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EXCEL - IDEA: XBRL DOCUMENT - Virtus Oil & Gas Corp.Financial_Report.xls

U.S. SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 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: May 31, 2014

 

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 001478725

 

VIRTUS OIL AND GAS CORP.

(Name of Small Business Issuer in its charter)

 

Nevada   46-0524121

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

1517 San Jacinto Street, Houston, Texas 77002

(Address of principal executive offices)

 

(281) 806-5000

Issuer’s telephone number

 

The Gas Tower, 555 West 5th Street, 31st Floor, Los Angeles, California 90013

(Former name, former address and former

fiscal year, if changed since last report)

 

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 past 90 days.

Yes x   No o

  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x   No 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 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 (Do not check if a smaller reporting company) 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 o   No x

 

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of July 14, 2014, the issuer had 48,800,000 shares of common stock, par value $0.001, issued and outstanding.

 

 
 

 

VIRTUS OIL AND GAS CORP.

QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE AND SIX MONTHS ENDED MAY 31, 2014 AND 2013

 

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

 

  PAGE #
     
Item 1. Financial Statements  
     
  Condensed Balance Sheets as of May 31, 2014 (Unaudited) and November 30, 2013 3
  Condensed Statements of Operations for the Three and Six Months ended May 31, 2014 and 2013, and the period from September 30, 2009 (Inception) to May 31, 2014 (Unaudited) 4
  Statement of Stockholders’ Equity (Deficit) from September 30, 2009 (Inception) to May 31, 2014 (Unaudited) 5
  Condensed Statements of Cash Flows for the Three and Six Months ended May 31, 2014 and 2013, and the period from September 30, 2009 (Inception) to May 31, 2014 (Unaudited) 6
  Notes to Condensed Financial Statements (Unaudited) 7-17
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18-23
Item 3. Quantitative and Qualitative Disclosures About Market Risk 24
Item 4. Controls and Procedures 24
     
PART II - OTHER INFORMATION
     
Item 1. Legal Proceedings 25
Item 1A. Risk Factors 25
Item 2. Unregistered Sales of Securities and Use of Proceeds 25
Item 3. Defaults Upon Senior Securities 25
Item 4. Mine Safety Disclosures 25
Item 5. Other Information 25
Item 6. Exhibits 25
  Signatures 26

 

 

 

 

2
 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

VIRTUS OIL AND GAS CORP.

(FORMERLY CURRY GOLD CORP)

(A DEVELOPMENT STAGE COMPANY)

CONDENSED BALANCE SHEETS

 

   May 31,   November 30, 
   2014   2013 
   (Unaudited)     
Current assets          
Cash  $632   $486 
Prepaid expenses   188    937 
Total current assets   820    1,423 
           
Property and equipment, net   1,151    1,295 
           
Deposit on Oil and gas properties, net allowance of $30,000 at May 31, 2014 and November 30, 2013   224,266     
           
Total assets  $226,237   $2,718 
           
           
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)          
           
Current liabilities:          
Accounts payable and accrued expenses  $82,883   $55,432 
Accrued interest, related party   8,101    4,529 
Note payable, related party   47,749    47,749 
Total current liabilities   138,733    107,710 
           
Stockholders' equity (deficit):          
Common stock, $0.001 par value, 150,000,000 shares authorized 48,800,000 and 47,300,000 shares issued and outstanding at May 31, 2014 and November 30, 2013, respectively   48,800    47,300 
Additional paid-in capital   1,471,761    171,179 
Stock subscription payable   230,000    60,000 
(Deficit) accumulated during development stage   (1,663,057)   (383,471)
Total stockholders' equity (deficit)   87,504    (104,992)
           
Total liabilities and stockholders' equity (deficit)  $226,237   $2,718 

 

See Accompanying Notes to Financial Statements.

 

3
 

 

VIRTUS OIL AND GAS CORP.

