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EX-32.1 - CERTIFICATION - VIKING INVESTMENTS GROUP, INC.sbat_ex321.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K

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

For the fiscal year ended: December 31, 2011

OR

¨
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ____________

Commission File Number: 000-29219

SINOCUBATE, INC.
(Exact name of registrant as specified in its charter)
 
Nevada
 
98-0199508
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification Number)
 
Kerry Centre, 1515 West Nanjing Road, Suite 1002
Shanghai, P.R. China, 2000040
 (Address of principal executive offices)

+ 86 (21) 5298 6257
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.001
Name of each exchange on which registered: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock

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

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 o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x     No ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x        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, or a non-accelerated filer. See definition of “large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer o
Accelerated filer o
Non-accelerated filer o
Smaller reporting company x

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

As of June 30, 2011, the aggregate market value of the shares of the Registrant’s common equity held by non-affiliates was approximately $186,015.  Shares of the Registrant’s common stock held by each executive officer and director and each by each person who owns 10 percent or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates of the Registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares of common stock outstanding as of March 29, 2012 was 18,553,778.

DOCUMENTS INCORPORATED BY REFERENCE:

None.
 


 
 

 
 
NOTE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K contains statements that constitute "forward-looking statements." These forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology like "believes," "anticipates," "expects," "estimates," "may," or similar terms. These statements appear in a number of places in this annual report and include statements regarding the Company’s intent, belief or current expectations and those of its directors or officers with respect to, among other things:(i) trends affecting its financial condition or results of operations, (ii) its business and growth strategies, and (iii) its financing plans. You are cautioned that forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Factors that could adversely affect actual results and performance include, among others, the Company’s need for additional capital, its history of losses, the intense competition the Company faces in its business, the fact that its stock is a “penny stock” and the other material risks described under “Risk Factors”. The accompanying information contained in this annual report, including, without limitation, the information set forth under the heading "Item 1. Business" identifies important additional factors that could materially adversely affect actual results and performance. You are urged to carefully consider these factors. All forward-looking statements attributable to us are expressly qualified in their entirety by the foregoing cautionary statement.
 
 
2

 
 
FORM 10-K
Table of Contents
 
   
Page
 
       
PART I
   
4
 
         
Item 1.
Business
   
4
 
Item 1A.
Risk Factors
   
5
 
Item 1B.
Unresolved Staff Comments
   
11
 
Item 2.
Properties
   
11
 
Item 3.
Legal Proceedings
   
11
 
Item 4.
(Removed and Reserved)
   
11
 
         
PART II
   
12
 
         
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
   
12
 
Item 6.
Selected Financial Data
   
13
 
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
   
13
 
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
   
16
 
Item 8.
Financial Statements and Supplementary Data
   
F-1
 
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
   
17
 
Item 9A.
Controls and Procedures
   
17
 
Item 9B. Other Information.     19  
         
PART III
   
20
 
         
Item 10.
Directors, Executive Officers and Corporate Governance
   
20
 
Item 11.
Executive Compensation
   
24
 
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
   
25
 
Item 13.
Certain Relationships and Related Transactions
   
26
 
Item 14.
Principal Accounting Fees and Services
   
27
 
         
PART IV
   
29
 
         
Item 15.
Exhibits, Financial Statement Schedules
   
29
 
         
SIGNATURES
   
30
 
 
 
3

 
 
PART I
 

Item 1.        Business
 

The Registrant, SinoCubate, Inc., is sometimes referred to hereinafter as “SinoCubate” or the “Company.”  The Company was incorporated under the laws of the State of Florida on May 3, 1989 as Sparta Ventures Corp. and remained inactive until June 27, 1998.  The name of the Company was changed to Thermal Ablation Technologies Corporation on October 8, 1998 and then to Poker.com, Inc. on August 10, 1999.  On September 15, 2003, the Company changed its name to LegalPlay Entertainment Inc. and on November 8, 2006, the name of the Company was changed to Synthenol Inc.  Effective November 3, 2008, the Company merged with and into a wholly-owned subsidiary, SinoCubate, Inc., which remained the surviving entity of the merger.  SinoCubate was formed in the State of Nevada on September 11, 2008.  The merger resulted in a change of name of the Company from Synthenol Inc. to SinoCubate, Inc. and a change in the state of incorporation of the Company from Florida to Nevada.  

On June 29, 2011, and on August 29, 2011, Viking Investments Group,  LLC, a company controlled and managed by the Company’s Chairman, Chief Executive Officer and President, Tom Simeo, incorporated under the laws of The Federation of St. Kitts and Nevis (“Viking Nevis”), sold 100,000 and 466,813 shares respectively of China Wood, Inc., publicly listed in the United States with the ticker “CNWD”, (the “China Wood Shares”) owned by Viking Nevis, in exchange for 1,912,000 and 12,569,420 newly issued restricted shares of SinoCubate respectively (the SinoCubate Shares”). On August 29, 2011, the Company acquired, from Tom Simeo, the Company’s Chairman, Chief Executive Officer and President, Viking Investments Group, LLC, incorporated in Delaware (“Viking Delaware”) for a value of One Hundred Dollars ($100).  By August 29, 2011, Viking Nevis completed the purchase of the China Wood Shares by having delivered a total of 566,813 shares of common stock in China Wood, Inc. to the Company.  The China Wood Shares were registered in a Form S-1 Registration Statement declared effective by the SEC on April 7, 2011. The China Wood Shares are subject to a “Leak-Out Provision” whereby only a certain amount of shares can be sold per month up and until the first anniversary of the effective day of the aforementioned registration statement, April 7, 2012.  In determining the fair value of the shares, the Company and Viking Nevis, agreed to use, where applicable, the closing bid price for the most recent trading days prior to the closing day of the transactions.

The Company’s current business plan is to provide incubate resources and services to support the successful development of late stage, non-publicly-listed companies based in the United States and emerging growth countries with the ultimate goal and endeavor for them to become publicly listed in the United States.  This incubate service includes financing, professional advisory services, board member services, CFO services, corporate governance advice and general corporate management advisory services to entrepreneurs and their advisers in consideration for a fee, comprised of either cash or equity, or a combination of both (hereinafter referred to as a “Transaction” or plural “Transactions”). It is believed that successful completion of a business incubation program increases the likelihood that a company will stay in business for the long term.  SinoCubate is neither an underwriter as the term is defined in Section 2(a)(11) of the Securities Act of 1933, nor an investment company pursuant to the Investment Company Act of 1940.  SinoCubate is not an investment adviser pursuant to the Investment Advisers Act of 1940. SinoCubate is not registered with FINRA or SIPC. 

 
 
4

 
 
This is a new direction for SinoCubate. Previously, SinoCubate’s business plan had been focused on investigating and then, if deemed economically feasible, entering into contractual arrangements with entities that would have enabled SinoCubate to either purchase outright the assets and and/or business operations of such entities or to enter into business arrangements, such as joint ventures or similar other combinations with those entities. SinoCubate does not expect to see immediate economic results from its development and, ultimately, there can be no guarantee that the business model will develop to become successful and/or profitable.
 
On November 25, 2011, and on December 12, 2011, the Company entered into binding Letter of Intents with two new Chinese clients located in Beijing and Shanghai to provide those clients consulting and general business development services, including consultation regarding potential stock listings through reverse mergers in the United States.  The Beijing client operates over 100 retail stores selling women’s underwear.  In addition to adding up to 200 more stores in the next two years, the client plans to establish a comprehensive online presence. The Shanghai client, a restaurant and tea house company, operates close to 130 stores in Shanghai and the Hunan province.  The client plans to add 50 more stores per year during the next three years and to build a central kitchen serving 300 stores.  Upon completion of the listing in the United States, the Company will own a stake in both of those clients.

