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EX-32.1 - HK EBUS Corp | v207854_ex32-1.htm |
EX-31.1 - HK EBUS Corp | v207854_ex31-1.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 November 30, 2010
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
Viper Resources, Inc.
|
||
(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)
|
||
(Former
Name, if Changed Since Last
Report)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ¨ No
¨
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
January 10, 2011 there were 84,116,214 shares of the issuer’s common stock, par
value $0.00001, outstanding.
VIPER
RESOURCES, INC.
FORM
10-Q
FOR
THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2010
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
|
18
|
Item
4
|
Controls
and Procedures
|
18
|
PART
II - OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
18
|
Item
1A.
|
Risk
Factors
|
18
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
18
|
Item
3.
|
Defaults
Upon Senior Securities
|
19
|
Item
4.
|
(Removed
and Reserved)
|
19
|
Item
5.
|
Other
Information
|
19
|
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 November 30, 2010 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 November 30, 2010 (Unaudited) and May 31,
2010
|
5
|
|
Statements
of Operations for the three and six months ended
|
||
November
30, 2010 and November 30, 2009 (Unaudited) and the period
from
|
||
November
18, 2005 (inception) through November 30, 2010 (Unaudited)
|
6
|
|
Statements
of Cash Flows for the six months ended
|
||
November
30, 2010 and November 30, 2009(Unaudited) and the period
from
|
||
November
18, 2005 (inception) through November 30, 2010 (Unaudited)
|
7
|
|
Notes
to Financial Statements
|
|
8 -
12
|
4
VIPER
RESOURCES, INC.
(formerly
Cobra Oil and Gas Company)
(An
Exploration Stage Company)
BALANCE
SHEET
November
30,
|
May
31,
|
|||||||
2010
|
2010
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
|
$ | 174,363 | $ | 202,557 | ||||
Total
current assets
|
174,363 | 202,557 | ||||||
Property
and equipment
|
||||||||
Office
equipment net of $724 and $434 depreciation
|
2,172 | 2,462 | ||||||
Oil
and gas properties, non producing, full cost method
|
96,000 | 96,000 | ||||||
Total
property and equipment
|
98,172 | 98,462 | ||||||
Other
assets
|
||||||||
Prepaid
expenses
|
- | 20,000 | ||||||
Total
other assets
|
- | 20,000 | ||||||
Total
Assets
|
$ | 272,535 | $ | 321,019 | ||||
LIABILITIES
& STOCKHOLDERS' EQUITY
|
||||||||
Current
Liabilities
|
||||||||
Accounts
payable and accrued liabilities
|
$ | 1,410 | $ | 2,050 | ||||
Due
to related party
|
100 | 1,510 | ||||||
Total
current liabilities
|
1,510 | 3,560 | ||||||
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; 84,116,214
issued and outstanding at November 30, 2010 and 79,116,214 issued and
outstanding at May 31, 2010
|
841 | 791 | ||||||
Additional
paid-in capital
|
6,743,372 | 6,643,422 | ||||||
Deficit
accumulated during the exploration stage
|
(6,473,188 | ) | (6,326,754 | ) | ||||
Total
Stockholders' Equity
|
271,025 | 317,459 | ||||||
Total
Liabilities and Stockholders' Equity
|
$ | 272,535 | $ | 321,019 |
5
VIPER
RESOURCES, INC.