(FORMERLY CURRY GOLD CORP)

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

   For the Three Months   For the Six Months   September 30, 2009 
   Ended May 31,   Ended May 31,   (inception) to 
   2014   2013   2014   2013   May 31, 2014 
                     
Revenue  $   $   $   $   $ 
                          
Operating expenses:                         
General and administrative   501,929    2,815    1,159,267    7,701    1,318,849 
Professional fees   59,675    4,606    116,747    18,751    297,862 
Total operating expenses   561,604    7,421    1,276,014    26,452    1,616,711 
                          
Net operating (loss)   (561,604)   (7,421)   (1,276,014)   (26,452)   (1,616,711)
                          
Other income (expense):                         
Foreign currency gain (loss)                   (1,055)
Impairment of oil and gas assets                   (30,000)
Interest expense   (1,210)   (1,204)   (3,572)   (2,237)   (15,291)
Total other income (expense)   (1,210)   (1,204)   (3,572)   (2,237)   (46,346)
                          
Net (loss)  $(562,814)  $(8,625)  $(1,279,586)  $(28,689)  $(1,663,057)
                          
Weighted average number of common shares outstanding - basic and fully diluted   48,914,856    46,900,000    48,652,210    46,900,000      
                          
Net (loss) per share - basic and fully diluted  $(0.01)  $(0.00)  $(0.03)  $(0.00)     

 

 

See Accompanying Notes to Financial Statements.

 

4
 

 

VIRTUS OIL AND GAS CORP.

(FORMERLY CURRY GOLD CORP)

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

 

      Common Stock     Additional Paid-In     Stock Subscription     (Deficit) Accumulated Development     Total
Stockholders’
Equity
 
      Shares     Amount     Capital     Payable     Stage     (Deficit)  
Common stock issued to founder for cash at $0.001 per share     28,000,000     $ 28,000     $ (26,000 )   $     $     $ 2,000  
Common stock issued to founders for cash at $0.01 per share     18,900,000       18,900       (5,400 )                 13,500  
Net loss for the year ended November 30, 2009                             (745 )     (745 )
                                                 
Balance, November 30, 2009     46,900,000       46,900       (31,400 )           (745 )     14,755  
                                                 
Net loss for the year ended November 30, 2010                             (33,941 )     (33,941 )
                                                 
Balance, November 30, 2010     46,900,000       46,900       (31,400 )           (34,686 )     (19,186 )
                                                 
Net loss for the year ended November 30, 2011                             (26,519 )     (26,519 )
                                                 
Balance, November 30, 2011     46,900,000       46,900       (31,400 )           (61,205 )     (45,705 )
                                                 
Contributed capital from debt forgiveness                 62,979                   62,979  
Net loss for the year ended November 30, 2012                             (50,362 )     (50,362 )
                                                 
Balance, November 30, 2012     46,900,000       46,900     $ 31,579           $ (111,567 )   $ (33,088 )
Common stock sold for cash at $0.33 per share     300,000       300       99,700                   100,000  
Common stock sold for cash at $0.40 per share     100,000       100       39,900       60,000             100,000  
Net loss for the year ended November 30, 2013                             (271,904 )     (271,904 )
                                                 
Balance, November 30, 2013     47,300,000     $ 47,300     $ 171,179     $ 60,000     $ (383,471 )   $ (104,992 )
                                                 
Common stock sold for cash at $0.40 per share     750,000       750       299,250       170,000             470,000  
Share based compensation     750,000       750       1,001,332                   1,002,082  
Net loss for the six months ended May 31, 2014                             (1,279,586 )     (1,279,586 )
                                                 
Balance, May 31, 2014     48,800,000     $ 48,800     $ 1,471,761     $ 230,000     $ (1,663,057)     $ 87,504  

 

See Accompanying Notes to Financial Statements.

 

5
 

 

VIRTUS OIL AND GAS CORP.

