ITEM 1.
BUSINESS
Business Development
We were incorporated in the State of Nevada on November 18, 2005. We were formed to purchase, operate and develop oil and gas properties. We are in the exploration stage, have no developed reserves or production, and have not realized any revenues from our operations. In January 2008 we participated in the drilling of the Mike Prospect located in North Central Adams County, Colorado. Following drilling, it was determined that the well could not produce in commercially viable quantities. We owned a 50% working interest in the Mike Prospect.
On May 22, 2008 we entered into a Memorandum of Intent with Coastal Petroleum Company (“Coastal”) which outlined the terms and conditions under which Coastal was willing to enter into a formal agreement with us on certain oil and gas leases owned by Coastal in Valley Creek, Montana. The leases involve approximately 82,800 net acres. Under the leases, Coastal has a 100% working interest with between 75.5% to 80.5% net revenue interests. Pursuant to the Memorandum of Intent, on May 23, 2008 we paid Coastal $180,000 in exchange for a two year option to purchase a 50% interest in the leases for $1,000,000. The option expired on June 10, 2010. Prior to exercising the purchase option, we had the right to drill a well at our expense on the leases and earn a 50% working interest in the spacing unit if the well was a producer and we made full payment for the 50% working interest. We had no obligation however, to drill any well on the leases before we exercised our right to purchase the 50% interest in the leases from Coastal. On June 10, 2008 we entered into a formal agreement with Coastal with respect to the foregoing.
On June 16, 2008 we entered into an Assignment of Farmout Agreement with West Canyon Energy Corp. (aka PetroSouth Energy Corp.). Thereunder, we were assignee of a 25% interest in and to a Farmout Agreement (the “Farmout Agreement”) dated February 1, 2008 by and between Transco Oil & Gas, Inc. as Farmor and West Canyon Energy Corp. respecting the North Semitropic Prospect (the “Prospect”) in Kern County, California. We paid $34,000 for the assignment and were responsible for the payment of our proportionate share of drilling and testing costs on the Prospect. On or about June 12, 2008 we paid Transco Oil & Gas, Inc. $100,347.50 representing the balance due by us on our share of the Prospect acquisition. We subsequently determined not to pursue our interest in the Prospect and effectively unwound the transaction. Accordingly, on November 28, 2008 we entered into an Assignment of Farmout Interest with West Canyon Energy Corp. pursuant to which we assigned back to West Canyon Energy Corp. the 25% interest in and to a Farmout Agreement. We received $134,438 for the assignment which approximated our cost.
On July 25, 2009 we entered into a Purchase Agreement with Enercor, Inc., a Nevada corporation (“Enercor”). Therein we acquired a 35% - 40% interest in certain contract rights acquired by Enercor as the successor to an agreement (the “Tar Sand Rights Agreement”) granting rights to extract tar sand deposits pursuant to Combined Hydrocarbon Leases (“CHL’s”) to be issued by the Bureau of Land Management (“BLM”) covering approximately 33,632 acres of land in Southern Uintah County, Utah (the “Property”). The issuance of the CHL’s was subject to regulatory requirements including, but not limited to, approvals of operating plans and environmental impact studies. If the CHL’s were issued, the right to develop the tar sand deposits covered by the CHL’s was to be assigned to Enercor, subject to a reserved overriding royalty and certain third party consent rights, and Enercor was to, in turn, assign a 35% - 40% working interest (the “Working Interest”) in the tar sand deposit development rights granted by the CHL’s to us. The Tar Sand Rights Agreement required the approval of the other contracting party to the assignment to and by Enercor of the tar sand deposit rights (the “Contract Approval”). On December 8, 2009 the other contracting party to the Tar Sand Rights Agreement entered into a Tar Sands Acquisition Agreement (the “Tar Sands Acquisition Agreement”) with Enercor pursuant to which it assigned to Enercor the existing federal oil and gas leases on the Property (the “Leases”), any CHL’s that may be subsequently issued on the Property, and all of such other contracting party’s rights in such Leases and CHL’s in exchange for $80,000, representing payment of certain out-of-pocket and legal fees incurred by such party in connection with the CHL conversion process, and a reserved overriding royalty. Upon the closing under the Tar Sands Acquisition Agreement, the Tar Sand Rights Agreement, including the Contract Approval requirement thereunder, was deemed void and of no further effect, Enercor owned the Leases and other rights described above, and Enercor had standing to deal directly with the BLM in connection with the request to the BLM to issued CHL’s on the Property. Accordingly, when and if CHL’s were issued on the Property, they would be issued directly to Enercor and Enercor would be required to assign the Working Interest in the tar sands deposits to us without the necessity of first obtaining third party approval. The grant of the CHL’s to Enercor remained subject to satisfactory completion of all regulatory requirements. Due to a lack of action on the part of the BLM and uncertainty regarding proposed tar sand extraction techniques, the contract rights were written down to a value of $0 as of May 31, 2010. Enercor no longer has rights in the Leases due to the failure to sustain the maintenance obligations incident thereto.
We were required to pay Enercor an aggregate of up to $5,000,000 for the contract interest in a combination of cash ($500,000 to $1,000,000) and shares of our restricted common stock ($4,000,000). The stock payment consisting of 4,147,237 shares of our common stock was made on July 31, 2009 (the “Initial Closing Date”). The cash payments, each in the amount of $100,000 were required to be made at 30 day intervals following the Initial Closing Date. We determined to limit our aggregate cash payments to $500,000, all of which have been made, and receive an assignment, if applicable, of a 35% working interest.
On December 29, 2009 we agreed to restructure our arrangement with Enercor from a purchase and sale arrangement to a joint venture arrangement for the joint development of the Property’s tar sand deposits. During the quarter ended February 28, 2010 we and Enercor determined to forgo the restructuring and leave the transaction as a purchase and sale arrangement. The determination to leave the transaction as a purchase and sale arrangement had no material effect on our rights in the Property or our transaction costs.
On August 5, 2009 we entered into a Purchase Agreement with Enercor. Therein we acquired a 37.5% working interest in a lease covering 640 acres in Uintah County, Utah (Lease UTU - 38076). The lease was subject to aggregate royalties of 18.25%. The lease provided for conventional oil and gas drilling. We intended to obtain a Combined Hydrocarbon Lease on the property which would allow us to also engage in tar sands extraction activity. The lease was adjacent to the leases which are the subject of our July 25, 2009 and August 12 2009 Purchase Agreements with Enercor. We paid Enercor 300,000 shares of our common stock for the working interest. Due to uncertainty concerning the viability of the lease, this lease was written down to a value of $36,000 as of May 31, 2010 and to a value or $0 as of May 31, 2011.
On August 12, 2009 we entered into a Purchase Agreement with Enercor. Therein we acquired a 62.5% working interest in a lease covering 640 acres in Uintah County, Utah (Lease UTU - 27413). The lease was subject to aggregate royalties of 18.25%. The lease provided for conventional oil and gas drilling. We intended to obtain a Combined Hydrocarbon Lease on the property which would allow us to also engage in tar sands extraction activity. The lease was adjacent to the leases which are the subject of our July 25, 2009 and August 5, 2009 Purchase Agreements with Enercor. We paid Enercor 300,000 shares of our common stock for the working interest. Due to uncertainty concerning the viability of the lease, this lease was written down to a value of $60,000 at May 31, 2010 and to a value of $0 as of May 31, 2011.
On July 6, 2009 we entered into a Share Issuance Agreement (the “Share Issuance Agreement”) with Baden Energy Group Ltd. (“Baden”) pursuant to which Baden could, at our request, purchase units of our securities at a price equal to 80% of the volume weighted average of the closing price for our common stock for the ten business days immediately preceding the date we supplied Baden with written notice of our request that they purchase units (the “Unit Price”). Each unit purchased consisted of one share of our restricted common stock and one common stock purchase warrant to purchase one share of our common stock for a period of three years from issuance at an exercise price equal to 125% of the Unit Price. Each such request by us was required to be in the amount of not less than $100,000 of units and required to be in multiples of $100,000. We were required to use the proceeds from all unit sales for exploration activities, working capital and general corporate activities. Baden could however, in its sole discretion, refuse to act on any request by us due to its determination that market conditions were unfavorable.
