Attached files
file | filename |
---|---|
EX-32 - HK EBUS Corp | v162781_ex32.htm |
EX-31 - HK EBUS Corp | v162781_ex31.htm |
EX-10.1 - HK EBUS Corp | v162781_ex10-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10 – Q
(Mark
One)
x
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended August 31, 2009
or
¨
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from ____________ to ________________
Commission
file number: 000-52782
Cobra
Oil & Gas Company
|
||
(Exact
name of registrant as specified in its charter)
|
||
Nevada
|
26-2113613
|
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
|
Uptown
Center
2100
West Loop South, Suite 900
Houston,
Texas 77027
|
||
(Address
of principal executive offices)
|
||
(832)
476-8941
|
||
(Registrant’s
telephone number, including area
code)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No o
Indicate
by check mark whether the registrant 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)
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No x
As of October 9, 2009 there were
76,912,227 shares of the issuer’s common stock, par value $0.00001,
outstanding.
COBRA
OIL & GAS COMPANY
FORM
10-Q
FOR
THE QUARTERLY PERIOD ENDED AUGUST 31, 2009
TABLE
OF CONTENTS
PAGE
|
||
Special
Note Regarding Forward Looking Information
|
3
|
|
PART
I - FINANCIAL INFORMATION
|
||
Item
1.
|
Financial
Statements
|
4
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
13
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
17
|
Item
4T.
|
Controls
and Procedures
|
17
|
PART
II - OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
18
|
Item
1A.
|
Risk
Factors
|
19
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
19
|
Item
3.
|
Defaults
Upon Senior Securities
|
20
|
Item
4.
|
Submission
of Matter to a Vote of Security Holders
|
20
|
Item
5.
|
Other
Information
|
20
|
Item
6.
|
Exhibits
|
22
|
SIGNATURES
|
23
|
2
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
To the
extent that the information presented in this Quarterly Report on Form 10-Q for
the quarter ended August 31, 2009 discusses financial projections, information
or expectations about our products or markets, or otherwise makes statements
about future events, such statements are forward-looking. We are
making these forward-looking statements in reliance on the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. Although we believe that the expectations reflected in these
forward-looking statements are based on reasonable assumptions, there are a
number of risks and uncertainties that could cause actual results to differ
materially from such forward-looking statements. These risks and uncertainties
are described, among other places in this Quarterly Report, in “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations”.
In
addition, we disclaim any obligations to update any forward-looking statements
to reflect events or circumstances after the date of this Quarterly
Report. When considering such forward-looking statements, you should
keep in mind the risks referenced above and the other cautionary statements in
this Quarterly Report.
3
PART
1 – FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
PAGE
|
|
Balance
Sheets as at August 31, 2009 and May 31, 2009
|
5
|
Statements
of Operations for the three months ended August 31, 2009 and August 31,
2008 and the period from November 18, 2005 (inception) through August 31,
2009
|
6
|
Statements
of Cash Flows for the three months ended August 31, 2009 and August 31,
2008 and the period from November 18, 2005 (inception) through August 31,
2009
|
7
|
Notes
to Financial Statements
|
8
|
4
COBRA
OIL & GAS COMPANY
(An
Exploration Stage Company)
BALANCE
SHEET
August
31,
|
May
31,
|
|||||||
2009
|
2009
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
|
$ | 218,615 | $ | 21,072 | ||||
Total
current assets
|
218,615 | 21,072 | ||||||
Property
and equipment
|
||||||||
Oil
and gas properties, non producing, full cost method
|
5,906,000 | 180,000 | ||||||
Total
Assets
|
$ | 6,124,615 | $ | 201,072 | ||||
LIABILITIES
& STOCKHOLDERS' EQUITY
|
||||||||
Current
Liabilities
|
||||||||
Accounts
payable and accrued liabilities
|
$ | 1,961 | $ | 3,560 | ||||
Due
to related party
|
100 | 123,603 | ||||||
Due
on oil lease contract
|
800,000 | - | ||||||
Total
current liabilities
|
802,061 | 127,163 | ||||||
Stockholders'
Equity
|
||||||||
Preferred
stock, $0.00001 par value;
|
||||||||
100,000,000
shares authorized;
|
||||||||
none
issued and outstanding
|
||||||||
Common
stock, $0.00001 par value;
|
||||||||
100,000,000
shares authorized;
|
||||||||
72,140,000
issued and outstanding at May 31, 2009
|
779 | 721 | ||||||
and
77,884,884 issued and outstanding at August 31, 2009
|
||||||||
Additional
paid-in capital
|
6,016,933 | 603,229 | ||||||
Deficit
accumulated during the exploration stage
|
