Pepper Rock Resources Corp. - FORM 10-Q - March 18, 2011

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EX-31.1 - Pepper Rock Resources Corp.exhibit311.htm
EX-32.1 - Pepper Rock Resources Corp.exhibit321.htm

 
 
 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2011

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission file number 000-53847


PEPPER ROCK RESOURCES CORP.
(Exact name of registrant as specified in its charter)

NEVADA
(State or other jurisdiction of incorporation or organization)

8200 Wilshire Blvd, Suite 200
Beverly Hills, CA 90211
(Address of principal executive offices, including zip code)

323-556-0780
(Telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 last 90 days. YES [X] NO [ ]

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

           Large Accelerated Filer [ ]      Accelerated Filer [ ]

           Non-accelerated Filer [ ]       Smaller Reporting Company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES [ ] NO [X]

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 57,890,679 as of March 10, 2011.


 


 
 
 
 


Pepper Rock Resources Corp.
(An Exploration Stage Company)
 
January 31, 2011
 
 Index
 
 
 Balance Sheets (Unaudited)  F-1      
   
 Statements of Expenses (Unaudited)  F-2
   
 Statements of Cash Flows (Unaudited)  F-3
   
 Notes to Unaudited Financial Statements  F-4
 




 
 
 
 

Pepper Rock Resources Corp.
(An Exploration Stage Company)
Balance Sheets
(Unaudited)


   
January 31,
2011
  
July 31,
2010
         
ASSETS
        
         
Current Assets
        
         
Cash
$
17,396
$
1,045
Due from related party
  
62
  
–
         
   
17,458
  
1,045
Property and equipment
  
1,146
  
–
         
Total Assets
$
18,604
$
1,045
         
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT
        
         
Current Liabilities
        
         
Accounts payable and accrued liabilities
$
60,825
$
53,452
Loans payable
  
24,340
  
24,340
Due to related party
  
184
  
3,027
Convertible note
  
–
  
300,000
         
Total Liabilities
  
85,349
  
380,819
         
         
Stockholders’ Deficit
        
         
Preferred Stock, 100,000,000 shares authorized, $0.00001 par value;
No shares issued and outstanding
  
–
  
–
         
Common Stock, 500,000,000 shares authorized, $0.00001 par value;
42,890,157 and 315,157 shares issued and outstanding as of January 31, 2011 and July 31, 2010, respectively
  
429
  
3
         
Additional Paid-in Capital
  
2,001,990
  
626,666
         
Deficit Accumulated During the Exploration Stage
  
(2,069,164)
  
(1,006,443)
         
Total Stockholders’ Deficit
  
(66,745)
  
(379,774)
         
Total Liabilities and Stockholders’ Deficit
$
18,604
$
1,045
         


 

F-1
 
 
 
Pepper Rock Resources Corp.
(An Exploration Stage Company)
Statements of Expenses
(Unaudited)


 
For the
Three Months
Ended
For the
Three Months
Ended
For the
Six Months
Ended
For the
Six Months
Ended
From
May 29, 2008
(Date of Inception)
 
January 31,
January 31,
January 31,
January 31,
to January 31,
 
2011
2010
2011
2010
2011
           
Expenses
          
           
Other general and administrative
$    755,916
$     7,066
$   789,206
$    22,997
$    1,055,455
Loss on settlement of accounts payable
–
–
–
–
106,179
Impairment of mineral properties
210,000
–
210,000
–
215,000
Impairment of oil and gas properties
–
–
–
–
300,000
Exploration costs
4,010
–
4,010
140
24,945
           
Loss from operations
$  (969,926)
$  (7,066)
$  (1,003,216)
$  (23,137)
$  (1,701,579)
           
Interest expense
(29,044)
–
(59,505)
–
(367,585)
           
Net Loss for the Period
$  (998,970)
$  (7,066)
$  (1,062,721)
$  (23,137)
$  (2,069,164)
           