(formerly
Cobra Oil and Gas Company)
(An
Exploration Stage Company)
STATEMENTS
OF OPERATIONS
November
18,
|
||||||||||||||||||||
2005
(Inception)
|
||||||||||||||||||||
Through
|
||||||||||||||||||||
Three
Months Ended November 30,
|
Six
Months Ended November 30,
|
November
30,
|
||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
2010
|
||||||||||||||||
Revenue
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Expenses
|
||||||||||||||||||||
Advertising
|
- | 1,495 | ||||||||||||||||||
Accounting
|
1,300 | 4,250 | 7,350 | 8,300 | 52,765 | |||||||||||||||
Bank
Charges
|
45 | 821 | 210 | 1,675 | 7,352 | |||||||||||||||
Delay
rentals
|
- | 2,944 | ||||||||||||||||||
Depreciation
|
145 | 145 | 290 | 145 | 724 | |||||||||||||||
Directors
fees
|
- | 12,500 | 17,000 | |||||||||||||||||
Exploration
costs
|
- | - | 129,885 | |||||||||||||||||
Insurance
|
5,000 | 10,000 | 20,000 | 10,000 | 60,000 | |||||||||||||||
Legal
|
7,500 | 77,718 | 32,413 | 100,551 | 322,905 | |||||||||||||||
Office
expense
|
1,064 | 7,946 | 2,665 | 11,176 | 27,666 | |||||||||||||||
Rent
|
4,140 | 6,000 | 8,219 | 12,739 | 67,593 | |||||||||||||||
Telephone
|
601 | 1,326 | 1,320 | 1,747 | 10,401 | |||||||||||||||
Transfer
agent
|
507 | 760 | 950 | 760 | 24,117 | |||||||||||||||
Travel
|
- | 10,543 | 10,543 | 37,982 | ||||||||||||||||
Management
services
|
30,000 | 30,000 | 60,000 | 75,000 | 308,100 | |||||||||||||||
Write
downs - oil and gas properties
|
5,243,871 | |||||||||||||||||||
Website/investor
communications
|
8,018 | 31,225 | 13,017 | 99,056 | 141,362 | |||||||||||||||
Total
expenses
|
58,320 | 180,734 | 146,434 | 344,192 | 6,456,162 | |||||||||||||||
Loss
from operations
|
(58,320 | ) | (180,734 | ) | (146,434 | ) | (344,192 | ) | (6,456,162 | ) | ||||||||||
Other income (expense) | ||||||||||||||||||||
(Interest)
|
- | - | - | (1,659 | ) | (17,026 | ) | |||||||||||||
Income
(loss) before provision for income taxes
|
(58,320 | ) | (180,734 | ) | (146,434 | ) | (345,851 | ) | (6,473,188 | ) | ||||||||||
Provision
for income tax
|
- | - | - | - | - | |||||||||||||||
Net
income (loss)
|
$ | (58,320 | ) | $ | (180,734 | ) | $ | (146,434 | ) | $ | (345,851 | ) | $ | (6,473,189 | ) | |||||
Net income (loss) per share | ||||||||||||||||||||
(Basic
and fully diluted)
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||||||
Basic
weighted average number of common shares outstanding
|
83,491,214 | 78,384,884 | 83,491,214 | 78,384,884 | ||||||||||||||||
Fully
diluted average number of common shares outstanding
|
83,491,214 | 78,384,884 | 83,491,214 | 78,384,884 |
6
VIPER
RESOURCES, INC.
(formerly
Cobra Oil and Gas Company)
(An
Exploration Stage Company)
STATEMENTS
OF CASH FLOWS
November
18,
|
||||||||||||
2005
(Inception)
|
||||||||||||
Six
Months Ended
|
Through
|
|||||||||||
November
30,
|
November
30,
|
|||||||||||
2010
|
2009
|
2010
|
||||||||||
Cash
Flows From Operating Activities
|
||||||||||||
Net
income (loss) during the exploration stage
|
(146,434 | ) | (345,850 | ) | (6,473,189 | ) | ||||||
Adjustments
to reconcile net loss to net cash provided by (used for) operating
activities:
|
||||||||||||
Donated
office space and services
|
- | - | 13,500 | |||||||||
Non-cash
expenses
|
||||||||||||
Depreciation
|
289 | 145 | 723 | |||||||||
Compensatory
stock issuances
|
- | 12,500 | 17,000 | |||||||||
Changes
in operating assets and liabilities
|
||||||||||||
Accounts
payable and accrued liabilities
|
(2,050 | ) | (391 | ) | 9,808 | |||||||
Other
assets
|
20,000 | (50,000 | ) | - | ||||||||
Exploration
costs - lease write downs
|
- | - | 5,243,871 | |||||||||
Net
cash provided by (used for) operating activities
|
(128,195 | ) | (383,596 | ) | (1,188,287 | ) | ||||||
Cash
Flows From Investing Activities:
|
||||||||||||
Fixed
assets
|
- | (2,896 | ) | (2,896 | ) | |||||||
Oil
and gas properties
|
- | (400,000 | ) | (691,871 | ) | |||||||
Net
cash flows from investing activities
|
- | (402,896 | ) | (694,767 | ) | |||||||
Cash
Flows From Financing Activities:
|
||||||||||||
Sale
of common stock
|
100,000 | 1,150,000 | 1,940,450 | |||||||||
Increase
in due to related party
|
- | - | 116,966 | |||||||||
Net
cash provided by (used for) financing activities
|
100,000 | 1,150,000 | 2,057,416 | |||||||||
Net
Increase (Decrease) in Cash
|
(28,195 | ) | 363,508 | 174,362 | ||||||||
Cash
at Beginning of Period
|
202,557 | 21,072 | - | |||||||||
Cash
at End of Period
|
$ | 174,362 | $ | 384,580 | $ | 174,362 | ||||||
Schedule of Non-Cash Investing and Financing
Activities
|
||||||||||||
In
fiscal year 2010 the Company paid cash of $500,000 and issued
4,747,227 common shares
valued
at $4,648,000 in exchange for oil and gas
properties valued at $5,148,000.