(695,158 | ) | (530,041 | ) | ||||
Total
Stockholders' Equity
|
5,322,554 | 73,909 | ||||||
Total
Liabilities and Stockholders' Equity
|
$ | 6,124,615 | $ | 201,072 |
The
accompanying notes are an integral part of these financial
statements
5
COBRA
OIL & GAS COMPANY
(An
Exploration Stage Company)
(Unaudited)
November
18,
|
||||||||||||
2005
(Inception)
|
||||||||||||
Through
|
||||||||||||
Three
Months Ended August 31,
|
August
31,
|
|||||||||||
2009
|
2008
|
2009
|
||||||||||
Revenue
|
$ | - | $ | - | $ | - | ||||||
Expenses
|
||||||||||||
Advertising
|
- | 1,495 | ||||||||||
Accounting
|
4,050 | 4,990 | 36,515 | |||||||||
Bank
Charges
|
854 | 354 | 5,099 | |||||||||
Delay
rentals
|
- | 2,944 | ||||||||||
Directors
fees
|
12,500 | - | 12,500 | |||||||||
Exploration
costs
|
- | 141,756 | ||||||||||
Legal
|
22,833 | 28,715 | 143,508 | |||||||||
Office
expense
|
3,230 | 2,121 | 12,730 | |||||||||
Rent
|
6,739 | 6,000 | 41,374 | |||||||||
Telephone
|
421 | 1,810 | 6,283 | |||||||||
Transfer
agent
|
- | 20,614 | ||||||||||
Travel
|
11,932 | 22,544 | ||||||||||
Management
services
|
45,000 | 30,000 | 158,100 | |||||||||
Website/investor
communications
|
67,831 | 5,000 | 77,670 | |||||||||
Total
expenses
|
163,458 | 90,922 | 683,132 | |||||||||
Loss
from operations
|
(163,458 | ) | (90,922 | ) | (683,132 | ) | ||||||
Other
income (expense)
|
||||||||||||
(Interest)
|
(1,659 | ) | (1,659 | ) | (12,026 | ) | ||||||
Income
(loss) before provision for income taxes
|
(165,117 | ) | (92,581 | ) | (695,158 | ) | ||||||
Provision
for income tax
|
- | - | - | |||||||||
Net
income (loss)
|
$ | (165,117 | ) | $ | (92,581 | ) | $ | (695,158 | ) | |||
Net
income (loss) per share
|
||||||||||||
(Basic
and fully diluted)
|
$ | (0.00 | ) | $ | (0.00 | ) | ||||||
Basic
weighted average number of
|
||||||||||||
common
shares outstanding
|
74,688,223 | 72,020,435 | ||||||||||
Fully
diluted average number of
|
||||||||||||
common
shares outstanding
|
74,688,223 | 72,020,435 |
The
accompanying notes are an integral part of these financial
statements
6
(An
Exploration Stage Company)
(Unaudited)
November
18,
|
||||||||||||
2005
(Inception)
|
||||||||||||
Three
Months Ended
|
Through
|
|||||||||||
August
31,
|
August
31,
|
|||||||||||
2009
|
2008
|
2009
|
||||||||||
Cash
Flows From Operating Activities
|
||||||||||||
Net
income (loss) during the exploration stage
|
(165,117 | ) | (92,581 | ) | (695,158 | ) | ||||||
Adjustments
to reconcile net loss to
|
||||||||||||
net
cash provided by (used for)
|
||||||||||||
operating
activities:
|
||||||||||||
Donated
office space and services
|
13,500 | |||||||||||
Changes
in operating assets and liabilities
|
||||||||||||
Accounts
payable and accrued liabilities
|
160 | 22,876 | ||||||||||
Compensatory
stock issuances
|
12,500 | 12,500 | ||||||||||
Exploration
costs - lease write offs
|
(648 | ) | ||||||||||
Net
cash provided by (used for)
|
||||||||||||
operating
activities
|
(152,457 | ) | (92,581 | ) | (646,930 | ) | ||||||
Cash
Flows From Investing Activities:
|
||||||||||||
Oil
and gas properties
|
(200,000 | ) | (134,437 | ) | (391,871 | ) | ||||||
Cash
Flows From Financing Activities:
|
||||||||||||
Sale
of common stock
|
550,000 | 250,000 | 1,140,450 | |||||||||
Deferred
offering costs
|
- | - | ||||||||||
Increase
in due to related party
|
1,659 | 116,966 | ||||||||||
Net
cash provided by (used for)
|
||||||||||||
financing
activities
|
550,000 | 251,659 | 1,257,416 | |||||||||
Net
Increase (Decrease) in Cash
|
197,543 | 24,641 | 218,615 | |||||||||
Cash
at Beginning of Period
|
21,072 | 49,644 | - | |||||||||
Cash
at End of Period
|
$ | 218,615 | $ | 74,285 | $ | 218,615 | ||||||
Schedule of Non-Cash Investing and Financing
Activities
|
||||||||||||
In
fiscal year 2010 the Company paid cash of $200,000, issued 4,747,227
common shares
|
||||||||||||
valued
at $4,726,000 and incurred debt of $800,000 in exchange for oil and gas
properties
|
||||||||||||
valued
at $5,726,000. The Company also issued 153,508 common shares for debt
relief of $125,262.
|
||||||||||||
Supplemental Disclosure
|
||||||||||||
Cash
paid for interest
|
$ | - | $ | - | $ | - | ||||||
Cash
paid for income taxes
|
$ | - | $ | - | $ | - |
The
accompanying notes are an integral part of these financial
statements
7
COBRA OIL
& GAS COMPANY
(An
Exploration Stage Company)
NOTES TO
THE FINANCIAL STATEMENTS
August
31, 2009
NOTE
1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Cobra Oil
& Gas Company (the “Company”), was incorporated in the State of Nevada on
November 18, 2005. The Company was formed to engage in identifying,
investigating, exploring, and where determined advantageous, developing, mining,
refining, and marketing oil and gas. The Company may also engage in
any other business permitted by law, as designated by the Board of Directors of
the Company.