The Share Issuance Agreement was in effect until July 6, 2010. During the term of the Share Issuance Agreement, we were able to sell up to $6,000,000 of units to Baden, which amount could be increased by Baden, in its discretion, to $10,000,000.
During the period ending July 6, 2010, we could not discuss, solicit, negotiate or engage in any investment or corporate financing agreements without the prior written consent of Baden, which consent could not be arbitrarily withheld. Further, Baden had a right of first refusal during such period on all of our proposed financings with third parties. The foregoing right of Baden to prohibit our discussion, solicitation, negotiation or engagement in investment or corporate financing agreements or to maintain a right of first refusal was to be of no further force or effect, however, in the event Baden refused a unit purchase request from us by reason of unfavorable market conditions.
The Share Issuance Agreement further provided that until July 6, 2010 we could only engage in equity financings and could not engage in debt financings. The Share Issuance Agreement was not assignable or transferrable by Baden without our prior written consent, which consent could not be arbitrarily withheld.
Effective August 12, 2009 Baden purchased 319,419 units, at our request, pursuant to our Share Issuance Agreement with Baden at a price of $0.94 per unit or an aggregate of $300,000. Each unit consists of one share of our common stock and one common stock purchase warrant to purchase one additional share of our common stock at a price of $1.18 per share for a period of three years from issuance.
Effective September 22, 2009 Baden purchased 600,000 units, at our request, pursuant to our Share Issuance Agreement with Baden at a price of $1.00 per unit or an aggregate of $600,000. Each unit consists of one share of our common stock and one common stock purchase warrant to purchase one additional share of our common stock at a price of $1.25 per share for a period of three years from issuance.
Effective February 23, 2010 Baden purchased 606,060 units, at our request, pursuant to our Share Issuance Agreement with Baden at a price of $0.165 per unit or an aggregate of $100,000. Each unit consists of one share of our common stock and one common stock purchase warrant to purchase one additional share of our common stock at a price of $0.20 per share for a period of three years from issuance.
Notwithstanding the July 6, 2010 termination of the Share Issuance Agreement, effective July 20, 2010 Baden purchased 5,000,000 Units, at our request, at a price of $0.02 per Unit or an aggregate of $100,000. Each Unit consists of one share of our common stock and one common stock purchase warrant to purchase one additional share of common stock at a price of $0.025 per share at any time during the period ending July 20, 2013.
On January 28, 2010, we entered into an Investment Agreement (“Investment Agreement”) with Dutchess Opportunity Fund, II, LP (the “Investor”). Pursuant to the Investment Agreement, the Investor committed to purchase up to $5,000,000 of our common stock over a period of thirty-six months (the “Equity Line”). On April 5, 2011 we notified the Investor of our determination to cancel the Investment Agreement. No stock was purchased by the Investor under the Investment Agreement.
Pursuant to the terms of a Registration Rights Agreement dated January 28, 2010 between us and the Investor, on February 25, 2010 we filed a registration statement (the “Registration Statement”) with the SEC to register the resale by the Investor of up to 25,000,000 shares of the common stock underlying the Investment Agreement. On April 6, 2010 we filed Amendment No. 1 to the Registration Statement and pursuant to a cut-back comment from the SEC Staff, reduced the number of shares being registered under the Registration Statement to 14,500,000. On June 1, 2010 we withdrew the registration statement and filed a new registration statement on June 2, 2010 under which we sought to register 14,705,000 shares. In conjunction with the cancellation of the Investment Agreement, we withdrew the registration statement.
Principal Products and Services
We are in the exploration stage and do not currently offer any products or services for sale. We have no oil and gas wells, no revenues and no producing properties. If we engage in exploration and drilling and subsequently determine that there are commercial quantities of oil and natural gas on our properties, we plan to produce the oil and natural gas and sell it at the wellhead.
We need to raise a significant amount of capital to pay for any exploration and development activities that we may engage in. If we cannot raise the capital we require or find partners that can fund our required expenditures, we will not be able to drill and our business will fail. Even assuming that we obtain the financing we require, if we do not discover and produce commercial quantities of oil and natural gas, we will not have any products or services to offer and our business could fail.
Competitive Business Conditions
The oil and natural gas industry is highly competitive. We compete with private and public companies in all facets of the oil and natural gas business. Numerous independent oil and gas companies, oil and gas syndicators, and major oil and gas companies actively seek out and bid for oil and gas prospects and properties as well as for the services of third-party providers, such as drilling companies, upon which we rely. Many of these companies not only explore for, produce and market oil and natural gas, but also carry out refining operations and market the resultant products worldwide. Most of our competitors have longer operating histories and substantially greater financial and other resources than we do.
Competitive conditions may be affected by various forms of energy legislation and/or regulation considered from time to time by the government of the United States and other countries, as well as factors that we cannot control, including international political conditions, overall levels of supply and demand for oil and gas, and the markets for synthetic fuels and alternative energy sources.
Patents, Trademarks and Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts
We presently utilize no patents, licenses, franchises, concessions, royalty agreements or labor contracts in connection with our business.
Research and Development
During the fiscal years ended May 31, 2011 and May 31, 2010 we made no expenditures on research and development.
Employees
As of September 12, 2011 our only employees are our four executive officers.
Reports to Security Holders
We file annual, quarterly and current reports and other information with the Securities and Exchange Commission. You may read and copy any reports, statement or other information that we file with the Commission at the Commission's public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the Commission at (202) 551-8090 for further information on the public reference room. These Commission filings are also available to the public from commercial document retrieval services and at the Internet site maintained by the Commission at http://www.sec.gov.
In addition our filings can be viewed on our Internet site at www.viper-resources.com.
ITEM 1A.
ITEM 1A.
RISK FACTORS
Not Applicable.
ITEM 1B.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
Not Applicable.
ITEM 2.
ITEM 2.
PROPERTIES
Our executive offices are located at 800 East Colorado Boulevard, Suite 888, Pasadena, CA 91101 and cover an area of approximately 8,142 square feet. The use of these offices is supplied to us on a rent free basis by an affiliated party.
During the fiscal year ended May 31, 2011 we leased office space of Uptown Center, 2100 West Loop South, Suite 900, Houston Texas and paid annual rent in the approximate amount of $24,000.
ITEM 3.
ITEM 3.
LEGAL PROCEEDINGS
Legal Proceedings
From time to time we may be a defendant and plaintiff in various legal proceedings arising in the normal course of our business. We are currently not a party to any material legal proceedings or government actions, including any bankruptcy, receivership, or similar proceedings. In addition, we are not aware of any threatened litigation or action that could affect our operations. Furthermore, as of the date of this Annual Report, our management is not aware of any proceedings to which any of our directors, officers, or affiliates, or any associate of any such director, officer, affiliate, or security holder is a party adverse to our company or has a material interest adverse to us.
ITEM 4.
ITEM 4.
(RESERVED)
PART II
ITEM 5.
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock was quoted on the OTC Bulletin Board of the National Association of Securities Dealers, Inc. (the “NASD”) under the symbol “CGCA.OB” from July 20, 2007 until November 6, 2009 and has traded since November 6, 2009 under the symbol “VPRS.OB”. The following table sets forth, for the fiscal quarters indicated, the high and low closing bid prices per share of our common stock, as derived from quotations provided by Pink Sheets, LLC. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. The prices indicated give retroactive effect to a 35:1 forward stock split in the form of a stock dividend effectuated on May 8, 2008.
Quarter Ended
High Bid
Low Bid
May 31, 2011
$
0.08
$
0.03
February 28, 2011
$
0.035
$
0.013
November 30, 2010
$
0.0225
$
0.011
August 31, 2010
$
0.035
$
0.015
May 31, 2010
$
0.141
$
0.035
February 26, 2010
$
0.27
$
0.125
November 30, 2009
$
1.16
$
0.25
August 31, 2009
$
1.53
$
0.46
May 31, 2009
$
1.00
$
0.47
February 28, 2009
$
0.90
$
0.25
November 30, 2008
$
0.25
$
0.25
August 31, 2008
$
0.25
$
0.25
Holders
As of September 12, 2011 there were approximately 7 record holders of our common stock.
Dividends
We have never declared any cash dividends with respect to our common stock. Future payment of dividends is within the discretion of our Board of Directors and will depend on our earnings, capital requirements, financial condition and other relevant factors. Although there are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our common stock, we presently intend to retain future earnings, if any, for use in our business and have no present intention to pay cash dividends on our common stock.
