GB SCIENCES INC - FORM 10-K

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EX-31.1 - GB SCIENCES INC	v228172_ex31-1.htm
EX-31.2 - GB SCIENCES INC	v228172_ex31-2.htm
EX-32.2 - GB SCIENCES INC	v228172_ex32-2.htm
EX-32.1 - GB SCIENCES INC	v228172_ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

FORM 10-K

__________________________

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended March 31, 2011

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

For the transition period from __________ to ___________

Commission file number: 333-82580

SIGNATURE EXPLORATION AND PRODUCTION CORP.

(Exact name of registrant as specified in its charter)

____________________

Delaware

(State or other Jurisdiction of Incorporation or Organization)

59-3733133

(IRS Employer I.D. No.)

___________________________

3200 Southwest Freeway, Ste 3300

Houston, TX 77027

Phone: (888) 895-3594

Fax: (888) 800-5918

(Address and telephone number of

principal executive offices)

___________________________

Securities registered under Section 12 (b) of the Exchange Act:

Title of each class		Name of each exchange on which registered
None		None

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

$0.0001 Par Value Common Stock
Title of Class

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No ü

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No ü

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 ü No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

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

Large accelerated filer Accelerated filer

Non-accelerated filer Smaller reporting company ü

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes No ü

The aggregate market value of the voting stock held by non-affiliates of the registrant on June 30, 2011, the last business day of the registrant’s most recently completed first quarter, based on the closing price on that date of $0.189 on the Over the Counter Bulletin Board, was approximately $636,000.

Documents Incorporated by Reference

None

SIGNATURE EXPLORATION AND PRODUCTION CORP.

FORM 10-K

TABLE OF CONTENTS

PART I			1

	ITEM 1.	DESCRIPTION OF BUSINESS	1
	ITEM 1A.	RISK FACTORS	3
	ITEM 1B.	UNRESOLVED STAFF COMMENTS	7
	ITEM 2.	PROPERTY	7
	ITEM 3.	LEGAL PROCEEDINGS	7
	ITEM 4.	SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS	7

PART II			7

	ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	7
	ITEM 6.	SELECTED FINANCIAL DATA	11
	ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANICAL CONDITION AND RESULTS OF OPERATION	11
	ITEM 7A.	QUANTITIATIVE AND QUALITATIVE DISCLOSERS ABOUT MARKET RISK	15
	ITEM 8.	FINANCIAL STATEMENTS	15
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES	15
	ITEM 9A.	CONTROLS AND PROCEDURES	15
	ITEM 9B.	OTHER INFORMATION	17

PART III			17

	ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE	17
	ITEM 11.	EXECUTIVE COMPENSATION	19
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	19
	ITEM 13.	CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	20
	ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	20

PART IV			22

	ITEM 15.	EXHIBITS	22

Forward Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts are forward-looking statements. You can find many of these statements by looking for words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” or similar expressions used in this report.

These forward-looking statements are subject to numerous assumptions, risks and uncertainties. Factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by us in those statements include, among others, the following:

	●	the quality of our properties with regard to, among other things, the existence of reserves in economic quantities;
	●	uncertainties about the estimates of reserves;

	●	our ability to increase our production and oil and natural gas income through exploration and development;
	●	the number of well locations to be drilled and the time frame within which they will be drilled;

	●	the timing and extent of changes in commodity prices for natural gas and crude oil;
	●	domestic demand for oil and natural gas;

	●	drilling and operating risks;
	●	the availability of equipment, such as drilling rigs and transportation pipelines;

	●	changes in our drilling plans and related budgets;
	●	the adequacy of our capital resources and liquidity including, but not limited to, access to additional borrowing capacity; and

●

other factors discussed under Item 1A Risk Factors with the heading “Risks Related To Our Business”.

Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. You are cautioned not to place undue reliance on such statements, which speak only as of the date of this report.

PART I

ITEM 1.

DESCRIPTION OF BUSINESS

Company Background

Our company was incorporated in the State of Delaware on April 4, 2001, under the name of “Flagstick Ventures, Inc.” On March 28, 2008, a majority of our stockholders approved changing our name to Signature Exploration and Production Corp. as our business model had changed to becoming an independent energy company engaged in the acquisition and development of crude oil and natural gas leases in the United States. As of March 31, 2011, we have not yet generated revenues or incurred expenses related to the energy operations.

Our common stock is quoted for trading on the OTC Bulletin Board under the symbol SXLP.

Our principal executive offices are located at 3200 Southwest Freeway, Suite 3300, Houston, Texas, 77027. Our telephone number is (888) 898-3594.

Business Strategy

We intend to build our business through the acquisition of non-producing and producing oil and natural gas properties located in North America. The current landscape for acquiring oil and gas properties is quite challenging, and, at the same time, quite compelling. We will endeavor to identify the most attractive drillbit opportunities, while adhering to strict internal transaction and risk management guidelines and maintaining regard for both engineering and capital structure. We will strive to insure that incremental economics generate acceptable rates of return, thus creating significant value for our shareholders. By doing so, Signature expects to benefit from management's large proprietary deal flow, extensive industry contacts, and relationships within the energy financial community.

Our search for oil and gas properties has been initially directed towards small and medium-sized oil and natural gas opportunities, in order to minimize front-end dilution. We are presently seeking lower risk property interests, and those properties which exhibit multi-zone stacked pay, in order to mitigate drilling risk. In building our portfolio of oil and gas interests, we may include non-operated and operated projects. The following are some of our investment and/or drilling related criteria:

Developmental drilling in proved producing areas;

Scalable acreage position;

Availability of deeper pool opportunities; 

Stacked pay; 

Acceptable incremental drillbit economics, high internal rate of return via developmental drilling, recompletions and workovers.

Seasonality

The exploration for oil and natural gas reserves depends on access to areas where operations are to be conducted. Seasonal weather variations, including freeze-up and break-up affect access in certain circumstances. Natural gas is used principally as a heating fuel and for power generation. Accordingly, seasonal variations in weather patterns affect the demand for natural gas.

Markets

We are currently in the exploration stage and we have not generated revenues. We are not producing oil or gas and we have no customers. The availability of a ready market and the prices obtained for oil and gas produced depend on many factors, including the extent of domestic production and imports of oil and gas, the proximity and capacity of natural gas pipelines and other transportation facilities, fluctuating demand for oil and gas, the marketing of competitive fuels, and the effects of governmental regulation of oil and gas production and sales.

A ready market exists for domestic oil and gas through existing pipelines and transportation of liquid products. Whether there exists an international market depends upon the existence of international delivery systems and on political and pricing factors.

Competition

The strength of commodity prices has resulted in significantly increased industry operating cash flows and has led to increased drilling activity. This has increased competition for undeveloped lands; skilled personnel; access to drilling rigs, service rigs and other equipment; and access to processing and gathering facilities, all of which may cause drilling and operating costs to increase. Some of our competitors are larger than us and have substantially greater financial and marketing resources. In addition, some of our competitors may be able to secure products and services from vendors on more favorable terms, offer a greater product selection, and adopt more aggressive pricing policies than we can.

Government Regulation

Our operations will be subject to various types of regulation at the federal, state and local levels. Such regulation includes requiring permits for the drilling of wells; maintaining bonding requirements in order to drill or operate wells; implementing spill prevention plans; submitting notification and receiving permits relating to the presence, use and release of certain materials incidental to oil and gas operations; and regulating the location of wells, the method of drilling and casing wells, the use, transportation, storage and disposal of fluids and materials used in connection with drilling and production activities, surface usage and the restoration of properties upon which wells have been drilled, the plugging and abandoning of wells and the transporting of production.

Our operations will be also subject to various conservation matters, including the regulation of the size of drilling and of spacing units or proration units, the number of wells which may be drilled in each unit, and the unitization or pooling of oil and gas properties. In this regard, some states allow the forced pooling or integration of tracts to facilitate exploration while other states rely on voluntary pooling of lands and leases, which may make it more difficult to develop oil and gas properties. In addition, state conservation laws establish maximum rates of production from oil and gas wells, generally limit the venting or flaring of gas, and impose certain requirements regarding the ratable purchase of production. The effect of these regulations is to limit the amounts of oil and gas we may be able to produce from our wells and to limit the number of wells or the locations at which we may be able to drill.

Operations on properties in which we have an interest are subject to extensive federal, state and local environmental laws that regulate the discharge or disposal of materials or substances into the environment and otherwise are intended to protect the environment. Numerous governmental agencies issue rules and regulations to implement and enforce such laws, which are often difficult and costly to comply with and which carry substantial administrative, civil and criminal penalties and in some cases injunctive relief for failure to comply.

Some laws, rules and regulations relating to the protection of the environment may, in certain circumstances, impose “strict liability” for environmental contamination. These laws render a person or company liable for environmental and natural resource damages, cleanup costs and, in the case of oil spills in certain states, consequential damages without regard to negligence or fault. Other laws, rules and regulations may require the rate of oil and gas production to be below the economically optimal rate or may even prohibit exploration or production activities in environmentally sensitive areas. In addition, state laws often require some form of remedial action, such as closure of inactive pits and plugging of abandoned wells, to prevent pollution from former or suspended operations.

Legislation has been proposed in the past and continues to be evaluated in Congress from time to time that would reclassify certain oil and gas exploration and production waste as hazardous waste. If such reclassification is successful, it would make these wastes subject to much more stringent storage, treatment, disposal and clean-up requirements, which could have a significant adverse impact on operating costs. From time to time initiatives to further regulate the disposal of oil and gas wastes are also proposed in certain states and may include initiatives at the county, municipal and local government levels. These various initiatives could have a similar adverse impact on operating costs.

The regulatory burden of environmental laws and regulations increases our cost and risk of doing business and consequently affects our profitability. The federal Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, also known as the “Superfund” law, imposes liability, without regard to fault, on certain classes of persons with respect to the release of a “hazardous substance” into the environment. These persons include the current or prior owner or operator of the disposal site or sites where the release occurred and companies that transported, disposed or arranged for the transport or disposal of the hazardous substances found at the site. Persons who are or were responsible for releases of hazardous substances under CERCLA may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment and for damages to natural resources. It is not uncommon for the federal or state government to pursue such claims. The federal Environmental Protection Agency and various state agencies continue to promulgate regulations that limit the disposal and permitting options for certain hazardous and non-hazardous wastes.