Exploration
Stage
The
Company is currently in the exploration stage. During the current quarter the
Company has entered into farmout agreements with Enercor, Inc. (a Nevada
Corporation) with respect to three leases. The first of these gives the Company
a 35% - 40% working interest in the “Tar Sands” components of leases, covering
approximately 33,632 acres located in Southern Uintah County Utah, when and if
granted by the U S Bureau of Land Management.
The
second of these leases is a lease granted by the State of Utah to Pioneer
Natural Resources which retains a 62.5% working interest. We have received a
37.5% working interest in approximately 640 acres which has rights for oil and
gas drilling and which we are seeking additional rights to the tar sands in the
area from the U S Bureau of Land Management.
The third
of these leases is one granted by the State of Utah to Questar Corporation which
owns the 37.5% residual working interest after our purchase of the 62.5% working
interest from Enercor. This lease has oil and gas drilling rights and we will be
seeking the tar sands approval also.
The
acquisition of each of these leases was accomplished primarily through the
issuance of new shares of Company common stock.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
8
COBRA OIL
& GAS COMPANY
(An
Exploration Stage Company)
NOTES TO
THE FINANCIAL STATEMENTS
August
31, 2009
Income
Tax
The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (“SFAS 109”). Under SFAS 109 deferred taxes are
provided on a liability method whereby deferred tax assets are recognized for
deductible temporary differences and operating loss carryforwards and deferred
tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
Fiscal
year
The
Company employs a fiscal year ending May 31.
Net
Income (Loss) per share
The net
income (loss) per share is computed by dividing the net income (loss) by the
weighted average number of shares of common outstanding. Warrants,
stock options, and common stock issuable upon the conversion of the Company’s
preferred stock (if any), are not included in the computation if the effect
would be anti-dilutive and would increase the earnings or decrease loss per
share.
Revenue
Recognition
Revenue
is recognized on an accrual basis as earned under contract terms. The
Company has had no revenue to date.
Oil
and Gas Interests
The
company follows the full-cost method of accounting for oil and natural gas
properties. Under this method, all costs incurred in the exploration,
acquisition, and development, including unproductive wells, are capitalized in
separate cost centers for each country. Such capitalized costs
include contract and concessions acquisition, geological, geophysical, and other
exploration work, drilling, completing and equipping oil and gas wells,
constructing production facilities and pipelines, and other related
costs.
The
capitalized costs of oil and gas properties in each cost center are amortized on
a composite units of production method based on future gross revenues from
proved reserves. Sales or other dispositions of oil and gas
properties are normally accounted for as adjustments of capitalized
costs. Gain or loss is not recognized in income unless a significant
portion of a cost center’s reserves is involved. Capitalized costs
associated with acquisition and evaluation of unproved properties are excluded
from amortization until it is determined whether proved reserves can be assigned
to such properties or until the value of the properties is
impaired. If the net capitalized costs of oil and gas properties in a
cost center exceed an amount equal to the sum of the present value of estimated
future net revenues from proved oil and gas reserves in the cost center and the
lower of cost or fair value of properties not being amortized, both adjusted for
income tax effects, such excess is charged to expense.
9
COBRA OIL
& GAS COMPANY
(An
Exploration Stage Company)
NOTES TO
THE FINANCIAL STATEMENTS
August
31, 2009
Since the
company has not produced any oil or gas, a provision for depletion has not been
made.
Financial
Instruments
The
carrying value of the Company’s financial instruments, including cash and cash
equivalents, as reported in the accompanying balance sheet, approximates fair
value.
Recent
Accounting Pronouncements
The
Company has adopted the provisions of SFAS No. 123(r) which are effective in
general for transactions entered into or modified after June 15,
2005. The adoption did not have a material effect on the results of
operations of the Company.
In May,
2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154,
“Accounting Changes and Error Corrections – A Replacement of APB Opinion No. 20
and SFAS No. 3”. SFAS 154 changes the requirements for the accounting
for and reporting of a change in accounting principle and applies to all
voluntary changes in accounting principle. It also applies to changes
required by an accounting pronouncement in the unusual instance that the
pronouncement does not include specific transition provisions. SFAS
154 requires retrospective application to prior periods’ financial statements of
changes in accounting principle, unless it is impracticable to determine either
the period-specific effects or the cumulative effect of the
change. The provisions of SFAS No. 154 are effective for accounting
changes and correction of errors made in fiscal years beginning after December
15, 2005. The adoption of this standard is not expected to have a
material effect on the Company’s results of operations or financial
position.
NOTE
2. OIL AND GAS PROPERTIES
During
the period ended May 31, 2008 the Company entered into a “memorandum of Intent”
with Coastal Petroleum Company which outlines the terms and conditions under
which Coastal is willing to enter into a formal agreement with the Company on
certain oil and gas leases owned by Coastal in Valley Creek, Montana. The leases
involve approximately 82,800 net acres. Under the leases, Coastal has a 100%
working interest with between 75.5% to 80.5% net revenue interests. Pursuant to
the Memorandum of Intent, on May 23, 2008 we paid Coastal $180,000 in exchange
for a two year option to purchase a 50% interest in the leases for
$1,000,000.
10
COBRA OIL
& GAS COMPANY
(An
Exploration Stage Company)
NOTES TO
THE FINANCIAL STATEMENTS
August
31, 2009
Prior to
exercising the purchase option, we have the right to drill a well at our expense
on the leases and earn a 50% working interest in the spacing unit if the well is
a producer and we make full payment for the 50% working interest. We have no
obligation however, to drill any well on the leases before we exercise our right
to purchase the 50% interest in the leases from Costal.
