC 820, FAIR VALUE MEASUREMENTS AND DISCLOSURES ("ASC 820"). This update requires the disclosure of transfers between the observable input categories and activity in the unobservable input category for fair value measurements. The guidance also requires disclosures about the inputs and valuation techniques used to measure fair value and become effective for interim and annual reporting periods beginning January 1, 2010. The adoption of this guidance did not have a material impact on the Company's financial statements. The Company does not expect the adoption of recently issued accounting pronouncements to have any significant impact on the Company's results of operations, financial position or cash flow. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances. NOTE 3 - MINERAL PROPERTY On July 6, 2010 the Company entered into an Option Agreement to acquire a 100% undivided legal, beneficial and register-able interest in an Exploration License E 80/3757 located in Halls Creek Shire in Western Australia. The option period is for two years from the effective date of the Agreement. Initial cash consideration is AU$7,000 (paid) upon signing the agreement. The exercise price of the option is AU$200,000 cash at the time the notice of exercise of option is sent to the Owner. At February 28, 2011, the accumulated costs totalled $7,703. Management has concluded these costs to be an impairment due to uncertainty in the ability of the Company to exercise the option underlying the Option Agreement. NOTE 4 - RELATED PARTY TRANSACTIONS During the period, the Company issued 2,000,000 common shares at $0.001 per share to the Company's President for cash proceeds of $2,000. At February 28, 2011 there was a balance due to the related party of $519. The balance due is payable on demand, has no term and carries no interest. NOTE 5 - INCOME TAXES As of February 28, 2011, the Company has estimated tax loss carry forwards for tax purpose of approximately $2,079, which expire by 2030. These amounts may be applied against future taxable income. Future tax benefits which may arise as a result of theses losses have not been recognized in these financial statements, as their realization has not been determined to be more likely than not to occur. The actual income tax provisions differ from the expected amounts calculated by applying the statutory income tax rate to the Company's loss before income taxes. The components of these differences are as follows: Loss before income tax $ 2,079 Statutory tax rate 34% Expected recovery of income taxes at standard rates 707 Change in valuation allowance (707) ------- Income tax provision $ -- ======= F-9
PENOLA INC. (An Exploration Stage Company) NOTES TO THE FINANCIAL STATEMENTS February 28, 2011 Components of deferred tax asset: Non-capital tax loss carry forwards $ 707 Less: valuation allowance (707) ------- Net deferred tax asset $ -- ======= The Company has not filed income tax returns since inception in the United States. Both taxing authorities prescribe penalties for failing to file certain tax returns and supplemental disclosure. Upon filing there could be penalties an interest assessed. Such penalties vary by jurisdiction and by assessing practices and authorities. As the Company has incurred losses since inception there would be no known or anticipated exposure to penalties for income tax liability. However, certain jurisdictions may assess penalties for failing to file returns and other disclosures and for failing to file other supplemental information associated with foreign ownership, debt and equity position. Inherent uncertainties arise over tax positions taken with respect to transfer pricing, related party transactions, tax credits, tax based incentives and stock based transactions. Management has considered the likelihood and significance of possible penalties associated with its current and intended filing positions and has determined, based on their assessment, that such penalties, if any, would not be expected to be material. NOTE 6 - SUBSEQUENT EVENTS The Company has evaluated subsequent events as of July 13, 2011 for potential recognition and disclosure in the financial statements and has determined there are none to be disclosed. This date represents the date the financial statements are issued. F-10
[OUTSIDE BACK COVER PAGE] PROSPECTUS PENOLA INC. 1,160,000 SHARES OF COMMON STOCK TO BE SOLD BY CURRENT SHAREHOLDERS We have not authorized any dealer, salesperson or other person to give you written information other than this prospectus or to make representations as to matters not stated in this prospectus. You must not rely on unauthorized information. This prospectus is not an offer to sell these securities or a solicitation of your offer to buy the securities in any jurisdiction where that would not be permitted or legal. Neither the delivery of this prospectus nor any sales made hereunder after the date of this prospectus shall create an implication that the information contained herein nor the affairs of the Issuer have not changed since the date hereof. Until __________, 2011 (90 days after the date of this prospectus), all dealers that effect transactions in these shares of common stock may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions. THE DATE OF THIS PROSPECTUS IS ___________, 2011
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the estimated expenses in connection with the issuance and distribution of the securities being registered hereby. All such expenses will be borne by the Company; none shall be borne by any selling security holders. Amount Item (US$) ---- ---------- SEC Registration Fee $ 13.47 Transfer Agent Fees 1,000.00 Legal Fees 5,000.00 Accounting Fees 5,000.00 Printing Costs 500.00 Miscellaneous 1,000.00 ---------- TOTAL $12,513.47 ========== INDEMNIFICATION OF DIRECTORS AND OFFICERS The Company's Bylaws and Articles of Incorporation provide that we shall, to the full extent permitted by the Nevada General Business Corporation Law, as amended from time to time (the "Nevada Corporate Law"), indemnify all of our directors and officers. Section 78.7502 of the Nevada Corporate Law provides in part that a corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of another corporation or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe her conduct was unlawful. Similar indemnity is authorized for such persons against expenses (including attorneys' fees) actually and reasonably incurred in defense or settlement of any threatened, pending or completed action or suit by or in the right of the corporation, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and provided further that (unless a court of competent jurisdiction otherwise provides) such person shall not have been adjudged liable to the corporation. Any such indemnification may be made only as authorized in each specific case upon a determination by the stockholders or disinterested directors that indemnification is proper because the indemnitee has met the applicable standard of conduct. Under our Bylaws and Articles of Incorporation, the indemnitee is presumed to be entitled to indemnification and we have the burden of proof to overcome that presumption. Where an officer or a director is successful on the merits or otherwise in the defense of any action referred to above, we must indemnify him against the expenses which such officer or director actually or reasonably incurred. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-1
RECENT SALES OF UNREGISTERED SECURITIES Within the past two years we have issued and sold the following securities without registration. On September 30, 2010, we issued 2,000,000 shares of common stock to our sole officer and director, at a purchase price of $0.001 per share, for aggregate proceeds of $2,000. The offering was made to a non-U.S. person, offshore of the U.S., with no directed selling efforts in the U.S., where offering restrictions were implemented in a transaction pursuant to the exclusion from registration provided by Rule 903(b)(3) of Regulation S of the Securities Act. Between October 2010 and January 2011, we accepted subscriptions for 1,160,000 shares of our common stock from 29 investors. The shares of common stock were sold at a purchase price of $0.025 per share, amounting in the aggregate to $29,000. The offering was made to non-U.S. persons, offshore of the U.S., with no directed selling efforts in the U.S., where offering restrictions were implemented in transactions pursuant to the exclusion from registration provided by Rule 903(b)(3) of Regulation S of the Securities Act. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The following exhibits are filed as part of this registration statement: Exhibit Description ------- ----------- 3.1 Articles of Incorporation of Registrant 3.2 Bylaws of the Registrant 5.1 Opinion of Law Offices of Thomas E. Puzzo, PLLC, regarding the legality of the securities being registered 10.1 Mineral Property Option Agreement, dated July 6, 2010, by and between Registrant and George Lee 23.1 Consent of Law Offices of Thomas E. Puzzo, PLLC (included in Exhibit 5.1) 23.2 Consent of M&K CPAS, PLLC 23.3 Consent of Gregory Curnow * ---------- * To be provided by amendment. UNDERTAKINGS The undersigned Registrant hereby undertakes: (a)(1) To file, during any period in which offers or sales of securities are being made, a post-effective amendment to this registration statement to: (i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) (ss.230.424(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; II-2
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: (i) If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. (5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: (i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; (ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; (iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or our securities provided by or on behalf of the undersigned registrant; and (iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to our directors, officers and controlling persons pursuant to the provisions above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities, other than the payment by us of expenses incurred or paid by one of our directors, officers, or controlling persons in the successful defense of any action, suit or proceeding, is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act, and we will be governed by the final adjudication of such issue. II-3
SIGNATURES In accordance with the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has authorized this registration statement to be signed on its behalf by the undersigned, in the West Preston, Victoria, Australia, on the 13th day of July, 2011. PENOLA INC. (Registrant) By: /s/ Filomena Gencarelli ---------------------------------------------- Name: Filomena Gencarelli Title: President and Chief Executive Officer (Principal Executive Officer and Principal Financial and Accounting Officer) POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Filomena Gencarelli, as her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in her name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement on Form S-1 of Penola Inc., and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, grant unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or her substitutes, may lawfully do or cause to be done by virtue hereof. In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated. Signature Title Date --------- ----- ---- /s/ Filomena Gencarelli President and Chief Executive Officer, July 13, 2011 ---------------------------------- Secretary, Treasurer and Director Filomena Gencarelli (Principal Executive Officer and Principal Financial and Accounting Officer) II-4
EXHIBIT INDEX Exhibit Description ------- ----------- 3.1 Articles of Incorporation of Registrant 3.2 Bylaws of the Registrant 5.1 Opinion of Law Offices of Thomas E. Puzzo, PLLC, regarding the legality of the securities being registered 10.1 Mineral Property Option Agreement, dated July 6, 2010, by and between Registrant and George Lee 23.1 Consent of Law Offices of Thomas E. Puzzo, PLLC (included in Exhibit 5.1) 23.2 Consent of M&K CPAS, PLLC 23.3 Consent of Gregory Curnow * ---------- * To be provided by amendment.