It is also not uncommon for neighboring landowners and other third parties to file claims for personal injury or property or natural resource damages allegedly caused by the release of hazardous substances into the environment.

Employees

We currently have three employees. They are not covered by a collective bargaining agreement, nor have we experienced a strike or other adverse work stoppage due to organized labor.

ITEM 1A.

RISK FACTORS

Risks Specific to Our Company

We have limited operating funds, and our ability to continue as a going concern is dependent upon our ability to obtain additional capital to operate the business.

We have experienced net losses since April 4, 2001, which losses have caused an accumulated deficit of approximately $5,578,000 as of March 31, 2011. In addition, we have consumed net cash used in operating activities of approximately $ 184,000 and $542,000 for the years ended March 31, 2011 and 2010, respectively. We will require additional funds to sustain and expand our current business, and to continue implementing our business plan. Our lack of sufficient financing to implement our business plan, and our expectation to continue operating losses for the foreseeable future raises substantial doubt about our ability to continue as a going concern.

Our independent auditors have expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.

Our independent registered certified public accounting firm has issued its report, which includes an explanatory paragraph for going concern uncertainty on our financial statements as of March 31, 2011. Our ability to continue as a going concern is heavily dependent upon our ability to obtain additional capital to sustain operations. Currently, we have no commitments to obtain additional capital, and there can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all.

Since we are in the early stage of development and have a limited operating history, it may be difficult for you to assess our business and future prospects.

We have no history of revenues from oil and natural gas operations and have no significant tangible assets. We have yet to generate positive earnings and there can be no assurance that we will ever operate profitably. With this limited operating history our company must be considered in the exploration stage. Our success is significantly dependent on a successful acquisition, drilling, completion and production program. Our operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. We may be unable to locate recoverable reserves or operate on a profitable basis. We are in the exploration stage and potential investors should be aware of the difficulties normally encountered by enterprises in the exploration stage. If our business plan is not successful, and we are not able to operate profitably, investors may lose some or all of their investment in our company.

We will need additional capital, the availability of which is uncertain, to fund our business and complete the implementation of our business plan.

We will require additional financing in order to carry out our business plan. Such financing may take the form of the issuance of common or preferred stock or debt securities, or may involve bank financing. There can be no assurance that we will obtain such additional capital on a timely basis, on favorable terms, or at all. If we are unable to generate the required amount of additional capital, our ability to meet our financial obligations and to implement our business plan may be adversely affected.

As we have incurred losses since inception, we are not now, nor will we be in the foreseeable future, in a position to pay dividends on our issued and outstanding stock.

We have never declared or paid cash dividends on our capital stock and do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business.

Our management may be unable to effectively integrate future acquisitions and to manage our growth and we may be unable to fully realize any anticipated benefits of these acquisitions.

Our future results will depend in part on our success in implementing our growth and acquisition strategy. Our ability to implement this strategy will be dependent on our ability to identify, consummate and successfully assimilate acquisitions on economically favorable terms. In addition, acquisitions involve a number of special risks that could adversely affect our operating results, including the diversion of management’s attention, failure to retain key acquired personnel, risks associated with unanticipated events or liabilities, legal, accounting and other expenses associated with acquisitions, some or all of which could increase our operating costs, reduce our revenues and cause a material adverse effect on our business, financial condition and results of operations. We have no preliminary agreements or understandings to acquire or be acquired by a company as of the date of this prospectus.

Risks Specific to Our Industry

We face strong competition from larger oil and gas companies, which could harm our business and ability to operate profitably.

The exploration and production of oil and gas business is highly competitive. Other oil and gas companies will compete with us by bidding for exploration and production licenses and other properties and services that we will need to operate our business in the countries in which we expect to operate. This competition is increasingly intense as prices of oil and natural gas on the commodities markets have risen in recent years. Additionally, other companies engaged in our line of business may compete with us from time to time in obtaining capital from investors.

Oil and gas properties have limited lives and, as a result, we may seek to replace and expand our reserves through the acquisition of new properties. In addition, there is a limited supply of desirable oil and gas lands available in North America where we would consider conducting exploration and/or production activities. The major oil and gas companies are often better positioned to obtain the rights to exploratory acreage for which we may compete.

Competitors include larger, foreign owned companies, which, in particular, may have access to greater resources than us, may be more successful in the recruitment and retention of qualified employees and may conduct their own refining and petroleum marketing operations. These factors may give them a competitive advantage. Oil and natural gas exploration and development activities are dependent on the availability of drilling and related equipment, transportation, power and technical support in the particular areas and our access to these facilities may be limited due to high competition. Shortages and/or the unavailability of necessary equipment or other facilities will impair our activities, either by delaying our activities, increasing our costs or otherwise.

We may not be able to develop oil and gas reserves on an economically viable basis.

To the extent that we succeed in discovering oil and/or natural gas reserves at our future properties, we are not sure that these reserves will be capable of supporting production levels we project or in sufficient quantities to be commercially viable. These risks are more acute in the early stages of exploration. Our expenditures on exploration may not result in new discoveries of oil or natural gas in commercially viable quantities. It is difficult to project the costs of implementing an exploratory drilling program due to the inherent uncertainties of drilling in unknown formations, the costs associated with encountering various drilling conditions such as over pressured zones, tools lost in the hole, changes in drilling plans and locations as a result of prior exploratory wells or additional seismic data and interpretations thereof.

We may encounter operating hazards related to oil and gas exploration and production, which may result in substantial losses to our business and your investment.

We are subject to operating hazards normally associated with the exploration and production of oil and gas, including unexpected formations or pressures, premature declines of reservoirs, blowouts, sour gas release, explosions, craterings, pollution, earthquakes, labor disruptions, fires, pipeline ruptures, oil spills, the invasion of water into producing formations and other environmental hazards and risks. The occurrence of any such operating hazards could result in substantial losses to us due to injury or loss of life and damage to or destruction of oil and gas wells, formations, production facilities or other properties, which could result in substantial losses to our business.

Our business is subject to environmental legislation and any changes in such legislation could negatively affect our results of operations.

The oil and gas industry is subject to many laws and regulations which govern the protection of the environment, health and safety and the management, transportation and disposal of hazardous substances. These laws and regulations may require removal or remediation of pollutants and may impose civil and criminal penalties for violations. Some of the laws and regulations authorize the recovery of natural resource damages by the government, injunctive relief and the imposition of stop, control, remediation and abandonment orders.

The costs arising from compliance with environmental and natural resource laws and regulations may increase our costs of operations, as well as further restrict our operations. If the costs of such compliance exceeds what we may have budgeted for, our ability to earn revenues will be harmed. Any regulatory changes that impose additional environmental restrictions or requirements on us could adversely affect us through increased operating costs, which could have a material adverse effect on our results of operations.

Any oil and gas we may discover or produce may not be readily marketable at the time of production, delaying our ability to generate meaningful revenue.

Crude oil, natural gas, condensate and other oil and gas products are generally sold to other oil and gas companies, government agencies and other industries. Natural gas associated with oil production is often not marketable due to demand or transportation limitations and is often flared at the producing well site. Pipeline facilities do not exist in certain areas of exploration and, therefore, any actual sales of discovered oil and gas might be delayed for extended periods until such facilities are constructed.

Risks Related to Our Securities

Our common stock is subject to the “penny stock” rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:

that a broker or dealer approve a person's account for transactions in penny stocks; and

the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person's account for transactions in penny stocks, the broker or dealer must:

obtain financial information and investment experience objectives of the person; and

make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:

sets forth the basis on which the broker or dealer made the suitability determination; and

that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Future sales of shares may adversely impact the value of our stock

We will seek to raise additional capital through the sale of our common stock. Future sales of our common stock could cause the market price of our common stock to decline.

Possible issuance of additional shares may impact the price of our stock

Our Certificate of Incorporation authorizes the issuance of 250,000,000 shares of common stock. Approximately 88% of our authorized common stock remains un-issued as of June 30, 2011. Our Board of Directors has the power to issue any or all of such additional common stock without stockholder approval. Investors should be aware that any stock issuances might result in a reduction of the book value or market price, if any, of the then outstanding common stock. If we were to issue additional common stock, such issuance will reduce proportionate ownership and voting power of the other stockholders. Also, any new issuance of common stock may result in a change of control.

Our share price may be highly volatile.

The market prices of equity securities of small companies have experienced extreme price volatility in recent years not necessarily related to the individual performance of specific companies. Factors such as announcements by us, or our competitors concerning products, technology, governmental regulatory actions, other events affecting healthcare companies generally and general market conditions may have a significant impact on the market price of our shares and could cause it to fluctuate substantially.

If we complete future acquisitions, we may dilute existing stockholders by issuing more of our common stock or we may incur expenses related to debt and goodwill, which could reduce our earnings.

We may issue equity securities in future acquisitions that could be dilutive to our stockholders. We also may incur additional debt in future acquisitions. Interest expense on debt incurred to fund our acquisitions may significantly reduce our profitability. While goodwill and other intangible assets with indefinite lives are not amortized to expense under generally accepted accounting principles, we would be required to review all of these assets at regular intervals for impairment and to charge an appropriate amount to expense when we identify impairment. If we identify impairment and are required to write-off a significant portion of our intangible assets at one time, then there could be a material adverse impact on our stock price.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None

ITEM 2.

PROPERTY

Our executive offices are located at 3200 Southwest Freeway, Ste 3300, Houston, TX 77027.

ITEM 3.

LEGAL PROCEEDINGS

The Company is not a party to any pending legal proceedings nor is any of its property subject to pending legal proceedings.

ITEM 4.

SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable

Part II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is quoted on the OTC Bulletin Board under the symbol "SXLP".

For the periods indicated, the following table sets forth the high and low per share intra-day sales prices per share of common stock. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.

Fiscal Year 2011	High ($)		Low ($)
Fourth Quarter	$	0.15	$	0.10
Third Quarter	$	0.30	$	0.11
Second Quarter	$	0.30	$	0.10
First Quarter	$	0.83	$	0.26
Fiscal Year 2010
Fourth Quarter	$	1.55	$	0.46
Third Quarter	$	1.01	$	0.25
Second Quarter	$	0.25	$	0.08
First Quarter	$	1.10	$	0.05

Dividends and Dividend Policy

We have never declared or paid cash dividends on our common stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance the expansion of our business and for general corporate purposes. We cannot assure you that we will pay dividends in the future. Our future dividend policy is within the discretion of our Board of Directors and will depend upon various factors, including our results of operations, financial condition, capital requirements and investment opportunities.

