Attached files

file filename
EX-31.1 - VIKING ENERGY GROUP, INC.v184308_ex31-1.htm
EX-32.1 - VIKING ENERGY GROUP, INC.v184308_ex32-1.htm



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
FORM 10-Q
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended:  March 31, 2010
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ______________  to _______________                              
 
Commission file number 000-29219
 
SINOCUBATE, INC.
(Exact name of registrant as specified in its charter)

Nevada
 
98-0199508
(State or other jurisdiction of incorporation or
organization)
 
(IRS Employer Identification No.)

65 Broadway, 7th Floor
New York, New York
 
10006
(Address of principal executive offices)
 
(Zip Code)

Issuer’s telephone number
 
(212) 359 4300

 
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes  x No  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large Accelerated
Filer
  o
Accelerated Filer
  o
Non Accelerated
Filer
  o
Smaller Reporting
Company
  x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes  No  o
 
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
 
Yes  o No  o    Not Applicable
 
APPLICABLE ONLY TO CORPORATE ISSUERS
 
The number of shares of common stock outstanding as of March 31, 2010 was 995,655.

 
 

 
 
SINOCUBATE, INC.
 
FORM 10-Q
 
PART I – FINANCIAL INFORMATION
   
     
ITEM 1. FINANCIAL STATEMENTS
   
     
Balance Sheets
 
F-2
     
Statement of Operations and Comprehensive Loss
 
F-3
     
Statement of Cash Flows
 
F-4
     
Statement of Stockholders’ Deficiency
 
F-5 - F-7
     
Notes to Financial Statements
 
F-8

 
F-1

 

PART I – FINANCIAL INFORMATION
 
ITEM 1.                 FINANCIAL STATEMENTS
 
SINOCUBATE, INC.
 (A Development Stage Company)
BALANCE SHEETS
(Unaudited)
(Stated in US Dollars)
 
   
March 31,
   
December 31,
 
   
2010(unaudited)
   
2009(audited)
 
             
ASSETS
 
$
   
$
 
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
   
     
 
                 
Capital stock
   
     
 
Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued or outstanding as of 03/31/2010
   
     
 
Common stock, $0.001 par value, 100,000,000 shares authorized, 995,655 shares issued and outstanding as of 03/31/2010
   
996
     
996
 
Additional paid-in capital
   
2,338,665
     
2,334,665
 
Deficit
   
(1,305,454
)
   
(1,305,454
)
Deficit accumulated during the development stage
   
(1,034,207
)
   
(1,030,207
)
                 
   
$
   
$
 
SEE ACCOMPANYING NOTES

 
F-2

 


SINOCUBATE, INC.
 (A Development Stage Company)
STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(Stated in US Dollars)
  
  
Three months ended
  
  
January 1, 2004 (Date of
Inception of the
Development Stage) to
  
  
  
March 31,
  
  
March 31,
  
   
2010
   
2009
   
2010
 
General and administrative expenses
                 
Amortization
 
$
-
   
$
-
   
$
27,077
 
Bad debt
   
-
     
-
     
525
 
Corporate promotion
   
-
     
-
     
13,920
 
Finance charges
   
-
     
-
     
27,397
 
Insurance
   
-
     
-
     
15,901
 
Interest on notes payable
   
-
     
   -
     
34,648
 
Management and consultant fees
   
-
     
-
     
314,374
 
Office supplies and services
   
1,000
     
-
     
48,744
 
Professional fees
   
3,000
     
5,802
     
312,517
 
Rent
   
-
     
-
     
16,311
 
Wages
   
-
     
-
     
84,258
 
                         
Loss before other items
   
(4,000
)
   
(5,802
)
   
(895,672
                         
Other items
                       
Loss on disposition of equipment
   
-
     
-
     
(15,028
Write-down of intangible assets
   
-
     
-
     
(50,001
Write-off of payables
   
-
     
-
     
73,607
 
Write-off of notes payable
   
-
     
-
     
14,823
 
Gain on settlement of lawsuit
   
-
     
-
     
44,445
 
Gain on sale of investment
   
-
     
-
     
31,874
 
Other income
   
-
     
-
     
42,530
 
                         
Income (loss) from continuing operations
   
(4,000
)
   
(5,802
)
   
(753,422
)
                         
Operating loss from discontinued operations
   
-
     
-
     
(388,905
                         
Gain on sales of discontinued operations
   
-
     
-
     
108,120
 
                         
Net income (loss)
 
$
(4,000
)
 
$
(5,802
)
 