(FORMERLY CURRY GOLD CORP)

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   For the Six   September 30, 2009 
   Months Ended   (inception) to 
   May 31, 2014   May 31, 2013   May 31, 2014 
             
CASH FLOWS FROM OPERATING ACTIVITIES               
Net (loss)  $(1,279,586)  $(28,689)  $(1,663,057)
Adjustments to reconcile net (loss) to net cash used in operating activities:               
Depreciation expense   144    41    288 
Impairment of oil and gas properties           30,000 
Share based compensation expense   1,002,082        1,002,082 
Decrease (increase) in assets:               
Prepaid expenses   749    375    (188)
Increase (decrease) in liabilities:               
Accounts payable   3,646    (5,272)   39,078 
Accrued expenses   23,805        45,042 
Accrued expenses, related party   3,572    2,237    14,055 
Net cash used in operating activities   (245,588)   (31,308)   (537,700)
                
CASH FLOWS FROM INVESTING ACTIVITIES               
Purchase of oil and gas properties   (224,266)       (254,266)
Purchase of property and equipment       (1,439)   (1,439)
Net cash used in investing activities   (224,266)   (1,439)   (255,705)
                
CASH FLOWS FROM FINANCING ACTIVITIES               
Proceeds from sale of common stock   470,000        685,500 
Proceeds from notes payable           21,435 
Proceeds from note payable, related party       34,944    84,235 
Repayments on note payable, related party       (2,113)   (2,133)
Net cash provided by financing activities   470,000    32,831    789,037 
                
NET CHANGE IN CASH   146    84    632 
                
CASH AT BEGINNING OF PERIOD   486         
                
CASH AT END OF PERIOD  $632   $84   $632 
                
SUPPLEMENTAL INFORMATION:               
Interest paid  $   $      
Income taxes paid  $   $      

 

See Accompanying Notes to Financial Statements.

 

6
 

 

VIRTUS OIL AND GAS CORP.

(FORMERLY CURRY GOLD CORP)

(A Development Stage Company)

Notes to Condensed Financial Statements

(Unaudited)

 

Note 1 - Nature of Business and Significant Accounting Policies 

 

Nature of Business

Virtus Oil and Gas Corp. (“the Company”) was incorporated in the state of Nevada on September 30, 2009 (“Inception”). The Company was originally formed as Curry Gold Corp to become an operator and franchisor of fast-casual food catering vans that capitalize on the growing trend of food to go (convenience food) with its Currywurst product, a product native to Germany, and market it through Switzerland and into major metropolitan US cities. On July 17, 2012, however, the Company abandoned its plans to enter into the catering van business and is now an oil and gas exploration and production company.

 

Basis of Presentation

The financial statements included herein, presented in accordance with United States generally accepted accounting principles and is stated in US currency have been prepared by the Company pursuant to the rules and regulations of the SEC.

 

The Company is considered to be in the development stage as defined by FASB ASC 915-10-05. This standard requires companies to report their operations, shareholders equity and cash flows from inception through the reporting date. The Company will continue to be reported as a development stage entity until, among other factors, revenues are generated from management’s intended operations. Management has provided financial data since inception (September 30, 2009).

 

The Company has adopted a fiscal year end of November 30.

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the 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.

 

Cash and Cash Equivalents

We maintain cash balances in non-interest-bearing accounts, which do not currently exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.

 

Development Stage Policy

The Company has not earned revenue from planned principal operations since inception (insert date of inception). Accordingly, the Company's activities have been accounted for as those of a "Development Stage Enterprise" as set forth by current authoritative account literature. Among the disclosures required by current accounting literature are that the Company's financial statements be identified as those of a development stage company, and that the statements of operations, stockholders' equity and cash flows disclose activity since the date of the Company's inception.

 

Stock Based Compensation

Stock-based awards to non-employees are accounted for using the fair value method.

 

The Company adopted provisions which require that we measure and recognize compensation expense at an amount equal to the fair value of share-based payments granted under compensation arrangements.