Recent Sales of Unregistered Securities

March 2011 Convertible Notes and Warrants

During March 2011, the Company entered into two Convertible Note Agreements ("Notes") for a total of $70,590. The Company received aggregate proceeds of $60,000 reflecting a 15% original issue discount to the Note holders and a nominal rate of 16.63%.

The Notes are due in March 2012. The note holders may convert any portion of the Notes that are outstanding, whether such portion represents principal or interest, into shares of common stock of the Company at a price equal to $0.10. The Notes include an anti-dilution adjustment that may not be adjusted below $0.01.

Simultaneously with the issuance of these Notes, the Company issued to each Note holder a 5-year warrant (the "Warrant") to purchase 705,900 shares of common stock of the Company. The Warrant is exercisable at a price equal to $0.15. The Warrants include an anti-dilution adjustment that may not be adjusted below $0.01.

The note holder will only be allowed to convert shares or exercise warrants or portion thereof to the extent that, at the time of the conversion or exercise, the conversion or exercise will not result in the note holder beneficially owning more than 9.9% of the issued and outstanding common shares of the Company.

August 2010 Convertible Notes and Warrants

During August 2010, the Company entered into two Convertible Note Agreements ("Notes") for a total of $58,824. The Company received aggregate proceeds of $50,000 reflecting a 15% original issue discount to the Note holders and a nominal rate of 16.63%.

The Notes are due in August 2011. The note holders may convert any portion of the Notes that are outstanding, whether such portion represents principal or interest, into shares of common stock of the Company at a price equal to $0.10. The Notes include an anti-dilution adjustment that may not be adjusted below $0.01.

Simultaneously with the issuance of these Notes, the Company issued to each Note holder a 5-year warrant (the "Warrant") to purchase 588,240 shares of common stock of the Company. The Warrant is exercisable at a price equal to $0.15. The Warrants include an anti-dilution adjustment that may not be adjusted below $0.01.

February 2010 Convertible Notes and Warrants

On February 10, 2010, the Company entered into two Convertible Note Agreements ("Notes") for a total of $352,942. The Company received aggregate proceeds of $300,000 $ reflecting a 15% original issue discount to the Note holders.

The Notes were due on February 10, 2011. The note holders may convert any portion of the Notes that are outstanding, whether such portion represents principal or interest, into shares of common stock of the Company at a price equal to $0.65. The Notes include an anti-dilution adjustment that may not be adjusted below $0.01.

Simultaneously with the issuance of these Notes, the Company issued to each Note holder a 5-year warrant (the "Warrant") to purchase 271,494 shares of common stock of the Company. The Warrant is exercisable at a price equal to $0.75 The Warrants include an anti-dilution adjustment that may not be adjusted below $0.01.

Due to the issuance of convertible debt in August 2010at $0.10 per share, the conversion price of these notes and warrants issued by the Company was reduced to $0.10 per share, pursuant to the anti-dilution provisions of these notes and warrants. Also, pursuant to the anti-dilution provisions of the warrants, the number of shares of common stock issuable upon exercise of the warrants will increase so that the aggregate exercise price payable, after taking into account the reduction in the exercise price to $0.10 per share, will be equal to the aggregate exercise price of the warrants prior to the adjustment.

January 2010 Convertible Notes and Warrants

On January 13, 2010, the Company entered into two Convertible Note Agreements ("Notes") for a total of $64,706. The Company received aggregate proceeds of $55,000 reflecting a 15% original issue discount to the Note holders.

The Notes were due on January 13, 2011. The note holders may convert any portion of the Notes that are outstanding, whether such portion represents principal or interest, into shares of common stock of the Company at a price equal to $0.35. The Notes include an anti-dilution adjustment that may not be adjusted below $0.01.

Simultaneously with the issuance of these Notes, the Company issued to each Note holder a 5-year warrant (the "Warrant") to purchase 92,437 shares of common stock of the Company. The Warrant is exercisable at a price equal to $0.50. The Warrants include an anti-dilution adjustment that may not be adjusted below $0.01.

Due to the issuance of convertible debt in August 2010 at $0.10 per share, the conversion price of these notes and warrants issued by the Company was reduced to $0.10 per share, pursuant to the anti-dilution provisions of these notes and warrants. Also, pursuant to the anti-dilution provisions of the warrants, the number of shares of common stock issuable upon exercise of the warrants will increase so that the aggregate exercise price payable, after taking into account the reduction in the exercise price to $0.10 per share, will be equal to the aggregate exercise price of the warrants prior to the adjustment.

December 2009 Convertible Notes and Warrants

On December 7, 2009, the Company entered into two Convertible Note Agreements ("Notes") for a total of $352,942. The Company received aggregate proceeds of $300,000 reflecting a 15% original issue discount to the Note holders.

The Notes were due on December 7, 2010. The note holders may convert any portion of the Notes that are outstanding, whether such portion represents principal or interest, into shares of common stock of the Company at a price equal to $0.35. The Notes include an anti-dilution adjustment that may not be adjusted below $0.01.

Simultaneously with the issuance of this Note, the Company issued to each Note holder a 5-year warrant (the "Warrant") to purchase 504,203 shares of common stock of the Company. The Warrant is exercisable at a price equal to $0.50. The Warrants include an anti-dilution adjustment that may not be adjusted below $0.01.

Due to the issuance of convertible debt in August 2010 at $0.10 per share, the conversion price of these notes and warrants issued by the Company was reduced to $0.10 per share, pursuant to the anti-dilution provisions of these notes and warrants. Also, pursuant to the anti-dilution provisions of the warrants, the number of shares of common stock issuable upon exercise of the warrants will increase so that the aggregate exercise price payable, after taking into account the reduction in the exercise price to $0.10 per share, will be equal to the aggregate exercise price of the warrants prior to the adjustment.

Consulting Agreements

During the year ended March 31, 2011, the Company issued 60,000 shares of its restricted common stock pursuant to a Consulting Services Agreement. The Company recorded the $62,400 fair value of the shares issued as stock-based consulting.

On April 19, 2010, the Company issued 28,571 shares to legal counsel as a retainer for services in the amount of $10,000.

During fiscal year 2010 the Company issued 80,137 shares of its restricted common stock pursuant to various Consulting Services Agreements. The Company recorded the $89,255 fair value of the shares issued as stock based consulting.

Option Agreement

On August 3, 2009, we signed an Option Agreement allowing the Company to purchase up to a fifty percent working interest in the oil and gas exploration and development activities on 2,087 acres known as Medicine River Ranch. This option is valid for one year or until a Definitive Participation Agreement is either entered into or rejected by both parties. The Company issued 25,000 shares of restricted common stock upon execution of this agreement and an additional 75,000 shares of restricted common stock were to be issued upon acceptance of a Definitive Participation Agreement. On January 29, 2010, both parties agreed to cancel this option and the issued shares were returned to the Company.

Employment Agreements

Employment Agreement. On September 29, 2009, the Company entered into an Employment Agreement with Steven Weldon, our Chief Executive Officer. As compensation for entering into this Agreement, the Company granted and issued to Mr. Weldon 3,600,000 shares of the common stock of the Company. The stock is restricted as defined by the rules and regulations promulgated under the Securities Act of 1933, as amended. The shares are fully paid and non-assessable. An expense of $900,000 was recognized for year ended March 31,2010. In the event that Mr. Weldon’s employment pursuant to this agreement is terminated for any reason, 100,000 shares per month remaining on the contract will be contributed back to the Company for cancellation.

On October 7, 2009, the Company entered into an Employment Agreement with Jordan Estra, our former Chief Executive Officer. As compensation for entering into this Agreement, the Company granted and issued to Mr. Estra 3,600,000 shares of the common stock of the Company. The stock is restricted as defined by the rules and regulations promulgated under the Securities Act of 1933, as amended. The shares are fully paid and non-assessable.

The shares issued pursuant to this Agreement were subject to certain terms and conditions. The shares were represented by 36 certificates of 100,000 shares each. All Certificates not delivered to the Executive are being held by the Company. One certificate representing 100,000 shares has been delivered to the Executive on the 7th of each month beginning November 7, 2009.

Upon the resignation of Mr. Estra’s on December 29, 2009, 3,327,000 shares represented by certificates still held by the Company were contributed back to the Company for cancellation. Mr. Estra received a total of 273,000 restricted shares and an expense of $131,040 was recognized for the year ended March 31, 2010.

Note Conversions

During the year ended March 31, 2010, the Company converted a total of $21,250 of notes payable and $373 of interest payable from certain Note Holders into common stock of the Company. The Company issued 2,125,000 shares of our common stock to satisfy the principal balances of the notes payable and 37,254 shares of our common stock to satisfy accrued interest of the notes payable. A loss of $177,941 was recognized for the conversion of a $2,000 note during the year ended March 31, 2010.

Agreement

During the year ended March 31, 2010 the Company entered into agreements with its former CEO and a significant stockholder in which they agreed to limit the transfer of their common stock holdings to 5 percent or less for each calendar month for a period of two years. In exchange, the Company issued them 10,326 shares of restricted common stock. The Company recognized compensation expense of $516 for the year ended March 31, 2009.

Equity Compensation Plan Information

The 2007 Amended Stock Option Plan was adopted by the Board of Directors on February 6, 2008. Under this plan, a maximum of 8,000,000 shares of our common stock, par value $0.0001, were authorized for issue. The vesting and terms of all of the options are determined by the Board of Directors and may vary by optionee; however, the term may be no longer than 10 years from the date of grant.

On August 20, 2009, the Company issued 4,000,000 options to a consultant valued at $984,600 under the 2007 Plan. The option’s exercise price is equal to fifty percent (50%) of the average closing bid price for the three day period prior to notice of exercise. The consultant will only be allowed to purchase shares upon the exercise of the option or portion thereof to the extent that, at the time of the purchase, the purchase will not result in the consultant beneficially owning more than 9.9% of the issued and outstanding common shares of the Company. These options expired on August 20, 2010.

ITEM 6.

SELECTED FINANCIAL DATA

N/A

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANICAL CONDITION AND RESULTS OF OPERATION

The following discussion of our plan of operation, financial condition and results of operations should be read in conjunction with the Company’s financial statements, and notes thereto, included elsewhere herein. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, those discussed in this Annual Report.