The
Company issued 153,508 common shares for debt relief of
$125,263.
|
||||||||||||
Supplemental Disclosure
|
||||||||||||
Cash
paid for interest
|
$ | - | $ | - | $ | - | ||||||
Cash
paid for income taxes
|
$ | - | $ | - | $ | - |
7
VIPER
RESOURCES, INC.
(formerly
Cobra Oil and Gas Company)
(An
Exploration Stage Company)
NOTES
TO THE FINANCIAL STATEMENTS
November
30, 2010
NOTE
1.
|
ORGANIZATION,
OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
|
Viper
Resources, Inc. formerly Cobra Oil and 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 and has no significant
operations.
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.
Income
Tax
The
Company accounts for income taxes under Accounting Standards Codified No. 740
(“ASC 740”). Under ASC 740 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.
8
VIPER
RESOURCES, INC.
(formerly
Cobra Oil and Gas Company)
(An
Exploration Stage Company)
NOTES
TO THE FINANCIAL STATEMENTS
November
30, 2010
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.
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.
9
VIPER
RESOURCES, INC.
(formerly
Cobra Oil and Gas Company)
(An
Exploration Stage Company)
NOTES
TO THE FINANCIAL STATEMENTS
November
30, 2010
Stock
based compensation
The
Company accounts for employee and non-employee stock awards under ASC 718,
whereby equity instruments issued to employees for services are recorded based
on the fair value of the instrument issued and those issued to non-employees are
recorded based on the fair value of the consideration received or the fair value
of the equity instrument, whichever is more reliably measurable.
NOTE
2.
|
OIL
AND GAS PROPERTIES
|
The
Company expensed $180,000 in Montana leases to exploration costs in fiscal year
May 2010. This was due to an option expiration that was not
exercised.
During
the fiscal year ended May 2010 the Company has entered into working interest
purchase agreements with Enercor, Inc. (a Nevada Corporation) with respect to
three leases. The first of these gives the Company the right to receive a 35%
working interest in the “Tar Sands” components of lease acreage, covering
approximately 33,632 acres located in Southern Uintah County Utah, when and if
exploration permission is granted by the U S Bureau of Land Management. The
transaction was originated in July of 2009 with a value of $4,500,000 consisting
of $4,000,000 in stock and $500,000 cash. Due to lack of action on the part of
the U S Bureau of Land Management, and the current degree of uncertainty with
regard to tar sand extraction techniques as applied to the Company’s lease
holdings, the lease was written down to a value of $0 as of the end of the May
2010 fiscal year.
The
second of these leases is a State of Utah BLM lease in which other parties
retain a 62.5% working interest. We have received a 37.5% working interest from
Enercor, Inc. 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 lease was acquired in August of 2009
and valued at $336,000 and was bought through the issuance of Company stock. At
the May 2010 fiscal year end the fair market value was determined to be $36,000,
with the Company taking a write down expense of $300,000.
The third
of these leases is a State of Utah BLM lease in which other parties retain a
37.5% residual working interest after our purchase of a 62.5% working interest
from Enercor. This lease has oil and gas drilling rights and we are seeking
approval for the tar sands also. This lease was acquired in July of 2009 through
the issuance of Company stock valued at $312,000. At the May 2010 fiscal year
end the fair market value was determined to be $60,000, with the Company taking
a write down expense of $252,000.
The
acquisition of each of these leases was accomplished primarily through the
issuance of new shares of Company common stock.