As of
August 31, 2009 we have taken no further action on this agreement.
During
the quarter ended August 31, 2009 the Company acquired the leases mentioned
above. It is the Company’s intent to pursue the necessary approvals from the U S
Bureau of Land Management and once such approval is granted to begin the process
of developing these leases.
NOTE
3. RELATED PARTY TRANSACTIONS
During
the quarter ended August 31, 2009 the Company negotiated a settlement with Mr.
Doug Berry, a former officer and stockholder, to exchange common stock of the
Company for monies that had been advanced to the Company by Mr. Berry. The terms
of the agreement are that the Company issue 153,508 shares of common stock in
exchange for release of debt amounting to $125,262.45 which includes $110,625.00
in principal and $14,637.45 of accrued interest. The shares were valued at
$0.816 per share which represented a 20% discount to the closing price of our
common stock on the date of the Agreement.
NOTE
4. LEASE
In May
2008 the Company entered into a one year office lease at a rate of $2,000 per
month plus costs. Initial expenses recorded under this lease in 2008 were
$4,890. The minimum required future payments under the lease for fiscal year end
2009 are approximately $24,000.
NOTE
5. WARRANTS
In May
2008 the Company sold 1,000,000 units to an investor for cash at $.25 per unit,
or $500,000 total. Each unit consists of one share of common stock, and one
warrant to purchase one share of common stock at an exercise price of $.40,
exercisable anytime through May 15, 2011. In fiscal year 2010 the
Company sold 1,819,149 units to investors for cash at $.50 - $.94 per unit, or
$550,000 total. Each unit consists of one share of common stock, and one warrant
to purchase one share of common stock at exercise prices of $.40 - $1.18,
exercisable anytime through dates from June 2011 through August 2012. No
warrants were exercised through August 31, 2009, leaving a balance of 2,819,149
warrants outstanding. As the warrants are non-detachable, all
proceeds from the unit sales have been allocated to common stock.
11
COBRA OIL
& GAS COMPANY
(An
Exploration Stage Company)
NOTES TO
THE FINANCIAL STATEMENTS
August
31, 2009
NOTE
6. INCOME TAX
The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (“SFAS 109”). Under SFAS 109 deferred taxes are provided on a
liability method whereby deferred tax assets are recognized for deductible
temporary differences and operating loss carryforwards and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
At May
31, 2008 and 2009 the Company had net operating loss carryforwards of
approximately $230,000 and $520,000 which begin to expire in 2026. The deferred
tax asset of approximately $73,000 and $166,000 in 2008 and 2009 created by the
net operating losses have been offset by a 100% valuation allowance. The change
in the valuation allowance in 2007 and 2008 was $51,086 and
$92,800.
At August
31, 2009 the Company incurred an additional $165,117 in net operating losses
which are added to the previously accumulated losses and will be offset by an
equivalent valuation allowance.
NOTE
7. GOING CONCERN
The
Company has suffered losses from operations and has a working capital
deficit. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern. The Company may raise
additional capital through the sale of its equity securities, through offerings
of debt securities, or through borrowings from financial
institutions. In addition, the Company hopes to generate revenues
from finding and producing oil and gas on its lease properties.
NOTE
8. SUPPLEMENTAL OIL AND GAS INFORMATION
Capitalized
costs at May 31, 2008 relating to the Company’s oil and gas activities are as
follows:
Unproved
properties, Montana, net
|
$ | 180,000. | ||
Unproved
properties, Utah, net
|
$ | 5,726,000. |
12
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The
following discussion should be read in conjunction with our audited consolidated
financial statements and the accompanying notes included elsewhere in this
Quarterly Report on Form 10-Q.
The
following discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in the forward-looking statements as a result of various factors, including
those discussed elsewhere in this annual report.
We are in
the exploration stage as an oil and gas exploration company and are presently
engaged in limited oil and gas activities in Utah and Montana. We had minimal
operations and generated no revenues during the quarter ended August 31, 2009 or
the fiscal year ended May 31, 2009. Our ability to develop and maintain a
meaningful level of revenues from operations is dependent on our ability to
successfully acquire and drill exploration and development wells and complete
producing property acquisition.
At the
present time, we have no developed properties and no production.
In its
report dated July 30, 2009, our auditors, Ronald R. Chadwick, PC expressed an
opinion that there is substantial doubt about our ability to continue as a going
concern. Our financial statements do not include any adjustments that may result
from the outcome of this uncertainty. We have generated no operating revenues
since our inception. We had an accumulated deficit of $695,158 and $530,041 as
of August 31, 2009 and May 31, 2009, respectively. Our continuation as a going
concern is dependent upon future events, including our ability to raise
additional capital and to generate positive cash flows.
In May
2008 we acquired a two year option to purchase a 50% interest in certain oil and
gas leases in Valley Creek, Montana. We have the right but not the obligation to
drill a well on the lands covered by these leases prior to exercising the
purchase option and earn a 50% working interest therein.
On each
of July 25, 2009, August 5, 2009 and August 12, 2009 we entered into Purchase
Agreements with Enercor Inc. pursuant to which we have acquired contract rights
and working interests in leases located in Uintah County, Utah. For a
more detailed discussion of these Purchase Agreements see Item 5
hereof.