Recent Sales of Unregistered Securities
We sold no shares of our common stock during the quarter ended May 31, 2011.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None
Securities Authorized For Issuance Under Equity Compensation Plans
We do not presently maintain any equity compensation plans and have not maintained any such plans since our inception.
ITEM 6.
ITEM 6.
SELECTED FINANCIAL DATA
Not applicable.
ITEM 7.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our audited consolidated financial statements and the accompanying notes included elsewhere in this
Annual Report on Form 10-K.
The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of various factors, including those discussed elsewhere in this
annual report
.
We are in the exploration stage as an oil and gas exploration company and during the year ended May 31, 2011 we engaged in limited oil and gas activities. We had minimal operations and generated no revenues during the fiscal year ended May 31, 2011. Our ability to develop and maintain a meaningful level of revenues from oil and gas operations is dependent on our ability to successfully acquire and drill exploration and development wells and complete producing property acquisitions.
At the present time, we have no developed properties and no production.
During the next 12 months, we intend to evaluate and determine whether to expand or discontinue our oil and gas operations. We may also seek to identify possible merger candidates in the oil and gas industry or in other fields.
In its report dated September 13, 2011, our auditors, Sam Kan & Company expressed an opinion that there is substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. We have generated no operating revenues since our inception. We had an accumulated deficit of $6,705,738 as of May 31, 2011. Our continuation as a going concern is dependent upon future events, including our ability to raise additional capital and to generate positive cash flows.
Our current business plan strategy is to develop the prospects that we may acquire interests in. We intend to fund any lease acquisitions and any seismic costs needed to further define the prospects from additional financing. No assurance can be given that such additional financing will be available to us as and when needed or, if available, the terms on which it will be available.
Subject to receipt of necessary financing and the evaluation of our proposed oil and gas operations, we plan to spend approximately $100,000 in the next 12 months on oil and gas related activities.
We will require financing to meet working capital costs, including the cost of reviewing and negotiating transactions and other ordinary general and administrative costs such as regulatory compliance, investor relations, advisory services, officer’s salaries, office and general expenses, professional fees, travel and entertainment and rent and related expenses. We estimate that the level of working capital needed for these general and administrative costs for the next twelve months will be approximately $150,000. However, this estimate is subject to change, depending on the number of transactions in which we ultimately become involved. In addition, funding will be required for follow-on development of working interest obligations of any successful exploration prospects.
Oil and gas exploration requires significant outlays of capital and in many situations may offer a limited probability of success. We hope to enhance our chances for success by effectively using available technology, rigorously evaluating sub-surface data, and, to the extent possible, managing dry-hole and financial risks.
We intend to rely on synergistic partnering with sophisticated industry partners. The ideal partner would tend to be a regionally focused independent which has a large seismic database, a solid grasp on the play’s history, and a lead in understanding technology to exploit the play. However, there is no assurance that we will be able to successfully negotiate any such partnering agreement or raise the necessary financing to invest in such a venture, or that any such venture will yield us any revenues or profits.
We will face competition from firms that are well-established, successful, better capitalized and, in many instances, willing to pay more for properties than what we might consider prudent. Thus, our success will depend on the execution of our business model to
·
identify available transactions;
·
quickly evaluate which transactions are most promising; and
·
negotiate a creative transaction structure.
Presently we have four full-time employee consisting of our executive officers, Dianwen Ju, Jimmy Wang, Xiao Chen and Vincent Wang. Changes in the number of employees during the next twelve months will be a function of the level of business activity.
We intend to contract out certain technical and administrative functions on an as-needed basis in order to conduct our operating activities. Our management team will select and hire these contractors and manage and evaluate their work performance.
Results of Operations
Revenues
We have had no revenues since our inception.
Expenses
We had operating expenses of $377,392 and $5,790,054 for the years ended May 31, 2011 and 2010 respectively. The decrease in operating expenses during the year ended May 31, 2011 was attributable to a decrease in general and administrative expenses.
Net Loss
We incurred net losses for the years ended May 31, 2011 and 2010 of $378,894 and $5,796,713, respectively. The decrease in net loss was directly attributable to the decrease in general and administrative expenses.
Liquidity and Capital Resources
At May 31, 2011 we had working capital of $38,475 compared to working capital of $198,997 at May 31, 2010. Current liabilities decreased to $1,509 at May 31, 2011 from $3,560 at May 31, 2010. Current assets decreased to $39,984 at May 31, 2011 from $202,557 at May 31, 2010 due to a decrease in cash.
Critical Accounting Policies and Estimates
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Income Tax
The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109 (“SFAS 109”). Under SFAS 109 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net Income (Loss) per share
The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company’s preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share.
Revenue Recognition
Revenue is recognized on an accrual basis as earned under contract terms. The Company has had no revenue to date.
Oil and Gas Interests
The Company follows the full-cost method of accounting for oil and natural gas properties. Under this method, all costs incurred in the exploration, acquisition, and development, including unproductive wells, are capitalized in separate cost centers for each country. Such capitalized costs include contract and concessions acquisition, geological, geophysical, and other exploration work, drilling, completing and equipping oil and gas wells, constructing production facilities and pipelines, and other related costs.
The capitalized costs of oil and gas properties in each cost center are amortized on a composite units of production method based on future gross revenues from proved reserves. Sales or other dispositions of oil and gas properties are normally accounted for as adjustments of capitalized costs. Gain or loss is not recognized in income unless a significant portion of a cost center’s reserves is involved. Capitalized costs associated with acquisition and evaluation of unproved properties are excluded from amortization until it is determined whether proved reserves can be assigned to such properties or until the value of the properties is impaired. If the net capitalized costs of oil and gas properties in a cost center exceed an amount equal to the sum of the present value of estimated future net revenues from proved oil and gas reserves in the cost center and the lower of cost or fair value of properties not being amortized, both adjusted for income tax effects, such excess is charged to expense.
Since the Company has not produced any oil or gas, a provision for depletion has not been made.
Financial Instruments
The carrying value of the Company’s financial instruments, including cash and cash equivalents, as reported in the Company’s balance sheet, approximates fair value.
Stock Based Compensation
The Company accounts for employee and non-employee stock awards under ASC 718, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable.
Recent Accounting Pronouncements
In April 2010, new accounting guidance was issued for the milestone method of revenue recognition. Under the new guidance, an entity can recognize revenue from consideration that is contingent upon achievement of a milestone in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. This guidance is effective prospectively for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The Company adopted the provisions of this guidance effective July 1, 2010, which did not have a material impact on its consolidated financial statements.
In February 2010, the FASB issued guidance to remove the requirement for an entity that files financial statement with the SEC to disclose a date through which subsequent events have been evaluated. The adoption of this guidance during our current fiscal quarter did not have any impact on our Consolidated Financial Statements.
On July 1, 2009, Financial Accounting Standards Board ("FASB") Accounting Standards CodificationTM ("ASC") became the sole source of authoritative Generally Accepted Accounting Principles ("GAAP") literature recognized by the Financial Accounting Standards Board for financial statements issued for interim and annual periods ending after September 15, 2009. Rules and interpretive releases of the Security Exchange Commission ("SEC") under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. Except for applicable SEC rules and regulations and a limited number of grandfathered standards, all other sources of GAAP for nongovernmental entities were superseded by the issuance of ASC. ASC did not change GAAP, but rather combined the sources of GAAP and the framework for selecting among those sources into a single source. Accordingly, the adoption of ASC had no impact on the financial results of the Company.
In June 2009, the FASB issued FAS 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles," which now resided with ASC 105, "Generally Accepted Accounting Principles." ASC 105 will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then-existing non- SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009.The Company does not expect the adoption of ASC 105 to have an impact on the Company's results of operations, financial condition or cash flows.
In June 2009, the FASB issued FAS 167, "Amendments to FASB Interpretation No. 46(R)," which now resides with ASC 810, "Consolidation." ASC 810 is intended to (1) address the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, as a result of the elimination of the qualifying special-purpose entity concept in ASC 860, and (2) constituent concerns about the application of certain key provisions of Interpretation 46(R), including those in which the accounting and disclosures under the Interpretation do not always provided timely and useful information about an enterprise's involvement in a variable interest entity. This statement must be applied as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009. The Company does not expect the adoption of ASC 810 to have an impact on the Company's results of operations, financial condition or cash flows.