Net Loss Per Common Share – Basic and Diluted
$       (0.09)
$    (0.02)
$       (0.19)
$     (0.08)
  
           
Weighted Average Common Shares Outstanding
10,945,000
289,000
5,630,000
289,000
  

 
 
 
 
Pepper Rock Resources Corp.
(An Exploration Stage Company)
Statements of Cash Flows
(Unaudited)


 
For the
Six Months
 Ended
January 31,
2011
For the
Six Months
 Ended
January 31,
2010
From
May 29, 2008
(Date of Inception)
to January 31,
2011
       
Operating Activities
      
       
Net loss for the period
$  (1,062,721)
$    (23,137)
$   (2,069,164)
       
Adjustment to reconcile net loss to net cash used in
operating activities:
      
Amortization
60
–
60
Donated services
–
2,400
8,000
Accretion of convertible debt discount
50,000
–
350,000
Shares issued to settle debt
–
–
112,891
Shares issued for services – related party
750,000
–
856,179
Impairment of mineral properties
210,000
–
215,000
Impairment of oil and gas properties
–
–
300,000
       
Changes in operating assets and liabilities:
      
Accounts payable and accrued liabilities
23,123
(2,807)
86,494
Due to related party - services
(2,905)
–
5,675
       
Net Cash Used in Operating Activities
(32,443)
(23,544)
(134,865)
       
Investing Activities
      
       
Mineral property costs
–
–
(5,000)
Oil and gas property costs
–
–
(300,000)
Purchase of equipment
(1,206)
–
(1,206)
       
Net Cash Used in Investing Activities
(1,206)
–
(306,206)
       
Financing Activities
      
       
Proceeds from convertible debt
50,000
–
350,000
Advances from related parties
–
–
28,027
       
Proceeds from other loans
–
23,340
33,340
Proceeds from issuance of common stock
–
–
57,100
Payment of advances
–
–
(10,000)
       
Net Cash Provided by Financing Activities
50,000
23,340
458,467
       
Increase (Decrease) in Cash
16,351
(204)
17,396
       
Cash - Beginning of Period
1,045
590
–
       
Cash - End of Period
$      17,396
$        386
$       17,396
       
       
Supplemental Disclosures
      
       
Interest paid
$              –
$            –
$               –
Income taxes paid
$              –
$            –
$               –
       
Non-Cash Activities
      
       
Conversion of convertible debt
$     50,000
$          –
$    350,000
Discount on convertible debt
$     50,000
$          –
$      50,000
Mineral option purchase with stock
$   210,000
$          –
$    210,000
Conversion of convertible interest
$     15,734
$          –
$      15,734

F-3
 
 
 
Pepper Rock Resources Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
January 31, 2011
(Unaudited)
 
1.  
Significant Accounting Policies and Basis of Presentation
 
Pepper Rock Resources Corp. (the "Company") was incorporated in the State of Nevada on May 29, 2008. The Company is an Exploration Stage Company, as defined by Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 915, Development Stage Entities. The Company's principal business is the acquisition and exploration of mineral resources. The Company has not presently determined whether its properties contain mineral reserves that are economically recoverable.
 
The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's July 31, 2010 report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year end July 31, 2010 as reported on Form 10-K, have been omitted.
 
Reclassifications
 
Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation.
 
2.  
Going Concern
 
These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated any revenue since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. At January 31, 2010, the Company has accumulated losses since inception.
 
These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
 
3.  
Related Party Transactions
 
a)  
For the six month period ended January 31, 2011, the Company recognized $Nil (2010 – $1,200) for donated services provided by the President of the Company. During the six month period ended January 31, 2011, the Company incurred $24,000 of management services provided by the President of the Company pursuant to the management agreement. As of January 31, 2011, the President of the Company is indebted to the Company in the amount of $62 (July 31, 2010 - $Nil). This amount is non-interest bearing, unsecured and due on demand.
 
b)  
For the six month period ended January 31, 2011, the Company issued 5,000,000 shares of common stock with a fair value of $750,000 to the President in consideration for management services provided to the Company.
 
c)  
As at January 31, 2011, the Company is indebted to the former President of the Company for $184 (July 31, 2010 – $184) for expenses paid on behalf of the Company. This amount is non-interest bearing, unsecured and due on demand.
 