Our
current business plan strategy is to develop our properties and any other
prospects that we may acquire interests in. We intend to fund any additional
lease acquisitions and any seismic costs needed to further define the prospects
from additional financing. No assurance can be given that such additional
financing will be available to us as and when needed or, if available, the terms
on which it will be available.
13
Subject
to receipt of necessary financing, we plan to spend approximately $1,200,000 in
the next 12 months on exploration and development activities such as seismic
data acquisition, additional lease acquisition, technical studies and
participating in joint venture development and exploration
drilling.
We will
require financing to meet working capital costs, including the cost of reviewing
and negotiating transactions and other ordinary general and administrative costs
such as regulatory compliance, investor relations, advisory services, officer’s
salaries, office and general expenses, professional fees, travel and
entertainment and rent and related expenses. We estimate that the level of
working capital needed for these general and administrative costs for the next
twelve months will be approximately $200,000. However, this estimate is subject
to change, depending on the number of transactions in which we ultimately become
involved. In addition, funding will be required for follow-on development of
working interest obligations of any successful exploration
prospects.
Oil and
gas exploration requires significant outlays of capital and in many situations
may offer a limited probability of success. We hope to enhance our chances for
success by effectively using available technology, rigorously evaluating
sub-surface data, and, to the extent possible, managing dry-hole and financial
risks.
We intend
to rely on synergistic partnering with sophisticated industry partners. The
ideal partner would tend to be a regionally focused independent which has a
large seismic database, a solid grasp on the play’s history, and a lead in
understanding technology to exploit the play. However, there is no assurance
that we will be able to successfully negotiate any such partnering agreement or
raise the necessary financing to invest in such a venture, or that any such
venture will yield us any revenues or profits.
We will
face competition from firms that are well-established, successful, better
capitalized and, in many instances, willing to pay more for properties than what
we might consider prudent. Thus, our success will depend on the execution of our
business model to
·
|
identify
available transactions
|
·
|
quickly
evaluate which transactions are most promising;
and
|
·
|
negotiate
a creative transaction
structure.
|
Presently,
we have one full-time employee consisting of Massimiliano Pozzoni, our President
and Chief Executive and Financial Officer. We do not expect significant changes
in the number of employees during the next twelve months.
We intend
to contract out certain technical and administrative functions on an as-needed
basis in order to conduct our operating activities. Our management team will
select and hire these contractors and manage and evaluate their work
performance.
14
Results
of Operations
Revenues
We have
had no revenues since our inception.
Expenses
Due to
increased salary and website/investor communication expenses, our operating
expenses during the three months ended August 31, 2009 increased to $163,458
from $90,922 during the three months ended August 31, 2008.
Net Loss
We
incurred a net loss for the three months ended August 31, 2009 and 2008 of
$165,117 and $92,581, respectively. The increase in net loss was
directly attributable to the increase in our operating expenses.
Liquidity
and Capital Resources
At August
31, 2009, we had a working capital deficit of $583,446 compared to a working
capital deficit of $106,091 at May 31, 2009. Current liabilities
increased to $802,061 at August 31, 2009 from $127,163 at May 31,
2009. The increase in current liabilities at August 31, 2009 compared
to May 31, 2009 was due to amounts due on lease contracts. Current
assets increased to $218,615 at August 31, 2009 from $21,072 at May 31, 2009.
The increase in current assets at August 31, 2009 compared to May 31, 2009 was
due to an increase in cash.
Critical
Accounting Policies and Estimates
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
15
Income
Tax
The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (“SFAS 109”). Under SFAS 109 deferred taxes are
provided on a liability method whereby deferred tax assets are recognized for
deductible temporary differences and operating loss carryforwards and deferred
tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
Net
Income (Loss) per share
The net
income (loss) per share is computed by dividing the net income (loss) by the
weighted average number of shares of common outstanding. Warrants,
stock options, and common stock issuable upon the conversion of the Company’s
preferred stock (if any), are not included in the computation if the effect
would be anti-dilutive and would increase the earnings or decrease loss per
share.
Revenue
Recognition
Revenue
is recognized on an accrual basis as earned under contract terms. The
Company has had no revenue to date.
Oil
and Gas Interests
The
Company follows the full-cost method of accounting for oil and natural gas
properties. Under this method, all costs incurred in the exploration,
acquisition, and development, including unproductive wells, are capitalized in
separate cost centers for each country. Such capitalized costs
include contract and concessions acquisition, geological, geophysical, and other
exploration work, drilling, completing and equipping oil and gas wells,
constructing production facilities and pipelines, and other related
costs.
The
capitalized costs of oil and gas properties in each cost center are amortized on
a composite units of production method based on future gross revenues from
proved reserves. Sales or other dispositions of oil and gas
properties are normally accounted for as adjustments of capitalized
costs. Gain or loss is not recognized in income unless a significant
portion of a cost center’s reserves is involved. Capitalized costs
associated with acquisition and evaluation of unproved properties are excluded
from amortization until it is determined whether proved reserves can be assigned
to such properties or until the value of the properties is
impaired. If the net capitalized costs of oil and gas properties in a
cost center exceed an amount equal to the sum of the present value of estimated
future net revenues from proved oil and gas reserves in the cost center and the
lower of cost or fair value of properties not being amortized, both adjusted for
income tax effects, such excess is charged to expense.
Since the
Company has not produced any oil or gas, a provision for depletion has not been
made.