 

The Company has adopted the “modified prospective” method, which results in no restatement of prior period amounts. This method would apply to all awards granted or modified after the date of adoption. In addition, compensation expense must be recognized for any unvested stock option awards outstanding as of the date of adoption on a straight-line basis over the remaining vesting period. The Company will calculate the fair value of options using a Black-Scholes option pricing model. The Company does not currently have any outstanding options subject to future vesting therefore no charge is required for the periods presented. Our method also requires the benefits of tax deductions in excess of recognized compensation expense to be reported in the Statement of Cash Flows as a financing cash inflow rather than an operating cash inflow. In addition, our method required a modification to the Company’s calculation of the dilutive effect of stock option awards on earnings per share. For companies that are using the “modified prospective” method, disclosure of pro forma information for periods prior to adoption must continue to be made.

 

7
 

 

VIRTUS OIL AND GAS CORP.

(FORMERLY CURRY GOLD CORP)

(A Development Stage Company)

Notes to Condensed Financial Statements

(Unaudited)

 

Note 1 - Nature of Business and Significant Accounting Policies (cont’d)

 

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not, that such asset will not be recovered through future operations.

 

Fair Value of Financial Instruments

Financial instruments consist principally of cash, trade and related party payables and accrued liabilities. The carrying amounts of such financial instruments in the accompanying balance sheets approximate their fair values due to their relatively short-term nature. It is management’s opinion that the Company is not exposed to significant currency or credit risks arising from these financial instruments.

 

Revenue Recognition

Revenue is recognized at the time of sale if collectability is reasonably assured. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.

 

Basic and Diluted Loss per Share

The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the periods presented, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

 

Recent Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-11: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The new guidance requires that unrecognized tax benefits be presented on a net basis with the deferred tax assets for such carryforwards. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2013. We do not expect the adoption of the new provisions to have a material impact on our financial condition or results of operations.

 

In February 2013, Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:

 

  - Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and
  - Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

 

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected to have a material impact on our financial position or results of operations.

 

8
 

 

VIRTUS OIL AND GAS CORP.

(FORMERLY CURRY GOLD CORP)

(A Development Stage Company)

Notes to Condensed Financial Statements

(Unaudited)

 

Note 1 - Nature of Business and Significant Accounting Policies (cont’d)

 

In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities , which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not expected to have a material impact on our financial position or results of operations.

 

In October 2012, the FASB issued ASU 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.

  

Note 2 - Going Concern

 

As shown in the accompanying financial statements, the Company has no revenues and has incurred continuous losses from operations, had an accumulated deficit of $1,663,057 and a working capital deficit of $137,913 at May 31, 2014. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is actively pursuing new ventures to increase revenues. In addition, the Company is currently seeking additional sources of capital to fund short term operations. The Company, however, is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful, therefore, without sufficient financing it would be unlikely for the Company to continue as a going concern.

 

The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. The financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

  

Note 3 - Related Party

 

From time to time the Company’s former CEO, Daniel Ferris paid invoices on behalf of the Company. As of May 31, 2014, the Company owed Mr. Ferris a total of $49,057, including $8,101 of interest accrued at 10% per annum and $3,805 in unpaid salary.

 

On July 5, 2012, the Company’s former CEO, Soenke Timm sold 2,000,000 shares of the Company’s $0.001 par value common stock, representing sixty percent (60%) of the issued and outstanding shares of common stock, to Daniel M. Ferris. Mr. Timm owned no shares of common stock of the Company after the sale to Mr. Ferris. At the time of the sale of the Shares, Mr. Timm was the sole director and officer of the Company. Mr. Timm subsequently resigned as an officer of the Company effective July 6, 2012. Also effective July 6, 2012, Mr. Timm, as sole director acting by written consent without a special meeting, appointed Mr. Ferris to serve as President, Treasurer and Secretary of the Company.

 

On October 12, 2009, the Company issued 2,000,000 founder’s shares to the Company’s former President at the par value of $0.001 in exchange for proceeds of $2,000.

 

On October 12, 2009, the Company issued 50,000 founder’s shares to a former Director of the Company at $0.01 in exchange for proceeds of $500.

 

During the month of October, 2009, the Company issued 1,300,000 founder’s shares at the $0.01 in exchange for proceeds of $13,000.

 

9
 

 

VIRTUS OIL AND GAS CORP.