On January 18, 2012, the Company signed an engagement letter with a new Chinese client located in Zhejiang Province to provide consulting and general business services, including consultation regarding potential stock listings via through a reverse merger in the United States.  This client is in the apparel business and owns 3 clothing factories, several name brands and operates multiple retail stores in China, and exports some of its products to Russia, the United States, and other foreign countries.  The client plans to increase its production facility, establish a comprehensive online presence and increase its retail chain in China, and to establish retail stores in the United States.  Upon completion of the listing in the United States, the Company will own a stake in this client.

Item 1A.     Risk Factors

There are several material risks associated with the Company. You should carefully consider the risks and uncertainties described below, which all constitute material risks relating to the Company.  If any of the following risks are realized, the Company’s business, operating results and financial condition could be harmed. This means investors could lose all or a part of their investment.

 Conflicts of Interest

Certain conflicts of interest may exist between the Company and its Chief Executive Officer and Chairman, and its principal shareholder, Viking Nevis.  Tom Simeo is also the principal officer of Viking Nevis.  As a result, conflicts of interest may arise that can be resolved only through exercise of such judgment as is consistent with fiduciary duties to the Company. See “Certain Relationships and Related Transactions.”
 
 
 
5

 
 
Need for Additional Financing

The Company currently has limited funds and the lack of additional funds may negatively impact the Company’s ability to pursue its business strategy of providing incubating services, to include financing, professional advisory services, board member services, CFO services, corporate governance and general corporate management to entrepreneurs seeking to enter the capital markets in the US and elsewhere, or to acquire or enter into contractual arrangements with an entity to either acquire such entity or to enter into a contract arrangement that will enable the Company to manage such an entity. Even if the Company’s funds prove to be sufficient to provide such services or to acquire an interest in, or complete a transaction with, an entity, the Company may not have enough capital to exploit the opportunity. The ultimate success of the Company may depend upon its ability to raise additional capital. The Company may investigate the availability, source, or terms that might govern the acquisition of additional capital but will not do so until it determines a need for additional financing. If additional capital is needed, there is no assurance that funds will be available from any source or, if available, that they can be obtained on terms acceptable to the Company. If not available, the Company’s operations will be limited to those that can be financed with its modest capital.
 
Regulation of Penny Stocks

The Company’s securities may be subject to a SEC rule that imposes special sales practice requirements upon broker-dealers who sell such securities to persons other than established customers or accredited investors. For purposes of the rule, the phrase “accredited investors” means, in general terms, institutions with assets in excess of $5,000,000, or individuals having a net worth, or joint net worth with spouse, in excess of $1,000,000 excluding the value of the person’s primary residence or having an annual income that exceeds $200,000 (or that, when combined with a spouse’s income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Consequently, the rule may affect the ability of broker-dealers to sell the Company’s securities and also may affect the ability of purchasers in this offering to sell their securities in any market that might develop.

In addition, the SEC has adopted a number of rules to regulate “penny stocks.” Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities Exchange Act of 1934, as amended or the Exchange Act. Because the securities of the Company may constitute “penny stocks” within the meaning of the rules, the rules would apply to the Company and to its securities. The rules may further affect the ability of owners of shares to sell the securities of the Company in any market that might develop for them.

Shareholders should be aware that, according to SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses.

 
 
6

 
 
Lack of Operating History

Even though providing incubate services is an area that the Company’s CEO is experienced in, the Company has only recently refocused its efforts on providing incubate services to companies in the United States and emerging growth countries.  Due to the special risks inherent in the implementation of a new business emphasis and plan, the Company must be regarded as a new or start-up venture with all of the unforeseen costs, expenses, problems, and difficulties to which such ventures are subject.
 
No Assurance of Success or Profitability, Especially in Light of the Likely Volatility of foreign Capital Markets

There is no assurance that the Company will be able to successfully implement its business plan and provided the contemplated services to its client companies. Even if the Company should be successful in providing its services to its client companies, there is a risk that developments regarding the political climate or capital markets in foreign countries could negatively impact our revenues, and there is no assurance that we will generate revenues or profits, or that the market price of the Company’s common stock will be increased thereby.
 
Impracticality of Exhaustive Investigation

The Company has limited or no funds and, this, coupled with the lack of full-time management will likely make it impracticable to conduct a complete and exhaustive investigation and analysis of its opportunities with respect to its prospective client companies.  Decisions will therefore likely be made without detailed feasibility studies, independent analysis, market surveys and the like which, if the Company had more funds available to it, would be desirable. The Company will be particularly dependent in making decisions upon information provided by its prospective client’s promoter, owner, sponsor, or others associated with the business opportunity seeking the Company’s participation. A significant portion of the Company’s available funds may be expended for investigative expenses and other expenses related to preliminary aspects of providing incubate services to clients, and potential profits would therefore be lessened.

Lack of Diversification

Because of the limited financial resources that the Company has, it is unlikely that the Company will be able to diversify its acquisitions or operations. The Company’s probable inability to diversify its activities into more than one area will subject the Company to economic fluctuations within a particular business or industry and therefore increase the risks associated with the Company’s operations.

Reliance upon Financial Statements

The Company generally will require audited financial statements from companies with which it seeks to enter into a contractual arrangement.  In cases where no audited financials are available, the Company will have to rely upon interim period unaudited information received from a prospective client company’s management that has not been verified by outside auditors. The lack of the type of independent verification which audited financial statements would provide increases the risk that the Company, in evaluating a contractual arrangement with such a company, will not have the benefit of full and accurate information about the financial condition and recent interim operating history of that company. This risk increases the prospect that the contractual arrangement with such a company might prove to be an unfavorable one for the Company or the holders of the Company’s securities.
 
 
 
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Moreover, the Company will be subject to the reporting provisions of the Exchange Act, and thus will be required to furnish certain information about significant contractual arrangements, including audited financial statements for any business with which it enters into a contractual arrangement for control. Consequently, prospects that do not have, or are unable to provide reasonable assurances that they will be able to obtain, the required audited statements would not be considered by the Company to be appropriate clients so long as the reporting requirements of the Exchange Act are applicable. Should the Company, during the time it remains subject to the reporting provisions of the Exchange Act, complete into a contract for control of an entity for which audited financial statements prove to be unobtainable, the Company would be exposed to enforcement actions by the SEC and to corresponding administrative sanctions, including permanent injunctions against the Company and its management. The legal and other costs of defending an SEC enforcement action would have material, adverse consequences for the Company and its business. The imposition of administrative sanctions would subject the Company to further adverse consequences. In addition, the lack of audited financial statements would prevent the securities of the Company from becoming eligible for listing on NASDAQ, or on any existing stock exchange.
 
Moreover, the lack of such financial statements is likely to discourage broker-dealers from becoming or continuing to serve as market makers in the securities of the Company. Without audited financial statements, the Company would almost certainly be unable to offer securities under a registration statement pursuant to the Securities Act of 1933 or the Securities Act, and the ability of the Company to raise capital would be significantly limited until such financial statements were to become available.
 
Other Regulation

A contractual arrangement for acquisition of equity ownership of or control may be of a company that is subject to rules and regulation by federal, state, local or foreign authorities. Compliance with such rules and regulations can be expected to be a time-consuming, expensive process and may limit other opportunities of the Company.

Limited Participation of Management

The Company is heavily dependent upon the skills, talents, and abilities of its Chief Executive Officer, Mr. Simeo, who currently has other business interests, to manage and implement its business plan.