EXHIBIT 3.1

ROSS MILLER
Secretary of State
206 North Carson Street
Carson City, Nevada 89701-4299
(775) 684-5708 Website: www.nvsos.gov

                           Filed in the office of           Document Number
                           /s/ Ross Miller                  20100318222-41
                           Ross Miller                      Filing Date and Time
                           Secretary of State               05/07/2010  4:43 PM
                           State of Nevada                  Entity Number
                                                            E0224792010-9

ARTICLES OF INCORPORATION
(PURSUANT TO NRS CHAPTER 78)

1. Name of Corporation:       PENOLA INC.

2. Resident Agent:            State Agent and transfer Syndicate, Inc.
   Name and Street:           112 North Curry Street
                              Carson City, Nevada 89703

3. Shares:                    Number of shares with par value: 125,000,000
                              Par value per share: $0.0010
                              Number of shares without par value: 0

4. Name &                     Filomena Gencarelli
   Addresses of Board
   of Directors/Trustees:     112 North Curry Street, Carson City, NV 89703

5. Purpose:                   Any lawful business purpose.

6. Names, Addresses
   and Signature
   of Incorporator:           Thomas E. Puzzo        /s/ Thomas E. Puzzo
                                   Name              ---------------------------
                                                          Incorporator Signature

                              4216 NE 70th Street, Seattle, WA 98115

7. Certificate of Acceptance
   of Appointment of
   Registered Agent:          I hereby accept appointment as Resident Agent for
                              the above named corporation:

                              /s/ [illegible]                   Date: 05/07/2011
                              ----------------------------
                              Authorized Signature of Registered Agent
                              or On Behalf of Registered Agent Entity

PAGE 2 OF ARTICLES OF INCORPORATION OF PENOLA INC. 3. CONTINUATION OF ARTICLE 3 "AUTHORIZED STOCK" FROM PAGE 1 3.1 Authorized Stock. The aggregate number of shares which the Corporation shall have authority to issue shall consist of one hundred twenty-five million shares (125,000,000), consisting of one hundred million shares (100,000,000) of common stock, par value $0.001 per share (the "Common Stock"), and twenty-five million shares (25,000,000) of "blank check" preferred stock, par value $0.001 per share (the "Preferred Stock"). The board of directors of the Corporation is authorized, subject to any limitation prescribed by law, to provide for the issuance of shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Nevada, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and any qualifications, limitation or restrictions thereof. 8. ACQUISITIONS OF CONTROLLING INTEREST AND INTERESTED STOCKHOLDERS 8.1 Acquisition of Controlling Interest. The Corporation elects not to be governed by NRS 78.378 to 78.3793. 8.2. Combinations with Interested Stockholders. The Corporation elects not to be governed by NRS 78.411 to 78.444.