4.  
Loan Payable
 
As at January 31, 2011, the Company owed $24,340 (July, 2010 - $24,340) in loans payable to unrelated third parties. These amounts were used for general corporate expenses. These amounts are unsecured, bear interest of prime bank rate plus 3% per annum and are payable on demand.

F-4
 
 
 
Pepper Rock Resources Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
January 31, 2011
(Unaudited)



5.  
Convertible Debt
 
a)  
During the fiscal year ended July 31, 2010, the Company issued a $300,000 secured Convertible Note ("the Note"). The Note is due sixty days after demand, bears interest of prime bank rate plus 3% per annum payable annually and is convertible into shares of common stock at $0.01 per share. The conversion feature of the convertible note provides for a rate of conversion that is below market value. This feature is characterized as a beneficial conversion feature ("BCF"). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20. The BCF of $300,000 was recognized immediately as interest expense due to the fact that the convertible note is due upon demand.
 
During the period ended January 31, 2011, the Note was converted into 30,000,000 common shares, and the accrued convertible interest payable thereon of $15,750 was converted into 1,575,000 common shares.
 
b)  
During the period ended January 31, 2011, the Company received $50,000 pursuant to a secured Convertible Note ("the Note"). The Note is due sixty days after demand, bears interest of prime bank rate plus 1% per annum payable annually and is convertible into shares of common stock at $0.01 per share. The conversion feature of the convertible note provides for a rate of conversion that is below market value. This feature is characterized as a BCF. A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20. During the period ended January 31, 2011, the Company recognized a BCF of $50,000 as interest expense due to the fact that the convertible note is due upon demand.
 
During the period ended January 31, 2011, the Note was converted into 5,000,000 common shares, and the accrued convertible interest payable thereon was forgiven.
 
6.  
Mineral Property
 
On January 3, 2011, the Company entered into an Option Agreement (the "Option Agreement") with Candorado Operating Company, Ltd. ("Candorado") whereby Candorado granted to the Company the exclusive option to acquire a 70% interest (the "Option") in certain mineral claims known as Man/Prime located in British Columbia, Canada (the "Property"). The Company may exercise such option by issuing a total of 1,500,000 shares of its common stock to Candorado and expending a total of $2,750,000 in exploration and development of the Property over a four-year period. The Company is also obligated to pay to Candorado a royalty that is equal to two percent (2%) of the net proceeds actually paid to the Company from the sale by the Company of minerals or other products mined. The Option requires the Company to issue to Candorado 1,000,000 shares of its common stock upon approval of the Option Agreement by the TSX Venture Exchange (the "Exchange"), and then another 250,000 shares on the twelve (12) month and on the twenty-four (24) month anniversaries of such approval. The Company's obligation to expend a total of $2,750,000 as part of its exercise of the Option is required to be done in accordance with the following schedule:
 
I.  
Total expenditures of $500,000 within 12 months of the Exchange's acceptance of the Option Agreement;
 
 
II.  
Total expenditures of $750,000 within the period of 24 months after the Exchange's acceptance of the Option Agreement;
 
 
III.  
Total expenditures of $1,500,000 within the period of 36 months after the Exchange's acceptance of the Option Agreement.
 
 
Under the Option Agreement, the Company also has the right of first refusal to acquire Candorado's remaining 30% interest at any time up to the fifth anniversary of the Exchange's acceptance of the Option Agreement. In the event that Candorado receives an offer from a third party to purchase its 30% interest, the Company shall have thirty (30) business days to match such offer.