Lack of Continuity in Management

The Company does not have any employment agreements with Chief Executive Officer, Mr. Simeo, and as a result, there is no assurance Mr. Simeo will continue to be associated with the Company in the future. In connection with future business opportunities, it is possible that Mr. Simeo may resign as an officer and director of the Company subject to compliance with Section 14f of the Exchange Act.  A decision to resign will be based upon the identity of the business opportunity and the nature of the transaction and is likely to occur without the vote or consent of the stockholders of the Company.

 
 
8

 
  
No Independent Audit Committee
 
The Company does not have an independent Audit Committee of its Board of Directors. The entire Board of Directors functions as the Company’s Audit Committee. The Sarbanes-Oxley Act of 2002, as amended or the SOX and rules and regulations adopted by the SEC to implement the SOX impose certain standards on listed companies relative to the maintenance and operations of Board of Directors Audit Committees, including but not limited to the requirement that Audit Committees be appointed, that membership of such committees comprise only independent directors, that a financial professional be among the membership of such committee and that such committee be afforded an adequate operating budget and be able to employ independent professional advisors. The SOX also requires that the Audit Committee oversee the work of a company’s outside auditors and that the outside auditors be responsible to the Audit Committee. At this time, the Company is not in compliance with the requirements of the Sarbanes-Oxley Act as they relate to independent Board of Directors Audit Committees. The Company believes that under rules and regulations adopted by the SEC to implement these provisions of the SOX it is not required to comply with its requirements relating to the appointment of an Audit Committee of its Board of Directors and conforming with the enumerated standards and guidelines because the Company is not a “Listed Company” as defined therein. Notwithstanding, the Company may ultimately be determined not to be in compliance therewith and may therefore face penalties and restrictions on its operations until it comes into full compliance. Additionally, the Company’s failure to comply with the provisions of the SOX could preclude it from being listed on NASDAQ or any other stock exchanges until it can show that it is in compliance. The Company’s failure to be in compliance with the SOX could also present an impediment to a potential business combination where the target company intends that the Company apply for listing on NASDAQ or any other applicable stock exchanges.
 
Indemnification of Officers and Directors

Nevada statutes provide for the indemnification of the Company’s directors, officers, employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of the Company. The Company will also bear the expenses of such litigation for any of its directors, officers, employees, or agents, upon such person’s promise to repay the Company if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by the Company which it may be unable to recoup.

Dependence upon Outside Advisors

To supplement the Company’s officers, directors and principal shareholders, the Company may be required to employ accountants, technical experts, appraisers, attorneys, or other consultants or advisors. The selection of any such advisors will be made by the Company without any input from stockholders. Furthermore, it is anticipated that such persons may be engaged on an “as needed” basis without a continuing fiduciary or other obligation to the Company. In the event the Company considers it necessary to hire outside advisors, such persons may be affiliates of the Company, if they are able to provide the required services.

No Foreseeable Dividends

The Company has not paid dividends on its common stock and does not anticipate paying such dividends in the foreseeable future.

 
 
9

 
 
Loss of Control by Present Management and Shareholders

The Company may consider, as consideration for future business opportunities, an amount of the Company’s authorized but unissued common stock that would, upon issuance, represent the great majority of the voting power and equity of the Company. The result would be that another company’s stockholders and management would control the Company, and the Company’s Board of Directors and management could be replaced by persons unknown at this time. Such a merger would result in a greatly reduced percentage of ownership of the Company by its current shareholders.
 
Rule 144 Sales

The majority of the outstanding shares of common stock held by present stockholders are “restricted securities” within the meaning of Rule 144 under the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 in general requires restricted securities to be held for a particular length of time, and prescribes the conditions which must be satisfied prior to the sale of the securities.  Under new amendments to Rule 144, if an issuer of securities, such as the Company, has been subject to reporting requirements of Section 13 or 15(d) of the Exchange Act for at least 90 days, then the restricted securities of such issuer are subject to a six-month holding period.  Under the amendments, a non-affiliate that has held restricted securities of a reporting issuer for more than six months but less than one year can resell the securities in reliance on Rule 144, if current information is available for the issuer.  After one year, the non-affiliate may freely resell the restricted securities without regard to any Rule 144 condition.  A non-affiliate of a non-reporting issuer must hold the securities for one year before any public resale.  After one year, a non-affiliate may freely resell such securities without regard to Rule 144 conditions.  Under the new amendments, Rule 144 is not available for the resale of securities initially issued by a shell company (reporting or non-reporting) or a former shell company unless certain conditions detailed under Rule 144 are met.  A sale under Rule 144 or under any exemption from the Securities Act, if available, or pursuant to subsequent registration of shares of common stock of present stockholders, may have a depressive effect upon the price of the Company’s common stock.
 
Other Information

Neither the Company nor any of its subsidiaries engaged in any research and development activities during 2011.  The Company does not manufacture any products or engage in any activity that requires compliance with environmental laws.

Employees

The Company, through its wholly owned subsidiary, Viking Delaware, employs approximately 10 people involved in business development, business analysis, financial consulting, execution and support of the Company’s business.

Reports to Securities Holders

The Company provides an annual report that includes its audited financial information to its shareholders upon written request.  The Company also makes its financial information equally available to any interested parties or investors through compliance with the disclosure rules of the Exchange Act. The Company is subject to disclosure filing requirements including filing a Form 10-K annually and Form 10-Q quarterly. In addition, the Company will file Form 8-K and other proxy and information statements from time to time as required.
 
 
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The public may read and copy any materials that the Company files with the SEC at the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Item 1B.     Unresolved Staff Comments

Not applicable.
 
Item 2.        Properties
 
The principal executive office of the Company is located at located at Kerry Centre, 1515 West Nanjing Road, Suite 1002, Shanghai, P.R. China, 200040, where it leases office space.
 
Item 3.        Legal Proceedings
 
As of December 31, 2011, the Company was not a party to any pending or threatened legal proceedings.

Item 4.        Mine Safety Disclosures

Not applicable.

 
11

 
 
PART II
 
Item 5.        Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 
Market Information

There is no "established trading market" for shares of the Company’s common stock. As of December 31, 2011, the Company’s common stock was quoted on the NASD OTC Bulletin Board under the symbol "SBAT.OB". No assurance can be given that any "established trading market" for the Company’s common stock will develop or be maintained.

The range of high and low closing bid quotations for the Company’s common stock during each quarter of the calendar years ended December 31 2011 and 2010, is shown below, as quoted by http://finance.yahoo.com .   Prices are inter-dealer quotations, without retail mark-up, markdown or commissions and may not represent actual transactions.

Stock Quotations
 
Quarter Ended
 
High Bid
   
Low Bid
 
March 31, 2010
   
0.20
     
0.20
 
June 30, 2010
   
0.20
     
0.20
 
September 30, 2010
   
0.21
     
0.21
 
December 31, 2010
   
0.30
     
0.30
 
March 31, 2011
   
0.30
     
0.30
 
June 30, 2011
   
0.30
     
0.30
 
September 30, 2011
   
0.20
     
0.20
 
December 31, 2011
   
0.30
     
0.30
 

The future sale of the Company’s presently outstanding "unregistered" and "restricted" common stock by present members of management and persons who own more than five percent of the Company’s outstanding voting securities may have an adverse effect on any "established trading market" that may develop in the shares of the Company’s common stock.

Holders

As of December 31, 2011, the Company had 45 shareholders of record of common stock, including shares held by brokerage clearing houses, depositories or otherwise in unregistered form.  The Company does not know the beneficial owners of such shares.
 