EXHIBIT 3.2

                                     BYLAWS
                                       OF
                                   PENOLA INC.
                             (A NEVADA CORPORATION)

                                    ARTICLE I

             Meetings of Stockholders and Other Stockholder Matters

     SECTION 1. Annual Meeting.  An annual meeting of the stockholders of Penola
Inc., a Nevada corporation  (hereinafter,  the "Corporation")  shall be held for
the election of directors and for the  transaction of such other proper business
at such time, date and place,  either within or without the State of Nevada,  as
shall be designated by resolution of the Board of Directors from time to time.

     SECTION 2.  Special  Meetings.  Special  meetings of  stockholders  for any
purpose or purposes may be called by the Board of  Directors,  or by a committee
of the Board of Directors that has been designated by the Board of Directors and
whose powers and authority,  as expressly  provided in a resolution of the Board
of Directors, include the power to call such meetings, and shall be held at such
time, date and place,  either within or without the State of Nevada, as shall be
designated by resolution  of the Board of Directors or such  committee.  Special
meetings of stockholders may not be called by any other person or persons.

     SECTION  3.  Notice of  Meetings.  Written  notice of each  meeting  of the
stockholders,  which shall state the time,  date and place of the meeting and in
the case of a special  meeting,  the purpose or purposes for which it is called,
shall,   unless   otherwise   provided  by  applicable   law,  the  Articles  of
Incorporation  or these  bylaws,  be given  not less than ten (10) nor more than
sixty (60) days before the date of such meeting to each stockholder  entitled to
vote at such meeting, and, if mailed, it shall be deposited in the United States
mail, postage prepaid, directed to the stockholder at such stockholder's address
as it appears on the records of the Corporation.  Whenever notice is required to
be given,  a written  waiver  thereof  signed by the  person  entitled  thereto,
whether before or after the time stated therein,  shall be deemed  equivalent to
notice.  Attendance of a person at a meeting shall constitute a waiver of notice
of such  meeting,  except  when the  person  attends a meeting  for the  express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.

     SECTION 4.  Adjournments.  Any meeting of the stockholders may adjourn from
time to time to reconvene  at the same or some other place,  and notice need not
be given of any such  adjourned  meeting  if the  time  and  place  thereof  are
announced  at the  meeting  at  which  the  adjournment  is  taken.  At any such
adjourned meeting at which a quorum may be present, the Corporation may transact
any business which might have been  transacted at the original  meeting.  If the
adjournment  is for more than thirty  days,  or if after the  adjournment  a new
record  date is fixed  for the  adjourned  meeting,  a notice  of the  adjourned
meeting  shall be given to each  stockholder  of record  entitled to vote at the
meeting.