(FORMERLY CURRY GOLD CORP)

(A Development Stage Company)

Notes to Condensed Financial Statements

(Unaudited)

 

Note 3 - Related Party (cont’d)

 

From time to time the former CEO loaned the Company money to fund operations. The CEO has advanced the following unsecured demand loans, bearing interest at 10%, to fund operations:

 

  - On April 8, 2011, the Company received a loan of $4,800
  - On September 30, 2010, the Company received a loan of $15,000
  - On September 15, 2010, the Company received a loan of $553
  - On August 11, 2010, the Company received a loan of $11,000
  - On June 28, 2010, the Company received a loan of $3,000

 

On July 6, 2012, these loans totaling $62,979, consisting of $55,788 of principal and $7,191 of accrued interest was forgiven and contributed as capital by the lenders.

 

On December 5, 2013, the Company entered into an Employment Agreement with Daniel M. Ferris regarding his position as President and Chief Executive Officer of the Company. Mr. Ferris will be paid a base salary of $120,000 per year. Mr. Ferris will also be entitled to receive up to 1,500,000 shares of Common Stock to be issued in increments of 500,000 shares on December 5 in 2014, 2015 and 2016. The Employment Agreement has an initial term of three years and will automatically renew for successive one-year periods until earlier terminated. The Employment Agreement may be terminated (i) at any time by the Company for “cause”, (ii) upon 90 days’ written notice by either party for any reason, or (iii) upon 30 days’ written notice by either party at the end of any term. The Employment Agreement also terminates immediately upon Mr. Ferris’ death or disability.

 

If Mr. Ferris’ employment is terminated for “cause” by the Company, or if he voluntarily resigns, then he will forfeit any shares of Common Stock that have not yet been issued by the Company as of the date of such termination or resignation. If Mr. Ferris’ employment is terminated for any other reason, he will be entitled to receive the full 1,500,000 shares of Common Stock. The Employment Agreement defines “cause” as the willful and continued failure by Mr. Ferris to perform his duties, the conviction of a felony, or any other material conduct that is contrary to the best interests of the Company or adversely affects the reputation of the Company.

 

The fair market value of the stock grant on the date of the Employment Agreement was $1,200,000. The Company paid the CEO $30,000 and $60,000 in cash compensation and recognized compensation expense of $100,000 and $800,000 related to the Employment Agreement during the three and six months ended May 31, 2014, respectively.

 

On May 13, 2014, Mr. Ferris voluntarily resigned from his position as President and Chief Executive Officer of the Company. Mr. Ferris resigned from his position on the board of directors of the Company effective July 10, 2014.

 

On August 1, 2013, the Company entered into an engagement letter with Clear Financial Solutions, Inc., a Texas corporation (Clear Financial). On December 5, 2013, the Company and Clear Financial entered into Amendment No. 1 to Engagement Letter. Under the engagement letter and the amendment (collectively, the “Engagement Letter”) Clear Financial will provide certain financial consulting services to the Company and Mr. Steven M. Plumb, founder and President of Clear Financial, will serve as the Chief Financial Officer of the Company. Clear Financial will, among other things, prepare and review the Company’s financial statements, oversee internal accounting controls and provide advice on generally accepted accounting principles. In addition, As compensation for the services provided, the Company will pay Clear Financial a fee of $4,500 per month and has agreed to issue up to 1,000,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), to Mr. Plumb. The Engagement Letter has an initial term of one year and will automatically renew for successive one-year periods until terminated by either party upon 60 days’ written notice prior to the end of the then current term. Clear Financial was paid $14,532 and $28,032 for Mr. Plumb’s services during the quarter ended May 31, 2014. In addition, in February 2014, the Company issued 500,000 shares of the Company’s common stock to Mr. Plumb, having a fair market value of $400,000 on the date of grant, which the Company recorded as compensation expense during the quarter ending May 31, 2014. In addition, the Company recognized $99,999 and $166,667 in compensation expense during the three and six ending May 31, 2014, respectively, related to the unissued portion of Mr. Plumb’s stock grant.