Overview

Plan of Operation

Our primary strategy is to develop existing acreage position through the drillbit in order to accrete significant value to our stockholders. The company will continue to seek those acquisitions of select properties that have been identified as attractive, both technically and geologically, and possess meaningful upside potential.

The Company continues to operate with very limited capital. Since our inception in 2001, we have been unable to locate a consistent source of additional financing for use in our operational or expansion plans. The Company is currently attempting to raise sufficient funds to purchase leases of oil and gas properties. We can give no assurances that the Company will be able to purchase any leases. Each oil and gas property in which we obtain an interest in will have an operator who will be responsible for marketing production.

Unproven Properties

Catron Prospect – Carton County, NM

We acquired a lease of 1,320 acres in Catron County, New Mexico. The lease term is for ten years. We are evaluating options for the use of this land.

Cash Requirements

We estimate that we will require an additional $1,616,000 to fund our currently anticipated requirements for ongoing operations for our existing business for the next twelve-month period. We expect to pay $51,000 for professional fees and expense related to being a public company, $80,000 for expenses related to general operations and $19,000 for a rent settlement. We will also need approximately $1,466,000 to repay $1,347,000 of notes payable and the related interest of approximately $119,000.

Based upon our cash position, we will need to raise additional capital prior by the end of fiscal 2012 in order to fund current operations. These factors raise substantial doubt about our ability to continue as a going concern. We are pursuing several alternatives to address this situation, including the raising of additional funding through equity or debt financings. We are in discussions with our existing stockholders to provide additional funding in exchange for notes or equity. In order to finance existing operations and pay current liabilities over the next twelve months, we will need to raise $1,616,000 of capital. However, there can be no assurance that the requisite financing will be consummated in the necessary time frame or on terms acceptable to us. Should we be unable to raise sufficient funds, we may be required to curtail our operating plans or possibly cease operations. No assurance can be given that we will be able to operate profitably on a consistent basis, or at all, in the future.

Results of Operations

Comparison of the fiscal year ended March 31, 2011 and March 31, 2010.

FINANCIAL INFORMATION

	2011			2010
Loss on oil and gas properties	$	132,000		$	-
Stock compensation		67,000			2,018,000
Investor relations		64,000			504,000
General and administrative		120,000			112,000
Other expense		202,000			331,000
Net loss	$	(585,000	)	$	(2,965,000	)

Loss on oil and gas properties. Loss on oil and gas properties increased by $132,000 due to the abandonment of dry holes during fiscal year 2011 as compared to none being abandoned during fiscal year 2010.

Stock Compensation. Stock compensation expenses decreased in 2011. This decrease can be attributed to employee compensation of $1,031,000 and consulting expense of $987,000 being incurred during fiscal year 2010 and only $67,000 of consulting expense being incurred during fiscal year 2011.

Investor Relations. Investor relations expenses decreased by approximately $440,000 in 2011. Investor relations were limited in 2011 as a cost savings measure.

General and Administrative. General and administrative expenses increased by $8,000 in 2011 due to an increase in travel and professional fees.

Other Expenses. Other expenses decreased by $129,000 in 2011 due to a loss in the fair value of convertible notes and warrants, a reduction in loan modifications loss, a reduction of interest on beneficial conversion features and an increase in the amortization of original issuance discounts.

Liquidity and Capital Resources

We had cash balances totaling approximately $48,000 as of March 31, 2011. Historically, our principal source of funds has been cash generated from financing activities.

Cash flow from operations. We have been unable to generate either significant liquidity or cash flow to fund our current operations. We anticipate that cash flows from operations will be insufficient to fund our business operations for the next twelve-month period.

Cash flows from investing activities. There was $900 and $72,000 of cash used in investing activities for the purchase of equipment in 2011 and the purchase of oil and gas leases for the year ended March 31, 2010.

Cash flows from financing activities. Net cash provided by financing activities was generated from promissory notes that total $210,000 and $632,500 for the years ended March 31, 2011 and 2010.

Variables and Trends

We have no operating history with respect to our acquisition and development of oil and gas properties. In the event we are able to obtain the necessary financing to move forward with our business plan, we expect our expenses to increase significantly as we grow our business. Accordingly, the comparison of the financial data for the periods presented may not be a meaningful indicator of our future performance and must be considered in light these circumstances.

Critical Accounting Policies

General

The preparation of financial statements requires management to utilize estimates and make judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. These estimates are based on historical experience and on various other assumptions that management believes to be reasonable under the circumstances. The estimates are evaluated by management on an ongoing basis, and the results of these evaluations form a basis for making decisions about the carrying value of assets and liabilities that are not readily apparent from other sources. Although actual results may differ from these estimates under different assumptions or conditions, management believes that the estimates used in the preparation of our financial statements are reasonable. Policies involving the most significant judgments and estimates are summarized below.

Oil and Gas Activities

We follow the successful efforts method of accounting for our oil and gas activities. Accordingly, costs associated with the acquisition, drilling and equipping of successful exploratory wells are capitalized. Geological and geophysical costs, delay and surface rentals and drilling costs of unsuccessful exploratory wells are charged to expense as incurred. Costs of drilling development wells are capitalized. Upon the sale or retirement of oil and gas properties, the cost thereof and the accumulated depreciation or depletion are removed from the accounts and any gain or loss is credited or charged to operations.

Fair Value of Financial Instruments

ASC Topic 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). ASC Topic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability.

Convertible notes issued with detachable warrants were measured at fair value, in accordance with ASC Topic 825-10-15, as one instrument, and that fair value was allocated to each component. The Company made the fair value election due to this methodology providing a fairer representation of the economic substance of the transaction within the fair value hierarchy. Due to the lack of relevant and market reflective Level 1 and Level 2 inputs, the Company valued the instruments using Level 3 inputs, which require significant judgment and estimates on behalf of management in developing model assumptions. The factors considered in developing those assumptions included; the Company’s inability to attract investment at terms more favorable to the Company, the lack of success in developing oil properties thus far, the continuing reduction in the net assets of the Company and the Company’s history of default on currently outstanding debt.

Based on management’s evaluation of the assumptions discussed above, the liabilities were initially recorded in an amount equal to the transaction price, which represented the fair value of the total liability at initial recognition.. The model used by the Company is calibrated so that the model value at initial recognition equals the transaction price. On an ongoing basis the fair value model used in valuing the convertible notes and derivative liability utilizes the following inputs; exercise price per warrant, conversion price per share, contract term, volatility, current stock prices and risk free rates. The following assumptions were made in the model: (1) risk free interest rate of 0.29% to 2.01%, (2) remaining contractual life of 1 to 4.98 years, (3) expected stock price volatility of 445% and (4) expected dividend yield of zero.

Equity-Based Compensation

The computation of the expense associated with stock-based compensation requires the use of a valuation model. The FASB issued accounting guidance requires significant judgment and the use of estimates, particularly surrounding Black-Scholes assumptions such as stock price volatility, expected option lives, and expected option forfeiture rates, to value equity-based compensation. We currently use a Black-Scholes option pricing model to calculate the fair value of our stock options. We primarily use historical data to determine the assumptions to be used in the Black-Scholes model and have no reason to believe that future data is likely to differ materially from historical data. However, changes in the assumptions to reflect future stock price volatility and future stock award exercise experience could result in a change in the assumptions used to value awards in the future and may result in a material change to the fair value calculation of stock-based awards. This accounting guidance requires the recognition of the fair value of stock compensation in net income. Although every effort is made to ensure the accuracy of our estimates and assumptions, significant unanticipated changes in those estimates, interpretations and assumptions may result in recording stock option expense that may materially impact our financial statements for each respective reporting period.

Commitments

Except as shown in the following table, as of March 31, 2011, we did not have any material capital commitments, other than funding our operating losses and repaying outstanding debt. It is anticipated that any capital commitments that may occur will be financed principally through borrowings from stockholders (although such additional financing has not been arranged). However, there can be no assurance that additional capital resources and financings will be available to us on a timely basis, or if available, on acceptable terms.

Future payments due on our contractual obligations as of March 31, 2011 are as follows:

Lease settlement liability	$	19,000
Convertible notes from shareholders		447,000
Convertible notes from shareholders, at face value		441,000
Accrued interest		119,000

Total	$	1,026,000

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Stock-Based Compensation

Please see page F-6, Note 3 of the audited financial statements.

Recent Accounting Pronouncements

Please see page F-6, Note 3 of the audited financial statements.

ITEM 7A.

QUANTITIATIVE AND QUILITATIVE DISCLOSERS ABOUT MARKET RISK

N/A

ITEM 8.

FINANCIAL STATEMENTS

The financial statements required to be filed hereunder are set forth on pages F-1 through F-6 and are incorporated herein by this reference.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

There were no other changes in or disagreements with our accountants on accounting and financial disclosure during the last two fiscal years.

ITEM 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Financial Officer concluded as of March 31, 2011 that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses in our internal controls over financial reporting discussed immediately below.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our evaluation of internal control over financial reporting includes using the COSO framework, an integrated framework for the evaluation of internal controls issued by the Committee of Sponsoring Organizations of the Treadway Commission, to identify the risks and control objectives related to the evaluation of our control environment. The internal controls for the Company are provided by executive management’s review and approval of all transactions. Our internal control over financial reporting also includes those policies and procedures that:

(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of March 31, 2011. This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permits us to provide only management's report in this annual report.

Identified Material Weaknesses

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected. The matters involving internal controls over financial reporting that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were:

ineffective controls over period end financial disclosure and reporting processes including not having a functioning audit committee consisting of independent Board members as well as lack of expertise with respect to the application of US GAAP and SEC rules and regulations.

one individual who, as an officer and director of the Company, has sole access and authority to receive cash and make cash disbursements

Management believes that the material weaknesses set forth above did not have an adverse effect on our financial results.

Management’s Remediation Initiatives

As a result of our findings, we have begun to remediate the deficiencies. In an effort to remediate the identified material weaknesses and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:

Identify and/or retain a second employee or member of management who is appropriately trained who will also have duel control with respect to the receipt of cash and the making of cash disbursements; and

Establish formal general accounting policies and procedures.

Update some of our current procedures to better address period end financial disclosure.

Update controls relating to other processes.