SECTION 5. Quorum. Except as otherwise provided by Nevada law, the Articles of Incorporation or these bylaws, at any meeting of the stockholders the holders of a majority of the shares of stock, issued and outstanding and entitled to vote, shall be present in person or represented by proxy in order to constitute a quorum for the transaction of any business. In the absence of a quorum, the holders of a majority of the shares present in person or represented by proxy and entitled to vote may adjourn the meeting from time to time in the manner described in Section 4 of this Article I. SECTION 6. Organization. At each meeting of the stockholders, the Chairman of the Board, or in his absence or inability to act, the President or, in his absence or inability to act, a Vice President or, in the absence or inability to act of such persons, any person designated by the Board of Directors, or in the absence of such designation, any person chosen by a majority of those stockholders present in person or represented by proxy, shall act as chairman of the meeting. The Secretary or, in his absence or inability to act, any person appointed by the chairman of the meeting shall act as secretary of the meeting and keep the minutes thereof. SECTION 7. Notice of Business . At any annual meeting of the stockholders of the Corporation, only such business shall be conducted as shall have been brought before the meeting. To be properly brought before an annual meeting, such business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors; (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors; or (iii) otherwise properly brought before the meeting by any stockholder of the Corporation who is a stockholder of record at the time of giving of the notice provided for in this Section 7, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 7. For business to be properly brought before an annual meeting of the stockholders by a stockholder, the stockholder shall have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received by the Secretary at the principal executive office of the Corporation not less than 60 days nor more than 90 days prior to the annual meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the annual meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. Such stockholder's notice to the Secretary of the Corporation shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting, the reasons for conducting such business at the annual meeting and, in the event that such business includes a proposal to amend any document, including these bylaws, the language of the proposed amendment, (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (c) the class and number of shares of capital stock of the Corporation which are beneficially owned by such stockholder and (d) any material interest of such stockholder in such business. Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at any annual meeting of the stockholders except in accordance with the procedures set forth in this Section 7. The chairman of the annual meeting of the stockholders shall, if the facts warrant, determine and declare to the meeting that business was not 2
properly brought before the meeting in accordance with the provisions of this Section 7, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section 7, a stockholder shall also comply with all applicable requirements of the Securities and Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder with respect to matters set forth in this Section 7. SECTION 8. Order of Business; Conduct of Meetings. The order of business at all meetings of the stockholders shall be as determined by the chairman of the meeting. SECTION 9. Voting; Proxies. Unless otherwise provided by Nevada law or in the Articles of Incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of capital stock which has voting power upon the matter in question held by such stockholder either (i) on the date fixed pursuant to the provisions of Section 10 of Article I of these bylaws as the record date for the determination of the stockholders to be entitled to notice of or to vote at such meeting; or (ii) if no record date is fixed, then at the close of business on the day next preceding the day on which notice is given. Each stockholder entitled to vote at any meeting of the stockholders may authorize another person or persons to act for him by proxy. Any such proxy shall be delivered to the secretary of such meeting at or prior to the time designated in the order of business for so delivering such proxies. At all meetings of the stockholders for the election of directors, a plurality of the votes cast shall be sufficient to elect. On all other matters, except as otherwise required by Nevada law or the Articles of Incorporation, a majority of the votes cast at a meeting of the stockholders shall be necessary to authorize any corporate action to be taken by vote of the stockholders. Unless required by Nevada law, or determined by the chairman of the meeting to be advisable, the vote on any question other than the election of directors need not be by written ballot. On a vote by written ballot, each written ballot shall be signed by the stockholder voting, or by his proxy if there be such proxy, and shall state the number of shares voted. SECTION 10. Fixing of Record Date for Stockholder Meetings. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 11. Fixing a Record Date for Other Purposes. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purposes of any other lawful action, the Board of Directors 3
may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall not be more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. SECTION 12. List of Stockholders Entitled to Vote. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present. SECTION 13. Inspectors. The Board of Directors may, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If the inspectors shall not be so appointed or if any of them shall fail to appear or act, the chairman of the meeting shall appoint inspectors. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his or her ability. The inspectors shall determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting or any stockholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, question or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as an inspector of an election of directors. Inspectors need not be stockholders. SECTION 14. Stock Ledger . The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 12 of this Article I, the books of the Corporation, or to vote in person or by proxy at any meeting of the stockholders. ARTICLE II Board of Directors SECTION 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors. The Board of 4
Directors may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not, by Nevada law or the Articles of Incorporation, directed or required to be exercised or done by the stockholders. SECTION 2. Number, Qualification. Except as otherwise fixed by or pursuant to provisions of the Articles of Incorporation relating to the rights of the holders of any class or series of stock having a preference over common stock as to dividends or upon liquidation to elect additional directors under specified circumstances, the number of directors of the Corporation shall be fixed from time to time by affirmative vote of a majority of the directors then in office. SECTION 3. Elections And Terms. The Board of Directors, other than those who may be elected by the holders of any classes or series of stock having a preference over the common stock as to dividends or upon liquidation, shall be elected for a term ending at the next following Annual Meeting of Stockholders and until their successors have been duly elected and qualified. SECTION 4. Newly Created Directorships And Vacancies. Except as otherwise fixed by or pursuant to provisions of the Articles of Incorporation relating to the rights of the holders of any class or series of stock having a preference over common stock as to dividends or upon liquidation to elect additional directors under specified circumstances, newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Except as otherwise provided under Nevada law, newly created directorships and vacancies resulting from any cause may not be filled by any other person or persons. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term and until such director's successor shall have been duly elected and qualified. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any director then in office. SECTION 5. Removal and Resignation. Except as otherwise fixed by or pursuant to provisions of the Articles of Incorporation relating to the rights of the holders of any class or series of stock having a preference over common stock as to dividends or upon liquidation to elect additional directors under specified circumstances, any director may be removed from office only for cause and only by the affirmative vote of the holders of two-thirds of the outstanding shares of stock entitled to vote generally in the election of directors. Any director may resign at any time upon written notice to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 6. Nomination of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election by the stockholders as directors of the Corporation. Nominations of persons for election as directors of the Corporation may be made at an annual meeting of stockholders (i) by or at the direction of the Board of Directors; (ii) by any nominating committee or persons appointed by the Board of Directors; or (iii) by any stockholder of the Corporation entitled to vote for the election of 5
directors at the meeting who complies with the notice procedures set forth in this Section 6. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive office of the Corporation not less than 60 days nor more than 90 days prior to the annual meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the annual meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. Such stockholder's notice to the Secretary of the Corporation shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as now or hereafter amended; and (b) as to the stockholder giving the notice, (i) the name and record address of such stockholder and (ii) the class and number of shares of capital stock of the Corporation which are beneficially owned by such stockholder. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation. No person shall be eligible for election by the stockholders as a director of the Corporation unless nominated in accordance with the procedures set forth herein. The chairman of the annual meeting of the stockholders shall, if the facts warrant, determine and declare to the meeting that nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. SECTION 7. Regular Meetings. Regular meetings of the Board of Directors may be held at such places within or without the State of Nevada and at such times as the Board of Directors may from time to time determine. Notice of regular meetings of the Board of Directors need not be given except as otherwise required by Nevada law or these bylaws. SECTION 8. Special Meetings. Special meetings of the Board of Directors may be held at any time or place within or without the State of Nevada whenever called by the Chairman of the Board of Directors, the President or by a majority of the entire Board of Directors. SECTION 9. Notice of Meetings. Notice of each special meeting of the Board of Directors (and of each regular meeting for which notice shall be required) shall be given by the Secretary as hereinafter provided in this Section 9, in which notice shall be stated the time and place of the meeting. Except as otherwise required by Nevada law or these bylaws, such notice need not state the purpose(s) of such meeting. Notice of each such meeting shall be mailed, postage prepaid, to each director, addressed to such director at such director's residence or usual place of business, by registered mail, return receipt requested delivered at least two (2) days before the day on which such meeting is to be held, or shall be sent addressed to such director at such place by electronic mail, telegraph, telex, cable or wireless, or be delivered to such director personally, by facsimile or by telephone, at least 24 hours before the time at which such meeting is to be held. A written waiver of notice, signed by 6
