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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
________________________
 
FORM 10-Q
__________________________
 
(Mark One)
ý
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2012

¨
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________

 
Commission file number:  333-82580

SIGNATURE EXPLORATION AND PRODUCTION CORP.
                                                                                                                                                                                   (Exact name of small business issuer 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, Texas 77027
Phone: (888) 895-3594
Fax: (888) 800-5918
(Address and telephone number of
principal executive offices)

(Address, including zip code, and telephone and facsimile numbers, including area code, of
registrant’s executive offices)
___________________________

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
___________________________


Indicate by check mark whether 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.
                                [X] Yes    [ ] No

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.


                      Class                                                                        Outstanding as of November 30, 2012
Common stock, .0001 par value                                                                         8,501,104


 
- 1 -

 



 
 
SIGNATURE EXPLORATION AND PRODUCTION CORP.

FORM 10-Q


INDEX


PART I – FINANCIAL INFORMATION
Page
Item 1.
Financial Statements
 
     
 
Condensed Balance Sheet (unaudited) at September 30, 2012 and March 31, 2012
3
 
Condensed Statements of Operations (unaudited) for the Three and Six Months Ended September 30, 2012 and 2011 and the Period from March 1, 2008 (Inception) to September 30, 2012
4
 
Condensed Statements of Cash Flows (unaudited) for the Six Months Ended September 30, 2012 and 2011 and the Period from March 1, 2008 (Inception) to September 30, 2012
5
 
Notes to Condensed Financial Statements (unaudited)
6
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
13
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
16
Item 4.
Controls and Procedures
16
     
PART II – OTHER INFORMATION
 
   
Item 1.
Legal Proceedings
16
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
16
Item 3.
Defaults Upon Senior Securities
20
Item 4.
Submission of Matters to a Vote of Security Holders
20
Item 5.
Other Information
20
Item 6.
Exhibits
20
     
SIGNATURE PAGE
21

 

 
 

 



 
- 2 -

 


 
SIGNATURE EXPLORATION AND PRODUCTION CORP.
(An Exploration Stage Company)
Condensed Balance Sheets

Assets
           
   
September 30,
   
March 31,
 
   
2012
   
2012
 
             
Current assets:
           
Cash
  $ -     $ 2,174  
Debt issuance costs
    4,898       4,625  
Prepaid expenses and other current assets
    450       450  
                 
Total current assets
    5,348       7,249  
                 
Property and Equipment:
               
                 
Property and Equipment,  less accumulated depreciation of  $627 and $477
    278       428  
Oil and gas properties, unproven
    36,000       36,000  
                 
Total property and equipment
    36,278       36,428  
                 
Total assets
  $ 41,626     $ 43,677  
                 
Liabilities and Capital Deficiency
             
                 
Current liabilities:
               
Accounts payable
  $ 14,625     $ 6,560  
Bank overdraft
    267       -  
Accrued interest
    186,043       163,998  
Other accrued expenses
    29,604       13,456  
Convertible notes from shareholders
    442,750       442,750  
Convertible notes from shareholders, at fair value
    154,152       308,255  
Derivative liability, at fair value
    136,516       334,497  
                 
Total current liabilities
    963,957       1,269,516  
                 
Commitments and contingencies
    -       -  
                 
Capital deficiency:
               
Common stock, $0.0001 par value, 250,000,000 shares authorized 8,501,104 and 32,527,930  shares issued and outstanding at September 30, 2012 and March 31, 2012
    851       3,253  
Additional paid-in capital
    4,366,262       4,363,860  
Deficit accumulated related to abandoned activities
    (1,676,223 )     (1,676,223 )
Deficit accumulated during exploration stage
    (3,613,221 )     (3,916,729 )
                 
Total capital deficiency
    (922,331 )     (1,225,839 )
                 
Total liabilities and capital deficiency
  $ 41,626     $ 43,677  

See accompanying notes to the financial statements.