 

The Engagement Letter further provides that Clear Financial may from time to time bring oil and gas investment opportunities to the Company’s attention. Pursuant to the Engagement Letter, the Company will assign a 1% carried interest to each of Mr. Plumb and/or Mr. Jerry Walters, a principal of Clear Financial, with respect to each oil and gas investment opportunity that Messrs. Plumb and/or Walters bring to the Company’s attention and in which the Company invests.

 

10
 

 

VIRTUS OIL AND GAS CORP.

(FORMERLY CURRY GOLD CORP)

(A Development Stage Company)

Notes to Condensed Financial Statements

(Unaudited)

 

Note 3 - Related Party (cont’d)

 

On May 13, 2014, the Company appointed Rupert Ireland to serve as President, Chief Executive Officer, Secretary and Treasurer of the Company, effective immediately. In connection with Mr. Ireland’s appointment as President and Chief Executive Officer, the Company entered into an Employment Agreement, dated May 13, 2014, with Mr. Ireland. Pursuant to the Employment Agreement, Mr. Ireland will be paid a base salary of $120,000 per year and a signing bonus of $5,000. Mr. Ireland will also be entitled to receive up to 3,000,000 shares of the Company’s common stock, $0.001 par value per share (“Common Stock”), to be issued in increments of 1,000,000 shares on May 13 in 2015, 2016 and 2017, if he continues to be employed. The Employment Agreement has an initial term of three years and will automatically renew for successive one-year periods until earlier terminated. The Employment Agreement may be terminated (i) at any time by the Company for “cause,” (ii) upon no less than 60 days’ written notice by either party for any reason, or (iii) upon no less than 30 days’ written notice by either party at the end of the original 3-year term or any renewal term. The Employment Agreement also terminates immediately upon Mr. Ireland’s death or disability.

 

If Mr. Ireland’s employment is terminated for “cause” by the Company, or if he voluntarily resigns, then he will forfeit any shares of Common Stock that have not yet been issued by the Company as of the date of such termination or resignation. If Mr. Ireland’s employment is terminated for any other reason, he will be entitled to receive the full 3,000,000 shares of Common Stock. The Employment Agreement defines “cause” as the willful and continued failure by Mr. Ireland to perform his duties, the conviction of a felony, or any other material conduct that is contrary to the best interests of the Company or adversely affects the reputation of the Company.

 

The fair market value of Mr. Ireland’s stock award was $2,550,000 on the date of grant. The Company is recognizing $70,833 per month in compensation related expense. As of May 31, 2014, the Company recognized $35,416 in expense related to Mr. Ireland’s stock grant.

 

11
 

 

VIRTUS OIL AND GAS CORP.

(FORMERLY CURRY GOLD CORP)

(A Development Stage Company)

Notes to Condensed Financial Statements

(Unaudited)

 

Note 4 - Fair Value of Financial Instruments

 

The Company adopted FASB ASC 820-10 upon inception at September 30, 2009. Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

 

The Company has cash and a related party note payable that is considered a financial instrument that must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

 

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. The fair value of the Company’s cash is based on quoted prices and therefore classified as Level 1.

 

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

 

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

 

The following schedule summarizes the valuation of financial instruments at fair value on a non-recurring basis in the balance sheets as of May 31, 2014 and November 30, 2013, respectively:

 

    Fair Value Measurements at May 31, 2014  
    Level 1     Level 2     Level 3  
Assets                        
Cash   $      –     $      –     $      –  
Total assets                  
Liabilities                      
Note payable, related party                  
Total liabilities                  
    $     $     $  

 

12
 

 

VIRTUS OIL AND GAS CORP.

(FORMERLY CURRY GOLD CORP)

(A Development Stage Company)

Notes to Condensed Financial Statements

(Unaudited)

 

Note 4 - Fair Value of Financial Instruments (cont’d)

 

    Fair Value Measurements at November 30, 2013  
    Level 1     Level 2     Level 3  
Assets                        
None   $      –     $      –     $      –  
Total assets                  
Liabilities                      
None                  
Total liabilities                  
    $     $     $  

 

There were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the three months ended May 31, 2014 and the year ended November 30, 2013.