16
Financial
Instruments
The
carrying value of the Company’s financial instruments, including cash and cash
equivalents, as reported in the Company’s balance sheet, approximates fair
value.
Recent
Accounting Pronouncements
The
Company has adopted the provisions of SFAS No. 123(r) which are effective in
general for transactions entered into or modified after June 15,
2005. The adoption did not have a material effect on the results of
operations of the Company.
In May,
2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154,
“Accounting Changes and Error Corrections – A Replacement of APB Opinion No. 20
and SFAS No. 3”. SFAS 154 changes the requirements for the accounting
for and reporting of a change in accounting principle and applies to all
voluntary changes in accounting principle. It also applies to changes
required by an accounting pronouncement in the unusual instance that the
pronouncement does not include specific transition provisions. SFAS
154 requires retrospective application to prior periods’ financial statements of
changes in accounting principle, unless it is impracticable to determine either
the period-specific effects or the cumulative effect of the
change. The provisions of SFAS No. 154 are effective for accounting
changes and correction of errors made in fiscal years beginning after December
15, 2005. The adoption of this standard is not expected to have a
material effect on the Company’s results of operations or financial
position.
Off-Balance Sheet
Arrangements
We have
never entered into any off-balance sheet financing arrangements and have not
formed any special purpose entities. We have not guaranteed any debt
or commitments of other entities or entered into any options on non-financial
assets.
Effect of Inflation and
Changes in Price
Our
future revenues, future rate of growth, results of operations, financial
condition and ability to borrow funds or obtain additional capital, as well as
the carrying value of our properties, are substantially dependent upon
prevailing prices of oil and natural gas. If the price of oil and
natural gas increases (decreases), there could be a corresponding increase
(decrease) in the operating cost that we are required to bear for operations, as
well as an increase (decrease) in revenues. Inflation has had a
minimal effect on the operating activities of the Company.
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Not
applicable.
ITEM 4T.
|
CONTROLS
AND PROCEDURES
|
17
Evaluation
of Our Disclosure Controls
Under the
supervision and with the participation of our chief executive and financial
officer, Massimiliano Pozzoni, we conducted an evaluation of the effectiveness
of the design and operation of our disclosure controls and procedures, as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), as of the end of the period covered by
this quarterly report (the “Evaluation Date”). Based on this evaluation, our
chief executive and financial officer concluded as of the Evaluation Date that
our disclosure controls and procedures were effective such that the information
relating to us, including our consolidated subsidiaries, required to be
disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is
recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms, and (ii) is accumulated and communicated to our
management, including our chief executive officer and chief financial officer,
as appropriate to allow timely decisions regarding required
disclosure.
Changes
in Internal Control Over Financial Reporting
There
have been no changes in our internal control over financial reporting that
occurred during the quarter ended August 31, 2009 that have materially affected
or are reasonably likely to materially affect our internal control over
financial reporting.
PART
II – OTHER INFORMATION
ITEM 1.
|
LEGAL
PROCEEDINGS
|
On August
14, 2009, Cobra Oil & Gas Corporation, a Texas corporation (the
“Plaintiff”), filed a complaint against us in the United States District Court
for the Southern District of Texas, Houston Division (Case No. 4:09-cv-02601)
seeking a preliminary injunction against us on the basis of alleged trademark
infringement and unfair competition arising from our use of the name Cobra Oil
& Gas in Texas. Effective September 8, 2009, we entered into a
Settlement Agreement with Plaintiff, whereby we agreed to cease use of the name
Cobra Oil & Gas Company and certain derivations thereof within 60 days of
the effective date of the Settlement Agreement. The 60 day
requirement was made subject to extension in the event of certain delays outside
of our control. In connection therewith, we have obtained the
approval of shareholders holding a majority of our outstanding shares to the
filing of a Certificate of Amendment to our Articles of Incorporation to change
our name from Cobra Oil & Gas Company to Viper Resources, Inc. We
expect to file the Certificate of Amendment and have it take effect within the
60 days period. As a result of the Settlement Agreement, on October
8, 2009, the District Court dismissed Plaintiff’s action with prejudice,
retaining jurisdiction to enforce the Settlement Agreement, if
necessary.
In the
ordinary course of our business, we may from time to time become subject to
routine litigation or administrative proceedings which are incidental to our
business. Except as discussed above, we are not a party to nor are we aware of
any existing, pending or threatened lawsuits or other legal actions involving
us.
18
ITEM 1A.
|
RISK
FACTORS
|
Not
applicable.
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
On June
23, 2009 we sold 100,000 units to a single subscriber at a price of $0.50 per
unit or an aggregate of $50,000. Each unit consists of one share of
our common stock and a warrant to purchase one share of our common stock at a
price of $0.80 per share, subject to adjustment, for a period of three years
from issuance. The units were sold in reliance on Regulation S under
the Securities Act of 1933, as amended.
On July
6, 2009 we issued 25,000 shares of our common stock to Warren Dillard in
consideration of his serving on our advisory board. The shares were
issued in reliance on Section 4(2) under the Securities Act of 1933, as
amended.
On July
15, 2009 we sold 200,000 units to a single subscriber at a price of $0.50 per
unit or an aggregate of $100,000. Each unit consists of one share of
our common stock and a warrant to purchase one share of our common stock at a
price of $0.80 per share, subject to adjustment, for a period of three years
from issuance. The units were sold in reliance on Regulation S under
the Securities Act of 1933, as amended.