In June 2009, the FASB issued FAS 140/166, "Accounting for Transfers of Financial Assets," an amendment of FAS 140, which now resides with ASC 860, "Transfers and Servicing." ASC 860 is intended to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets: the effects of a transfer on its financial position, financial performance , and cash flows: and a transferor's continuing involvement, if any, in transferred financial assets. This statement must be applied as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009. The Company does not expect the adoption of ASC 860 to have an impact on the Company's results of operations, financial condition or cash flows.
In May 2009, the FASB issued FAS 165, "Subsequent Events," which now resides with ASC 855, "Subsequent Events." This pronouncement establishes standards for accounting for and disclosing subsequent events (events which occur after the balance sheet date but before financial statements are issued or are available to be issued). ASC 855 requires and entity to disclose the date subsequent events were evaluated and whether that evaluation took place on the date financial statements were issued or were available to be issued. It is effective for interim and annual periods ending after June 15, 2009. The adoption of ASC 855 did not have a material impact on the Company's financial condition or results of operation.
In May, 2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154, “Accounting Changes and Error Corrections - A Replacement of APB Opinion No. 20 and SFAS No. 3”. SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The provisions of SFAS No. 154 are effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The adoption of this standard did not have a material effect on the Company’s results of operations or financial position.
Off Balance Sheet Arrangements
None.
Contractual Obligations
Not applicable.
ITEM 7A
ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
ITEM 8.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Financial Statements and notes thereto commencing on page.
ITEM 9.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On July 6, 2011, our board of directors approved the dismissal of Ronald R. Chadwick, P.C. (“Chadwick”) as our independent registered public accounting firm and engaged Sam Kan & Company (“SK”) as our independent registered public accounting firm, both effective as of July 6, 2011.
Chadwick’s report on our financial statements for each of the past two fiscal years ended May 31, 2010 and 2009 did not contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles, except that the report was qualified as to our ability to continue as a going concern.
During the fiscal years ended May 31, 2010 and 2009 and the subsequent interim period through July 6, 2011, there were no: (i) disagreements with Chadwick on any matter of accounting principles or practices, financial statement disclosure, or auditing scope of procedure which, if not resolved to the satisfaction of Chadwick, would have caused Chadwick to make reference to the matter in their report, or (ii) reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.
During the fiscal years ended May 31, 2010 and 2009 and the subsequent interim period through July 6, 2011, neither we nor anyone acting on our behalf consulted SK regarding either: (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
ITEM 9A.
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Our Disclosure Controls and Internal Controls
We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer as appropriate, to allow timely decisions regarding required disclosure. During the quarter ended May 31, 2011 we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13(a)-15(e) and 15d-15(e) under the 1934 Act. Based on this evaluation, management concluded that, as of May 31, 2011, our disclosure controls and procedures were effective.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; (ii) provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Management assessed the effectiveness of our internal control over financial reporting as of May 31, 2011 based on the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that assessment, management concluded that, as of May 31, 2011, our internal control over financial reporting was effective based on the criteria established in Internal Control-Integrated Framework.
Limitations on Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer (principal financial officer), does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our control systems are designed to provide such reasonable assurance of achieving their objectives. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Controls
During the fiscal quarter ended May 31, 2011, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
ITEM 9B.
ITEM 9B.
OTHER INFORMATION
Not applicable.
PART III
ITEM 10.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Executive Officers, Directors and Key Employees
Directors serve until the next annual meeting of the stockholders; until their successors are elected or appointed and qualified, or until their prior resignation or removal. Officers serve for such terms as determined by our board of directors. Each officer holds office until such officer’s successor is elected or appointed and qualified or until such officer’s earlier resignation or removal. No family relationships exist between any of our present directors and officers.
The following table sets forth certain information, as of May 31, 2011, with respect to our directors and executive officers.
Name
Positions Held
Age
Date of Election or Appointment as Director
Dianwen Ju
President and Chief Executive Officer
April 25, 2011
Jimmy Wang
Treasurer
N/A
Xiao Chen
Chief Financial Officer
N/A
Vincent Wang
Secretary
N/A
The following is a brief account of the business experience during the past five years or more of each of our directors and executive officers.
Dianwen Ju, Ph.D. received a Ph.D. degree in Immunology in 1999, a Master’s degree in Pharmacology in 1994, and a Bachelor’s degree in Pharmacy in 1991 in Second Military Medical University, Shanghai, China. He joined Shanghai MediPharm Biotech in 2002 as a director of R&D and he is currently CEO and Chairman of MediPharm Biotech Pharmaceuticals Co. Ltd (Bermuda). He is also a Research Professor in Fudan University, Shanghai, China. He has 20 years of R&D experiences in biological drugs and new therapies for the treatment of malignant cancer. He has more than 40 publications in peer-reviewed international journals including Journal of Clinical Oncology, Cancer Research, Gene Therapy, International Journal of Oncology, Cancer Gene Therapy, Cancer Immunology & Immunotherapy, et al. He has invented 15 biotechnologies of which 8 are patented and the remainings are pending. Before joining MediPharm in 2002, Dr. Ju had been an assistant director and a senior scientist in Shanghai Brilliance Biotech Institute and a lecturer in Immunology in Second Military Medical University for 6 years.10
Jimmy Wang is the Chief Financial Officer of American Compass, Inc., where he has served, initially as Chief Accounting Officer, since 2003. Prior to joining American Compass, Inc., he served as an accounting manager for Planned Parenthood of the Greater Miami Valley from 2000 to 2003. He has served as a Director for Nevada Gold Holdings, Inc. since January 25, 2011. He is a graduate of the City University of New York, where he majored in both Accounting & Information Systems and Economics.
Xiao Chen worked at Brilliance China Group from 1994 to 2001. From 2005 to 2008, he worked as director of finance at Shanghai Medipharm Co. Ltd. Since 2008, Mr Chen has been working at Hybrid Kinetic Group Limited as vice general manager of investments in China. Mr Chen holds a bachelor’s degree in investment management from Shanghai Finance University.
Vincent Wang has been the Secretary and a Director of Nevada Gold Holdings, Inc. since November 24, 2010. Mr. Wang has been Vice President of Hybrid Kinetic Motors Corp. since 2009 and has also served as a director of American Compass, Inc, a wholly-owned subsidiary of Hybrid Kinetic Group Limited, since 2009. Mr Wang has extensive experience in educational and linguistic fields. He holds a masters degree in linguistics from National Taiwan Normal University.
Board of Directors; Board Committees
None of our directors receive any remuneration for acting as such. Directors may however be reimbursed their expenses, if any, for attendance at meetings of the Board of Directors. Our Board of Directors may designate from among its members an executive committee and one or more other committees. No such committees presently exist, due to the fact that we presently have only one director. Accordingly, we do not have an audit committee or an audit committee financial expert. We are presently not required to have an audit committee financial expert and do not believe we otherwise need one at this time due to our limited business operations. Similarly we do not have a nominating committee or a committee performing similar functions. Our sole director, Dianwen Ju, serves the functions of an audit committee and a nominating committee. We have not implemented procedures by which our security holders may recommend board nominees to us but expect to do so in the future, when and if we engage in material business operations.
Corporate Governance
Leadership Structure
Our board has 1 member, Dianwen Ju. Accordingly we have not designated a chairman.
We are a small, exploration stage company which has yet to achieve operating revenues. We believe that our present management structure is appropriate for a company of our size and state of development.
Our board is actively involved in our risk oversight function and collectively undertakes our risk oversight function. This review of our risk tolerances includes, but is not limited to, financial, legal and operational risks and other risks concerning our reputation and ethical standards.
Given our size, we do not have a nominating committee or a diversity policy. Our entire board monitors and assesses the need for and qualifications of additional directors. We may adopt a diversity policy in the future in connection with our anticipated growth.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act, as amended, requires that our directors, executive officers and persons who own more than 10% of a class of our equity securities that are registered under the Exchange Act to file with the Commission initial reports of ownership and reports of changes of ownership of such registered securities.
To our knowledge, based solely on a review of copies of such reports, no person required to file such a report failed to file a required report with respect to the fiscal year covered by this report.