NOTE
3.
|
RELATED
PARTY TRANSACTIONS
|
During
the year ended May 31, 2010, 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 $125,263 which includes $110,625 in principal
and $14,638 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.
10
VIPER
RESOURCES, INC.
(formerly
Cobra Oil and Gas Company)
(An
Exploration Stage Company)
NOTES
TO THE FINANCIAL STATEMENTS
November
30, 2010
The chief
executive officer of Enercor, Inc. a company from which Viper Resources, Inc.
purchased various lease interest in fiscal year 2010 for $5,148,000, formerly
sat on the advisory board of Viper Resources, Inc. and is a shareholder in the
Company.
NOTE
4.
|
OFFICE
LEASE
|
In May
2008 the Company entered into a one year office lease, automatically renewable
each year for one year until terminated by the landlord or tenant, at a rate of
$2,000 per month plus costs. Lease expenses recorded under this lease in 2010
and 2009 were approximately $24,000 each year. The minimum required payments
under the lease for fiscal year end 2011 are approximately $24,000.
NOTE
5.
|
WARRANTS
|
At May
31, 2008 the Company had 1,000,000 common stock purchase warrants outstanding,
originally sold as part of a unit, allowing the holder to purchase one share of
common stock at an exercise price of $.40, anytime through May 15, 2011. In
fiscal year 2009 the Company sold 1,000,000 units to an investor for cash at
$.25 per unit, or $250,000 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, anytime through June 9, 2011. At May 31, 2009 none of the
warrants had been exercised, leaving a yearend balance of 2,000,000 warrants.
The entire value of the units of $250,000 was assigned to the common stock as
the warrants are non-detachable.
In fiscal
year 2010 the Company sold 2,025,209 units to investors for cash at prices from
$.17 - $1.00 per unit, or $1,250,000 total. Each unit consists of one share of
common stock, and one warrant to purchase one share of common stock at an
exercise prices ranging from $.20 - $1.25, anytime through expiration dates from
June 2012 through February 2013. The entire value of the units was assigned to
the common stock as the warrants are non-detachable. At May 31, 2010 none of the
warrants had been exercised or had expired, leaving a yearend balance of
4,025,209 warrants.
During
the quarter ended August 31, 2010 the Company sold 5,000,000 units to investors
at a price of $0.02 per unit for a total of $100,000. Each unit consists of one
share of common stock, and one warrant to purchase one share of common stock at
an exercise price of $0.025, anytime through expiration date of July 2013. The
entire value of the units was assigned to the common stock as the warrants are
non-detachable. At November 30, 2010 none of the warrants had been exercised or
had expired, leaving a quarter end balance of 9,025,209
warrants.
11
VIPER
RESOURCES, INC.
(formerly
Cobra Oil and Gas Company)
(An
Exploration Stage Company)
NOTES
TO THE FINANCIAL STATEMENTS
November
30, 2010
NOTE
6.
|
INCOME
TAX
|
The
Company accounts for income taxes pursuant to ASC 740 (“ASC 740”). Under ASC 740
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, 2010 and 2009 the Company had net operating loss carryforwards of
approximately $6,313,000 and $520,000 which begin to expire in 2026. The
deferred tax asset of approximately $2,210,000 and $180,000 in 2010 and 2009
created by the net operating losses have been offset by a 100% valuation
allowance. The change in the valuation allowance in 2010 and 2009 was $2,030,000
and $100,000.
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 August 31, 2010 relating to the Company’s oil and gas activities are as
follows:
Unproved
properties, Utah, net
|
$ | 96,000. |
Capitalized
costs at May 31, 2010 relating to the Company’s oil and gas activities are as
follows:
Unproved
properties, Utah, net
|
$ | 96,000. |
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 November 30, 2010
or the fiscal year ended May 31, 2010. 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 August 10, 2010, 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 $6,473,188 and $6,326,754
as of November 30, 2010 and May 31, 2010, 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.
On 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 (see Part II, 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 find 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.
Subject
to receipt of necessary financing, we plan to spend approximately $1,000,000 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.
13
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.
Results
of Operations
Revenues
We have
had no revenues since our inception.
14
Expenses
Three and Six Months Ended
November 30, 2010 and 2009
Due
principally to lower legal, travel and website/investor communication expenses,
our operating expenses during the three and six months ended November 30, 2010
decreased to $58,320 and $146,434 from $180,733 and $344,191 during the three
and six months ended November 30, 2009.