Although we have not remedied these issues in the past fiscal year, we anticipate that these initiatives will be at least partially, if not fully, implemented by March 31, 2012. Additionally, we plan to test our updated controls in order to remediate our deficiencies by March 31, 2012.

Conclusion

As a result of management's assessment of the effectiveness of our internal control over financial reporting as of March 31, 2011, and the identification of the material weakness set forth above, management has concluded that our internal control over financial reporting is not effective. It is reasonably possible that, if not remediated, the material weaknesses noted above, could result in a material misstatement in our reported financial statements that might result in a material misstatement in a future annual or interim period. In light of the identified material weakness and the conclusion that our internal control over financial reporting is not effective, management will take the remediation initiatives set forth above. In addition management performed (1) additional review of the area described above, and (2) performed additional analyses, including but not limited to a detailed balance sheet and statement of operations analytical review. These procedures were completed so management could gain assurance that the financial statements and schedules included in this Form 10-K fairly present in all material respects the financial position, results of operations and cash flows for the periods presented.

Changes in Internal Control over Financial Reporting

There were no changes were made during our most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting, as required by Rules 13a-15(d) and 15d-15(d) under the exchange Act.

ITEM 9B.

OTHER INFORMATION

None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The names of our executive officers and directors, their ages as of June 30, 2011, and the positions currently held by each are as follows:

Name	Age	Position
Alan Gaines	55	Chief Executive Officer and Chairman
Dr. Amiel David	70	Chief Operating Officer
Steven Weldon	35	Chief Financial Officer and Director

Alan D. Gaines served as Chairman of the Board of Directors of Dune Energy from May 2001 to April 2011 and as the Chief Executive Officer from May 2001 to April 17, 2007. From April 2005 until August 2007, Mr. Gaines served as Vice Chairman of Baseline Oil & Gas Corp. From April 2005 until September 2007, he served as Chief Executive Officer of Cross Canyon Energy Corp. Mr. Gaines has over 25 years of experience as an energy investment and merchant banker. In 1983, he co-founded Gaines, Berland Inc., an investment bank and brokerage firm, specializing in global energy markets, with particular emphasis given to small to medium capitalization companies involved in exploration and production, pipelines, refining and marketing, and oilfield services. Mr. Gaines holds a B.B.A. in Finance from Baruch College, and an M.B.A. in Finance (with distinction) from Zarb School, Hofstra University School of Graduate Management.

Dr. Amiel David has been a manager at PeTech Enterprises, Inc., a family owned oil and gas business since 1982 until present. From 2008 to the present Dr. David is an owner of Amrich Energy, Inc, an oil production company. From 2005 and 2006, Dr. David was the President and COO of Dune Energy, Inc. In 2007 and 2008, Dr. David was a Senior Advisor to the Board of Directors of Dune Energy, Inc. Dr. David has over 40 years of experience as an engineer and energy investor. Dr. David has a BS—Petroleum Engineering from Tulsa University, an MSE—Chemical Engineering from the University of Pennsylvania, an MBA from the University of Pittsburgh), and a PhD—Petroleum Engineering from Stanford University.

Steven Weldon, a Certified Public Accountant, has served as our Chief Financial Officer since September 2005. Prior to joining Signature Exploration and Production Corp. Mr. Weldon was the Tax Manager for Westgate Resorts, Ltd., a timeshare developer, since July 2000. Since September 2005, Mr. Weldon has also served as the Chief Financial Officer of Inverted Paradigms Corp., a software developer. Mr. Weldon was an adjunct professor at Florida Southern College from January 2002 to October 2005. Since May 2005, Mr. Weldon has served as the president, sole stockholder and director of Steven W. Weldon, PA, a public accounting firm providing tax and accounting services. Mr. Weldon received his Bachelor of Science degree and his Masters in Business Administration from Florida Southern College.

During the past five years none of our directors, executive officers, promoters or control persons was:

the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

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

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

found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law.

Section 16(a) Beneficial Ownership Reporting Compliance.

Since we have no stock registered under Section 12(b) or Section 12(g) of the Exchange Act, there are no persons who need to file reports under Section 16(a) of the Exchange Act.

Code of Ethics

We adopted the Signature Exploration and Production Corp. Code of Ethics for the CEO and Senior Financial Officers (the “finance code of ethics”), a code of ethics that applies to our Chief Executive Officer, Chief Financial Officer and other finance organization employees. A copy of the finance code of ethics may be obtained from the Company, free of charge, upon written request delivered to Signature Exploration and Production Corp. 3200 Southwest Freeway, Suite 3300, Houston, TX 77027. If we make any substantive amendments to the finance code of ethics or grant any waiver, including any implicit waiver, from a provision of the code to our Chief Executive Officer or Chief Financial Officer, we will disclose the nature of such amendment or waiver in a report on Form 8-K.

ITEM 11.

EXECUTIVE COMPENSATION

The following summary compensation table reflects all compensation awarded to, earned by, or paid to our Chief Executive Officer and president and other employees for all services rendered to us in all capacities during each of the years ended March 31, 2011, 2010 and 2009.

Summary Compensation Table

Name and Position	Year	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation		Total

Steven Weldon, CEO, President and Director	2011		30,000		-		-		-		-		-		-		30,000
	2010		30,000		-		900,000		-		-		-		-		930,000
	2009		30,000		-		-		-		-		-		-		30,000

Jordan Estra, former CEO, President and Director	2011		-		-		-		-		-		-		-		-
	2010		-		-		131,040		-		-		-		-		131,040
	2009		-		-		-		-		-		-		-		-

Directors’ Compensation

Directors are not currently compensated, although each is entitled to be reimbursed for reasonable and necessary expenses incurred on our behalf. All directors hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified. There are no agreements with respect to the election of directors. Officers are appointed annually by the Board of Directors and each executive officer serves at the discretion of the Board of Directors. Our board of directors does not have an audit or any other committee.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table presents information known to us, as of June 30, 2011, relating to the beneficial ownership of common stock by:

each person who is known by us to be the beneficial holder of more than 5% of our outstanding common stock;

each of our named executive officers and directors; and

our directors and executive officers as a group.

We believe that all persons named in the table have sole voting and investment power with respect to all shares beneficially owned by them, except as noted.

Percentage ownership in the following table is based on 31,125,930 shares of common stock outstanding as of June 30, 2011. A person is deemed to be the beneficial owner of securities that can be acquired by that person within 60 days from the date of this Annual Report upon the exercise of options, warrants or convertible securities. Each beneficial owner’s percentage ownership is determined by dividing the number of shares beneficially owned by that person by the base number of outstanding shares, increased to reflect the shares underlying options, warrants or other convertible securities included in that person’s holdings, but not those underlying shares held by any other person.

Name of Beneficial Owner	Number of Shares of Common Stock Beneficially Owned		Percentage of Shares Beneficially Owned

Alan Gaines		12,012,413		38.6	%

Dr. Amiel David		12,012,413		38.6	%

Steven Weldon		3,745,212		12.0	%

All directors and officers (3 person)		27,770,083		89.2	%

___________

(1)

Unless otherwise noted, the address of each person listed is c/o Signature Exploration and Production Corp. 3200 Southwest Freeway, Suite 3300, Houston, TX 77027.

ITEM 13.

CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

During the year ended March 31, 2009 the Company entered into agreements with its former CEO and a significant stockholder in which they agreed limit the transfer of their common stock holdings to 5 percent or less for each calendar month for a period of two years. In exchange, the Company issued them 10,326 shares of restricted common stock. The Company recognized compensation expense of $516 for the year ended March 31, 2009.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

	Fiscal 2011		Fiscal 2010
Audit Fees(1)	$	51,000	$	34,000
Audit-Related Fees(2)		-0-		-0-
Tax Fees(3)		-0-		-0-

Subtotal	$	51,000	$	34,000

All other Fees(4)		-0-		-0-

Total	$	51,000	$	34,000

(1)	Audit Fees –Audit fees billed to the Company by Mark Bailey and Company, Ltd. for auditing the Company’s annual financial statements and reviewing the financial statements included in the Company’s Quarterly Reports on Form 10-Q.

(2)

Audit-Related Fees – There were no other fees billed by Mark Bailey and Company, Ltd, and during the last two fiscal years for assurance and related services that were reasonably related to the performance of the audit or review of the Company's financial statements and not reported under "Audit Fees" above.

(3)	Tax Fees – There were no tax fees billed during the last past fiscal year for professional services.

(4)	All Other Fees – There were no other fees billed by during the last two fiscal years for products and services provided.

Pre-approval of Audit and Non-Audit Services of Independent Auditor

The Board of Director’s policy is to pre-approve all audit and non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services. The Board of Director’s pre-approval policy with respect to non-audit services is included as Exhibit 99.1 of to this Annual Report. Pre-approval is generally provided for up to 12 months from the date of pre-approval and any pre-approval is detailed as to the particular service or category of services. The Board of Directors may delegate pre-approval authority to one or more of its members when expedition of services is necessary.

PART IV

ITEM 15.

EXHIBITS

EXHIBIT NUMBER		DESCRIPTION

3.1		Form of Articles of Incorporation of Signature Exploration and Production Corp. (Previously filed on Form SB-2, filed with the Securities and Exchange Commission on February 12, 2002)
3.2		Bylaws of Signature Exploration and Production Corp. (Previously filed on Form SB-2, filed with the Securities and Exchange Commission on February 12, 2002)
10.1		Code of Ethics (Previously filed on Form 10-KSB, filed with the Securities and Exchange Commission on June 22, 2004)
10.2		Diabetic Treatment Centers of America, Inc. 2005 Restricted Stock Plan (Previously filed on the Company’s Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on August 5, 2005)
10.3		Joint Venture Agreement (Previously filed on Form 8-K, filed with the Securities and Exchange Commission on May 16,2006)
10.4		2007 Amended Stock Option(5) (Previously filed on Form S-8 POS, filed with the Securities and Exchange Commission on February 8, 2008)
10.5		Letter of Intent Dated February 3, 2009 (Previously filed on Form 10-K, filed with the Securities and Exchange Commission on July 14, 2009)
10.6		Letter of Intent Dated February 24, 2009 (Previously filed on Form 10-K, filed with the Securities and Exchange Commission on July 14, 2009)
10.7		Gating Agreement – Scott Allen (Previously filed on Form 10-K, filed with the Securities and Exchange Commission on July 14, 2009)
10.8		Gating Agreement – SEARA LLC (Previously filed on Form 10-K, filed with the Securities and Exchange Commission on July 14, 2009)
10.9		Gating Agreement – B&R Holding Company, LLC (Previously filed on Form 10-K, filed with the Securities and Exchange Commission on July 14, 2009)
31.1		Certification of Chief Executive Officer Pursuant to Securities and Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
99.1		Audit Committee Pre-Approval Policy(2)

__________

*Filed Herewith

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SIGNATURE EXPLORATION AND PRODUCTION CORP.