Code of Ethics
In 2007 we adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, persons performing similar functions as well as to our directors and employees. A copy of our Code of Ethics will be provided to any person requesting same without charge. To request a copy of our Code of Ethics please make written request to our President c/o Viper Resources, Inc. at 800 East Colorado Boulevard, Suite 888, Pasadena, CA 91101.
ITEM 11.
ITEM 11.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the total compensation paid or accrued by us during the two fiscal years ended May 31, 2011, and 2010 to (i) all individuals that served as our principal executive officer or acted in a similar capacity for us at any time during the fiscal year ended May 31, 2011; (ii) all individuals that served as our principal financial officer or acted in a similar capacity for us at any time during the fiscal year ended May 31, 2011; and (iii) all individuals that served as executive officers of ours at any time during the fiscal year ended May 31, 2011 that received annual compensation during the fiscal year ended May 31, 2011 in excess of $100,000.
Summary Compensation Table
Name and Principal Position
Year
Salary
($)
Bonus
($)
Stock Awards
($)
Option Awards
($)
Non-
Equity Incentive
Plan Compen-sation ($)
Change in Pension Value
and
Non-
qualified
Deferred
Compen-sation
Earnings
($)
All
Other
Compen-sation
($)
Total
($)
Massimiliano Pozzoni(1), Chief Executive and Financial Officer
120,000
99,000
120,000
99,00
Dianwen Ju, President and Chief Executive Officer
Xiao Chen,
Chief Financial Officer
(1)
Effective March 21, 2008 Massimiliano Pozzoni was appointed as our President, Treasurer, Secretary, and Principal Executive and Financial Officer. Mr. Pozzoni resigned his director and executive officer positions on April 25, 2011.
(2)
Effective April 25, 2011 Dianwen Ju was appointed as a director and as our President and Chief Executive Officer.
(3)
Effective April 25, 2011 Xiao Chen was appointed as a director and as our Chief Financial Officer.
We have not issued any stock options or maintained any stock option or other incentive plans since our inception. We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans. Similarly, we have no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers or any other persons following, or in connection with the resignation, retirement or other termination of a named executive officer, or a change in control of us or a change in a named executive officer’s responsibilities following a change in control.
Employment Agreements
On June 5, 2008 we entered into an Executive Employment Agreement (the “Agreement”) with Massimiliano Pozzoni to serve as our President. The Agreement has a one year term and was renewable by mutual written agreement. Mr. Pozzoni was paid an annual salary of $120,000 under the Agreement, payable in equal installments of $10,000 per month and was entitled to reimbursement of business expenses. The Agreement provided for termination by us due to the death or disability of Mr. Pozzoni and could also be terminated by us with or without cause. Mr. Pozzoni could terminate the Agreement for good reason. In the event the Agreement was terminated by us without cause or by Mr. Pozzoni for good reason we were obligated to pay Mr. Pozzoni the equivalent of three month’s salary. In the event our stock traded at an average price of $2.00 or more per share during a minimum period of 30 calendar days, Mr. Pozzoni was entitled to a review of his employment agreement.
Effective January 1, 2009 Massimiliano Pozzoni agreed to a temporary reduction in the monthly payment due to him under his employment agreement from $10,000 to $7,000. Effective January 1, 2010 Mr. Pozzoni’s monthly salary was restored to $10,000. The Employment Agreement was terminated on April 25, 2011 in connection with the resignation of Mr. Pozzoni.
None of our current officers or directors are currently receiving compensation for serving as such.
ITEM 12.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information with respect to the beneficial ownership of our common stock known by us as of May 31, 2011 by:
·
each person or entity known by us to be the beneficial owner of more than 5% of our common stock;
·
each of our directors;
·
each of our executive officers; and
·
all of our directors and executive officers as a group.
The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on such date and all shares of our common stock issuable to such holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by such person at said date which are exercisable within 60 days of May 31, 2011. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent such power may be shared with a spouse.
Name of Beneficial Owner
Title of Class
Amount and Nature
of Beneficial
Ownership(1)
Percentage
of
Class(2)
Chimerica Capital, LLC
800 East Colorado Blvd,
Suite 888
Pasadena, CA 91101
Common Stock,
$0.00001 par value
35,000,000 shares, direct(3)
41.6%
Baden Energy Group Ltd.
Rue Du Rhone 14
1204 Geneva, Switzerland
Common Stock,
$0.00001 par value
13,050,958 shares, direct(4)
15.5%
Dianwen Ju
800 East Colorado Blvd,
Suite 888
Pasadena, CA 91101
Common Stock,
$0.00001 par value
0 shares owned
0%
Jimmy Wang
800 East Colorado Blvd,
Suite 888
Pasadena, CA 91101
Common Stock,
$0.00001 par value
35,000,000 shares, indirect(3)
41.6%
Xiao Chen
800 East Colorado Blvd,
Suite 888
Pasadena, CA 91101
Common Stock,
$0.00001 par value
0 shares owned
0%
Vincent Wang
800 East Colorado Blvd,
Suite 888
Pasadena, CA 91101
Common Stock,
$0.00001 par value
0 shares owned
0%
All directors and executive officers as a group (4 persons)
Common Stock,
$0.00001 par value
35,000,000 shares, indirect(3)
41.6%
(1)
As used herein, the term beneficial ownership with respect to a security is defined by Rule 13d-3 under the Securities Exchange Act of 1934 as consisting of sole or shared voting power (including the power to vote or direct the vote) and/or sole or shared investment power (including the power to dispose or direct the disposition of) with respect to the security through any contract, arrangement, understanding, relationship or otherwise, including a right to acquire such power(s) during the next 60 days. Unless otherwise noted, beneficial ownership consists of sole ownership, voting and investment rights.
(2)
There were 84,116,214 shares of common stock issued and outstanding on May 31, 2011.
(3)
Jimmy Wang has the power to vote and dispose of the shares owned by Chimerica Capital, LLC.
(4)
Includes 6,525,479 presently exercisable warrants.
Changes in Control
Not Applicable.
Securities Authorized for Issuance Under Equity Compensation Plans
We do not presently maintain any equity compensation plans and have not maintained any such plans since our inception.
ITEM 13.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
As discussed in greater detail in Item 10. Executive Compensation - Employment Agreements, on June 5, 2008 we entered into a one year Executive Employment Agreement with Massimiliano Pozzoni, which provided for the payment of an annual salary of $120,000 or $10,000 per month. Effective January 1, 2009 Mr. Pozzoni agreed to a temporary reduction in the monthly payment due to him under the Executive Employment Agreement from $10,000 to $7,000 per month. Effective January 1, 2010 the monthly payment amount was restored to $10,000.
On August 31, 2009 we entered into a Settlement Agreement (the “Agreement”) with Douglas Berry, a former officer and director, whereby we settled our outstanding debt to Mr. Berry in the amount of $125,262.45 through the issuance of 153,508 shares of our restricted common stock. The debt was the result of loans made to us by Mr. Berry in the aggregate amount of $110,625 and the resulting interest of $14,637.45 due thereon. The shares were valued at $0.816 per share which represented a 20% discount to the closing price of our common stock on the date of the Agreement.
Effective April 25, 2011 Massimiliano Pozzoni sold 35,000,000 shares of common stock to Chimerica Capital, LLC.
Director Independence
Our sole present director is not “independent” as that term is defined by the National Association of Securities Dealers Automated Quotations (“NASDAQ”) as our director also serves as one of our executive officers.
ITEM 14.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees.
The aggregate fees billed to us by our principal accountant for services rendered during the fiscal years ended May 31, 2011 and 2010 are set forth in the table below:
Fee Category
Fiscal year ended
May 31, 2011
Fiscal year ended
May 31, 2010
Audit fees (1)
$ 4,000
$8,500
Audit-related fees (2)
Tax fees (3)
All other fees (4)
Total fees
$ 4,000
$8,500
(1)
Audit fees consist of fees incurred for professional services rendered for the audit of consolidated financial statements, for reviews of our interim consolidated financial statements included in our quarterly reports on Form 10-Q and for services that are normally provided in connection with statutory or regulatory filings or engagements.
(2)
Audit-related fees consist of fees billed for professional services that are reasonably related to the performance of the audit or review of our consolidated financial statements, but are not reported under “Audit fees.”
(3)
Tax fees consist of fees billed for professional services relating to tax compliance, tax planning, and tax advice.
(4)
All other fees consist of fees billed for all other services.