 
- 3 -

 


SIGNATURE EXPLORATION AND PRODUCTION CORP.
(An Exploration Stage Company)
 Condensed Statements of Operations (unaudited)
For the Three and Six months ended September 30, 2012 and 2011,
and the Period from March 1, 2008 (Inception) to September 30, 2012

   
For the Three Months Ended September 30,
   
For the Six Months Ended September 30,
       
   
2012
   
2011
   
2012
   
2011
   
Inception March 1, 2008 – September 30, 2012
 
                               
                               
Net revenue
  $ -     $ -     $ -     $ -     $ -  
                                         
Cost of revenue
    -       -       -       -       -  
                                         
Gross profit (loss)
    -       -       -       -       -  
                                         
Stock Compensation
    -       -       -       -       2,085,078  
Loss on oil and gas assets
    -       -       -       -       132,189  
Investor relations
    -       -       -       991       568,805  
General and administrative expenses
    18,120       21,931       49,804       77,705       510,136  
                                         
Loss from continuing operations
    (18,120 )     (21,931 )     (49,804 )     (78,696 )     (3,296,208 )
                                         
Other income/(expense)
                                       
                                         
     Change in fair value of convertible notes
    -       (23,978 )     166,860       (168,376 )     270,884  
     Change in fair value of warrants
    -       (17,030 )     212,284       (177,747 )     325,509  
     Loss on extinguishment of debt
    -       -       -       -       (177,941 )
     Loss on loan modification
    -       -       -       -       (283,000 )
     Interest expense
    (12,975 )     (11,643 )     (25,832 )     (28,612 )     (452,467 )
 
                                       
Total other income/(expense)
    (12,975 )     (52,651 )     353,312       (374,735 )     (317,015 )
                                         
Net income/(loss)
  $ (31,095 )   $ (74,582 )   $ 303,508     $ (453,431 )   $ (3,613,223 )
                                         
Weighted average common shares outstanding – basic and diluted
    8,537,752       30,418,741       10,788,628       26,635,382       10,056,241  
                                         
Net income/( loss) per share - basic and diluted
  $ (0.00 )   $ (0.00 )   $ 0.03     $ (0.02 )   $ (0.36 )

See accompanying notes to the financial statements.


 
- 4 -

 

SIGNATURE EXPLORATION AND PRODUCTION CORP.
(An Exploration Stage Company)
 Condensed Statements of Cash Flows
For the Six months ended September 30, 2012 and 2011,
and the Period from March 1, 2008 (Inception) to September 30, 2012
   
2012
   
2011
   
Inception (March 1, 2008 – September 30, 2012)
 
 
                 
 Cash flows from operating activities:
                 
                    Net income/(loss)   $ 303,508     $ (453,431 )   $ (3,613,223 )
                         
                    Adjustments to reconcile net loss to net cash used in                        
                         operating activities:                        
                                   Depreciation expense     150       150       627  
                                   Loss on oil and gas assets     -       -       132,189  
                                   Stock compensation     -       -       2,172,350  
                                   Loss on loan modification     -       -       283,000  
                                   Loss on extinguishment of debt     -       -       177,941  
                                   Change in fair value of convertible notes     (166,860 )     168,376       (270,884 )
                                   Change in fair value of warrants     (212,284 )     177,747       (325,509 )
                                   Non-cash interest     3,786       10,067       384,936  
                    Changes in operating assets and liabilities:                        
                                   Other assets     -       -       5,013  
                                   Accounts payable     8,333       (363 )     (2,636 )
                                   Accrued expenses     38,193       18,544       74,062  
                         
                                   Net cash used in operating activities     (25,174 )     (78,910 )     (982,133 )
                         
Cash flows from investing activities:
                       
                         
                                   Investment in oil and gas properties     -       -       (72,189 )
                                   Purchase of property and equipment     -       -       (906 )
                         
                                   Net cash used in investing activities     -       -       (73,095 )
                         
Cash flows from financing activities:
                       
                                   Proceeds from issuance of debt to stockholders     23,000       40,000       1,054,500  
                         
                                   Net cash provided by financing activities     23,000       40,000       1,054,500  
                         
Net increase (decrease) in cash
    (2,174 )     (38,910 )     729  
                         
Cash, beginning of period
  $ 2,174     $ 47,692     $ 729  
                         
Cash, end of period
  $ -     $ 8,782     $ -  
                         
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   $ -     $ -     $ 10,924  
                         Convertible debt issued for oil and gas lease agreements   $ -     $ -     $ 96,000  
                         Stock issued to settle convertible debt   $ -     $ 100,000     $ 125,250  
                         Stock issued to settle interest expense   $ -     $ -     $ 373  
See accompanying notes to the financial statements.
 
 
- 5 -

 
SIGNATURE EXPLORATION AND PRODUCTION CORP.
Notes to Condensed Financial Statements (unaudited)
September 30, 2012

NOTE 1 - ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
 
The accompanying unaudited condensed financial statements have been prepared by the Company, pursuant to the rules and regulations of the U. S. Securities and Exchange Commission for Form 10-Q.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.  The unaudited condensed financial statements included herein reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim period.  Interim results are not necessarily indicative of the results that may be expected for the year.  The unaudited condensed financial statements should be read in conjunction with the condensed financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operation, for the year ended March 31, 2012, contained in the Company’s March 31, 2012 Annual Report on Form 10-K.