 
 
12

 
 
Item 6.        Selected Financial Data
 
The Company, as a smaller reporting company (as defined by Rule 12b-2 of the Exchange Act), is not required to furnish information required by this item.
 
Item 7.        Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
You should read the following discussion and analysis in conjunction with the audited consolidated financial statements and notes thereto appearing elsewhere in this annual report on Form 10-K.

In preparing the management’s discussion and analysis, the registrant presumes that you have read or have access to the discussion and analysis for the preceding fiscal year.
 
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended or the Reform Act.  All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earning, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions of performance; and statements of belief; and any statements of assumptions underlying any of the foregoing.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: the Company’s ability to raise capital and the terms thereof; and other factors referenced in the Form 10-K.
 
The use in this Form 10-K of such words as “believes”, “plans”, “anticipates”, “expects”, “intends”, and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. These forward-looking statements present the Company’s estimates and assumptions only as of the date of this report.  Except for the Company’s ongoing obligation to disclose material information as required by the federal securities laws, the Company does not intend, and undertakes no obligation, to update any forward-looking statements.

Although the Company believes that the expectations reflected in any of the forward-looking statements are reasonable, actual results could differ materially from those projected or assumed or any of the Company’s forward-looking statements.  The Company’s future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.
 
 
13

 

PLAN OF OPERATIONS

Overview

The Company’s current business plan is to provide incubate resources and services to support the successful development of late stage, non-publicly-listed companies based in the United States and emerging growth countries with the ultimate goal and endeavor for them to become publicly listed in the United States.  This incubate service include financing, professional advisory services, board member services, CFO services, corporate governance advice and general corporate management advisory services to entrepreneurs and their advisers in consideration for a fee, comprised of either cash or equity, or a combination of both (hereinafter referred to as a “Transaction” or plural “Transactions”). It is believed that successful completion of a business incubation program increases the likelihood that a company will stay in business for the long term.  SinoCubate is neither an underwriter as the term is defined in Section 2(a)(11) of the Securities Act of 1933. SinoCubate is not an investment company pursuant to the Investment Company Act of 1940.  SinoCubate is not an investment adviser pursuant to the Investment Advisers Act of 1940. SinoCubate is not registered with FINRA or SIPC. 

This is a new direction for SinoCubate. Previously, SinoCubate’s business plan had been focused on investigating and then, if deemed economically feasible, entering into contractual arrangements with entities that would have enabled SinoCubate to either purchase outright the assets and and/or business operations of such entities or to enter into business arrangements, such as joint ventures or similar other combinations with those entities. SinoCubate does not expect to see immediate economic results from its development and, ultimately, there can be no guarantee that the business model will develop to become successful and/or profitable.
 
Going Concern Qualification

The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.  Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances; however there is no assurance of additional funding being available.

RESULTS OF CONTINUING OPERATIONS

The following discussion of the consolidated financial condition and results of operation of the Company should be read in conjunction with the consolidated financial statements and the related Notes included elsewhere in this Report.
 
 
14

 
 
Liquidity and Capital Resources
 
At December 31, 2011 the Company had working capital deficiency of US$ 20,075

At December 31, 2011, the Company had a holding of 566,813 shares of China Wood, with the open market bid price at December 31, 2011 of US$6 per share with an aggregate value of approximately US$3,400,878. However, the stock is currently illiquid, and the management arbitrarily estimates and anticipates a fair market price per share of US$4.00 (see Note 5 to the financial statements). Such estimate is based on Viking Nevis’ subsequent Guaranty Agreement, executed by Viking Nevis, on April 11, 20112, whereby Viking Nevis agreed to repurchase all 566,813 shares of China Wood for US$4.00 per share if the 45-day volume-weighted average price (VWAP)* of the shares of China Wood equaled US4.00 per share or less.

*Volume-weighted average price (VWAP) is the ratio of the value traded to total volume traded over a particular time horizon. It is a measure of the average price a stock traded at over the trading horizon.
 
Revenue

The Company had no net sales at December 31, 2011 or December 31, 2010.

Expenses

The operating expenses were $3,637,578 in the year ended December 31, 2011, compared with $25,198 for the corresponding period in 2010.  The increase was mainly due to office rental fees, wages, the office expenses and impairment loss on long-term investment.
 
Net Loss

The Company incurred a net loss of $ 3,637,564 in the year ended December 31, 2011, compared with net loss of $25,198 in the year ended December 31, 2010.  The increase in net loss was mainly due to rental fees, wages and the office expenses.

Off Balance Sheet Arrangements
 
The Company does not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in the Company’s securities.
 
 
15

 

Seasonality
 
The Company’ operating results are not affected by seasonality.
 
Inflation
 
The Company’s business and operating results are not affected in any material way by inflation.
 
Item 7A.     Quantitative and Qualitative Disclosures About Market Risk.
 
The Company, as a smaller reporting company (as defined by Rule 12b-2 of the Exchange Act), is not required to furnish information required by this item.
 
 
16

 

Item 8.
Financial Statements and Supplementary Data
 
Report of Independent Registered Public Accountants Firm
    F-2  
Balance Sheet
    F-3  
Statement of Operations and Comprehensive Loss
    F-4  
Statement of Cash Flows (audited)
    F-5 - F-6  
Statement of Stockholders' Deficiency (audited)
    F-7 - F-9  
Notes to Financial Statements
    F-10 - F19  
 
 
F-1

 
 
Schwartz Levitsky Feldman llp
CHARTERED ACCOUNTANTS
LICENSED PUBLIC ACCOUNTANTS
TORONTO · MONTREAL
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 
To the Board of Directors and Stockholders of
SinoCubate, Inc.
(A Development Stage Company)

We have audited the accompanying consolidated balance sheets of SinoCubate, Inc. (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of operations, comprehensive loss, statement of stockholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of the Company from the date of inception to December 31, 2007, which statements reflect cumulative total assets of $66,273 and cumulative expenses of $1,057,305 for the period from inception to December 31, 2007.  Those statements were audited by another auditor whose report has been furnished to us, and our opinion, insofar as it relates to the cumulative financial information from inception of the development stage on January 1, 2004 to December 31, 2007, is based solely on the report of the other auditor.

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 audits 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 controls over financial reporting.  Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion based on our audits and the report of the other accounting firm the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2011 and 2010 and the results of its operations and its cash flows for the years then ended and for the period from inception of the development stage on January 1, 2004 to December 31, 2011 in conformity with generally accepted accounting principles in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company is a development stage company and has no established source of revenue. Management’s plans regarding these matters are also disclosed in Note 1. These conditions raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
 
   
 
Toronto, Ontario, Canada
Chartered Accountants
April 14, 2012
Licensed Public Accountants
 
2300 Yonge Street, Suite 1500
Toronto, Ontario M4P 1E4
Tel:  416 785 5353
Fax:  416 785 5663
 
 
F-2

 
 
SINOCUBATE, INC.
(A Development Stage Company)
Consolidated Balance Sheets
(Audited)
(Amounts expressed in US dollars)
 
   
December 31
 
   
2011
   
2010
 
             
ASSETS
           
Cash
  $ 7,946     $ -  
Other receivables
    718       -  
Total current assets
    8,664       -  
Long-term Investment  (Notes 4)
    2,267,252       -  
                 
TOTAL ASSETS
  $ 2,275,916     $ -  
                 
LIABILITIES AND STOCKHOLDERS’EQUITY
               
LIABILITIES
               
Current liabilities
               
Accrued expenses
  $ 28,739     $ -  
TOTAL LIABILITIES
  $ 28,739     $ -  
                 
Related Party Transactions (Note 3)
Commitment (Note 6)
               