Dated: July 11, 2011
	By:	/s/ Alan Gaines
	Name:	Alan Gaines
	Title:	Chief Executive Officer, President and Chairman

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

	SIGNATURE EXPLORATION AND PRODUCTION CORP.

Dated: July 11, 2011
	By:	/s/ Alan Gaines
	Name:	Alan Gaines
	Title:	Chief Executive Officer, President and Director

	SIGNATURE EXPLORATION AND PRODUCTION CORP.

Dated: July 11, 2011
	By:	/s/ Steven Weldon
	Name:	Steven Weldon
	Title:	Chief Financial Officer and Director

Table of Contents

Report of Independent Registered Certified Public Accounting Firm		F-1

Financial Statements:

	Balance Sheets – March 31, 2011 and 2010	F-2

	Statements of Operations – Years ended March 31, 2011 and 2010	F-3

	Statements of Stockholders’ Equity (Capital Deficiency) – Years ended March 31, 2011 and 2010	F-4

	Statements of Cash Flows – Years ended March 31, 2011 and 2010	F-5

Notes to Financial Statements		F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Signature Exploration and Production Corp. We have audited the accompanying balance sheets of Signature Exploration and Production Corp. as of March 31, 2011 and 2010, and the related statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended March 31, 2011 and from inception (March 1, 2008) to date. Signature Exploration and Production Corp’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Signature Exploration and Production Corp. as of March 31, 2011 and 2010, and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2011 and from inception to date, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 of the accompanying financial statements, the Company has incurred losses, has not generated any revenue, and has negative operating cash flows since the inception of exploration activities. These factors and the need for additional financing in order for the Company to meet its business plans, raise substantial doubt about its ability to continue as a going concern. Management’s plan to continue as a going concern is also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Mark Bailey & Company, Ltd.

Reno, NV

July 11, 2011

F-1

SIGNATURE EXPLORATION AND PRODUCTION CORP.

(An Exploration Stage Company)

Balance Sheets

Assets
	March 31,			March 31,
	2011			2010

Current assets:
Cash	$	47,692		$	22,258
Debt issuance costs		14,329			75,823
Prepaid expenses and other current assets		5,913			450

Total current assets		67,934			98,531

Property and Equipment:

Property and Equipment, less accumulated depreciation of $270		635			-
Oil and gas properties, unproven		36,000			168,189

Total property and equipment		36,635			168,189

Total assets	$	104,569		$	266,720

Liabilities and Capital Deficiency

Current liabilities:
Accounts payable	$	363		$	-
Accrued interest		119,031			72,670
Other accrued expenses		19,000			19,000
Convertible notes from shareholders		446,750			426,708
Convertible notes from shareholders, at fair value		440,775			258,475
Derivative liability, at fair value		393,726			292,050

Total current liabilities		1,419,645			1,068,903

Commitments and contengencies		-			-

Capital deficiency:
Common stock, $0.0001 par value, 250,000,000 shares authorized 7,101,104 and 7,012,534 shares issued and outstanding for the years ended March 31, 2011 and 2010		710			701
Additional paid-in capital		4,262,403			4,190,012
Deficit accumulated related to abandoned activities		(1,676,223	)		(1,676,223	)
Deficit accumulated during exploration stage		(3,901,966	)		(3,316,673	)

Total capital deficiency		(1,315,076	)		(802,183	)

Total liabilities and capital deficiency	$	104,569		$	266,720

See accompanying notes to the financial statements.

F-2

SIGNATURE EXPLORATION AND PRODUCTION CORP.

(An Exploration Stage Company)

Statements of Operations

For the years ended March 31, 2011 and 2010,

and the Period from March 1, 2008 (Inception) to March 31, 2011

	2011			2010			Inception March 1, 2008 – March 31, 2011


Net revenue	$	-		$	-		$	-

Cost of revenue		-			-			-

Gross profit (loss)		-			-			-

Loss on oil and gas properties		132,189			-			132,189
Stock compensation		66,938			2,018,140			2,085,078
Investor relations		64,005			503,809			567,814
General and administrative expenses		120,288			113,556			358,482

Loss from continuing operations		(383,420	)		(2,635,505	)		(3,143,563	)

Other income/(expense)
Change in fair value of convertible notes		(137	)		41,731			41,594
Change in fair value of warrants		(36,782	)		60,687			23,905
Loss on extinguishment of debt		-			(177,941	)		(177,941	)
Loss on loan modification		-			(80,500	)		(283,000	)
Interest expense		(164,954	)		(173,333	)		(362,962	)

Total other expenses		(201,873	)		(329,356	)		(758,404	)

Net loss	$	(585,293	)	$	(2,964,861	)	$	(3,901,967	)

Weighted average common shares outstanding – basic and diluted		7,078,882			4,270,373			4,078,738

Net loss per share - basic and diluted	$	(0.08	)	$	(0.69	)	$	(0.96	)

See accompanying notes to the financial statements.

F-3

SIGNATURE EXPLORATION AND PRODUCTION CORP.

(An Exploration Stage Company)

Statements of Stockholders’ Equity (Capital Deficiency)

For the years ended March 31, 2011 and 2010,

and the Period from March 1, 2008 (Inception) to March 31, 2011

							Deficit			Deficit
							accumulated			accumulated
					Additional		Related to			during
	Common stock				paid-in		abandoned			exploration
	Shares		Amount		capital		activities			stage			Total
Balance, March 1, 2008		886,816	$	89	$	1,469,648	$	(1,676,223	)	$	-		$	(206,486	)

Net loss		-		-		-		-			(9,845	)		(9,845	)

Balance, March 31, 2008		886,816	$	89	$	1,469,648	$	(1,676,223	)		(9,845	)	$	(216,331	)

Issuance of stock as compensation, in March 2009		10,326		1		515		-			-			516

Loss on loan modification		-		-		202,500		-			-			202,500

Net loss		-		-		-		-			(341,967	)		(341,967	)

Balance, March 31, 2009		897,142	$	90	$	1,672,663	$	(1,676,223	)	$	(351,812	)	$	( 355,282	)

Issuance of stock for debt conversions		2,162,254		216		21,406		-			-			21,622

Compensation expense – employment contracts		3,873,000		387		1,030,653		-			-			1,031,040

Compensation expense – stock option		-		-		984,600		-			-			984,600

Compensation expense – consulting		80,137		8		89,249		-			-			89,257

Beneficial conversion features		-		-		133,000		-			-			133,000

Loss on loan modification		-		-		258,441		-			-			258,441

Net loss		-		-		-		-			(2,964,861	)		(2,964,861	)

Balance, March 31, 2010		7,012,534	$	701	$	4,190,012	$	(1,676,223	)	$	(3,316,673	)	$	( 802,183	)

Compensation expense – consulting		60,000		6		62,394		-			-			62,400

Legal Retainer		28,570		3		9,997		-			-			10,000

Net loss		-		-		-		-			(585,293	)		(585,293	)

Balance, March 31, 2011		7,101,104	$	710	$	4,262,403	$	(1,676,223	)	$	(3,901,966	)	$	( 1,315,076	)

See accompanying notes to financial statements.

F-4

SIGNATURE EXPLORATION AND PRODUCTION CORP.

(An Exploration Stage Company)

Statements of Cash Flows

For the years ended March 31, 2011 and 2010,

and the Period from March 1, 2008 (Inception) to March 31, 2011

	2011			2010			Inception (March 1, 2008 – March 31, 2011

Cash flows from operating activities:
Net loss	$	(585,293	)	$	(2,964,861	)	$	(3,901,967	)

Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation expense		270			-			270
Loss on oil and gas assets		132,189			-			132,189
Stock compensation		66,938			2,104,894			2,172,349
Loss on loan modification		-			80,500			283,000
Loss on extinguishment of debt		-			177,941			177,941
Change in fair value of convertible notes		137			(41,731	)		(41,594	)
Change in fair value of warrants		36,782			(60,687	)		(23,905	)
Non-cash interest		164,954			173,333			362,445
Changes in operating assets and liabilities:
Other assets		-			225			(450	)
Accounts payable		363			(8,439	)		(17,166	)
Accrued expenses		-			(2,760	)		(3,554	)

Net cash used in operating activities		(183,660	)		(541,585	)		(860,442	)

Cash flows from investing activities:

Investment in oil and gas properties		-			(72,189	)		(72,189	)
Purchase of property and equipment		(906	)		-			(906	)

Net cash used in investing activities		(906	)		(72,189	)		(73,095	)

Cash flows from financing activities:
Proceeds from issuance of debt to stockholders		210,000			632,000			980,500

Net cash provided by financing activities		210,000			632,000			980,500

Net increase (decrease) in cash		25,434			18,266			46,963

Cash, beginning of year	$	22,258		$	4,032		$	729

Cash, end of year	$	47,692		$	22,258		$	47,692

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	-		$	-		$	-

Non-cash investing and financing activities:
Stock issued for legal retainer included in other assets	$	5,462			-		$	5,462
Convertible debt issued for oil and gas lease agreements	$	-		$	96,000		$	96,000
Stock issued to settle convertible debt		-		$	21,250		$	21,250
Stock issued to settle interest expense	$	-		$	373		$	373

See accompanying notes to the financial statements.

F-5

SIGNATURE EXPLORATION AND PRODUCTION CORP.

Notes to Financial Statements

March 31, 2011

NOTE 1 – ORGANIZATION AND PRINCIPLES OF CONSOLIDATION

Reporting Entity. Signature Exploration and Production Corp. (“Signature” or “the Company”) was incorporated on April 4, 2001 under the laws of the State of Delaware. The Company is authorized to issue 250,000,000 shares of common stock, par value $.0001. As of March 1, 2008, the Company became an exploration stage company engaged in the acquisition and development of crude oil and natural gas leases in the United States. We have reported our Statement of Operations and Statement of Cash Flows from the inception as an exploration stage company to the current reporting period of March 31, 2011. The Company’s office is located in Houston, Texas.