$
(1,034,207
                         
Basic and diluted income (loss) per
                       
 Common share – continuing operations
   
 (0.004
   
 (0.01
       
                         
Weighted average number of common share outstanding – basic and diluted
   
995,655
     
995,655
         
                         
Comprehensive income (loss)
                       
Net income (loss)
 
$
(4,000
)
 
$
(5,802
)
 
$
(1,034,207
Foreign currency translation adjustment
   
-
     
-
     
-
 
Total comprehensive income (loss)
 
$
(4,000
)
 
$
(5,802
)
 
$
(1,034,207
SEE ACCOMPANYING NOTES

 
F-3

 


SINOCUBATE, INC.
 (A Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)
(Stated in US Dollars)

  
  
Three months ended
  
  
January 1, 2004 (Date
of Inception of the
Development Stage) to
  
  
  
March 31,
  
  
March 31,
  
   
2010
   
2009
   
2010
 
Cash flows from operating activities
                 
Net income (loss)
 
$
(4,000
)
 
$
(5,802
)
 
$
(1,034,207
Adjustments to reconcile net loss to net cash used in operating activities:
                       
Finance charges
   
     
     -
     
27,387
 
Accrued interest on notes payable
   
     
 -
     
31,414
 
Amortization
   
     
     
27,077
 
Accrued expenses and costs assumed by majority shareholder
   
4,000
     
5,802
     
81,310
 
Foreign exchange effect on notes payable
   
     
-
     
5,303
 
Issuance of common stock for services
   
     
     
1,000
 
Stock-based compensation
   
     
     
28,480
 
Loss on disposition of equipment
   
     
     
225,184
 
Write-down of intangible assets
   
     
     
360,001
 
Write-off of payables
   
     
     
(73,607
Write-off of notes payable
   
     
     
(18,729
)
Gain on settlement of lawsuit
   
     
     
(44,445
Gain on sales of discontinued operations
   
     
     
(108,121
)
    Gain on sale of investments
   
     
     
(31,874
)
    Other income
   
     
                 —
     
(42,530
)
Changes in non-cash working capital items:
                       
Accounts payable and accrued liabilities
   
     
 —
     
143,521
 
Cash used in continuing operations
   
     
     
(422,836
Discontinued operations
   
     
     
(171,213
                         
Net cash used in operating activities
   
     
     
(594,049
)
                         
Cash flows from investing activities
                       
Proceeds from sale of subsidiary
   
 —
     
     
1
 
Proceeds from assets disposition
   
     
     
5,458
 
Purchase of equipment
           
     
(5,808
Net cash used in investing activities
   
     
     
(349
)
                         
Cash flows from financing activities
                       
Settlement of notes payable
   
     
     
398,614
 
Proceeds from issuance of common stock
   
     
     
1,000
 
Net cash provided by financing activities
   
     
     
399,614
 
                         
Effect of exchange rate changes on cash
   
     
     
(14,734
)
Change in cash
   
     
     
(209,518
Cash, beginning of period
   
     
     
209,518
 
Cash, ending of period
 
$
   
$
   
$
 

 
F-4

 

INOCUBATE, INC.
 (A Development Stage Company)
STATEMENT OF STOCKHOLDERS’ DEFICIENCY
(Stated in US Dollars)

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

 
F-5

 

SINOCUBATE, INC.
 (A Development Stage Company)
STATEMENT OF STOCKHOLDERS’ DEFICIENCY
 (Stated in US Dollars)
  
                                     
Deficit
       
  
                         
Accumulated
         
Accumulated
       
  
             
Additional
         
Other
         
During the
       
  
 