Subsequent Event (Note 11)
               
                 
STOCKHOLDER’S EQUITY
               
Capital Stock
               
Preferred stock, $0.001 par value, 5,000,000 shares authorized,
               
no shares issued or outstanding as of December 31, 2011 and                
2010 (Note 9)     -       -  
                 
Common stock, $0.001 par value, 100,000,000 shares
               
authorized and outstanding 18,553,778 shares issued
               
as of December 31, 2011, and 995,655 shares issued
               
as of December 31, 2010 (Note 9)
  $ 18,554     $ 996  
                 
Additional Paid-In Capital (Note 9)
    8,227,046       2,359,863  
Deficit
    (1,305,454 )     (1,305,454 )
Deficit accumulated during the development stage
    (4,692,969 )     (1,055,405 )
                 
TOTAL STOCKHOLDER’S EQUITY
    2,247,177       -  
              -  
TOTAL LIABILITIES AND STOCKHOLDERS’EQUITY
  $ 2,275,916     $ -  

The accompanying notes are an integral part of these consolidated financial statements
 
 
F-3

 
 
SINOCUBATE, INC.
(A Development Stage Company)
Consolidated Statement Of Operations And Comprehensive Loss
(Audited)
(Amounts expressed in US dollars)
 
   
For the Year Ended
   
For the Year Ended
   
January 1, 2004 (Date of
Inception of the Development Stage) to
 
   
December 31, 2011
   
December 31, 2010
   
December 31, 2011
 
General and administrative expenses:
                 
Amortization
  $ -     $       $ 27,077  
Bad debt
    -               525  
Corporate promotion
    -               13,920  
Finance charges
    -               27,397  
Insurance
    -               15,901  
Interest on notes payable
    -               34,648  
Management and consultant fees
    -               314,374  
Office supplies and miscellaneous expenses
    24,675       3,198       75,617  
Professional fees
    35,739       22,000       367,256  
Rent
    43,676               59,987  
Wages
    734,902               819,160  
Impairment loss on long-term investment  (note 4)
    2,798,586               2,798,586  
                         
Loss before other items
    (3,637,578 )     (25,198 )     (4,554,448 )
                         
Other items:
                       
Loss on disposition of equipment
    -               (15,028 )
Write-down of intangible assets
    -               (50,001 )
Write-off of payables
    -               73,607  
Write-off of notes payable
    -               14,823  
Gain on settlement of lawsuit
    -               44,445  
Gain on sale of investment
    -               31,874  
Other income
    14               42,544  
                         
Loss from continuing operations
    (3,637,564 )     (25,198 )     (4,412,184 )
                         
Operating loss from discontinued operations
    -               (388,905 )
                         
Gain on sales of discontinued operations
    -               108,120  
                         
Net loss and Comprehensive loss
  $ (3,637,564 )   $ (25,198 )   $ (4,692,969 )
                         
Basic and diluted Loss per common share
    (0.84 )     (0.03 )        
Weighted average number of common share
                       
outstanding – basic and diluted
    4,306,118       995,655          
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-4

 
 
SINOCUBATE, INC.
(A Development Stage Company)
Consolidated Statement Of Cash Flows
(Audited)
(Amounts expressed in US dollars)
 
   
For the Year Ended
   
For the Year Ended
   
January 1, 2004 (Date of Inception of the Development Stage) to
 
   
December 31, 2011
   
December 31, 2010
   
December 31, 2011
 
Cash flows from operating activities:
                 
                         
Net loss
  $ (3,637,564 )   $ (25,198 )   $ (4,692,969 )
Adjustments to reconcile net loss to net cash used in operating activities:
                       
                         
Finance charges
                    27,387  
Accrued interest on notes payable
                    31,414  
Amortization
                    27,077  
Expenses and service costs assumed by shareholders
    769,378       25,198       871,886  
Foreign exchange effect on notes payable
                    5,303  
Issuance of common stock for services
                    1,000  
Stock-based compensation
                    28,480  
Loss on disposition of equipment
                    225,184  
Write-down of intangible assets
                    360,001  
Write-off of payables
                    (73,607 )
Write-off of notes payable
                    (18,729 )
Gain on settlement of lawsuit
                    (44,445 )
Gain on sale of discontinued operations
                    (108,121 )
    Gain on sale of investments
                    (31,874 )
    Other income
                    (42,530 )
Impairment loss on long-term investment  (note 4)
    2,798,586               2,798,586  
Changes in non-cash working capital items:
                       
Increase in accrued expenses
    28,739               28,739  
Other receivables
    (718 )             142,803  
Cash used in continuing operations
    (41,579 )     -       (464,415 )

 
F-5

 
 
SINOCUBATE, INC.
(A Development Stage Company)
Consolidated Statement Of Cash Flows
(Audited)
(Amounts expressed in US dollars)
 
   
For the Year Ended
   
For the Year Ended
   
January 1, 2004 (Date of Inception of the Development Stage) to
 
   
December 31, 2011
   
December 31, 2010
   
December 31, 2011
 
                   
Discontinued operations
                (171,213 )
                     
Net cash used in operating activities
    (41,579 )     -       (635,628 )
                         
Cash flows from investing activities:
                       
Proceeds from sale of subsidiary
                    1  
Proceeds from assets disposition
                    5,458  
Purchase of equipment
                    (5,808 )
Net cash used in investing activities
    -       -       (349 )
                         
Cash flows from financing activities:
                       
Settlement of notes payable
                    398,614  
Proceeds from issuance of common stock
    49,525               50,525  
                         
Net cash provided by financing activities
    49,525               449,139  
                         
Effect of exchange rate changes on cash
                    (14,734 )
                         
Net increase/(decrease) in cash
    7,946       -       (201,572 )
                         
Cash, beginning of year
    -       -       209,518  
                         
Cash, ending of year
  $ 7,946     $ -     $ 7,946  
                         
Supplemental Cash Flow Information (See Note 7)                        
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-6

 
 
SINOCUBATE, INC.
(A Development Stage Company)
Consolidated Statement Of Stockholders' Equity
(Audited)
(Amounts expressed in US dollars)
 