NOTE 2 – BASIS OF PRESENTATION

The Company’s financial statements have been prepared assuming the Company will continue as a going concern. The Company has experienced net losses since April 4, 2001, which losses have caused an accumulated deficit of approximately $5,578,000 at March 31, 2011 of which $3,902,000 has been accumulated during our current exploration activities. In addition, the Company has consumed cash in its operating activities of approximately $184,000 and $542,000 for the years ended March 31, 2011 and 2010, respectively. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

Management has been able, thus far, to finance the losses through a public offering, private placements and obtaining operating funds from stockholders. The Company is continuing to seek sources of financing. There are no assurances that the Company will be successful in achieving its goals.

In view of these conditions, the Company’s ability to continue as a going concern is dependent upon its ability to obtain additional financing or capital sources, to meet its financing requirements, and ultimately to achieve profitable operations. The Company is currently acquiring and developing crude oil and natural gas leases. Management believes that its current and future plans provide an opportunity to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that may be necessary in the event the Company cannot continue as a going concern.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Exploration Stage Company. The Company is considered to be in the exploration stage.

Cash and Cash Equivalents. The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.

Revenue Recognition. Revenue associated with the production and sales of crude oil, natural gas, natural gas liquids and other natural resources owned by the Company will be recognized when production is sold to a purchaser at a fixed or determinable price when delivery has occurred and title passes from the Company to its customer, and if the collectability of the revenue is probable.

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

F-6

SIGNATURE EXPLORATION AND PRODUCTION CORP.

Notes to Financial Statements

March 31, 2011

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

Income Taxes. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in financial statements or tax returns. Deferred tax items are reflected at the enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Due to the uncertainty regarding the success of future operations, management has valued the deferred tax asset allowance at 100% of the related deferred tax assets.

Loss per Share. The Company’s basic loss per share has been calculated using the weighted average number of common shares outstanding during the period. The Company has 72,109,090 potentially dilutive common shares at March 31, 2011. However, such common stock equivalents, were not included in the computation of diluted net loss per share as their inclusion would have been anti-dilutive.

Oil and gas properties. In July 2009, the Company changed its method of accounting for its oil and gas exploration and development activities from the full cost method to the successful efforts method. This change did not affect our financial statements as we did not have any activity at that time. Although the full cost method of accounting for oil and gas exploration and development activities continues to be an accepted alternative, the successful efforts method of accounting is the preferred method. The Company believes the successful efforts method provides a more transparent representation of its results of operations and the ability to assess the Company’s investments in oil and gas properties for impairment based on their estimated fair values rather than being required to base valuation on prices and costs as of the balance sheet date.

In accordance with the successful efforts method of accounting for oil and gas properties, costs of productive wells, developmental dry holes and productive leases are capitalized into appropriate groups of properties based on geographical and geological similarities. These capitalized costs are amortized using the unit-of-production method based on estimated proved reserves. Proceeds from sales of properties are credited to property costs, and a gain or loss is recognized when a significant portion of an amortization base is sold or abandoned.

Exploration costs, such as exploratory geological and geophysical costs, delay rentals and exploration overhead, are charged to expense as incurred. Exploratory drilling costs, including the cost of stratigraphic test wells, are initially capitalized but charged to exploration expense if and when the well is determined to be nonproductive. The determination of an exploratory well’s ability to produce must be made within one year from the completion of drilling activities. The acquisition costs of unproved acreage are initially capitalized and are carried at cost, net of accumulated impairment provisions, until such leases are transferred to proved properties or charged to exploration expense as impairments of unproved properties.

Recent Accounting Pronouncements

During January 2010 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-06, Fair Value Measurements and Disclosures (ASC Topic 820): Improving Disclosures about Fair Value Measurement. ASU 2010-06 amends ASC Subtopic 820-10, to require the following: (1) New disclosures related to: (a) Transfers in and out of levels 1 and 2 and (b) Activity in level 3 fair value measurements; (2) Amends existing disclosure requirements on: (a) Level of disaggregation and (b) Inputs and valuation techniques. ASU 2010-06 became effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in level 3 fair value measurements. These disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company does not expect this new disclosure to have a material impact on the footnotes to the financial statements.

F-7

SIGNATURE EXPLORATION AND PRODUCTION CORP

Notes to Financial Statements

March 31, 2011

NOTE 4 – FAIR VALUE MEASUREMENTS

Level 1. Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.

Level 2. Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

Level 3. Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 fair value elections are made on an instrument by instrument basis.

The Company holds certain financial liabilities which are measured at fair value on a recurring basis in accordance with ASC topic 825-10-15. The elections are made on an instrument by instrument basis. In valuing the instruments for which a fair value election has been made, Level 3 inputs are generally required. The Company has elected to implement the fair value option to account for certain convertibles notes and detachable warrants.

The tables below detail the Company’s assets and liabilities measured at fair value.

	Fair Value Measurements March 31, 2011
	Level 1		Level 2		Level 3		Total
Convertible notes from stockholders, at fair value	$	-	$	-	$	440,775	$	440,775
Derivative liability	$	-	$	-	$	393,726	$	393,726
	Fair Value Measurement March 31, 2010
	Level 1		Level 2		Level 3		Total
Convertible notes from stockholders, at fair value	$	-	$	-	$	258,475	$	258,475
Derivative liability	$	-	$	-	$	292,050	$	292,050

F-8

SIGNATURE EXPLORATION AND PRODUCTION CORP

Notes to Financial Statements

March 31, 2011

NOTE 4 – FAIR VALUE MEASUREMENTS, CONTINUED

The following table presents the changes in Level 3 instruments measured on a recurring basis for the years ended March 31, 2011 and 2010:

	Convertible Notes		Derivative Liability		Total

Balance, March 31, 2009	$	-	$	-	$	-
Realized and unrealized gains (losses);
Included in other income (expense)		41,731		60,687		102,41
Purchases, issuances, and settlements		300,206		352,737		652,942
Balance, March 31, 2010	$	258,475	$	292,050	$	550,525

Realized and unrealized gains (losses);
Included in other income (expense)		137		36,782		36,919
Purchases, issuances, and settlements		182,163		64,894		247,057
Balance, March 31, 2011	$	440,775	$	393,726	$	834,501

The convertible notes and derivative liability in the preceding tables were measured at fair value, in accordance with ASC Topic 825-10-15, as one instrument and that fair value was allocated to each component. The Company made the fair value election due to this methodology providing a fairer representation of the economic substance of the transaction within the fair value hierarchy. Due to the lack of relevant and market reflective Level 1 and Level 2 inputs, the Company valued the instruments using Level 3 inputs, which require significant judgment and estimates on behalf of management in developing model assumptions. The factors considered in developing those assumptions included; the Company’s inability to attract investment at terms more favorable to the Company, the lack of success in developing oil properties thus far, the continuing reduction in the net assets of the Company and the Company’s history of default on currently outstanding debt.

Based on management’s evaluation of the assumptions discussed above, the liabilities were initially recorded in an amount equal to the transaction price, which represented the fair value of the total liability at initial recognition.. The model used by the Company is calibrated so that the value at initial recognition equals the transaction price. On an ongoing basis the fair value model used in valuing the convertible notes and derivative liability utilizes the following inputs; exercise price per warrant, conversion price per share, contract term, volatility, current stock prices and risk free rates. The following assumptions were made in the model: (1) risk free interest rate of 0.29% to 2.01%, (2) remaining contractual life of 1 to 4.98 years, (3) expected stock price volatility of 445% and (4) expected dividend yield of zero. Adjustments to fair value are recognized in earnings at each period end.

The carrying amounts of cash, accounts payable and accrued expenses approximate their respective fair values because of the short-term maturity of these items. The carrying amount of the Company’s convertible notes from shareholders represents the face value of the notes, which approximated fair value at the time of issuance.

F-9

SIGNATURE EXPLORATION AND PRODUCTION CORP

Notes to Financial Statements

March 31, 2011

NOTE 5 – OIL AND GAS PROPERTIES

The Company's aggregate capitalized costs related to oil and natural gas properties, unproven are as follows:

Prospect	Costs

Koliba	$	67,189
Kenedy		60,000
Catron		36,000
Nettie Rhodes		5,000

Dry hole costs		(132,189	)

Total	$	36,000

Koliba Prospect – Bloomington TX

In October 2009, we acquired a 15% working interest in this well. The Koliba well prospect covers 143 acres over an anticlinal structure (target) located in the North McFaddin Field. Drilling began on this property on June 29, 2010 and was finished on July 19, 2010. After testing the well, it was determined that it was not financially feasible to complete the well and was subsequently capped. As a result of this, a loss on oil and gas assets was recognized in the amount of $67,189.

Catron Prospect – Carton County, NM

We acquired a lease of 1,320 acres in Catron County, New Mexico. The lease term is for ten years.

Kenedy Prospect – Kenedy County, TX

In August 2009, we acquired a 10% working interest with an option to acquire 10% on additional wells on a 980 acre prospect located in Kenedy County, Texas. Drilling began on this property November 2010 and was finished in December 2010. After testing the well, it was determined that it was not financially feasible to continue with the well and the Company chose not to participate in the completion of the well. As a result of this, a loss on oil and gas assets was recognized in the amount of $60,000.

Nettie Rhodes Prospect – Young County, Texas

In August 2009, we acquired a five percent turnkey working interest on the Nettie Rhodes Lease consisting of approximately 160 acres. The Company determined that it was not financially feasible to drill this well. As a result of this, a loss on oil and gas assets was recognized in the amount of $5,000.

NOTE 6 – DEFERRED INCOME TAXES

At March 31, 2011, the Company had net operating loss carryforwards for income tax purposes of approximately $3,817,000 available as offsets against future taxable income. The net operating loss carryforwards are expected to expire at various times from 2022 through 2030. Utilization of the Company’s net operating losses may be subject to substantial annual limitation if the Company experiences a 50% change in ownership, as provided by the Internal Revenue Code and similar state provisions. Such an ownership change would substantially increase the possibility of net operating losses expiring before complete utilization.

F-10

SIGNATURE EXPLORATION AND PRODUCTION CORP.