Net Loss
Three and Six Months Ended
November 30, 2010 and 2009
We
incurred net losses for the three and six months ended November 30, 2010 of
$58,320 and $146,434, respectively. We incurred net losses for the
three and six months ended November 30, 2009 of $180,733 and $345,850,
respectively. The decrease in net loss was directly attributable to
the decrease in our operating expenses.
Liquidity
and Capital Resources
At
November 30, 2010, we had working capital of $172,853 compared to working
capital of $198,997 at May 31, 2010. Current liabilities decreased to
$1,510 at November 30, 2010 from $3,560 at May 31, 2010. The decrease
in current liabilities at November 30, 2010 compared to May 31, 2010 was due to
decreases in accounts payable and accrued liabilities and amounts due to related
parties. Current assets decreased to $174,383 at November 30, 2010
from $202,557 at May 31, 2010. The decrease in current assets at November 30,
2010 compared to May 31, 2010 was due to a decrease 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.
16
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 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.
17
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Not
applicable.
ITEM
4.
|
CONTROLS
AND PROCEDURES
|
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 November 30, 2010 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
|
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. We are not presently a party to nor are we aware of any existing,
pending or threatened lawsuits or other legal actions involving us.
ITEM
1A.
|
RISK
FACTORS
|
Not
applicable.
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
We made
no sales of equity securities during the three months ended November 30,
2010.
18
ITEM
3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
None.
ITEM
4.
|
(REMOVED
AND RESERVED)
|
ITEM
5.
|
OTHER
INFORMATION
|
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 “Property”). 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 was to
be assigned to Enercor, subject to a reserved overriding royalty and certain
third party consent rights, and Enercor was to, in turn, assign a 35% – 40%
working interest (the “Working Interest”) in the tar sand deposit development
rights granted by the CHL’s to us. The Tar Sand Rights Agreement
required the approval of the other contracting party to the assignment to and by
Enercor of the tar sand deposit rights (the “Contract Approval”). On
December 8, 2009 the other contracting party to the Tar Sand Rights Agreement
entered into a Tar Sands Acquisition Agreement (the “Tar Sands Acquisition
Agreement”) with Enercor pursuant to which it assigned to Enercor the existing
federal oil and gas leases on the Property (the “Leases”), any CHL’s that may be
subsequently issued on the Property, and all of such other contracting party’s
rights in such Leases and CHL’s in exchange for $80,000, representing payment of
certain out-of-pocket and legal fees incurred by such party in connection with
the CHL conversion process, and a reserved overriding royalty. Upon
the closing under the Tar Sands Acquisition Agreement, the Tar Sand Rights
Agreement, including the Contract Approval requirement thereunder, was deemed
void and of no further effect, Enercor owned the Leases and other rights
described above, and Enercor now has standing to deal directly with the BLM in
connection with the request to the BLM to issued CHL’s on the Property.
Accordingly, when and if CHL’s are issued on the Property, they will be issued
directly to Enercor and Enercor will be required to assign the Working Interest
in the tar sands deposits to us without the necessity of first obtaining third
party approval. The grant of the CHL’s to Enercor remains subject to
satisfactory completion of all regulatory requirements. We expect the BLM to
issue the CHL’s but can offer no assurance as to when and if this will
occur.
We were
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
were required to be made at 30 day intervals following the Initial Closing
Date. We determined to limit our aggregate cash payments to $500,000,
all of which have been made, and receive an assignment, if applicable, of a 35%
working interest.
19
On
December 29, 2009 we agreed to restructure our arrangement with Enercor from a
purchase and sale arrangement to a joint venture arrangement for the joint
development of the Property’s tar sand deposits. During the quarter
ended February 28, 2010 we and Enercor determined to forgo the restructuring and
leave the transaction as a purchase and sale arrangement. The determination to
leave the transaction as a purchase and sale arrangement had no material effect
on our rights in the Property or our transaction costs.
On August
5, 2009 we entered into a Purchase Agreement with 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 August
12, 2009 we entered into a Purchase Agreement with 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 July
6, 2009 we entered into a Share Issuance Agreement (the “Share Issuance
Agreement”) with Baden Energy Group Ltd. (“Baden”) pursuant to which Baden
could, 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 supplied Baden with written
notice of our request that they purchase units (the “Unit
Price”). Each unit purchased consisted 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 was required
to be in the amount of not less than $100,000 of units and required to be in
multiples of $100,000. We were required to use the proceeds from all
unit sales for exploration activities, working capital and general corporate
activities. Baden could however, in its sole discretion, refuse to
act on any request by us due to its determination that market conditions were
unfavorable.