the director entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Notice of any such meeting need not be given to any director who shall, either before or after the meeting, submit a signed waiver of notice or who shall attend such meeting without protesting, prior to or at its commencement, the lack of notice to him. SECTION 10. Quorum and Manner of Acting. Except as hereinafter provided, a majority of the whole Board of Directors shall be present in person or by means of a conference telephone or similar communications equipment which allows all persons participating in the meeting to hear each other at the same time at any meeting of the Board of Directors in order to constitute a quorum for the transaction of business at such meeting; and, except as otherwise required by Nevada law, the Articles of Incorporation or these bylaws, the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum at any meeting of the Board of Directors, a majority of the directors present thereat may adjourn such meeting to another time and place. Notice of the time and place of any such adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless such time and place were announced at the meeting at which the adjournment was taken, to the other directors. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. The directors shall act only as a Board and the individual directors shall have no power as such. SECTION 11. Action Without a Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board of Directors. SECTION 12. Telephonic Participation. Members of the Board of Directors may participate in a meeting of the Board by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation in such a meeting shall constitute presence in person at such meeting. SECTION 13. Organization. At each meeting of the Board, the Chairman of the Board or, in his absence or inability to act, the Chief Executive Officer or, in his absence or inability to act, another director chosen by a majority of the directors present shall act as chairman of the meeting and preside thereat. The Secretary or, in his absence or inability to act, any person appointed by the chairman shall act as secretary of the meeting and keep the minutes thereof. SECTION 14. Compensation. The Board of Directors shall have authority to fix the compensation, including fees and reimbursement of expenses, of directors for services to the Corporation in any capacity. 7
ARTICLE III Committees SECTION 1. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one or more committees, each committee to consist of two or more of the directors of the Corporation. The Board of Directors may fill vacancies in, change the membership of, or dissolve any such committee. The Board of Directors may designate one or more directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of such absent or disqualified member. Any such committee, to the extent provided by Nevada law and to the extent provided in the resolution of the Board of Directors, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Each committee shall keep written minutes of its proceedings and shall report such minutes to the Board of Directors when required. All such proceedings shall be subject to revision or alteration by the Board of Directors; provided, however, that third parties shall not be prejudiced by such revision or alteration. SECTION 2. Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules for the conduct of its business. In the absence of such rules, each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article II of these bylaws. SECTION 3. Standing Committees. Notwithstanding anything contained in this Article III to the contrary, the Board of Directors shall maintain two (2) standing committees consisting of (i) a Corporate Governance Committee; and (2) an Audit Committee. The Corporate Governance Committee shall consist of at least three (3) members of the Board of Directors who are "non-employee directors" within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, and who are "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended. The Corporate Governance Committee shall have the power and authority to recommend general compensation polices to the full Board of Directors, oversee the Corporation's compensation plans, establish the compensation levels for the Corporation's Chief Executive Officer and other Executive Officers and advise the full Board of Directors on general compensation policies for the Company's Executive Officers. The Audit Committee shall consist of at least three (3) members of the Board of Directors, none of which shall also serve as an Executive Officer of the Corporation. The Audit Committee shall have the power and authority to review and report to the full Board of Directors with respect to the selection, retention, termination and terms of engagement of the Corporation's independent public accountants and maintain communications among the Board of Directors, the independent public accountants and the Corporation's internal accounting staff with respect to accounting and audit procedures. The Audit Committee shall also 8
have the power and authority to review the Corporation's processes, internal accounting and control procedures and policies and related matters with the Corporation's management. ARTICLE IV Officers SECTION 1. Number. The officers of the Corporation shall be elected by the Board of Directors and shall consist of a Chairman of the Board, a Chief Executive Officer, a President, one or more Vice Presidents, a Secretary, a Treasurer, and such other officers and assistant officers as may be deemed necessary or desirable by the Board of Directors. Any number of offices may be held by the same person. In its discretion, the Board of Directors may choose not to fill any office for any period that it may deem advisable unless otherwise required by Nevada law. SECTION 2. Election and Term of Office. The officers of the Corporation shall be elected annually by the Board of Directors at its first meeting held after each annual meeting of stockholders or as soon thereafter as conveniently may be. The Chief Executive Officer shall appoint persons to other officers as he or she deems desirable and such appointments, if any, shall serve at the pleasure of the Board of Directors. Each officer shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided. SECTION 3. Resignations. Any officer may resign at any time upon written notice to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 4. Removal. Any officer or agent of the Corporation may be removed, either with or without cause, at any time, by the Board of Directors at any meeting of the Board of Directors or, except in the case of an officer or agent elected or appointed by the Board of Directors, by the Chief Executive Officer, but any such removal shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 5. Vacancies. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise, may be filled for the unexpired portion of the term of the office which shall be vacant by the Board of Directors at any special or regular meeting. SECTION 6. Powers and Duties of Executive Officers. The officers of the Corporation shall have such powers and duties in the management of the Corporation as may be prescribed in a resolution by the Board of Directors and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board of Directors. The Board of Directors may require any officer, agent or employee to give security for the faithful performance of his or her duties. 9
SECTION 7. The Chairman of the Board. The Chairman of the Board shall be an officer of the Corporation for the purpose of executing agreements and other instruments on behalf of the Corporation but shall not be an employee of the Corporation. He shall, if present, preside at each meeting of the stockholders and of the Board of Directors and shall be an ex-officio member of all committees of the Board of Directors. Such person shall perform all duties incident to the office of Chairman of the Board and such other duties as may from time to time be assigned to such person by the Board of Directors. SECTION 8. The Chief Executive Officer. The Chief Executive Officer shall have the general and active supervision and direction over the business operations and affairs of the Corporation and over the other officers, agents and employees and shall see that their duties are properly performed. At the request of the Chairman of the Board, or in the case of his absence or inability to act, the Chief Executive Officer shall perform the duties of the Chairman of the Board and when so acting shall have all the powers of, and be subject to all the restrictions upon the Chairman of the Board. Such person shall perform all duties incident to the office of Chief Executive Officer and such other duties as may from time to time be assigned to such person by the Board of Directors. SECTION 9. The President. The President shall be the Chief Operating Officer of the Corporation and shall have general and active supervision and direction over the business operations and affairs of the Corporation and over its several officers, agents and employees, subject, however, to the direction of the Chief Executive Officer and the control of the Board of Directors. In general, the President shall have such other powers and shall perform such other duties as usually pertain to the office of President or as from time to time may be assigned to him by the Board of Directors or the Chief Executive Officer. SECTION 10. Vice Presidents. Each Vice President shall have such powers and perform such duties as from time to time may be assigned to him by the Board of Directors or the Chief Executive Officer. SECTION 11. The Treasurer. The Treasurer shall (a) have charge and custody of, and be responsible for, all the funds and securities of the Corporation; (b) keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation; (c) cause all monies and other valuables to be deposited to the credit of the Corporation in such depositories as may be designated by the Board; (d) receive, and give receipts for, monies due and payable to the Corporation from any source whatsoever; (e) disburse the funds of the Corporation and supervise the investment of its funds as ordered or authorized by the Board, taking proper vouchers therefor; and (f) in general, have all the powers and perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors or the Chief Executive Officer. SECTION 12. The Secretary. The Secretary shall (a) record the proceedings of the meetings of the stockholders and directors in a minute book to be kept for that purpose; (b) see that all notices are duly given in accordance with the provisions of these bylaws and as required by law; (c) be custodian of the records and the seal of the Corporation and affix and attest the seal to all stock certificates of the Corporation (unless the seal of the Corporation on 10