   
Common Shares
   
Treasury Stock
   
Additional
Paid-in
Capital
   
Subscriptions
Received
   
Accumulated
Other
Comprehensive
Income
   
Deficit
   
Deficit
Accumulated
During the
Development
Stage
   
Total Stockholders’ Equity
 
   
Number
   
Amount
                                           
          $     $     $     $     $     $     $     $  
May 3, 1989 (Inception) through December 31, 1997
    60,022       600             9,400                   (10,000 )            
Net loss
                                        (148,931 )           (148,931 )
Shares issued for cash
    180,000       1,800             148,200       2,000                         152,000  
Balance at December 31, 1998
    240,022       2,400             157,600       2,000             (158,931 )           3,069  
Net loss
                                        (511,587 )           (511,587 )
Foreign currency translation adjustment
                                  (14,130 )                 (14,130 )
Share issued for services
    15,000       150             124,850                               125,000  
Subscription receivable
    12,000       120             99,880       8,000                         108,000  
Share issued for intangible assets
    15,000       150             124,850                               125,000  
Balance at December 31, 1999
    282,022       2,820             507,180       10,000       (14,130 )     (670,518 )           (164,648 )
Net loss
                                        (339,063 )           (339,063 )
Foreign currency translation adjustment
                                  18,885                   18,885  
Shares issued for cash
    21,600       216             259,784                               260,000  
Shares issued for settlement of debt
    4,500       45             174,955                               175,000  
Subscription receivable
    600       6             9,994       (200 )                       9,800  
Subscription received
    30,000       300             499,700       (9,350 )                       490,650  
Stock option benefit
                      14,235                               14,235  
Balance at December 31, 2000
    338,722       3,387             1,465,848       450       4,755       (1,009,581 )           464,859  
Net loss
                                        375,621             375,621  
Foreign currency translation adjustment
                                  13,629                   13,629  
Shares issued for cash
    300       3             2,247                               2,250  
Subscription received
                            200                         200  
Stock option benefit
                      118,920                               118,920  
Repurchase of common stock for treasury
                (270 )     (6,611 )                             (6,881 )
Balance at December 31, 2001
    339,022       3,390       (270 )     1,580,404       650       18,384       (633,960 )           968,598  
Net loss
                                          (63,864 )           (63,864 )
Foreign currency translation adjustment
                                  (1,155 )                 (1,155 )
Shares issued for cash
    4,500       45             33,705                               33,750  
Balance at December 31, 2002
    343,522       3,435       (270 )     1,614,109       650       17,229       (697,824 )           937,329  
Net loss
                                        (607,630 )           (607,630 )
Foreign currency translation adjustment
                                  1,752                   1,752  
Stock option benefit
                      11,800                                 11,800  
Cancellation of agreement
                            (650 )                       (650 )
Share issues for cash on exercise of options
    12,000       120             11,880                               12,000  
Share issues for consulting services
    45,000       450             49,675                               50,125  
Share issues for intangible assets
    60,000       600             104,400                               105,000  
 
 
F-7

 
 
   
Common Shares
   
Treasury Stock
   
Additional
Paid-in
Capital
   
Subscriptions
Received
   
Accumulated
Other
Comprehensive
Income
   
Deficit
   
Deficit
Accumulated
During the
Development
Stage
   
Total Stockholders’ Equity
 
   
Number
   
Amount
                                           
          $     $     $     $     $     $     $     $  
Share issued for software
    60,000       600             53,400                               54,000  
Balance at December 31, 2003
    520,522       5,205       (270 )     1,845,264             18,981       (1,305,454 )           563,726  
Net loss
                                              (795,364 )     (795,364 )
Foreign currency translation adjustment
                                  (238 )                 (238 )
Stock-based compensation
                      4,460                               4,460  
Shares issued for cash on exercise of options
    1,000       10             990                               1,000  
Share issued for debt
    140,000       1,400             68,600                               70,000  
Share issued for consulting services
    2,000       20             980                               1,000  
Balance at December 31, 2004
    663,522       6,635       (270 )     1,920,294             18,743       (1,305,454 )     (795,364 )     (155,416 )
Net loss
                                              (54,416 )     (54,416 )
Foreign currency translation adjustment
                                  (702 )                 (702 )
Share issues for consulting services
    18,000       180             8,820                               9,000  
Balance at December 31, 2005
    681,522       6,815       (270 )     1,929,114             18,041       (1,305,454 )     (849,780 )     (201,534 )
Net loss
                                              (36,575 )     (36,575 )
Foreign currency translation adjustment
                                  563                   563  
Share issues for debt
    50,000       500             24,500                               25,000  
Balance at December 31, 2006
    731,522       7,315       (270 )     1,953,614             18,604       (1,305,454 )     (886,355 )     (212,546 )
Net loss
                                              (170,950 )     (170,950 )
Discount on notes payable
                      20,573                               20,573  
Foreign currency translation adjustment
                                  (13,391 )                 (13,391 )
Balance at December 31, 2007
    731,522       7,315       (270 )     1,974,187             5,213       (1,305,454 )     (1,057,305 )     (376,314 )
Issuance of new shares
    284,637       2,846             267,559                               270,405  
Cancellation of shares
    (20,504 )     (205 )     270       (65 )                              
Services assumed by majority stockholder
                      32,000                               32,000  
Change in par value of common share from $0.01 per share to $0.001 per share
          (8,960 )           8,960                                
Net income
                                              79,122       79,122  
Foreign currency translation adjustment
                                  (5,213 )                 (5,213 )
Balance at December 31, 2008 (audited)
    995,655       996             2,282,641                   (1,305,454 )     (978,183 )      
Services assumed by majority stockholder
                      28,004                               28,004  
Stock-based compensation 
                            24,020                                       24,020  
Net Loss
                                              (52,024 )     (52,024 )
Balance at December 31, 2009 (audited)
    995,655       996             2,334,665                   (1,305,454 )     (1,030,207 )      
Services assumed by majority stockholder
                      25,198                               25,198  
Net Loss
                                              (25,198 )     (25,198 )
Balance at December 31, 2010
    995,655       996             2,359,863                   (1,305,454 )     (1,055,405 )     -  
 
 
F-8

 
 
   
Common Shares
   
Treasury Stock
   
Additional
Paid-in
Capital
   
Subscriptions
Received
   
Accumulated
Other
Comprehensive
Income
   
Deficit
   
Deficit
Accumulated
During the
Development
Stage
   
Total Stockholders’ Equity
 
   
Number
   
Amount
                                           
          $     $     $     $     $     $     $     $  
Net Loss
    -       -       -       -       -       -       -       (3,637,564 )     (3,637,564 )
Expenses assumed by stockholders
    -       -       -       51,148       -       -       -               51,148  
Issuance 14,481,420 new shares for exchanging 566,813 shares of the common stock of China Wood (note 9)
    14,481,420       14,481               5,051,357                                       5,065,838  
Issuance new shares for investment from shareholders (Note 9)
    263,780       264               49,261                                       49,525  
Issuance new shares to shareholders for expenses assumed (Note 9)
    2,812,923       2,813               715,417                                       718,230  
Balance at December 31, 2011
    18,553,778       18,554       -       8,227,046       -       -       (1,305,454 )     (4,692,969 )     2,247,177  

The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-9

 
 
Note 1
Nature of Business and Going Concern
 
The Company was incorporated under the laws of the State of Florida on May 3, 1989 as Sparta Ventures Corp. and remained inactive until June 27, 1998.  The name of the Company was changed to Thermal Ablation Technologies Corporation on October 8, 1998 and then to Poker.com, Inc. on August 10, 1999.  On September 15, 2003, the Company changed its name to LegalPlay Entertainment Inc. and on November 8, 2006, the name of the Company was changed to Synthenol Inc.  Effective November 3, 2008, the Company merged with and into a wholly-owned subsidiary, SinoCubate, Inc., which remained the surviving entity of the merger.  SinoCubate was formed in the State of Nevada on September 11, 2008.  The merger resulted in a change of name of the Company from Synthenol Inc. to SinoCubate, Inc. and a change in the state of incorporation of the Company from Florida to Nevada.  
 
Since November 2008, the Company has sought to enter into contractual arrangements with entities that allow the Company to either purchase outright the assets and/or business operations of such entities or to enter into business arrangements, such as joint ventures or similar combinations with such entities to manage and operate such entities.  The Company is a development stage company as defined by the Financial Accounting Standards Board Accounting Standards Codification, or FASB ASC 915, “Development Stage Entities.”
 
On August 29, 2011, the Company acquired from Tom Simeo, the Company’s Chairman, Chief Executive Officer and President, Viking Investments LLC, incorporated in Delaware (“Viking Delaware”) for a nominal value of One Hundred Dollars ($100).  At the time of the acquisition, except for a lease obligation related to the Company’s office, located at Kerry Centre, 1515 West Nanjing Road, Suite 1002, Shanghai, P.R. China, 200040, Viking Delaware had no assets and no liabilities.
 