Common Shares
   
Treasury
   
Paid-in
   
Subscriptions
   
Comprehensive
         
Development
       
   
Number
   
Amount
   
Stock
   
Capital
   
Received
   
Income
   
Deficit
   
Stage
   
Total
 
Balance at December 31, 2002
    343,522       3,435       (270 )     1,614,109       650       17,229       (697,824 )     -       937,329  
Net loss
    -       -       -       -       -       -       (607,630 )     -       (607,630 )
Foreign currency translation adjustment
    -       -       -       -       -       1,752       -       -       1,752  
Stock option benefit
    -       -       -       11,800               -       -       -       11,800  
Cancellation of agreement
    -       -       -               (650 )     -       -       -       (650 )
Share issues for cash on exercise of options
    12,000       120       -       11,880       -       -       -       -       12,000  
Share issues for consulting services
    45,000       450       -       49,675       -       -       -       -       50,125  
Share issues for intangible assets
    60,000       600       -       104,400       -       -       -       -       105,000  
Share issued for software
    60,000       600       -       53,400       -       -       -       -       54,000  
Balance at December 31, 2003
    520,522       5,205       (270 )     1,845,264       -       18,981       (1,305,454 )     -       563,726  
Net loss
    -       -       -       -       -       -       -       (795,364 )     (795,364 )
Foreign currency translation adjustment
    -       -       -       -       -       (238 )     -       -       (238 )
Stock-based compensation
    -       -       -       4,460       -       -       -       -       4,460  
Shares issued for cash on exercise of options
    1,000       10       -       990       -       -       -       -       1,000  
Share issued for debt
    140,000       1,400       -       68,600       -       -       -       -       70,000  
Share issued for consulting services
    2,000       20       -       980       -       -       -       -       1,000  
Balance at December 31, 2004
    663,522       6,635       (270 )     1,920,294       -       18,743       (1,305,454 )     (795,364 )     (155,416 )
Net loss
    -       -       -       -       -       -       -       (54,416 )     (54,416 )
Foreign currency translation adjustment
    -       -       -       -       -       (702 )     -       -       (702 )
Share issues for consulting services
    18,000       180       -       8,820       -       -       -       -       9,000  
Balance at December 31, 2005
    681,522       6,815       (270 )     1,929,114       -       18,041       (1,305,454 )     (849,780 )     (201,534 )
Net loss
    -       -       -       -       -       -       -       (36,575 )     (36,575 )
Foreign currency translation adjustment
    -       -       -       -       -       563       -       -       563  
Share issues for debt
    50,000       500       -       24,500       -       -       -       -       25,000  
Balance at December 31, 2006
    731,522     $ 7,315     $ (270 )   $ 1,953,614     $ -     $ 18,604     $ (1,305,454 )   $ (886,355 )   $ (212,546 )
SEE ACCOMPANYING NOTES

 
F-6

 

SINOCUBATE, INC.
 (A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY
(Stated in US Dollars)
                                       
Deficit
     
  
                           
Accumulated
         
Accumulated
     
  
               
Additional
         
Other
         
During the
     
  
   
Common Shares
   
Treasury
   
Paid-in
   
Subscriptions
   
Comprehensive
         
Development
     
  
   
Number
   
Amount
   
Stock
   
Capital
   
Received
   
Income
   
Deficit
   
Stage
   
Total
  
Balance at December 31, 2006
  
  
731,522
  
  
$
7,315
  
  
$
(270
)
  
$
1,953,614
  
  
$
-
  
  
$
18,604
  
  
$
(1,305,454
)
  
$
(886,355
)
  
$
(212,546
)
Net loss
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(170,950
)
   
(170,950
)
Discount on notes payable
   
-
     
-
     
-
     
20,573
     
-
     
-
     
-
     
-
     
20,573
 
Foreign currency translation adjustment
   
-
     
-
     
-
     
-
     
-
     
(13,391
)
   
-
     
-
     
(13,391
)
Balance at December 31, 2007
   
731,522
     
7,315
     
(270
)
   
1,974,187
     
-
     
5,213
     
(1,305,454
)
   
(1,057,305
)
   
(376,314
)
Issuance of new shares
   
284,637
     
2,846
             
267,559
                                     
  270,405
 
Cancellation of shares
   
(20,504)
     
(205)
     
270
     
(65)
                                     
-
 
Donation from majority stockholder
                           
32,000
                                     
32,000
 
Change in par value of common share from $0.01 per share to $0.001 per share
           
(8,960)
             
8,960
                                         
Net income
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
79,122
     
79,122
 
Foreign currency translation adjustment
   
-
     
-
     
-
     
-
     
-
     
(5,213
)
   
-
             
(5,213
)
Balance at December 31, 2008 (audited)
   
995,655
   
$
996
   
$
   
$
2,334,665
   
$
   
$
   
$
(1,305,454
)
 
$
(1,030,207
)
 
$
 
Donation from by majority stockholder
                           
28,004
                                     
28,004
 
Stock-based Compensation
                           
24,020
                                     
24,020
 
Net Loss
                                                           
(52,024
)
   
(52,024
)
Balance at December 31, 2009 (audited)
   
995,655
   
$
996
   
$
   
$
2,334,665
   
$
   
$
   
$
(1,305,454
)
 
$
(1,030,207
)
   
 
Donation from majority stockholder
                           
4,000
                     
             
4,000
 
Net Loss
                                                   
     
(4,000)
     
(4,000)
 
Balance at March 31, 2010(unaudited)
   
995,655
   
$
996
     
   
$
2,338,665
     
     
     
(1,305,454
)
   
(1,034,207
)
   
 
 
SEE ACCOMPANYING NOTES

 
F-7

 

SINOCUBATE, INC.
 (A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2010
(Unaudited)
 
Note 1       Interim Financial Statements
 
The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles or GAAP for interim financial information and with the instructions to Form 10-Q as promulgated by the Securities and Exchange Commission or the SEC.  Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles for complete financial statements. The accompanying unaudited financial statements and related notes should be read in conjunction with the audited financial statements and the Form 10-K of the Company for the year ended December 31, 2009.  In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.