such certificates shall be a facsimile, as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal; (d) see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and (e) in general, have all the powers and perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board of Directors or the Chief Executive Officer. SECTION 13. Officers' Bonds or Other Security. The Board of Directors may secure the fidelity of any or all of its officers or agents by bond or otherwise, in such amount and with such surety or sureties as the Board of Directors may require. SECTION 14. Compensation. The compensation of the officers of the Corporation for their services as such officers shall be fixed from time to time by the Board of Directors; provided, however, that the Board of Directors may delegate to the Chief Executive Officer or the President the power to fix the compensation of officers and agents appointed by the Chairman of the Board or the President, as the case may be. An officer of the Corporation shall not be prevented from receiving compensation by reason of the fact that such person is also a director of the Corporation. ARTICLE V Shares of Stock SECTION 1. Stock Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman of the Board or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, certifying the number of shares owned by such holder in the Corporation. Any of or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may nevertheless be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION 2. Books of Account and Record of Stockholders. The books and records of the Corporation may be kept at such places, within or without the State of Nevada, as the Board of Directors may from time to time determine. The stock record books and the blank stock certificate books shall be kept by the Secretary or by any other officer or agent designated by the Board of Directors. SECTION 3. Transfer of Shares. Transfers of shares of stock of the Corporation shall be made on the stock records of the Corporation only upon authorization by the registered holder thereof, or by his attorney hereunto authorized by power of attorney duly executed and filed with the Secretary or with a transfer agent or transfer clerk, and on surrender of the certificate or certificates for such shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of all taxes thereon. Except as otherwise provided by Nevada law, the Corporation shall be entitled to recognize the exclusive right of a person in whose name any share or shares stand on the 11
record of stockholders as the owner of such share or shares for all purposes, including, without limitation, the rights to receive dividends or other distributions, and to vote as such owner, and the Corporation may hold any such stockholder of record liable for calls and assessments and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in any such share or shares on the part of any other person whether or not it shall have express or other notice thereof. Whenever any transfers of shares shall be made for collateral security and not absolutely, and both the transferor and transferee request the Corporation to do so, such fact shall be stated in the entry of the transfer. SECTION 4. Regulations. The Board of Directors may make such additional rules and regulations, not inconsistent with these bylaws, as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. It may appoint, or authorize any officer or officers to appoint, one or more transfer agents or one or more transfer clerks and one or more registrars and may require all certificates for shares of stock to bear the signature or signatures of any of them. SECTION 5. Lost, Stolen or Destroyed Stock Certificates. The holder of any certificate representing shares of stock of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of such certificate, and the Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board of Directors may, in its discretion, require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient, as the Board in its absolute discretion shall determine, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. Anything herein to the contrary notwithstanding, the Board of Directors, in its absolute discretion, may refuse to issue any such new certificate, except pursuant to judicial proceedings under the laws of the State of Nevada. ARTICLE VI Contracts, Checks, Drafts, Bank Accounts, Etc. SECTION 1. Execution of Contracts. Except as otherwise required by statute, the Articles of Incorporation or these bylaws, any contract or other instrument may be executed and delivered in the name and on behalf of the Corporation by such officer or officers (including any assistant officer) of the Corporation as the Board of Directors may from time to time direct. Such authority may be general or confined to specific instances as the Board of Directors may determine. Unless authorized by the Board of Directors or expressly permitted by these bylaws, no officer or agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it pecuniary liable for any purpose or to any amount. SECTION 2. Loans. Unless the Board of Directors shall otherwise determine, the President or any Vice-President may effect loans and advances at any time for the Corporation from any bank, trust company or other institution, or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other certificates or evidences 12
of indebtedness of the Corporation, but no officer or officers shall mortgage, pledge, hypothecate or transfer any securities or other property of the Corporation other than in connection with the purchase of chattels for use in the Corporation's operations, except when authorized by the Board of Directors. SECTION 3. Checks, Drafts, Bank Accounts, etc. All checks, drafts, bills of exchange or other orders for the payment of money out of the funds of the Corporation, and all notes or other evidence of indebtedness of the Corporation, shall be signed in the name and on behalf of the Corporation by such persons and in such manner as shall from time to time be authorized by the Board of Directors. SECTION 4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositaries as the Board of Directors may from time to time designate or as may be designated by any officer or officers of the Corporation to whom such power of designation may from time to time be delegated by the Board of Directors. For the purpose of deposit and for the purpose of collection for the account of the Corporation, checks, drafts and other orders for the payment of money which are payable to the order of the Corporation may be endorsed, assigned and delivered by any officer or agent of the Corporation. SECTION 5. General and Special Bank Accounts. The Board of Directors may from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositaries as the Board of Directors may designate or as may be designated by any officer or officers of the Corporation to whom such power of designation may from time to time be delegated by the Board of Directors. The Board of Directors may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of these bylaws, as it may deem expedient. ARTICLE VII Indemnification SECTION 1. Right To Indemnification. The Corporation shall indemnify and hold harmless to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is a party or is threatened to be made a party or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, or by or in the right of the Corporation to procure a judgment in its favor (a "Proceeding"), by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity, including serving with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; provided, however, with respect to a Proceeding involving the right 13
of the Corporation to procure judgment in its favor, such indemnification shall only cover expenses (including attorney fees) and shall only be made if such person acted in good faith and in a manner such person reasonably believed to be in the best interests of the Corporation and shall not be made with respect to any Proceeding as to which such person has been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Nevada or the court in which such Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of the State of Nevada or such other court shall deem proper. The Corporation shall be required to indemnify a person in connection with a Proceeding (or part thereof) initiated by such person only if the Proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. SECTION 2. Prepayment of Expenses. Expenses incurred in defending any Proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it should be ultimately determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article VII or otherwise. SECTION 3. Claims. If a claim for indemnification or payment of expenses under this Article VII is not paid in full within 60 days after a written claim therefor has been received by the Corporation, the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable Nevada law. SECTION 4. Non-Exclusivity of Rights. The indemnification provided by this Article VII shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under these bylaws or any agreement or vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 5. Other Indemnification. The Corporation's obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise. SECTION 6. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such 14
person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of Nevada law, the Articles of Incorporation or of this Article VII. SECTION 7. Amendment or Repeal. Any repeal or modification of the foregoing provisions of this Article VII shall not adversely affect any right or protection hereunder of any person respect of any act or omission occurring prior to the time of such repeal or modification. ARTICLE VIII General Provisions SECTION 1. Registered Office . The registered office and registered agent of the Corporation will be as specified in the Articles of Incorporation of the Corporation. SECTION 2. Other Offices. The Corporation may also have such offices, both within or without the State of Nevada, as the Board of Directors may from time to time determine or the business of the Corporation may require. SECTION 3. Fiscal Year. The fiscal year of the Corporation shall be so determined by the Board of Directors. SECTION 4. Seal. The seal of the Corporation shall be circular in form, shall bear the name of the Corporation and shall include the words and numbers "Corporate Seal", "Nevada" and the year of incorporation. SECTION 5. Voting Securities Owned By Corporation. Voting securities in any other corporation held by the Corporation shall be voted by the Chief Executive Officer, unless the Board of Directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution. SECTION 6. Inspection of Books and Records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in the State of Nevada or at its principal place of business. SECTION 7. Section Headings. Section headings in these bylaws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein. 15
SECTION 8. Inconsistent Provisions. In the event that any provision of these bylaws is or becomes inconsistent with any provision of the Articles of Incorporation, the general corporation law of the State of Nevada or any other applicable law, the provision of these bylaws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect. ARTICLE IX Amendments These bylaws, may be adopted, amended or repealed, and new bylaws made, by the Board of Directors of the Corporation, but the stockholders of the Corporation may make additional bylaws and may alter and repeal any bylaws, whether adopted by them or otherwise, by affirmative vote of the holders of two-thirds of the outstanding shares of stock entitled to vote upon the election of directors. I, the undersigned, being the Secretary of Penola Inc., DO HEREBY CERTIFY the foregoing to be the bylaws of the Corporation, as adopted by consent to action by Directors in lieu of a special meeting of the Corporation, dated July 13, 2011. /s/ Filomena Gencarelli ------------------------------ Filomena Gencarelli, Secretary 16