On June 29, 2011, and on August 29, 2011, Viking Investments Group,  LLC, a company controlled and managed by the Company’s Chairman, Chief Executive Officer and President, Tom Simeo,  incorporated under the laws of The Federation of St. Kitts and Nevis, (“Viking Nevis”) sold 100,000 and 466,813 shares respectively of China Wood, Inc., publicly listed in the United States with the ticker “CNWD”, (the “China Wood Shares”) owned by Viking Nevis, in exchange for 1,912,000 and 12,569,420 newly issued restricted shares of SinoCubate respectively (the SinoCubate Shares”). On August 29, 2011, the Company acquired from Tom Simeo, the Company’s Chairman, Chief Executive Officer and President, Viking Investments Group, LLC, incorporated in Delaware (“Viking Delaware”) for a nominal value of One Hundred Dollars ($100).  At the time of the acquisition, except for a lease obligation related to the Company’s office, located at Kerry Centre, 1515 West Nanjing Road, Suite 1002, Shanghai, P.R. China, 200040, Viking Delaware had no assets and no liabilities.  By August 29, 2011, Viking Nevis completed the purchase of the China Wood Shares by having delivered a total of 566,813 shares of common stock in China Wood, Inc. to the Company.  The China Wood Shares were registered in a Form S-1 Registration Statement declared effective by the SEC on April 7, 2011. The China Wood Shares are subject to a “Leak-Out Provision” whereby only a certain amount of shares can be sold per month up and until the first anniversary of the effective day of the aforementioned registration statement, April 7, 2012.  In determining the fair value of the shares, the Company and Viking Nevis, agreed to use, where applicable, the closing bid price for the most recent trading days prior to the closing day of the transactions.
 
On September 26, 2011, the Company entered into a non-competition agreement with Viking Investments Group LLC, a Nevis and St. Kitts corporation (“Viking Nevis”) whereby Viking Nevis agreed to cease all operations in China and transfer all rights, title and interest related to its business in China to the Company and its wholly owned subsidiary, Viking Investments Group LLC, a Nevada corporation, in exchange for the Company issuing registered shares of its common stock under a Form S-8 to Viking’s staff.
 
The Company had a net loss of $3,637,564 and $25,198 for the years ended December 31, 2011 and December 31, 2010 respectively. The Company had cash balances in the amount of $7,946. The Company’s loss in 2011 was higher than 2010 as a result of an impairment loss recognized for a long-term investment owned by the Company as of December 31, 2011 (See Note 4). The Company had a working capital deficiency in the amount of $20,075 as of December 31, 2011.The Company’s ability to continue as a going concern is dependent upon its ability to generate
 
 
F-10

 
 
Note 1
Nature of Business and Going Concern (continued)
 
future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances; however there is no assurance of additional funding being available.
 
Note 2
Summary of Significant Accounting Policies
 
     a)  Consolidated Financial Statements
 
The financial statements presented herein reflect the consolidated financial results of the Company and its wholly owned subsidiary Viking Delaware. All significant intercompany transactions and balances have been eliminated upon consolidation.
 
The foregoing audited consolidated financial statements have been prepared in accordance with generally accepted accounting principles or GAAP for consolidated financial information and with the instructions to Form 10-K as promulgated by the Securities and Exchange Commission or the SEC.  Accordingly, these consolidated financial statements include all of the disclosures required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, the audited consolidated financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the period presented.
 
 
b)
Basis of Presentation
 
The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in United States (“US GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year-end is December 31.
 
 
c)
Use of Estimates
 
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts and timing of revenues and expenses, the reported amounts and classification of assets and liabilities, and disclosure of contingent assets and liabilities. The Company’s actual results could vary materially from management’s estimates and assumptions. Significant areas requiring the use of management estimates relate to the determination of expected tax rates for future income tax recoveries, stock-based compensation and impairment of long-term investment.
 
 
d)
Financial Instruments
 
ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 820, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures.  The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
 
  
Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
 
 
F-11

 
 
Note 2
Summary of Significant Accounting Policies (continued)
 
  
Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
 
  
Level 3: inputs to the valuation methodology are unobservable and significant to the fair value measurement.
 
The Company provides disclosures regarding financial instruments as prescribed by generally accepted accounting principles. These disclosures do not purport to represent the aggregate net fair value of the Company. The long-term investment is impaired and its carrying value is reduced to reflect its fair value based on level 3 inputs. The fair value estimates are based on various assumptions, methodologies, subjective considerations and the Guaranty and Repurchase Agreement entered into between the Company and Viking Nevis, which vary widely among different financial institutions and which are subject to change. (See Note 11 also)
 
 
e)
Cash
 
Cash includes bank deposits and cash on hand.
 
 
f)
Loss per Share
 
Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and, adjusted by any effects of warrants and options outstanding, if dilutive, that may add to the number of common shares during the period.
 
 
g)
Comprehensive Income
 
FASB ASC 220 “Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in the consolidated financial statements. For the fiscal years ended December, 2011 and 2010, comprehensive loss was $ (3,637,564) and $ (25,198) respectively.
 
 
h)
Income Taxes
 
The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets likely. The Company did not incur any material impact to its financial condition or results of operations due to the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company is subject to U.S federal jurisdiction income tax examinations for the tax years 2006 through 2011. In addition, the Company is subject to state and local income tax examinations for the tax years 2006 through 2011.
 
 
F-12

 
 
Note 2
Summary of Significant Accounting Policies (continued)
 
 
i)
Stock-Based Compensation
 
The Company may issue stock options to employees and stock options or warrants to non-employees in non-capital raising transactions for services and for financing costs. The Company has adopted ASC Topic 718 (formerly SFAS 123R), “Accounting for Stock-Based Compensation”, which establishes a fair value method of accounting for stock-based compensation plans. In accordance with guidance now incorporated in ASC Topic 718, the cost of stock options and warrants issued to employees and non-employees is measured on the grant date based on the fair value. The fair value is determined using the Black-Scholes option pricing model. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period.
  
The fair value of stock warrants was determined at the date of grant using the Black-Scholes option pricing model. The Black-Scholes option model requires management to make various estimates and assumptions, including expected term, expected volatility, risk-free rate, and dividend yield. The expected term represents the period of time that stock-based compensation awards granted are expected to be outstanding and is estimated based on considerations including the vesting period, contractual term and anticipated employee exercise patterns. Expected volatility is based on the historical volatility of the Company’s stock. The risk-free rate is based on the U.S. Treasury yield curve in relation to the contractual life of stock-based compensation instrument. The dividend yield assumption is based on historical patterns and future expectations for the Company dividends.
 
 
j)
Long-term investment
 
Management determines the appropriate classification of investment securities at the time of purchase. Securities are classified held-to-maturity when the Company has both the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost. Securities that are bought and held principally for the purpose of selling in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings. Securities not classified as held-to-maturity or trading are classified as available-for-sale. Available-for-sale securities are stated at fair value, with the impairment losses, net of income taxes, charged to net income in the period in which it occurs.
 
The fair value of securities is based on quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. A decline in the market value of any available-for-sale or held-for-maturity security below cost that is deemed to be other-then-temporary results in a reduction in carrying amount to fair value.
 
Impairments that are considered other-than-temporary are recognized as a loss in the consolidated statements of operations. The Company considers various factors in reviewing impairments, including the length of time and extent to which fair value has been less than the Company’s cost basis, the financial condition and near-term prospects of the issuer, and the Company’s intent and ability to hold the investments for a period of time sufficient to allow for any anticipated recovery in market value.
 