The Company’s condensed 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 $5,289,000 as of September 30, 2012. 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 in the process of 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 condensed 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 2 – BASIS OF PRESENTATION

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. In accordance with U.S. GAAP, 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 September 30, 2012. The Company’s office is located in Houston, Texas.


 
- 6 -

 


 
 
SIGNATURE EXPLORATION AND PRODUCTION CORP.
Notes to Condensed Financial Statements (unaudited)
September 30, 2012

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 six 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.
 

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.

Income/(Loss) per Share. The Company’s basic and diluted income/(loss) per share has been calculated using the weighted average number of common shares outstanding during the period. The Company has 65,605,906 dilutive common stock equivalent shares outstanding as of September 30, 2012.

Oil and gas properties.
The Company accounts for its oil and gas activities under the successful efforts method. 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.


 
- 7 -

 

SIGNATURE EXPLORATION AND PRODUCTION CORP.
Notes to Condensed Financial Statements (unaudited)
September 30, 2012

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

Recent Accounting Pronouncements

There were no recently issued accounting pronouncements that will have a material impact on the Company’s financial statements

NOTE 4 – FAIR VALUE MEASUREMENTS

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. The three levels of the fair value hierarchy under ASC Topic 820-10 are described below:

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 September 30, 2012
       
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Convertible notes from stockholders, at fair value
  $ -     $ -     $ 154,152     $ 154,152  
Derivative liability
  $ -     $ -     $ 136,516     $ 136,516  
   
 
Fair Value Measurement March 31, 2012
         
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Convertible notes from stockholders, at fair value
  $ -     $ -     $ 308,255     $ 308,255  
Derivative liability
  $ -     $ -     $ 334,497     $ 334,497  



 
- 8 -

 

 
 
SIGNATURE EXPLORATION AND PRODUCTION CORP. AND SUBSIDIARY
Notes to Condensed Financial Statements (unaudited)
September 30, 2012

NOTE 4 – FAIR VALUE MEASUREMENTS, CONTINUED
 
The following table presents the changes in Level 3 instruments measured on a recurring basis for the period ended September 30, 2012:
 
   
Convertible Notes
   
Derivative Liability
   
Total
 
                   
Balance,  March 31, 2012
  $ 308,255     $ 334,497     $ 642,752  
                         
Realized and unrealized gains (losses);
                       
      Included in other income (expense)
    (166,860 )     (212,284 )     (379,144 )
Purchases, issuances, and settlements
    12,757       14,303       27,060  
Balance, September 30, 2012
  $ 154,152     $ 136,516     $ 290,668  
                         
 
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 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 0.17% to 0.62%, (2) remaining contractual life of 1 to 4.88 years, (3) expected stock price volatility of 345% to 697% and (4) expected dividend yield of zero.

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.

NOTE 5 – OIL AND GAS PROPERTIES

Catron Prospect – Catron County, NM

We acquired a lease of 1,320 acres in Catron County, New Mexico for $36,000.  The lease term is for ten years.

NOTE 6 – 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.
 
 
 
- 9 -

 
 
SIGNATURE EXPLORATION AND PRODUCTION CORP.
Notes to Condensed Financial Statements (unaudited)
September 30, 2012

NOTE 6 – CONVERTIBLE NOTES AND WARRANTS, CONTINUED
   
Convertible Notes
   
Accrued Interest
 
Balance, beginning of period
  $ 442,750     $ 163,998  
Amortization of beneficial conversion feature
    -       -  
Accrued interest
    -       22,045  
Balance, end of period
  $ 442,750     $ 186,043  

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 $442,750 of convertible notes from shareholders and the $186,043 of related accrued interest.  As of September 30, 2012, 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, 2012
Fair Value at September 30, 2012
Fair Value at March 31, 2012
Fair Value at September 30, 2012
December 2009(2)
$       352,942
$300,000
$         47,109
$           6,446
$       113,204
$        22,319
January 2010
     64,706
    60,000
        7,919
        3,606
     9,493
     3,290
February 2010 (1)
   352,942
300,000
    156,694
    81,377
   114,872
   51,883
August 2010
     58,824
    50,000
      30,482
      15,658
     30,464
     13,844
March 2011
     70,590
    60,000
      34,006
      17,701
     34,062
     15,784
August 2011
47,060
40,000
27,012
13,965
27,455
12,827
February 2012
11,766
11,000
5,033
2,642
4,947
2,267
July 2012
27,060
23,000
-
12,757
-
14,303
 
$       985,890
$844,000
$ 308,255
$ 154,152
$ 334,497
$ 136,516
             
(1)  
A portion of the proceeds from this debt, $100,000 was not received until April 2010.
 