On July
29, 2009 we sold 200,000 units to a single subscriber at a price of $0.50 per
unit or an aggregate of $100,000. Each unit consists of one share of
our common stock and a warrant to purchase one share of our common stock at a
price of $0.80 per share, subject to adjustment, for a period of three years
from issuance. The units were sold in reliance on Regulation S under
the Securities Act of 1933, as amended.
In
connection with our August 5, 2009 and August 12, 2009 Purchase Agreement with
Enercor, Inc. we issued 300,000 shares of our common stock effective August 5,
2009 and 300,000 shares of our common stock effective August 12,
2009. The shares were issued in reliance on Section 4(2) under the
Securities Act of 1933, as amended.
In
connection with our July 25, 2009 Purchase Agreement with Enercor, Inc.
effective July 31, 2009 we issued 4,147,237 shares of our common
stock. The shares were issued in reliance on Section 4(2) under the
Securities Act of 1933, as amended.
On August
31, 2009 we issued 153,508 shares of our restricted common stock to a former
officer and director in connection with an August 31, 2009 Settlement
Agreement. The shares were issued in reliance on Section 4(2) under
the Securities Act of 1933, as amended.
Effective
August 12, 2009 we sold 319,419 units to a single subscriber pursuant to a July
6, 2009 Share Purchase Agreement. Each unit consists of one share of
common stock and one common stock purchase warrant to purchase one additional
share of common stock at a price of $1.18 per share for a period of three years
from issuance. The units were issued in reliance on Section 4(2)
under the Securities Act of 1933, as amended.
19
Effective
September 22, 2009 we sold 600,000 units to a single subscriber pursuant to a
July 6, 2009 Share Purchase Agreement. Each unit consists of one
share of common stock and one common stock purchase warrant to purchase one
additional share of common stock at a price of $1.25 per share for a period of
three years from issuance. The units were issued in reliance on
Section 4(2) under the Securities Act of 1933, as amended.
ITEM 3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
None.
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
No
matters were submitted to a vote of our securityholders during the quarter ended
August 31, 2009. Subsequent to the period covered by this report
however, on September 8, 2009 our board of directors and shareholders holding
39,147,237 of our then outstanding shares (approximately 51.3%) approved an
amendment to our Articles of Incorporation to (i) change our name from Cobra Oil
& Gas Company to Viper Resources, Inc.; and (ii) increase our authorized
capitalization from 200,000,000 shares, consisting of 100,000,000 shares of
common stock, $0.00001 par value and 100,000,000 shares of preferred stock,
$0.00001 par value to 400,000,000 shares, consisting of 300,000,000 shares of
common stock $0.00001 par value and 100,000,000 shares of preferred stock,
$0.00001 par value. The amendment of our Articles of Incorporation
will not be effective until the Articles of Amendment are filed with and made
effective by the Nevada Secretary of State. We expect this to take place in
November 2009. The name change is being effected to resolve a name conflict with
a Texas corporation operating as Cobra Oil & Gas
Corporation. After the name change, we will continue to operate in
the same line of business and in the same manner that we are presently
operating.
ITEM 5.
|
OTHER
INFORMATION
|
Effective
September 22, 2009 Baden Energy Group Ltd. (“Baden”) purchased 600,000 units, at
our request, pursuant to our July 6, 2009 Share Purchase Agreement with Baden at
a price of $1.00 per unit or an aggregate of $600,000. Each unit
consists of one share of our common stock and one common stock purchase warrant
to purchase one additional share of our common stock at a price of $1.25 per
share for a period of three years from issuance.
On August
31, 2009 we entered into a Settlement Agreement (the “Agreement”) with Douglas
Berry, a former officer and director, whereby we settled our outstanding debt to
Mr. Berry in the amount of $125,262.45 through the issuance of 153,508 shares of
our restricted common stock. The debt was the result of loans made to
us by Mr. Berry in the aggregate amount of $110,625 and the resulting interest
of $14,637.45 due thereon. The shares were valued at $0.816 per share
which represented a 20% discount to the closing price of our common stock on the
date of the Agreement.
20
Effective
August 12, 2009 Baden Energy Group Ltd. (“Baden”) purchased 319,419 units, at
our request, pursuant to our July 6, 2009 Share Purchase Agreement with Baden at
a price of $0.94 per unit or an aggregate of $300,000. Each unit
consists of one share of our common stock and one common stock purchase warrant
to purchase one additional share of our common stock at a price of $1.18 per
share for a period of three years from issuance.
On August
12, 2009 we entered into a Purchase Agreement with Enercor, Inc., a Nevada
corporation (“Enercor”). Therein we acquired a 62.5% working interest
in a lease covering 640 acres in Uintah County, Utah (Lease UTU –
27413). The lease is subject to aggregate royalties of
18.25%. The lease provides for conventional oil and gas
drilling. We intend to apply to the Bureau of Land Management for the
issuance of a Combined Hydrocarbon Lease on the property which will allow us to
also engage in tar sands extraction activity. The lease is adjacent
to the leases which are the subject of our July 25, 2009 and August 5, 2009
Purchase Agreements with Enercor. We paid Enercor 300,000 shares of
our common stock for the working interest.