Audit Committee’s Pre-Approval Practice.
Prior to our engagement of our independent auditor, such engagement was approved by our board of directors. The services provided under this engagement may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. Pursuant our requirements, the independent auditors and management are required to report to our board of directors at least quarterly regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. Our board of directors may also pre-approve particular services on a case-by-case basis. All audit-related fees, tax fees and other fees incurred by us for the year ended December 31, 2008, were approved by our board of directors.
PART IV
ITEM 15.
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Financial Statements
Page
Report of Independent Registered Public Accounting Firm
Balance Sheets as of May 31, 2011 and 2010
Statements of Operations for the years ended May 31, 2011 and 2010 and for the period from November 18, 2005 (Inception) through May 31, 2011
Statements of Changes in Stockholders’ Equity (Deficit) for the period from November 18, 2005 (Inception) through May 31, 2011
Statements of Cash Flows for the years ended May 31, 2011 and 2010 and for the period from November 18, 2005 (Inception) through May 31, 2011
Notes to Financial Statements
Financial Statement Schedules
All financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
Exhibits
In reviewing the agreements included as exhibits to this Form 10-K, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:
·
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
·
have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
·
may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
·
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Form 10-K and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.
The following exhibits are included as part of this report:
Exhibit No.
SEC Report
Reference No.
Description
3.1
3.1
Articles of Incorporation, as filed with the Nevada Secretary of State on November 18, 2005 (1)
3.2
3.1
Certificate of Amendment filed with the Nevada Secretary of State on October 14, 2009 (2)
3.3
3.2
Bylaws (1)
4.1
4.1
Warrant dated August 12, 2009 exercisable for 319,419 shares issued to Baden Energy Group Ltd. (3)
4.2
4.1
Warrant dated September 22, 2009 excercisable for 60,000 shares issued to Baden Energy Group Ltd. (4)
10.1
10.1
Assignment of Quit Claim of Oil and Gas Leases, dated May 15, 2006 (1)
10.2
10.2
Joint Venture Agreement with DNR Oil & Gas Inc., dated May 15, 2006 (1)
10.3
10.3
Joint Venture Agreement with Colorado Oil & Gas, Inc., dated May 15, 2006 (1)
10.4
10.1
Well Service and Operating Agreement dated May 11, 2007 between Registrant and DNR Oil & Gas Company (5)
10.5
10.1
Memorandum of Intent, dated May 22, 2008 between Registrant and Coastal Petroleum Company (6)
10.6
10.1
Executive Employment Agreement effective June 5, 2008 between Registrant and Massimiliano Pozzoni (7)
10.7
10.1
Assignment of Farmout Interest dated June 16, 2008 between Registrant and West Canyon Energy Corp. (8)
10.8
10.2
Formal Agreement dated June 18, 2008 between Registrant and Coastal Petroleum Corp. (8)
10.9
10.1
Share Issuance Agreement dated July 6, 2009 between Registrant and Baden Energy Group Ltd. (10)
10.10
10.1
Purchase Agreement dated July 25, 2009 between Registrant and Enercor, Inc. (11)
10.11
10.1
Purchase Agreement dated August 5, 2009 between Registrant and Enercor, Inc. (12)
10.12
10.1
Purchase Agreement dated August 12, 2009 between Registrant and Enercor, Inc. (13)
10.13
10.13
July 6, 2009 Advisory Board Agreement with Warren Dillard (14)
10.14
10.1
Investment Agreement between Registrant and Dutchess Opportunity Fund II, LP, dated January 28, 2010 (2)
10.15
10.2
Registration Rights Agreement between Registrant and Dutchess Opportunity Fund II, LP, dated January 28, 2010 (2)
10.16
10.1
Settlement Agreement, effective September 8, 2009 between Registrant and Cobra Oil & Gas Corporation (15)
14.1
14.1
Code of Ethics (9)
*
Subsidiaries of Registrant
31.1
*
Certification of Principal Executive Officer pursuant to Rule 15d-15(e), promulgated under the Securities and Exchange Act of 1934, as amended
31.2
*
Certification of Principal Financial Officer pursuant to Rule 15d-15(e), promulgated under the Securities and Exchange Act of 1934, as amended
32.1
*
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)
32.2
*
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)
* Filed herewith.
(1)
Filed as an exhibit, numbered as indicated above, to Registrant’s Registration Statement on Form SB-2, as filed with the Securities and Exchange Commission on July 25, 2006, which exhibit is incorporated herein by reference.
(2)
Filed as an exhibit, numbered as indicated above, to Registrant’s Current Report on Form 8-K, dated October 14, 2009, as filed with the Securities and Exchange Commission on February 3, 2010, which exhibit is incorporated herein by reference.
(3)
Filed as an exhibit, numbered as indicated above, to Registrant’s Current Report on Form 8-K dated August 12, 2009, as filed with the Securities and Exchange Commission on August 17, 2009, which exhibit is incorporated herein by reference.
(4)
Filed as an exhibit, numbered as indicated above, to Registrant’s Current Report on Form 8-K dated September 22, 2009, as filed with the Securities and Exchange Commission on September 25, 2009, which exhibit is incorporated herein by reference.
(5)
Filed as an exhibit, numbered as indicated above, to Registrant’s Quarterly Report on Form 10-QSB for the quarter ended August 31, 2007, as filed with the Securities and Exchange Commission on October 15, 2007, which exhibit is incorporated herein by reference.
(6)
Filed as an exhibit, numbered as indicated above, to Registrant’s Current Report on Form 8-K dated May 22, 2008, as filed with the Securities and Exchange Commission on May 27, 2008, which exhibit is incorporated herein by reference.
(7)
Filed as an exhibit, numbered as indicated above, to Registrant’s Current Report on Form 8-K dated June 5, 2008, as filed with the Securities and Exchange Commission on June 6, 2008, which exhibit is incorporated herein by reference.
(8)
Filed as an exhibit, numbered as indicated above, to Registrant’s Current Report on Form 8-K dated June 10, 2008, as filed with the Securities and Exchange Commission on July 2, 2008, which exhibit is incorporated herein by reference.
(9)
Filed as an exhibit, numbered as indicated above, to Registrant’s Annual Report on Form 10-KSB for the year ended May 31, 2007, as filed with the Securities and Exchange Commission on August 28, 2007, which exhibit is incorporated herein by reference.
(10)
Filed as an exhibit, numbered as indicated above, to Registrant’s Current Report on Form 8-K dated July 6, 2009, as filed with the Securities and Exchange Commission on July 14, 2009, which exhibit is incorporated herein by reference.
(11)
Filed as an exhibit, numbered as indicated above, to Registrant’s Current Report on Form 8-K dated July 25, 2009, as filed with the Securities and Exchange Commission on July 30, 2009, which exhibit is incorporated herein by reference.
(12)
Filed as an exhibit, numbered as indicated above, to Registrant’s Current Report on Form 8-K dated August 5, 2009, as filed with the Securities and Exchange Commission on August 11, 2009, which exhibit is incorporated herein by reference.
(13)
Filed as an exhibit, numbered as indicated above, to Registrant’s Current Report on Form 8-K dated August 12, 2009, as filed with the Securities and Exchange Commission on August 17, 2009, which exhibit is incorporated herein by reference.
(14)
Filed as an exhibit, numbered as indicated above, to Registrant’s Annual Report on Form 10-K for the year ended May 31, 2009, as filed with the Securities and Exchange Commission on August 20, 2009, which exhibit is incorporated herein by reference.
(15)
Filed as an exhibit, numbered as indicated above, to Registrant’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2009, as filed with the Securities and Exchange Commission on October 15, 2009, which exhibit is incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
VIPER RESOURCES, INC.
Dated: September 16, 2011
By:
/s/ Dianwen Ju
Dianwen Ju, President and
Chief Executive Officer
Dated: September 16, 2011
By:
/s/ Xiao Chen
Xiao Chen, Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on this 16th day of September, 2011.
/s/ Dianwen Ju
September 16, 2011
Dianwen Ju, President, Chief Executive Officer, and Director
FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
Viper Resources, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of Viper Resources, Inc. (hereinafter the “Company”), as of May 31, 2011 and 2010, and the related statements of operations, stockholders' equity (deficit), and cash flows for the years ended May 31, 2011 and 2010, and for the period from inception on November 18, 2005 to May 31, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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, the financial statements referred to above present fairly, in all material respects, the financial positions of the Company as of May 31, 2011 and 2010, and the results of its operations and cash flows for the years then ended, and for the period from inception on November 18, 2005 to May 31, 2011 are in conformity with U.S. generally accepted accounting principles.