(2)  
$100,000 of this debt was converted to 1,000,000 shares of common stock.
 
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 September 30, 2012 $847,064 of the debt is in default, although no shareholders have made demands for payment of these loans.

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 2017. The table below shows the change in the number of warrants outstanding as of September 30, 2012 and March 31, 2012.
 
 
- 10 -

 

 
SIGNATURE EXPLORATION AND PRODUCTION CORP.
Notes to Condensed Financial Statements (unaudited)
September 30, 2012

NOTE 6 – CONVERTIBLE NOTES AND WARRANTS, CONTINUED

             
   
Warrants Outstanding
 
   
Number of Shares
   
Exercise Price
 
Outstanding at March 31, 2012
    11,921,206     $ 0.15-$0.10  
  Warrants issued
    270,600     $ 0.15  
  Warrants exercised
    -       -  
  Warrants expired/cancelled
    -       -  
Outstanding at September 30, 2012
    12,191,806     $ 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 274,048,164 additional shares. Currently there are 250,000,000 shares authorized, leaving a deficit of 24,048,164 shares, which takes into account the 8,501,104 shares already outstanding at September 30, 2012.

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 $442,750. 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 44,275,000 shares. Therefore, no additional liability was recorded at September 30, 2012.


NOTE 6 – STOCKHOLDERS’ EQUITY (CAPITAL DEFICIENCY)

Subscription Agreement
On July 17, 2012, the Company issued 115,000 restricted shares of common stock of the Company to two stockholders for $23,000.   On August 15, 2012 the 115,000 restricted shares were returned to the Company in exchange for two Convertible Note Agreements ("Notes") for a total of $27,060 reflecting a 15% original issue discount to the Note holders and a nominal rate of 16.63%.

The Notes are due in February 2013.  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 includes an anti-dilution adjustment that may not be adjusted below $0.01.

Simultaneously with the issuance of these Notes, the Company issued to the Note holders a 5-year warrant (the "Warrants") to purchase 270,600 shares of common stock of the Company.  The Warrants are exercisable at a price equal to $0.15. The Warrants include an anti-dilution adjustment that may not be adjusted below $0.01.


 
- 11 -

 
 
SIGNATURE EXPLORATION AND PRODUCTION CORP.
Notes to Condensed Financial Statements (unaudited)
September 30, 2012

NOTE 6 – STOCKHOLDERS’ EQUITY (CAPITAL DEFICIENCY) (CONTINUED)

The note holders 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.

Agreements
Mr. Alan Gaines, our former Chief Executive Officer and Chairman, had entered into an Employment Agreement with the Company for a one year term beginning May 2, 2011.  Mr. Gaines would have been compensated with 12,013,413 shares of restricted common stock, payable upon the completion of a Qualified Acquisition or Qualified Equity Raise.  An expense of $960,993 would have been recorded as stock compensation at the time a Qualified Acquisition or Qualified Equity Raise was completed.  Upon the resignation of Mr. Gaines on April 18, 2012, the shares were canceled and no expense was recognized.

Dr. Amiel David, our former Chief Operating Officer, has entered into an Employment Agreement with the Company for a one year term beginning May 2, 2011. Dr. David would have been compensated with 12,013,413 shares of restricted common stock, payable upon the completion of a Qualified Acquisition or Qualified Equity Raise.  An expense of $961,073 would have been recorded as stock compensation at the time a Qualified Acquisition or Qualified Equity Raise was completed.  Upon the resignation of Mr. David on April 18, 2012, the shares were canceled and no expense was recognized.

NOTE 7 – SUBSEQUENT EVENTS

November 2012 Convertible Notes and Warrants

During November 2012, the Company entered into two Convertible Note Agreements ("Notes") for a total of $13,178.  The Company received aggregate proceeds of $11,200 reflecting a 15% original issue discount to the Note holders and a nominal rate of 16.63%.

The Notes are due in November 2013.  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 includes an anti-dilution adjustment that may not be adjusted below $0.01.