As December 31, 2011 and 2010, the Company has no trading and held-to-maturity securities. The Company’s long-term investment was classified as available-for-sale.
 
 
F-13

 
 
Note 2
Summary of Significant Accounting Policies (continued)
 
 
k)
Recent Accounting Pronouncements
   
In May 2011, FAB issued ASU No 2011-4, “Fair value Measurement (Topic 820): Amendments to achieve value Measurement and Disclosure Requirements in US GAAP and IFRSs.” ASU 2011-04 amends Topic 820 to provide common fair value measurement and disclosure requirements in US General Accepted Accounting Principles (“U.S. GAAP”) and International Financial Reporting Standards.  Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements, as well as providing guidance on how fair value should be applied where it is used already required or permitted by other standards within U.S. GAAP.  ASU No 2011-04 is to be applied prospectively, and early adoption is not permitted.  For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011.  The adoption of ASU No. 2011-04 is not expected to have a material impact on our results of operations or our financial position.
 
In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income (“ASU 2011-05 which is intended to facilitate the convergence of U.S. GAAP and International Financial Reporting Standards (“IFRS”) as well as to increase the transparency of items reported in other comprehensive income.  As a result of ASU 2011-05, all nonowner changes in stockholders’ equity are required to be presented in a single continuous statement of comprehensive income or in two separate but consecutive statements.  The option to present other comprehensive income in the statement of changes in equity has been eliminated.  ASU 2011-05 is effective for fiscal years beginning after December 15, 2011 and should be applied retrospectively.  The Company expects to adopt this standard beginning in 2012.  As ASU 2011-05 impacts presentation only, it will have no effect on the Company’s consolidated financial statements.
 
In December 2011, the FASB issued ASU 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Item Out of Accumulated Other Comprehensive Income in Accounting Standards Update No 2011-05.” ASU 2011-12 defers the specific requirement to present items that are reclassified from accumulated other comprehensive income to net income separately with their respective components of net income and other comprehensive income.  ASU 2011-12 did not defer the requirement to report comprehensive income either in a single continuous statement or in two separate but consecutive financial statements.  The amendments are effective at the same time as the amendments in ASU 2011-05.
 
 
F-14

 
 
Note 3
Related Party Transactions
 
On April 3, 2009, the Company entered into an agreement with Viking Delaware, providing that effective August 15, 2008, Viking Delaware will pay for any services performed on behalf of the Company by third parties until such time that Viking Delaware is no longer the majority shareholder of the Company.  On August 2, 2011, effective as of April 1, 2011, Viking Delaware will advance and pay all third party costs for SinoCubate as needed, but SinoCubate has an obligation to reimburse Viking Delaware at a later stage upon demand from Viking Delaware.  As of August 29, 2011, Viking Delaware’s rights and obligations are transferred to Viking Nevis.
 
For the year ended December 31, 2011, Viking Delaware assumed the rental, wages, professional service fee, and other office expenses in the aggregate amount of $769,378 on its own.  For the year ended December 31, 2010, Viking Nevis disbursed professional and other service fees in the aggregate amount of $25,198 to be repaid by the Company to Viking Nevis on demand.
 
On June 29, 2011, and on August 29, 2011, Viking Investments, LLC, a company controlled and managed by the Company’s Chairman, Chief Executive Officer and President, Tom Simeo, incorporated under the laws of The Federation of St. Kitts and Nevis, (“Viking Nevis”) sold 100,000 and 466,813 shares respectively of China Wood, Inc., publicly listed in the United States with the ticker “CNWD”, (the “China Wood Shares”) owned by Viking Nevis, in exchange for 1,912,000 and 12,569,420 newly issued restricted shares of SinoCubate respectively (the SinoCubate Shares”). By August 29, 2011, Viking Nevis completed the purchase of the China Wood Shares by having delivered a total of 566,813 shares of common stock in China Wood, Inc. to the Company.  The China Wood Shares were registered in a Form S-1 Registration Statement declared effective by the SEC on April 7, 2011. The China Wood Shares are subject to a “Leak-Out Provision” whereby only a certain amount of shares can be sold per month up and until the first anniversary of the effective day of the aforementioned registration statement, (April 7, 2012).  In determining the fair value of the shares, the Company and Viking Nevis, agreed to use, where applicable, the closing bid price for the most recent trading days prior to the closing day of the transactions. (See Note 4)
 
Note 4
Long-term investment

   
December 31,
   
December 31,
 
   
2011
   
2010
 
     $    
$
 
Shares of Common Stock in China Wood Inc.      
    5,065,838        
Impairment loss      
    (2,798,586 )      
   Net value      
    2,267,252        
 
On June 29, 2011, and on August 29, 2011, Viking Investments, LLC, a company controlled and managed by the Company’s Chairman, Chief Executive Officer and President, Tom Simeo, incorporated under the laws of The Federation of St. Kitts and Nevis, (“Viking Nevis”) sold 100,000 and 466,813 shares respectively of China Wood, Inc., publicly listed in the United States with the ticker “CNWD”, (the “China Wood Shares”) owned by Viking Nevis, in exchange for 1,912,000 and 12,569,420 newly issued restricted shares of SinoCubate respectively (the SinoCubate Shares”).
 
 
F-15

 
 
Note 4
Long-term investment (continued)
                   
China Wood Shares were registered in a Form S-1 Registration Statement declared effective by the SEC on April 7, 2011. The China Wood Shares are subject to a “Leak-Out Provision” whereby only a certain amount of shares can be sold per month up and until the first anniversary of the effective day of the aforementioned registration statement, April 7, 2012.  Accordingly, the Company classifies its holdings in these securities as available-for-sale securities. The Company records the investment at fair value. The stock is currently illiquid, and the management estimates and anticipates a fair market price per share of US$4.00. Such estimate is based on Viking Nevis’ Guaranty and Repurchase Agreement that Viking Nevis agreed to repurchase all 566,813 shares of China Wood for US$4.00 per share if the 45-day volume-weighted average price of the shares of China Wood equaled US4.00 per share or less (see Note 11). The company recognized an impairment loss of $2,798,586 based on the estimated $4.00 price per share and charged the impairment loss to net income.
 
Note 5
Expenses
 
Expenses including the rental, professional service fee, other office expenses for the years ended December 31, 2011 and December 31, 2010 were $104,090 and $25,198, respectively, were all assumed by the major stockholders.
 
On October 26, 2011, the Company issued 2,812,923 shares of common stock, par value $0.001 per share, to Tom Simeo (2,160,000 shares), Meilong Fu (300,000 shares), Fengying Zhong (203,720 shares), David Rees (60,000 shares), Lily Jin (75,453 shares) and Howard Lee (13,750 shares) respectively for services rendered under their respective consulting agreement. The Company recorded the stock-based compensation with an amount of $718,230 in net income. (See Note 9.b)
 
Note 6
Commitment

The Company, via Viking Investment Group LLC (“Viking Delaware”) entered into a lease agreement with Shanghai New Ci Hou Real Estate Co. Ltd., from April 9, 2011 to April 8, 2013.  The monthly rental fee is US$7,273. Total net rental fee deducted with the sublease in the year ended December 31, 2011 was US$43,676. The total commitment for the total gross rental fee without net of sublease for the lasting lease period is US$111,224.
 
Note 7
Supplemental Cash Flow Information
 
 
Years ended
December 31,
 
January 1, 2004
(Date of Inception of the Development stage) to December 31,
 
 
2011
  2010   2011  
Cash paid for:
           
Interest
  $     $