We were not engaged to examine management's assessment of the effectiveness of the Company’s internal control over financial reporting as of May 31, 2011 and 2010, and accordingly, we do not express an opinion thereon.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 8 to the financial statements, the Company has suffered recurring losses and has experienced negative cash flows from operations, which raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to those matters are also described in Note 8 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Sam Kan & Company
Sam Kan & Company
September 13, 2011
Alameda, California
(Continued)
(INSERT STATEMENT OF CASH FLOWS)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies of Viper Resources, Inc. (hereinafter the "Company"), a company organized in the state of Nevada (A Development Stage Company) is presented to assist in understanding the Company's financial statements. The accounting policies presented in these footnotes conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the accompanying financial statements. These financial statements and notes are representations of the Company's management who are responsible for their integrity and objectivity. The Company has not realized significant revenues from its planned principal business purpose and is considered to be in its development state in accordance with ASC 915, "Development Stage Entities", formerly known as SFAS 7, "Accounting and Reporting by Development State Enterprises."
Organization, Nature of Business and Trade Name
Viper Resources, Inc., formerly known as Cobra Oil and Gas Company, was incorporated in the State of Nevada on November 18, 2005. On October 14, 2009, the Company filed a Certificate of Amendment to its Articles of Incorporation to increase its shares of authorized common stock from 100,000,000 to 300,000,000 and to change its name from Cobra Oil and Gas Company to Viper Resources, Inc. The Company was formed to engage in identifying, investigating, exploring, and where determined advantageous, developing, mining, refining, and marketing oil and gas. The Company may also engage in any other business permitted by law, as designated by the Board of Directors of the Company. On April 25, 2011, the Company’s new management came to a resolution that the Company shall never engage business in the oil and gas sector again.
Changes in Key Management Positions
On April 25, 2011 Dianwen Ju was appointed to serve as a member of our board of directors. Immediately following Mr. Ju’s appointment, Massimiliano Pozzoni resigned as a director and as our sole executive officer. Upon Mr. Pozzoni’s resignation as our sole executive officer, the following persons were appointed to serve in the following offices:
President and Chief Executive Officer:
Dianwen Ju
Treasurer:
Jimmy Wang
Chief Financial Officer:
Xiao Chen
Secretary:
Vincent Wang
Accounting Basis
These financial statements are prepared on the accrual basis of accounting in conformity with accounting principle generally accepted in the United States of America.
Development Stage
The Company is currently in the development stage and has no significant operations.
Fiscal year
The Company employs a fiscal year ending May 31.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company is subject to uncertainty of future events, economic, environmental and political factors and changes in the Company's business environment; therefore, actual results could differ from these estimates. Accordingly, accounting estimates used in the preparation of the Company's financial statements will change as new events occur and that more experience is acquired, as additional information is obtained and as the Company's operating environment changes. Changes are made in estimates as circumstances warrant. Such changes in estimates and refinement of estimation methodologies are reflected in the statements.
Financial Instruments
The financial accounting regulation, ASC 825-10-50, Disclosures about Fair Value of Financial Instruments, requires the determination of fair value of the Company's financial assets and liabilities. The estimated fair values of financial instruments were determined by management using available market information and appropriate valuation methodologies. The carrying amounts of financial instruments including cash and advance from shareholder approximate their fair value because of their short maturities.
Oil and Gas Interests
The Company follows the full-cost method of accounting for oil and natural gas properties. Under this method, all costs incurred in the exploration, acquisition, and development (including unproductive wells) is capitalized in separate cost centers for each country. Such capitalized costs include contract and concessions acquisition, geological, geophysical, and other exploration work, drilling, completing and equipping oil and gas wells, constructing production facilities and pipelines, and other related costs.
The capitalized costs of oil and gas properties in each cost center are amortized on composite units of production method based on future gross revenues from proved reserves. Sales or other dispositions of oil and gas properties are normally accounted for as adjustments of capitalized costs. Gain or loss is not recognized in income unless a significant portion of a cost center’s reserves is involved. Capitalized costs associated with acquisition and evaluation of unproved properties are excluded from amortization until it is determined whether proved reserves can be assigned to such properties or until the value of the properties is impaired. If the net capitalized costs of oil and gas properties in a cost center exceed an amount equal to the sum of the present value of estimated future net revenues from proved oil and gas reserves in the cost center and the lower of cost or fair value of properties not being amortized, both adjusted for income tax effects, such excess is charged to expense.
Since the Company has not produced any oil or gas, a provision for depletion has not been made.
Cash and Cash Equivalents
Cash and cash equivalents include short-term, highly liquid investments with maturities of less than three months when acquired. The Company had $39,984 and $202,557 in cash and cash equivalent on May 31, 2011 and 2010, respectively.
Revenue Recognition
Revenue is recognized on an accrual basis as earned under contract terms. The Company has had no revenue to date.
Income Tax
The Company accounts for income taxes under Accounting Standards Codified No. 740 (“ASC 740”). Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Stock based compensation
The Company accounts for employee and non-employee stock awards under ASC 718, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable.
Net Income (Loss) per share
The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company’s preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share.
Basic Loss Per Share
The Company computes net loss per share in accordance with ASC 260, Accounting for Earnings Per Share. Under the provisions of ASC 260, basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive.
Basic net loss per common share is based on the weighted average number of shares of common stock outstanding since inception. As of May 31, 2011 the Company has 84,116,214 common shares outstanding.
The computations of basic loss per share of common stock are based on the weighted average number of share outstanding at the date of the financial statements. There are no common stock equivalents outstanding.
Loss
Shares
Per Share
(Numerator)
(Denominator)
(Amount)
For the year ended May 31, 2011
$ (378,985)
83,433,154
$ (0.00)
Recently Issued Accounting Pronouncements
In April 2010, new accounting guidance was issued for the milestone method of revenue recognition. Under the new guidance, an entity can recognize revenue from consideration that is contingent upon achievement of a milestone in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. This guidance is effective prospectively for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The Company adopted the provisions of this guidance effective July 1, 2010, which did not have a material impact on its consolidated financial statements.
In February 2010, the FASB issued guidance to remove the requirement for an entity that files financial statement with the SEC to disclose a date through which subsequent events have been evaluated. The adoption of this guidance during our current fiscal quarter did not have any impact on our Consolidated Financial Statements.
On July 1, 2009, Financial Accounting Standards Board ("FASB") Accounting Standards CodificationTM ("ASC") became the sole source of authoritative Generally Accepted Accounting Principles ("GAAP") literature recognized by the Financial Accounting Standards Board for financial statements issued for interim and annual periods ending after September 15, 2009. Rules and interpretive releases of the Security Exchange Commission ("SEC") under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. Except for applicable SEC rules and regulations and a limited number of grandfathered standards, all other sources of GAAP for nongovernmental entities were superseded by the issuance of ASC. ASC did not change GAAP, but rather combined the sources of GAAP and the framework for selecting among those sources into a single source. Accordingly, the adoption of ASC had no impact on the financial results of the Company.
In June 2009, the FASB issued FAS 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles," which now resided with ASC 105, "Generally Accepted Accounting Principles." ASC 105 will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then-existing non- SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009.The Company does not expect the adoption of ASC 105 to have an impact on the Company's results of operations, financial condition or cash flows.
In June 2009, the FASB issued FAS 167, "Amendments to FASB Interpretation No. 46(R)," which now resides with ASC 810, "Consolidation." ASC 810 is intended to (1) address the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, as a result of the elimination of the qualifying special-purpose entity concept in ASC 860, and (2) constituent concerns about the application of certain key provisions of Interpretation 46(R), including those in which the accounting and disclosures under the Interpretation do not always provided timely and useful information about an enterprise's involvement in a variable interest entity. This statement must be applied as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009. The Company does not expect the adoption of ASC 810 to have an impact on the Company's results of operations, financial condition or cash flows.