Simultaneously with the issuance of these Notes, the Company issued to the Note holders a 5-year warrant (the "Warrants") to purchase 131,780 shares of common stock of the Company.  The Warrants are 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 holders 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.


 
- 12 -

 

Item 2.                      Management’s Discussion and Analysis or Plan of Operations.

FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements regarding the Company’s expectations, beliefs, intentions or future strategies that are signified by the words “expects,” “anticipates,” “intends,” “believes,” or similar language. These forward-looking statements, including those with respect to our operating results for 2008, are based upon current expectations and beliefs of the Company’s management and are subject to risks and uncertainties that could cause results to differ materially from those indicated in the forward-looking statements. Some, but not all, of the factors, which could cause actual results to differ materially include those set forth in the risks discussed below under the subheading “Risk Factors” and elsewhere in this report. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements, or to explain why actual results differ. Readers should carefully review the risk factors described in this section below and in any reports filed with the Securities and Exchange Commission (“SEC”).

Overview
 
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 September 30, 2012, we have not yet generated revenues related to the energy operations.

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 March in 2008, 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 – Catron 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 $1,646,000 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 and $80,000 for expenses related to general operations.  We will also need approximately $1,515,000 to repay $1,329,000 of notes payable and the related interest of approximately $186,000.

Based upon our cash position, we will need to raise additional capital prior by the end of fiscal 2013 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 $1,646,000 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.

 
- 13 -

 
Results of Operations
 
Comparison of the three and six months ended September 30, 2012 and September 30, 2011.

FINANCIAL INFORMATION
   
For the Three Months Ended September 30,
   
For the Six Months Ended September 30,
 
   
2012
   
2011
   
2012
   
2011
 
Investor relations
  $ -     $ -     $ -     $ 1,000  
Loss on oil and gas assets
    -       -       -       -  
General and administrative
    18,000       22,000       50,000       77,000  
Other income/(expense)
    (13,000 )     (53,000 )     353,000       (375,000 )
Net income/( loss)
  $ (31,000 )   $ (75,000 )   $ 303,000     $ (453,000 )


 
Comparison of the Three Months Ended September 30, 2012 and September 30, 2011
 
General and Administrative.  General and administrative expenses decreased by $4,000 in 2012.  This decrease can be attributed to a reduction of travel expenses.

Other Income/( Expenses).  Other expense increased by $40,000 in 2012 due to a decrease in the fair value of convertible notes and warrants.

Comparison of the Six Months Ended September 30, 2012 and September 30, 2011
 
Investor Relations.  Investor relations expenses decreased by approximately $1,000 in 2012 to reduce operating expenses.

General and Administrative.  General and administrative expenses decreased by $27,000 in 2011.  This decrease can be attributed to a reduction of professional fees.

Other Income/( Expenses). Other expenses decreased by $728,000 in 2012 due to an decrease in the fair value of convertible notes and warrants.

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. The critical accounting policies affecting our financial reporting are summarized in Note 1 to the condensed financial statements included in this quarterly report. Policies involving the most significant judgments and estimates are summarized below.
 
 
- 14 -

 
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 0.17% to 0.62%, (2) remaining contractual life of 1 to 4.88 years, (3) expected stock price volatility of 345% to 697% and (4) expected dividend yield of zero

Commitments
 
Except as shown in the following table, as of September 30, 2012, 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 September 30, 2012 are as follows:


Convertible notes from shareholders
    443,000  
Convertible notes from shareholders, at face value
    886,000  
Accrued interest
    186,000  
         
Total
  $ 1,515,000  


 
- 15 -

 


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.

Item 3 – QUANTITATIVE AND QUALITATIVE DISCLOSERS ABOUT MARKET RISK

NA

ITEM 4 - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer has carried out an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of September 30, 2012.
 
 
Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer has concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are ineffective. Internal control weaknesses incldue 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.

Material Weaknesses

In our Form 10-K for the fiscal year ended March 31, 2012 under Item 9-A- Controls and Procedures, we identified material weaknesses in our system of internal control over financial reporting. A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.


PART II - OTHER INFORMATION

Item 1. 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 2. Unregistered Sales of Equity Securities and Use of Proceeds.


Recent Sales of Unregistered Securities

July 2012 Convertible Notes and Warrants

On July 17, 2012, the Company issued 115,000 restricted shares of common stock of the Company to two stockholders for $23,000.   On August 15, 2012 the 115,000 restricted shares were returned to the Company in exchange for two Convertible Note Agreements ("Notes") for a total of $27,060 reflecting a 15% original issue discount to the Note holders and a nominal rate of 16.63%.