On August
5, 2009 we entered into a Purchase Agreement with Enercor, Inc., a Nevada
corporation (“Enercor”). Therein we acquired a 37.5% working interest
in a lease covering 640 acres in Uintah County, Utah (Lease UTU –
38076). The lease is subject to aggregate royalties of
18.25%. The lease provides for conventional oil and gas
drilling. We intend to apply to the Bureau of Land Management for the
issuance of a Combined Hydrocarbon Lease on the property which will allow us to
also engage in tar sands extraction activity. The lease is adjacent
to the leases which are the subject of our July 25, 2009 and August 12, 2009
Purchase Agreements with Enercor. We paid Enercor 300,000 shares of
our common stock for the working interest.
On July
25, 2009 we entered into a Purchase Agreement with Enercor, Inc., a Nevada
corporation (“Enercor”). Therein we acquired a 35% – 40% interest in
certain contract rights acquired by Enercor as the successor to an agreement
(the “Tar Sand Rights Agreement”) granting rights to extract tar sand deposits
pursuant to Combined Hydrocarbon Leases (“CHL’s”) to be issued by the Bureau of
Land Management (“BLM”) covering approximately 33,632 acres of land in Southern
Uintah County, Utah. The issuance of the CHL’s is subject to
regulatory requirements including, but not limited to, approvals of operating
plans and environmental impact studies. If the CHL’s are issued, the
right to develop the tar sand deposits covered by the CHL’s will be assigned to
Enercor, subject to a reserved overriding royalty and subject to certain
third-party consent rights discussed below, and Enercor will, in turn, assign a
35% – 40% working interest in the tar sand deposit development rights granted by
the CHL’s to us. The Tar Sand Rights Agreement requires the approval
of the other contracting party to the assignment to and by Enercor of the tar
sand deposit rights (the “Contract Approval”). We expect the BLM to
issue the CHL’s upon the satisfactory completion of all regulatory requirements,
expect the Contract Approval to be granted and hope to be able to commence tar
sand extraction in approximately 10 months. No assurance can be
given, however, as to when and if the Contract Approval and Combined Hydrocarbon
Leases will be granted and if granted, when we would be able to commence tar
sand extraction activities.
21
We are
required to pay Enercor an aggregate of up to $5,000,000 for the contract
interest in a combination of cash ($500,000 to $1,000,000) and shares of our
restricted common stock ($4,000,000). The stock payment consisting of
4,147,237 shares of our common stock was made on July 31, 2009 (the “Initial
Closing Date”). The cash payments, each in the amount of $100,000 are
required to be made at 30 day intervals following the Initial Closing
Date. To date we have made $300,000 in cash payments. We
have the option to limit our aggregate cash payments to $500,000. To
the extent we do so, we will acquire less than a 40% interest in the contract
rights and receive an assignment, if applicable, of less than a 40% working
interest.
On July
6, 2009 we entered into a Share Issuance Agreement (the “Agreement”) with Baden
Energy Group Ltd. (“Baden”) pursuant to which Baden may, at our request,
purchase units of our securities at a price equal to 80% of the volume weighted
average of the closing price for our common stock for the ten business days
immediately preceding the date we supply Baden with written notice of our
request that they purchase units (the “Unit Price”). Each unit will
consist of one share of our restricted common stock and one common stock
purchase warrant to purchase one share of our common stock for a period of three
years from issuance at an exercise price equal to 125% of the Unit
Price. Each such request by us must be in the amount of not less than
$100,000 of units and must be in multiples of $100,000. We must use
the proceeds from all unit sales for exploration activities, working capital and
general corporate activities. Baden may however, in its sole
discretion, refuse to act on any request by us due to its determination that
market conditions are unfavorable.
The
Agreement is in effect until July 6, 2010 and is subject to extension for an
additional six month term at the option of either party by providing the other
party with written notice thereof prior to July 6, 2010. During the
term of the Agreement, as such may be extended, we may sell up to $6,000,000 of
units to Baden, which amount may be increased by Baden, in its discretion, to
$10,000,000.
During
the period ending July 5, 2010, we may not discuss, solicit, negotiate or engage
in any investment or corporate financing agreements without the prior written
consent of Baden, which consent will not be arbitrarily
withheld. Further, Baden has a right of first refusal during such
period on all of our proposed financings with third parties. The
foregoing right of Baden to prohibit our discussion, solicitation, negotiation
or engagement in investment or corporate financing agreements or to maintain a
right of first refusal will be of no further force or effect, however, should
Baden refuse a unit purchase request from us by reason of unfavorable market
conditions.
The
Agreement further provides that until July 6, 2010 we may only engage in equity
financings and may not engage in debt financings. The Agreement is
not assignable or transferrable by Baden without our prior written consent,
which consent may not be arbitrarily withheld.
ITEM 6.
|
EXHIBITS
|
(a)
|
Exhibits.
|
|
10.1
|
Settlement
Agreement effective September 8, 2009 between Registrant and Cobra Oil
& Gas Corporation
|
|
31.1/31.2
|
Rule
13(a)-14(a)/15(d)-14(a) Certification of Principal Executive and Financial
Officer
|
|
32.1/32.2
|
Rule
1350 Certification of Chief Executive and Financial
Officer
|
22
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
COBRA
OIL AND GAS COMPANY
|
||
Dated: October
14, 2009
|
By:
|
/s/
Massimiliano Pozzoni
|
Massimiliano
Pozzoni
|
||
President,
Chief Executive and
|
||
Accounting
Officer
|
23