At January 31, 2011, the Company recorded $210,000 as an impairment of mineral properties as no proven or probable reserves have been determined.

F-5
 
 
 
Pepper Rock Resources Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
January 31, 2011
(Unaudited)



7.  
Equity
 
a)  
On November 17, 2010, the Company effected a 200:1 reverse stock split of the issued and outstanding common stock. As a result, the  outstanding share capital decreased from 63,031,388 shares of common stock to 315,157 shares of common stock. All share amounts have been retroactively adjusted for all periods presented.
 
b)  
On December 27, 2010, the Company issued 5,000,000 shares of common stock with a fair value of $750,000 for management services received from the President of the Company.
 
c)  
On December 27, 2010, the Company issued 5,000,000 shares of common stock upon the conversion of the Note referred to in Note 5 (b).
 
d)  
On January 3, 2011, the Company issued 1,000,000 shares of common stock for the acquisition of the mineral property referred to in Note 6.
 
e)  
On January 12, 2011, the Company issued 30,157,750 shares of common stock upon the conversion of the Note referred to in Note 5 (a).


F-6
 
 
 


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

This section of the report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

RESULTS OF OPERATIONS / PLAN OF OPERATION

We are a start-up, exploration stage corporation and have not yet generated or realized any revenues from our business activities.

On February 10, 2010 we entered into a joint venture agreement with Oxalis Energy Group, Inc. for an exclusive right to participate in Oxalis' natural gas project at the Adams - Baggett Ranch near Ozona, Texas. Under the terms of the agreement we committed to investing an aggregate of $5,300,000 into the development of the property.

An initial payment of $300,000 was made and consequent payments of $500,000 every month were required in order to fulfill our obligations under this agreement. The initial payment of $300,000 was used for the re-activation of two natural gas wells on the property and the acquisition of a 50% working interest in these wells.

However, the Company did not make the monthly payments of $500,000 and is in default of its agreement with Oxalis. As such, the Company has no right, title or interest in the Adams-Baggett Ranch joint venture with Oxalis Energy Group. The Company also recorded a $300,000 impairment of oil and gas properties for the initial payment.

On January 3, 2011, the Company entered into an Option Agreement (the “Option Agreement”) with Candorado Operating Company, Ltd. (“Candorado”) whereby Candorado granted to the Company the exclusive option to acquire a 70% interest (the “Option”) in certain mineral claims known as Man/Prime located in British Columbia, Canada (the “Property”). The Company may exercise the Option by issuing a total of 1.5 million shares of its common stock to Candorado and expending a total of $2.75 million in exploration and development of the Property over a four-year period. The Company is also obligated to pay to Candorado a royalty that is equal to two percent (2%) of the net proceeds actually paid to the Company from the sale by the Company of minerals or other products mined and removed from the Property, after deduction of smelting costs, treatment charges and penalties.

Candorado is a junior exploration company primarily focused on the Quesnel Trough, located in central British Columbia. Candorado is listed on the TSX Venture Exchange (the “Exchange”). The Option requires the Company to issue to Candorado 1 million shares of its common stock upon approval of the Option Agreement by the TSX Venture Exchange (the “Exchange”), and then another 250,000 shares on the twelve (12) month and on the twenty-four (24) month anniversaries of such approval.

The Company’s obligation to issue 1.5 million shares of its common stock to Candorado is required to be completed as follows: (a) 1 million shares upon approval of the Option Agreement by the Exchange; (b) 250,000 shares twelve (12) months after the date of the Exchange’s approval; and (c) 250,000 shares twenty-four (24) months after the date of the Exchange’s approval. During the quarter ended January 31, 2011, the Company issued 1 million shares to Candorado, which were valued at $210,000.

The Company’s obligation to expend a total of $2.75 million as part of its exercise of the Option is required to be done in accordance with the following schedule:

(i)  
Total expenditures of $500,000 within 12 months of the Exchange’s acceptance of the Option Agreement;
 
(ii)  
Total expenditures of $750,000 within the period of 24 months after the Exchange’s acceptance of the Option Agreement;
 
(iii)  
Total expenditures of $1.5 Million within the period of 36 months after the Exchange’s acceptance of the Option Agreement.