The Notes are due in February 2013.  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 includes an anti-dilution adjustment that may not be adjusted below $0.01.

Simultaneously with the issuance of these Notes, the Company issued to the Note holders a 5-year warrant (the "Warrants") to purchase 270,600 shares of common stock of the Company.  The Warrants are exercisable at a price equal to $0.15. The Warrants include an anti-dilution adjustment that may not be adjusted below $0.01.

 
- 16 -

 
The note holders 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.

February 2012 Convertible Notes and Warrants

During February 2012, the Company entered into two Convertible Note Agreements ("Notes") for a total of $11,766.  The Company received aggregate proceeds of $11,000 reflecting a 15% original issue discount to the Note holders and a nominal rate of 16.63%.

The Notes are due in February 2013.  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 includes an anti-dilution adjustment that may not be adjusted below $0.01.

Simultaneously with the issuance of these Notes, the Company issued to the Note holders a 5-year warrant (the "Warrants") to purchase 117,660 shares of common stock of the Company.  The Warrants are 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 holders 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 2011 Convertible Notes and Warrants

During August 2011, the Company entered into three Convertible Note Agreements ("Notes") for a total of $47,060.  The Company received aggregate proceeds of $40,000 reflecting a 15% original issue discount to the Note holders and a nominal rate of 16.63%.

The Notes are due in August 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 includes an anti-dilution adjustment that may not be adjusted below $0.01.

Simultaneously with the issuance of these Notes, the Company issued to the Note holders a 5-year warrant (the "Warrants") to purchase 470,600 shares of common stock of the Company.  The Warrants are 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 holders 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.

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 were 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.


 
- 17 -

 
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 were 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.

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.


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.

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.
 
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.

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.

 
- 18 -

 
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.

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 under the 2007 Plan. The shares were issued at fifty percent (50%) of the closing price on the date of issuance for a total 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

Mr. Alan Gaines, our former Chief Executive Officer and Chairman, had entered into an Employment Agreement with the Company for a one year term beginning May 2, 2011.  Mr. Gaines would have been compensated with 12,013,413 shares of restricted common stock, payable upon the completion of a Qualified Acquisition or Qualified Equity Raise.  An expense of $960,993 would have been recorded as stock compensation at the time a Qualified Acquisition or Qualified Equity Raise was completed.  Upon the resignation of Mr. David on April 18, 2012, the shares were canceled and no expense was recognized.

Dr. Amiel David, our former Chief Operating Officer, has entered into an Employment Agreement with the Company for a one year term beginning May 2, 2011. Dr. David would have been compensated with 12,013,413 shares of restricted common stock, payable upon the completion of a Qualified Acquisition or Qualified Equity Raise.  An expense of $961,073 would have been recorded as stock compensation at the time a Qualified Acquisition or Qualified Equity Raise was completed.  Upon the resignation of Mr. David on April 18, 2012, the shares were canceled and no expense was recognized.

Note Conversions

During the year ended March 31, 2012, the Company converted a total of $104,000 of notes payable from certain Note Holders into common stock of the Company.  The Company issued 1,400,000 shares of our common stock to satisfy the principal balances of the notes payable.

 
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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.


Item 3. Defaults Upon Senior Securities.

The Company is currently in default on stockholder’s loans totaling $1,290,000 and accrued interest of approximately $186,000.  The Company may use the collateral of restricted shares of the Company’s common stock to satisfy these notes.  As of September 30, 2012, no stockholders have made demands for payment of these loans.

Item 4. Submission of Matters to a Vote of Security Holders.

Not Applicable

Item 5. Other Information.

Not Applicable.

 Item 6.  Exhibits
(a) Exhibits

EXHIBIT
NUMBER
 
 
DESCRIPTION
     
31.1
 
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended*
     
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.*
            
       101
 
XBRL data files of Financial Statements and Notes contained in this Quarterly Report on Form 10-Q
     
*           Filed herewith.


 
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SIGNATURES

In accordance with the requirements of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


 
 
Date:           December 12, 2012                                           

SIGNATURE EXPLORATION AND PRODUCTION CORP.
 
By:_/s/ Steven Weldon___________
Name: Steven Weldon
 
Title:   Chief Executive Officer, Chairman, and Director


Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
 

 
 
By:_/s/ Steven Weldon_______________                                                                                           December 12, 2012
Name: Steven Weldon                                                                                (Date)
Title:   Chief Executive Officer, Chairman, and Director


 
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