In June 2009, the FASB issued FAS 140/166, "Accounting for Transfers of Financial Assets," an amendment of FAS 140, which now resides with ASC 860, "Transfers and Servicing." ASC 860 is intended to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets: the effects of a transfer on its financial position, financial performance , and cash flows: and a transferor's continuing involvement, if any, in transferred financial assets. This statement must be applied as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009. The Company does not expect the adoption of ASC 860 to have an impact on the Company's results of operations, financial condition or cash flows.
In May 2009, the FASB issued FAS 165, "Subsequent Events," which now resides with ASC 855, "Subsequent Events." This pronouncement establishes standards for accounting for and disclosing subsequent events (events which occur after the balance sheet date but before financial statements are issued or are available to be issued). ASC 855 requires and entity to disclose the date subsequent events were evaluated and whether that evaluation took place on the date financial statements were issued or were available to be issued. It is effective for interim and annual periods ending after June 15, 2009. The adoption of ASC 855 did not have a material impact on the Company's financial condition or results of operation.
NOTE 2. OIL AND GAS PROPERTIES
The Company expensed $180,000 in Montana leases to exploration costs in fiscal year 2010. This was due to an option expiration that was not exercised.
During the fiscal year ended May 31, 2010 the Company entered into working interest purchase agreements with Enercor, Inc. (A Nevada Corporation) with respect to three leases. The first of these gives the Company a 35% working interest in the “Tar Sands” components of the lease acreage, covering approximately 33,632 acres located in Southern Uintah County, Utah, when and if exploration permission is granted by the U S Bureau of Land Management. The transaction was originated in July of 2009 with a value of $4,500,000 consisting of $4,000,000 in stock and $500,000 cash. Due to lack of action on the part of the U S Bureau of Land Management, and the current degree of uncertainty with regard to tar sand extraction techniques as applied to the Company’s lease holdings, the lease was written down to a value of $0 as of the end of the fiscal year 2010.
The second of these leases is a State of Utah BLM lease in which other parties retain a 62.5% working interest. We have received a 37.5% working interest from Enercor, Inc. in approximately 640 acres which has rights for oil and gas drilling and in which we are seeking additional rights to the tar sands in the area from the U S Bureau of Land Management. The lease was acquired in August of 2009 and valued at $336,000 and was bought through the issuance of Company stock. At the fiscal year end on May 31, 2010, the fair market value was determined to be $36,000, with the Company taking a write down expense of $300,000. At the fiscal year end on May 31, 2011, management determined that this lease will not be able to generate any future benefit to the Company and therefore the fair market value was determined to be $0, with the Company taking a further write down expense of $36,000.
The third of these leases is a State of Utah BLM lease in which other parties retain a 37.5% working interest after our purchase of a 62.5% working interest from Enercor. This lease has oil and gas drilling rights and we are seeking approval for the tar sands also. This lease was acquired in July of 2009 through the issuance of Company stock valued at $312,000. At the fiscal year end on May 31, 2010, the fair market value was determined to be $60,000, with the Company taking a write down expense of $252,000. At the fiscal year end on May 31, 2011, management determined that this lease will not be able to generate any future benefit to the Company and therefore the fair market value was determined to be $0, with the Company taking a further write down expense of $60,000.
The acquisition of each of these leases was accomplished primarily through the issuance of new shares of Company common stock.
NOTE 3. RELATED PARTY TRANSACTIONS
On August 31, 2009, the Company negotiated a settlement with Mr. Doug Berry, a former officer and stockholder, to exchange common stock of the Company for monies that had been advanced to the Company by Mr. Berry. The terms of the agreement are that the Company issue 153,508 shares of common stock in exchange for release of debt amounting to $125,263 which includes $110,625 in principal and $14,638 of accrued interest. The shares were valued at $0.816 per share which represented a 20% discount to the closing price of our common stock on the date of the Agreement.
The chief executive officer of Enercor, Inc. a company from which Viper Resources, Inc. purchased various lease interest in fiscal year 2010 for $5,148,000, previously sat on the advisory board of Viper Resources, Inc. and is a shareholder in the Company.
NOTE 4. COMMON STOCK
The Company is authorized to issue 100,000,000 shares of preferred stock with par values in $.00001. The Company is also authorized to issue 300,000,000 shares of common stock with par values in $.00001. On May 6, 2008, the Company undergoes a forward split of 35 for each share of common stock. On July 20, 2010, the Company issued 5,000,000 shares of common stock to investors at a price of $0.02 per unit for a total of $100,000. There are 84,116,214 and 79,116,214 shares issued and outstanding as of May 31, 2011 and May 31, 2010 respectively.
Effective April 25, 2011, Massimiliano Pozzoni sold 35,000,000 shares of common stock standing in his name to Chimerica Capital, LLC. Jimmy Wang has the power to vote and dispose of the shares transferred to Chimerica Capital, LLC.
NOTE 5. OFFICE LEASE
In May 2008 the Company entered into a one year office lease, automatically renewable each year for one year until terminated by the landlord or tenant, at a rate of $2,000 per month plus costs. Lease expenses recorded under this lease in 2011 and 2010 were approximately $24,000 each year. This lease will be terminated at the end of fiscal year 2011. The Company will hold office at a location provided by one of its officers rent-free.
NOTE 6. WARRANTS
At May 31, 2008 the Company had 1,000,000 common stock purchase warrants outstanding, originally sold as part of a unit, allowing the holder to purchase one share of common stock at an exercise price of $.40, anytime through May 15, 2011. In fiscal year 2009 the Company sold 1,000,000 units to an investor for cash at $.25 per unit, or $250,000 total. Each unit consists of one share of common stock, and one warrant to purchase one share of common stock at an exercise price of $.40, anytime through June 9, 2011. At May 31, 2009 none of the warrants had been exercised, leaving a year-end balance of 2,000,000 warrants. The entire value of the units of $250,000 was assigned to the common stock as the warrants are non-detachable.
In fiscal year 2010 the Company sold 2,025,209 units to investors for cash at prices from $.17 - $1.00 per unit, or $1,250,000 total. Each unit consists of one share of common stock, and one warrant to purchase one share of common stock at exercise prices ranging from of $.20 - $1.25, anytime through expiration dates from June 2012 through February 2013. The entire value of the units was assigned to the common stock as the warrants are non-detachable. At May 31, 2010 none of the warrants had been exercised or had expired, leaving a year-end balance of 4,025,209 warrants.
During the year ended May 31, 2011 the Company sold 5,000,000 units to investors at a price of $0.02 per unit for a total of $100,000. Each unit consists of one share of common stock, and one warrant to purchase one share of common stock at an exercise price of $0.025, anytime through expiration date of July 2013. The entire value of the units was assigned to the common stock as the warrants are non-detachable. As of May 31, 2011, none of the warrants have been exercised. During the fiscal year of 2011 there were 1,000,000 warrants expired, leaving a year-end balance of 8,025,209 warrants.
NOTE 7. INCOME TAX
The Company accounts for income taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
At May 31, 2011 and 2010 the Company had net operating loss carryforwards of approximately $6,705,739 and $6,313,000 which begin to expire in 2026. Deferred tax asset of approximately $2,279,951 and $2,210,000 in 2011 and 2010 created by the net operating losses have been offset by a 100% valuation allowance. The change in the valuation allowance in 2011 and 2010 was $69,951 and $2,030,000, respectively.
NOTE 8. GOING CONCERN
Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading, or seeking protection from creditors pursuant to laws or regulations. Accordingly, assets and liabilities are recorded on the basis that the entity will be able to realize its assets and discharge its liabilities in the normal course of business.
The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its planned business. Management has plans to seek additional capital through a public offering of its common stock. These conditions raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments that might arise from this uncertainty.
There can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from the operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company's existing stockholders.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might necessary in the event the Company cannot continue in existence.
NOTE 9. SUPPLEMENTAL OIL AND GAS INFORMATION
Capitalized costs at May 31, 2010 relating to the Company’s oil and gas activities are as follows:
·
Unproved properties, Utah, net = $96,000.
Capitalized costs at May 31, 2011 relating to the Company’s oil and gas activities are as follows:
·
Unproved properties, Utah, net = $ 0.
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated all events or transactions that occurred after May 31, 2011 through the date of this Annual Report. The Company determined that it did not have any other subsequent events through September 15, 2011, which is the date the financial statements were issued, requiring recording or disclosure in the financial statements for the year ended May 31, 2011.