 
 
 

The Company can accelerate the expenditures on the Property at its discretion. Candorado’s remaining 30% interest shall be carried through to feasibility and Candorado is not required to provide any additional funding to advance the Property.

Under the Option Agreement, the Company also has the right of first refusal to acquire Candorado’s remaining 30% interest at any time up to the fifth anniversary of the Exchange’s acceptance of the Option Agreement. In the event that Candorado receives an offer from a third party to purchase its 30% interest, the Company shall have thirty (30) business days to match such offer

We are currently seeking additional suitable natural resource property opportunities. Although we are searching for such opportunities, there can be no assurance that we will be able to enter into any definitive agreements. We anticipate that any new opportunities will require additional financing. There can be no assurance, however, that we will be able to acquire the financing necessary to enable us to pursue our plan of operation regarding the Man/Prime property or enter into such additional acquisition agreements. If our company requires additional financing and we are unable to acquire such funds, our business may fail.

Even if we are able to enter into a business opportunity and obtain the necessary funding, there is no assurance that any revenues would be generated by us or that revenues generated would be sufficient to provide a return to investors.

We anticipate that the selection of an additional business opportunity in which to participate will be complex and without certainty of success. The investigation and analysis of natural resource opportunities that may be available may be extremely difficult and complex. We can provide no assurance that we will be able to locate compatible business opportunities.
 
 
If we can't or don't raise more money, we will either cease activities or look for other opportunities. If we cease activities, we don't know what we will do and we don't have any plans to do anything.

We do not intend to hire additional employees at this time. All of the work on the properties will be conducted by unaffiliated independent contractors that we will hire. The independent contractors will be responsible for surveying, geology, engineering, exploration, drilling and excavation. The geologists will evaluate the information derived from the exploration and excavation and the engineers will advise us on the economic feasibility of removing the mineralized material and/or the oil and gas.

We have nominal cash at the present time and cannot operate until we raise additional capital.

LIMITED OPERATING HISTORY; NEED FOR ADDITIONAL CAPITAL

There is no historical financial information about us upon which to base an evaluation of our performance. We are an exploration stage corporation and have not generated any revenues from activities. We cannot guarantee we will be successful in our business activities. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the exploration and drilling of our properties, and possible cost overruns due to price and cost increases in services.

We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.

Material Changes in Financial Condition

At January 31, 2011, we had a working capital deficit of $67,891, compared to a working capital deficit of $379,407, at July 31, 2010.  At January 31, 2011, our total assets consisted of cash of $17,396, and property and equipment of $1,146.  This compares with total assets at July 31, 2010 consisting of cash of $1,045.  These material changes have arisen as a result of the Company having raised funds in the form of a convertible promissory note.

At January 31, 2011, our total current liabilities decreased to $85,287 from $380,819, at July 31, 2010.  During the six months ended January 31, 2011, accounts payable and accrued liabilities,


 
 
 

increased to $60,825, from $53,452, amounts due to related party decreased to $184 from $3,027 and convertible note decreased to $0 from $300,000. Refer to note 5 (a) of the financial statements.

We do not have sufficient funds to carry out normal operations for more than two (2) months.  Our short and long-term survival is dependent on funding from sales of securities as necessary or from shareholder loans, and thus, to the extent that we require additional funds to support our operations or the expansion of our business, we may attempt to sell additional equity shares or issue debt.  Any sale of additional equity securities will result in dilution to our stockholders.  Recent events in worldwide capital markets may make it more difficult for us to raise additional equity or capital.  There can be no assurance that additional financing, if required, will be available to us or on acceptable terms.

Result of Operations

We recognized nil revenue for the six-month period ended January 31, 2011 (January 31, 2010: nil).