Notes to Financial Statements

March 31, 2011

NOTE 6 – DEFERRED INCOME TAXES, CONTINUED

The tax effects of the primary temporary differences giving rise to the Company’s deferred tax assets and liabilities are as follows for the year ended March 31, 2011:

Deferred tax assets:	2011			2010
Net operating loss carryforward	$	1,448,000		$	1,338,000
Stock based compensation		-			388,000
Total deferred tax assets		1,448,000			1,726,000
Less valuation allowance		(1,448,000	)		(1,726,000	)
Net deferred tax asset	$	-		$	-

Because of the Company’s lack of earnings history, the deferred tax assets have been fully offset by a valuation allowance. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during those periods that the temporary differences become deductible. The Company believes that the tax positions taken in its tax returns would be sustained upon examination by taxing authorities. During the year ended March 31, 2011, the decrease in the deferred tax asset valuation allowance amounted to approximately $278,000.

The provision for income taxes is different than would result from applying the U.S. statutory rate to profit before taxes for the reasons set forth in the following reconciliation:

	2011			2010
Tax benefit computed at U.S. statutory rates	$	(205,000	)	$	(1,038,000	)

Increases (decreases) in taxes resulting from:
Non-deductible items		22,000			55,000
Stock Compensation		-			361,000
Change in valuation allowance		198,000			669,000
State taxes		(15,000	)		(47,000	)
Total	$	-		$	-

NOTE 7 – CONVERTIBLE NOTES AND WARRANTS

Convertible Notes from Shareholders

The Company has debt outstanding to shareholders, which was issued between 2006 and 2009. The debt was not issued with warrants and some of the debt was not originally issued with a conversion feature. During fiscal years 2009 and 2010, the notes without conversion features were modified to contain a conversion feature, for which the Company recorded a loss on the modification. Convertible notes from shareholders issued during fiscal year 2010 contained a beneficial conversion feature, with the discount being amortized over the term of the note, see table below.

F-11

SIGNATURE EXPLORATION AND PRODUCTION CORP.

Notes to Financial Statements

March 31, 2011

NOTE 7 – CONVERTIBLE NOTES AND WARRANTS, CONTINUED

	Convertible Notes		Accrued Interest
Balance, beginning of period	$	426,708	$	72,670
Amortization of beneficial conversion feature		20,042		-
Accrued interest		-		46,361
Balance, end of period	$	446,750	$	119,031

Convertible notes from shareholders accrue interest at a rate of 10 percent per annum. The note holders have the sole option of converting the principal and interest represented by these notes into our common stock at a strike price equal to a $0.01. The note holders will only be allowed to convert shares or portion thereof to the extent that, at the time of the conversion, the conversion will not result in the note holders beneficially owning more than 9.9% of the issued and outstanding common shares of the Company.

The Company is currently in default on the entire $446,750 of convertible notes from shareholders and the $119,031 of related accrued interest. As of March 31, 2011, no shareholders have made demands for payment of these loans.

Convertible Notes from Shareholders at fair value and derivative liability

The table below provides the details of the convertible notes from shareholders at fair value and the derivative liability at fair value for each issuance of convertible notes with detachable warrants for which a fair value election was made. See Note 4 for a discussion of the fair value election and a reconciliation of the change in the fair value of the notes and derivative liability.

					Notes				Derivative Liability (Warrants)
Month Notes were issued	Face Value on Issuance Date		Proceeds		Fair Value at March 31, 2010		Fair Value at March 31, 2011		Fair Value at March 31, 2010		Fair Value at March 31, 2011
December 2009	$	352,942	$	300,000	$	187,054	$	173,258	$	189,974	$	169,675
January 2010		64,706		60,000		13,541		9,690		13,675		12,073
February 2010 (1)		352,942		300,000		57,880		182,621		88,401		135,840
August 2010		58,824		50,000		-		35,586		-		35,994
March 2011		70,590		60,000		-		39,620		-		40,144
	$	900,004	$	770,000	$	258,475	$	440,775	$	292,050	$	393,726

(1)

A portion of the proceeds from this debt, $100,000 was not received until April 2010.

The notes above were all issued with a 15% original issue discount to the note holders and have a nominal interest rate of 16.63%. The note holders may convert, into shares of common stock, any portion of the notes that are outstanding, whether such portion represents principle or interest at $0.10. All of the convertible debt at fair value has a one year maturity. Therefore, at March 31, 2011 $652,943 of the debt is in default, although no shareholders have made demands for payment of these loans. These notes do not accrue interest in addition to the discount and do not contain any default interest provisions.

F-12

SIGNATURE EXPLORATION AND PRODUCTION CORP.

Notes to Financial Statements

March 31, 2011

NOTE 7 – CONVERTIBLE NOTES AND WARRANTS, CONTINUED

Each note was issued with a five year warrant to purchase shares of common stock of the Company. The warrants expire at various dates from 2014 to 2016. The table below shows the change in the number of warrants outstanding as of March 31, 2011 and 2010.

	Warrants Outstanding
	Number of Shares		Exercise Price
Outstanding at March 31, 2009		-	$	-
Warrants issued		1,736,268	$	0.75-$0.50
Warrants exercised		-		-
Warrants expired/cancelled		-		-
Outstanding at March 31, 2010		1,736,268	$	0.75-$0.50
Warrants issued		1,294,140	$	0.15
Additional warrants exercisable due to anti-dilution provisions		8,302,538	$	0.10
Warrants exercised		-		-
Warrants expired/cancelled		-		-
Outstanding at March 31, 2011		11,332,946	$	0.15-$0.10

The convertible notes and warrants issued between December 2009 and February 2010 originally contained substantially higher conversion and exercise prices, however, due to the anti-dilution provisions in the agreements, and as a result of the debt and warrants issued in August 2010, all of the previous exercise prices were revised to be $0.10, which was the conversion price contained in the August 2010 note agreement.

All of the notes and warrants contain an anti-dilution adjustment that state the conversion and exercise price may not be adjusted below $0.01. In addition, the note holder is only allowed to convert shares or exercise warrants or portions thereof to the extent that at the time of the conversion or exercise, the conversion or exercise will not result in the note holder beneficially owning more than 9.9% of the issued and outstanding common shares of the Company.

As part of its ongoing analysis for the proper classification of debt and equity instruments, the Company evaluated how many shares would need to be issued if all debt was converted and all warrants were exercised at the lowest possible price of $0.01. If such conversions and exercises were to take place the Company would have to issue 254,475,600 additional shares. Currently there are 250,000,000 shares authorized, leaving a deficit of 11,576,704 shares, which takes into account the 7,101,104 shares already outstanding at March 31, 2011.

In accordance with ASC topic 815-40, the Company evaluated whether an additional liability should be recorded to reflect the deficit in authorized shares. Specifically, the Company considered the guidance in ASC 840-40-35-12, which allows for reclassification of contracts on a systematic, rational and consistently applied basis. Based on this guidance the Company determined that the only potentially convertible shares not currently recorded as a liability relate to the convertible notes from shareholders, in the amount of $446,750. As this debt is already convertible at $0.01 the Company believes this debt would be converted before any other notes and warrant exercises, causing the Company to have enough authorized shares to issue upon the potential conversion of those 44,675,000 shares. Therefore, no additional liability was recorded at March 31, 2011.

F-13

SIGNATURE EXPLORATION AND PRODUCTION CORP.

Notes to Financial Statements

March 31, 2011

NOTE 8 – STOCKHOLDERS’ EQUITY (CAPITAL DEFICIENCY)

Consulting Agreements.

On April 19, 2010, the Company issued 28,571 shares to legal counsel as a retainer for services in the amount of $10,000.

Option Agreement. On August 3, 2009, we signed an Option Agreement allowing the Company to purchase up to a fifty percent working interest in the oil and gas exploration and development activities on 2,087 acres known as Medicine River Ranch. This option is valid for one year or until a Definitive Participation Agreement is either entered into or rejected by both parties. The Company issued 25,000 shares of restricted common stock upon execution of this agreement and an additional 75,000 shares of restricted common stock will be issued upon acceptance of a Definitive Participation Agreement. On January 29, 2010, both parties agreed to cancel this option and the issued shares were returned to the Company.

Employment Agreement. On October 7, 2009, the Company entered into an Employment Agreement with Jordan Estra, our former Chief Executive Officer. As compensation for entering into this Agreement, the Company granted and issued to Mr. Estra 3,600,000 shares of the common stock of the Company. The stock is restricted as defined by the rules and regulations promulgated under the Securities Act of 1933, as amended. The shares are fully paid and non-assessable.

The shares issued pursuant to this Agreement were subject to certain terms and conditions. The shares were represented by 36 certificates of 100,000 shares each. All certificates not delivered to the Executive are being held

by the Company. One certificate representing 100,000 shares will be delivered to the Executive on the 7th of each month beginning November 7, 2009.

Note Conversion. During the year ended March 31, 2010, the Company converted a total of $21,250 of notes payable and $373 of interest payable from certain Note Holders into common stock of the Company. The Company issued 2,125,000 shares of our common stock to satisfy the principal balances of the notes payable and 37,254 shares of our common stock to satisfy accrued interest of the notes payable. A loss of $177,941 was recognized for the conversion of a $2,000 note during the year ended March 31, 2010.

F-14

SIGNATURE EXPLORATION AND PRODUCTION CORP.

Notes to Financial Statements

March 31, 2011

NOTE 9 – STOCK OPTION PLAN

On February 6, 2008, the Board of Directors adopted the Signature Exploration and Production Corp. 2007 Amended Stock Option Plan (“2007 Plan”). Under the 2007 Plan, 8,000,000 shares of the Company’s restricted common stock may be issuable upon the exercise of options issued to employees, advisors and consultants.

NOTE 10 – SUBSEQUENT EVENT

Agreements

Mr. Alan Gaines, our Chief Executive Officer and Chairman, has entered into an Employment Agreement with the Company for a one year term beginning May 2, 2011. Mr. Gaines will be compensated with 12,012,413 shares of restricted common stock, payable upon the completion of a Qualified Acquisition or Qualified Equity Raise.

Dr. Amiel David, our Chief Operating Officer, has entered into an Employment Agreement with the Company for a one year term beginning May 2, 2011. Dr. David will be compensated with 12,013,413 shares of restricted common stock, payable upon the completion of a Qualified Acquisition or Qualified Equity Raise.

F-15

GB SCIENCES INC - FORM 10-K - July 11, 2011

Attached files

GB SCIENCES INC Reports