The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

Note 2       Nature of business and going concern
 
Since November 2008, the Company has sought to enter into contractual arrangements with entities that allow the Company to either purchase outright the assets and/or business operations of such entities or to enter into business arrangements, such as joint ventures or similar combinations with such entities to manage and operate such entities.  The Company is a development stage company as defined by the Financial Accounting Standards Board Accounting Standards Codification, or FASB ASC 915, “Development Stage Entities.”

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

On December 19, 2009, Viking Investments, LLC, an entity controlled and managed by Tom Simeo, the Company’s chairman, chief executive officer and president, announced a strategic partnership with Viking, whereby Viking, in exchange for a fee, and SinoCubate will work together and assist various business entities in the Peoples Republic of China or the PRC in their endeavors to become publicly listed companies in the United States.  In connection with the strategic agreement, the Company was to newly issue 4,750,000 shares of the Company’s common stock to Viking in exchange for One Hundred Thousand (100,000) shares of common stock of Renhuang Pharmaceuticals, Inc. or Renhuang owned by Viking, and newly issue 15,000,000 shares of the Company’s common stock to Viking in exchange for entry into the strategic partnership agreement.  In connection with the foregoing transactions, Philip Wan and Yung Kong Chin were appointed directors and officers of the Company and were each granted warrants to purchase 50,000 shares of common stock of the Company at an exercise price of $0.26 per share exercisable in whole or in part at any time during the 3 years after issuance.  Effective, March 26, 2010, the parties elected to terminate the strategic partnership agreement and the directors and officers appointed thereby, Messrs. Wan and Chin, resigned as directors and officers of the Company and agreed not to exercise their warrants to purchase the Company’s shares. The Company has subsequently cancelled the warrants.  No shares were issued to Viking and neither the Company nor Viking has monetary or other demand on the other related to the cancellation.

 
F-8

 

SINOCUBATE, INC.
 (A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2010
(Unaudited)

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

As of the date of this Report, the Company has not entered into an agreement with any entity and there can be no assurance that the Company will ever be able to identify and enter into an agreement with an entity or whether, if the Company successful enters into an agreement with a suitable entity, such combination may become successful and/or profitable.

Note 3       Summary of Significant Accounting Policies

a)      Basis of Presentation and Going Concern Assumption

The financial statements of the Company have been prepared in accordance with GAAP and are expressed in U.S. dollars. The Company’s fiscal year-end is December 31.

These financial statements have been prepared in accordance with GAAP applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year.  Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.  At March 31, 2010, the Company has accumulated losses of $2,339,661 since its inception and expects to incur further losses in the development of its business, both of which casts substantial doubt about the Company’s ability to continue as a going concern.  The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company’s current business plan is to seek, investigate, and, if warranted, enter into contractual arrangements with entities that enables the Company to either purchase outright the assets and and/or business operations of such entities or to enter into business arrangements, such as joint ventures or similar combinations with such entities to manage and operate such entities as affiliated entities of the Company.

b)      Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts and timing of revenues and expenses, the reported amounts and classification of assets and liabilities, and disclosure of contingent assets and liabilities. The Company’s actual results could vary materially from management’s estimates and assumptions. Significant areas requiring the use of management estimates relate to the determination expected tax rates for future income tax recoveries and the warrants.

c)      Income Taxes

The Company uses the asset and liability method of accounting for income taxes pursuant to FASB ASC 740 "Income Taxes".  Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

 
F-9

 

d)      Stock-Based Compensation
 
The Company may issue stock options to employees and stock options or warrants to non-employees in non-capital raising transactions for services and for financing costs. The Company has adopted ASC Topic 718 (formerly SFAS 123R), “Accounting for Stock-Based Compensation”, which establishes a fair value method of accounting for stock-based compensation plans. In accordance with guidance now incorporated in ASC Topic 718, the cost of stock options and warrants issued to employees and non-employees is measured on the grant date based on the fair value. The fair value is determined using the Black-Scholes option pricing model. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period.