Our short and long term survival is dependent on funding from sales of securities as necessary or from shareholder loans.

Material Changes in Results of Operations

For The Three Months Ended January 31, 2011, Compared To The Three Months Ended January 31, 2010.

There were no revenues from operations during the three months ending January 31, 2011, or during the three months ended January 31, 2010.

For the three months ended January 31, 2011, operating expenses were $969,926 compared to $7,066 during the three months ended January 31, 2010.  The increase was principally due to an increase in our general and administrative expenses, [cost of issuance of stock for services rendered by our former president of $750,000] and impairment of mineral properties in the amount of $210,000.

Operating expenses during the three months ended January 31, 2011, consisted of general and administrative expenses of $737,960 (2010: $1,220), management services of $12,000 (2010: $1,200), Professional fees of $5,956 (2010: $4,646), impairment of mineral properties $210,000 (2010: $nil) and exploration costs $4,010 (2010: $nil).

During the three month period ended January 31, 2011, we recognized a net loss of $998,970 compared to a net loss of $(7,066) for the three-month period ended January 31, 2010.  The increased loss of $991,904 was mainly due to the issuance of stock for services and impairment of mineral property totalling $960,000, and an increase in our activities.

For The Six Months Ended January 31, 2011, Compared To The Six Months Ended January 31, 2010.

There were no revenues from operations during the six months ending January 31, 2011, or during the six months ended January 31, 2010.

For the six months ended January 31, 2011, operating expenses were $1,003,216 compared to $23,137 during the six months ended January 31, 2010.

Operating expenses during the six months ended January 31, 2011, consisted of other general and administrative expenses of $743,998 (2010: $2,091), management services at $24,000 (2010: $2,400) professional fees of $21,208 (2010: $18,506). Impairment of mineral properties $210,000 (2010: nil), and exploration costs of $4,140 (2010: $140).

During the six month period ended January 31, 2011, we recognized a net loss of $1,062,721, compared to a net loss of $23,137 for the six-month period ended January 31, 2010.  The increased loss of $1,039,584 was due to an increase in our activities over the prior period as discussed above.




 
 
 

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have issued 57,890,629 shares of our common stock and received $57,100.

As of the date of this report, we have conducted limited operations and therefore have not generated any revenue. We have incurred losses since inception. In addition, we have a working capital deficit at January 31, 2011. These factors raise substantial doubt regarding the Company's ability to continue as a going concern for the next twelve months unless we obtain additional capital to pay our bills. This is because we have not generated any revenues and no revenues are anticipated at present.

Accordingly, we must raise cash from sources other than the sale of minerals and oil and gas found on the properties. Our only other sources for cash at this time are loans from related parties and additional sales of common stock. Our success or failure will be determined by what additional financing we obtain and what we find under the ground.

Funds raised from our recent Promissory Note issued were used to pay administrative and other expenses. We have to raise additional money to explore natural resource properties in the future. If we find oil and gas, or other minerals, and it is economically feasible to remove the mineralized material or the drilling of oil and gas, we will attempt to raise even more money through a subsequent private placement, public offering or through loans.

At the present time, we have not made any arrangements to raise additional cash. If we need additional cash and cannot raise it, we will either have to suspend activities until we do raise the cash, seek additional opportunities, or cease activities entirely. Other than as described in this paragraph, we have no other financing plans.

In May 29, 2008, we issued 162,500 shares of common stock to our former officer and director, Curtis C. Daye. The purchase price of the shares was $6,500. This was accounted for as an acquisition of shares. Curtis C. Daye covered some of our initial expenses by paying $184 for incorporation documents, administrative costs, and courier costs. The amount owed to Mr. Daye is non-interest bearing, unsecured and due on demand. Further, the agreement with Mr. Daye is oral and there is no written document evidencing the agreement.

On July 8, 2008, we issued 126,500 shares of common stock to 46 individuals in consideration of $50,600.