EXHIBIT 5.1

                      Law Offices of Thomas E. Puzzo, PLLC
                                4216 NE 70th St.
                            Seattle, Washington 98115
       Tel: (206) 522-2256 / Fax: (206) 260-0111 / E-mail: tpuzzo@msn.com

                                  July 13, 2011

VIA ELECTRONIC TRANSMISSION

Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549

     Re: Penola Inc., a Nevada corporation;
         Registration Statement on Form S-1

Ladies and Gentlemen:

     We have acted as counsel to Penola Inc, a Nevada corporation (the
"Company"), in connection with the registration statement on Form S-1 (the
"Registration Statement"), filed by the Company with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), for the registration, offer and resale of up to 1,160,000 shares (the
"Shares") of common stock, par value $0.001 per share, of the Company.

     We have examined the originals, photocopies, certified copies or other
evidence of such records of the Company, certificates of officers of the Company
and public officials, and other documents we have deemed relevant and necessary
as a basis for the opinion hereinafter expressed. In such examination, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as certified copies or photocopies and the authenticity of the
originals of such latter documents.

     Based on our examination mentioned above, we are of the opinion that the
Shares being sold pursuant to the Registration Statement are duly authorized,
legally and validly issued, fully paid and non-assessable.

     We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm in the related
Prospectus. In giving the foregoing consent, we do not admit that we are in the
category of persons whose consent is required under Section 7 of the Act, or the
rules and regulations of the Securities and Exchange Commission.

                                Very truly yours,


                                /s/ Law Offices of Thomas E. Puzzo, PLLC
                                ---------------------------------------------

EXHIBIT 10.1

                        MINERAL PROPERTY OPTION AGREEMENT

THIS AGREEMENT is dated the 6th of July 2010.

BETWEEN

          PENOLA INC. a company duly  incorporated in the State of Nevada having
          an office at Suite 212, 1802 North Carson Street,  Carson City, Nevada
          89701

          ("OPTIONEE")

AND

          GEORGE FRANCIS LEE of PO Box 343 Donnybrook WA 6239

          ("OWNER")

WHEREAS

A.       The Owner legally and beneficially  owns Exploration  License E 80/3757
         located  in the  Halls  Creek  Shire  in  Western  Australia  and  more
         particularly  described on the attached  Schedule "A" (collectively the
         "Property").

B.       The  Owner  wishes to grant an  exclusive  option  to the  Optionee  to
         acquire one hundred  percent (100%) interest in and to the Property and
         the Optionee wishes to acquire the same on the terms and conditions set
         forth herein.

NOW THEREFORE  THIS  AGREEMENT  WITNESSES  that in  consideration  of the mutual
covenants and agreements herein contained, the parties agree as follows:

1.       GRANT OF OPTION

1.1      The Owner hereby  gives and grants the Optionee the sole and  exclusive
         right and option (the "Option") to acquire from the Owner a one hundred
         percent (100%) undivided legal,  beneficial and register-able  interest
         in and to the Property in accordance with the terms of this Agreement.

1.2      The  consideration  in order for the  Optionee to  exercise  the Option
         andto earn its interest in the Property will be as follows:

1.2.1    Upon  signing  this formal  option  agreement,  cash  consideration  of
         $7,000, Australian Dollars.

1.2.2    The  option  period is for two years  from the date of  signing of this
         agreement.

                                       1

1.2.3 Net Smelter Return Royalty: The property shall not be subject to net smelter royalty out side that which may be negotiated when securing registered interested Native Title Party agreements. 1.2.4 Maintenance of Property in Good Standing: During the tenure of this agreement, the Owner undertakes to meet the minimum expenditure commitment on the property and arrange and pay for sufficient exploration work to be carried out on the property to keep the property in good standing from the date of the agreement. Expenditure shall be of a nature that is permissible to be claimed as expenditure in connection with mining as defined by the Mining Act 1978 and Mining Regulations 1981 (as amended). Expenditure can include geological services, drilling, sampling, assaying, aerial photography, any geotechnical service such as geophysics, aerial magnetic surveys, ground surveys, field inspections by qualified persons, being geologists and geoscientists, mapping, soil sampling, stream sediment sampling and any other recognised geological service that can be applied to the tenements that will investigate the potential of the tenements 1.2.5 The exercise price of the option is $200,000 cash to be paid at the same time that the Notice of Exercise of Option is sent to the Owner. The payment is to be made in Australian Dollars and can be made by a recognised Bank Cheque. 1.3 Upon failure of the Optionee to deliver the consideration comprising the Option payment within the time period set forth herein, the Owner shall provide the Optionee with a written notice of default and the Optionee shall have a period of 30 days following receipt of such notice of default to rectify the same, failing which this Agreement shall automatically terminate at the end of such 30 days notice period without further notice from the Owner. 2. REGISTRATION AND TRANSFER OF PROPERTY INTEREST 2.1 Upon request by the Optionee and at any time after the terms of this Agreement have been met, the Owner shall transfer the Property to the Optionee and record the transfer with appropriate recorded. 3. REPRESENTATIONS AND WARRANTIES 3.1 The Optionee represents and warrants to the Owner that: a) it is a company duly incorporated, validly subsisting, and in good standing under the laws of the State of Nevada; b) it has full power and authority to enter into and perform its obligations under this Agreement; c) and the signing, delivery and performance of this Agreement will not conflict with any other Agreement; and d) The Optionee is not a reporting issuer and the common shares of the Optionee are not listed for trading any stock exchange. 3.2 The Owner hereby represents and warrants to the Optionee that: (a) He has full power, capacity and authority to enter into and perform their obligations under this Agreement; (b) He is the beneficial and registered owner of Exploration License E 80/3757; 2
(c) The Property is accurately described in Schedule A attached hereto and forming a material part of this Agreement; and (d) The Owner have the exclusive right to enter into this Agreement and have all necessary authority to dispose of their interest in and to the Property in accordance with the terms of this Agreement. 4. COVENANTS OF THE OWNER 4.1 While the Option remains outstanding, the Owner covenants and agree to the Optionee that: (a) As long as the Optionee is not in default hereunder, not do any act or thing which would in any way adversely affect the rights of the Optionee hereunder; (b) Make available to the Optionee and its representatives all records, maps, drill core and files in their possession relating to the Property and permit the Optionee and its representative at their own risk and expense to take abstracts there form and make copies thereof; (c) Co-operate with the Optionee in obtaining any access, surface or other rights on or related to the Property s the Optionee reasonable deems desirable; and (d) For the period of this agreement, the Owner will offer to the Optionee any further claims/property the Owner stakes within 2 kilometres from the Property. 5. ASSIGNMENT 5.1 Upon providing written notice to the other party in accordance with the terms of this Agreement, either party may assign its respective rights and obligations under this Agreement, provided that the assignee executes an assumption of all of the assignor's obligations hereunder and agrees to be bound by all terms and conditions of this Agreement. No such assignment shall in any way enlarge or diminish the right of obligations of the Optionee or Owner hereunder. Upon the assumption by the assignee of the assignor's obligations, the assigning party shall be fully released from and shall not be liable or responsible to the non-assigning party in any way for any duties, costs, payments or other liabilities or obligations that thereafter arise or accrue directly or indirectly under this Agreement 6. TERMINATION OF OPTION 6.1 The Optionee may at any time terminate this Agreement by giving 30-day advance written notice of said termination to Owner. On or promptly after delivery of the notice of termination, the Owner shall execute and deliver to the Optionee a written release of the Agreement in proper form for recording. 7. GENERAL PROVISIONS 7.1.1 Events of FORCE MAJEURE shall suspend the obligations of the parties hereto for their duration, except for payments of sums of money and for taxes and fees due and owing on the Property. 3
7.1.2 It is understood and agreed that the language of this agreement is English with the consent of the parties hereto. 7.1.3 This agreement shall be governed by the laws of the State of Nevada. 7.1.3.1 In the event of a dispute between the parties arising out of this agreement the matter shall be referred to the arbitration of one person. The decision of the arbitrator soappointed shall be final and binding upon the parties hereto. All costs and expenses of such arbitration shall be borne by the parties hereto equally. This agreement constitutes the entire agreement between the Optionee and the Owner pertaining to the Property and supersedes all prior and contemporaneous agreements, whether oral or written, between the parties in connection with the Claims. No supplement, modification or waiver of this agreement shall be binding unless executed in writing by the parties to be bound thereby. 7.1.4 The parties hereto agree to do or cause to be done all acts or things necessary to implement and carry into effect this agreement to its full effect. 7.1.5 Time shall be of the essence in the performance of this agreement. 7.1.6 This agreement shall ensure to the benefit of and be binding on the parties hereto and their respective successors and assigns. 7.1.7 This agreement may be executed in two or more counterparts, each of which will be deemed to be an original and all of which will constitute one agreement. Facsimile signatures are acceptable and binding. This Agreement may be executed in several counterparts as may be necessary or by facsimile and each such counterpart agreement or facsimile so executed are deemed to be an original and such counterparts and facsimile copies together will constitute one and the same instrument. ACCEPTED AND AGREED TO: PENOLA INC. /s/ Filomena Gencarelli ------------------------------------ Filomena Gencarelli - President 4
ACCEPTED AND AGREED TO: /s/ George Francis Lee ------------------------------------ George Francis Lee 5
SCHEDULE "A" PROPERTY TENURE NO. CLAIM NAME SIZE ---------- ---------- ---- Exploration License E 80/3757 Halls Creek 324.1437 ha 6

Exhibit 23.2

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the  incorporation in this  Registration  Statement on Form
S-1, of our report dated July 13, 2011,  of Penola Inc.  (An  Exploration  Stage
Company)  relating to the  financial  statements as of February 28, 2011 and for
the period from May 7, 2010  (inception) to February 28, 2011, and the reference
to our firm under the caption "Experts" in the Registration Statement.


/s/ M&K CPAS, PLLC
-------------------------------
www.mkacpas.com
Houston, Texas

July 13, 2011