The Share
Issuance Agreement was in effect until July 6, 2010. During the term of the
Share Issuance Agreement, we were able to sell up to $6,000,000 of units to
Baden, which amount could be increased by Baden, in its discretion, to
$10,000,000.
20
During
the period ending July 6, 2010, we could not discuss, solicit, negotiate or
engage in any investment or corporate financing agreements without the prior
written consent of Baden, which consent could not be arbitrarily withheld.
Further, Baden had 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 was to be of no further force or effect, however, in the event Baden
refused a unit purchase request from us by reason of unfavorable market
conditions.
The Share
Issuance Agreement further provided that until July 6, 2010 we could only engage
in equity financings and could not engage in debt financings. The
Share Issuance Agreement was not assignable or transferrable by Baden without
our prior written consent, which consent could not be arbitrarily
withheld.
Effective
August 12, 2009 Baden purchased 319,419 units, at our request, pursuant to our
Share Issuance 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.
Effective
September 22, 2009 Baden purchased 600,000 units, at our request, pursuant to
our Share Issuance 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.
Effective
February 23, 2010 Baden purchased 606,060 units, at our request, pursuant to our
Share Issuance Agreement with Baden at a price of $0.165 per unit or an
aggregate of $100,000. 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 $0.20 per share for a period of three years from
issuance.
Notwithstanding
the July 6, 2010 termination of the Share Issuance Agreement, effective July 20,
2010 Baden purchased 5,000,000 units, at our request, at a price of $0.02 per
unit or an aggregate of $100,000. 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 $0.025 per share for a period of three years from
issuance. Baden has no further obligation to buy any of our securities and we do
not expect to be making additional sales of our securities to Baden in the
future.
21
On
January 28, 2010, we entered into an Investment Agreement (“Investment
Agreement”) with Dutchess Opportunity Fund, II, LP (the
“Investor”). Pursuant to the Investment Agreement, the Investor
committed to purchase up to $5,000,000 of our common stock over a period of
thirty-six months (the “Equity Line”). We may draw on the facility
from time to time, as and when we determine appropriate in accordance with the
terms and conditions of the Investment Agreement. The purchase price
shall be set at 94% of the highest posted bid price for our common stock during
the 5 consecutive trading day period beginning on the trading day immediately
following the date of delivery of the applicable put notice. The
amount that we are entitled to put in any one notice shall be equal to either
(i) 200% of the average daily trading volume for our common stock for the 3
trading days prior to the applicable put notice date, multiplied by the average
of the 3 daily closing prices immediately preceding the put date or (ii)
$100,000. The Investor will not be obligated to purchase shares
if the Investor’s total number of shares beneficially held at that time would
exceed 4.99% of the number of shares of our common stock as determined in
accordance with Rule 13d-1 of the Securities Exchange Act of 1934, as
amended. In addition, we are not permitted to draw on the facility
unless there is an effective registration statement to cover the resale of the
shares.
Pursuant
to the terms of a Registration Rights Agreement dated January 28, 2010 between
us and the Investor, on February 25, 2010 we filed a registration statement (the
“Registration Statement”) with the SEC to register the resale by the Investor of
up to 25,000,000 shares of the common stock underlying the Investment
Agreement. On April 6, 2010 we filed Amendment No. 1 to the
Registration Statement and pursuant to a cut-back comment from the SEC Staff,
reduced the number of shares being registered under the Registration Statement
to 14,500,000. On June 1, 2010 we withdrew the registration statement and filed
a new registration statement on June 2, 2010 under which we are seeking to
register 14,705,000 shares. We are obligated to use all commercially reasonable
efforts to have the registration statement declared effective as soon as
possible.
ITEM
6.
|
EXHIBITS
|
(a)
|
Exhibits.
|
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.
VIPER RESOURCES, INC. | ||
Dated: January
10, 2011
|
By:
|
/s/ Massimiliano Pozzoni
|
Massimiliano
Pozzoni
|
||
President,
Chief Executive, Financial
|
||
and
Accounting
Officer
|
23