On July 1, 2010, the Company issued to the President of the Company 13,789 shares of common stock at a fair value of $0.55 per share for $25,000 owed in management fees, and expenses paid on behalf of the Company by the President.

On July 8, 2010, the Company issued 12,368 shares of common stock to settle $17,500 of accounts payable, which was related to certain consulting services provided by Resource Management Services, an unrelated party.
 
On November 17, 2010, the Company effected a 200:1 reverse stock split of the issued and outstanding common stock. As a result, the issued and outstanding share capital decreased from 63,031,388 shares of common stock to 315,157 shares of common stock. All share amounts have been retroactively adjusted for all periods presented.
 
On December 27, 2010, the Company issued 20,000,000 shares of common stock with a fair value of $3,000,000 for management services received from the former President of the Company, Mr. Philip Kueber. Due to Mr. Kueber’s recent resignation, the Company expects to receive from Mr. Kueber 15,000,000 shares for cancellation and return to treasury.
 
During the period ended January 31, 2011, the Company received $50,000 pursuant to a secured Convertible Note. This note was due sixty days after demand, bears interest of prime bank rate plus 1% per annum payable annually and was convertible into shares of common stock at $0.01 per share, which was below market value. On December 27, 2010, the Note was converted into 5,000,000 common shares, and the accrued convertible interest payable thereon was forgiven.
 
On January 3, 2011, the Company issued 1,000,000 shares of common stock for the acquisition of the Man/Prime mineral property.


 
 
 


 
On March 10, 2010, the Company issued a $300,000 secured Convertible Note ("the Note"). The Note was due sixty days after demand, bears interest of prime bank rate plus 3% per annum payable annually and is convertible into shares of common stock at $0.01 per share, which was below market value. On January 12, 2011, the Note was converted into 30,000,000 common shares, and the accrued convertible interest payable thereon of $15,750 was converted into 1,575,000 common shares.

As of January 31, 2011, our total assets were $18,542 and our total liabilities were $85,287.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a “smaller reporting company” as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 4. CONTROLS AND PROCEDURES.

At the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15(d)-15(e) under the 1934 Act). Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that these disclosure controls and procedures are not effective to ensure that information acquired to be disclosed by us in reports that we file or submit under the 1934 Act is recorded, processed summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. Specifically, we were required to make a significant number of adjusting journal entries and are unduly reliant upon consultants in the financial statement closing process. As a result, we do not have the personnel required to assure that all of the Company’s financial information is provided to our accounting staff in a timely and satisfactory manner.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

There have been no changes in our internal controls over financial reporting that occurred during the three months ended January 31, 2011, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.



 
 
 

PART II - OTHER INFORMATION

On March 11, 2011, the Company expanded its Board of Directors to three (3) members and appointed Mr. W. Scott Lawler, Esq., as member of the Board. Mr. Lawler is corporate/securities attorney with over 22 years of experience. Mr. Lawler is currently licensed to practice law in the States of Arizona and California. Mr. Lawler has also been admitted to the Utah State Bar and is currently on inactive status in that state. Mr. Lawler received a Bachelor's Degree in Business Management in 1984 from Brigham Young University and his Juris Doctorate degree from U.S.C. Law Center in 1988. Mr. Lawler legal practice focuses on small to medium size public companies, mergers and acquisitions, corporate finance, SEC reporting, public and private offerings and other general business matters.

ITEM 6. EXHIBITS.

The following documents are included herein:

Exhibit No.            Document Description
-----------                                                      --------------------

 31.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

 
 

 
 
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities on this 16th day of March, 2011.

PEPPER ROCK RESOURCES CORP.


BY: /s/ DON NICHOLSON
Name: Don Nicholson
Title:  President, Chief Executive Officer, Secretary, Treasurer, Principal Financial Officer, Principal Accounting Officer, and member of the Board of Directors
 
 
 

 
 
 

Pepper Rock Resources Corp. Reports

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