 

Level 2 liabilities consist of a short term, unsecured, related party promissory note. No fair value adjustment was necessary during the three months ended May 31, 2014 and the year ended November 30, 2013.

 

Note 5 - Fixed Assets and deposits

 

Fixed assets consist of the following at May 31, 2014 and November 30, 2013, respectively:

 

   May 31,   November 30, 
   2014   2013 
Office equipment  $1,439   $1,439 
Less accumulated depreciation   (288)   (144)
   $1,151   $1,295 

 

Depreciation and amortization expense totaled $72 and $144 for the three and six months ended May 31, 2014, respectively and $41 during the three and six months ended May 31, 2013.  

 

During the six months ended May 31, 2014, the Company made payments of $104,525 and $97,734 toward Tidewater Agreement, See Note 6. The total purchase price for the unproven leases is $290,000 and is payable by the Company as follows: $45,000 on or before December 21, 2013, $45,000 on or before February 4, 2014, $100,000 on or before May 5, 2014 and $100,000 on or before August 3, 2014. The leases will not be transferred to the Company until the purchase price has been paid in full. The Company has also agreed to assume its proportionate share of all rental payments due on the leases, beginning immediately. The Company is not obligated to make payments; however, if the Company fails to pay timely any rental payment, it will lose its interest in the underlying lease.

 

13
 

 

VIRTUS OIL AND GAS CORP.

(FORMERLY CURRY GOLD CORP)

(A Development Stage Company)

Notes to Condensed Financial Statements

(Unaudited)

 

Note 6 – Deposit on Oil and gas properties (cont’d)

 

Oil and gas properties consist of the following at May 31, 2014 and November 30, 2013, respectively:

 

   May 31,   November 30, 
   2014   2013 
Oil and gas properties  $254,266   $30,000 
Less impairment   (30,000)   (30,000)
   $224,266   $ 

 

Tidewater Agreement

 

On November 14, 2013, the Company, entered into a purchase agreement (the “Tidewater Agreement”) with Tidewater Oil & Gas Company LLC (“Tidewater”) pursuant to which the Company agreed to purchase an 87.5% working interest in unproven oil and gas leases covering approximately 36,787 acres in Iron County, Utah. Tidewater has agreed to deliver the leases to the Company with an 80% net revenue interest. Tidewater’s sale of the leases was subject to the approval of the U.S. District Court for the District of Colorado (the “Bankruptcy Court”), which is presiding over Tidewater’s Chapter 11 bankruptcy proceedings. The Bankruptcy Court approved the sale of the leases on December 11, 2013.

 

Pursuant to the Tidewater Agreement, the purchase price for the leases is $290,000 and is payable by the Company as follows: $45,000 on or before December 21, 2013, $45,000 on or before February 4, 2014, $100,000 on or before May 5, 2014 and $100,000 on or before August 3, 2014. The Company made the initial $45,000 payment on December 17, 2013. The leases will not be transferred to the Company until the purchase price has been paid in full. The Company has also agreed to assume its proportionate share of all rental payments due on the leases, beginning immediately. The Company is not obligated to make payments; however, if the Company fails to pay timely any rental payment, it will lose its interest in the underlying lease.

 

The Tidewater Agreement contemplates the drilling of an initial 12,000 foot vertical test well in the Jurassic-Navajo, Permian-Kaibab formation on the leases. Although Tidewater will retain a 12.5% working interest in the leases, the Company has agreed to pay 100% of the cost of drilling and completing this test well, which is estimated to be approximately $2.5 million. The Company has agreed to pre-pay such costs at least 30 days prior to the spud date, which is expected to be no later than February 3, 2015. If the Company fails to prepay such costs, it will forfeit its interests in the oil and gas leases and Tidewater will retain the purchase price. On January 30, 2014, the Company paid $52,734 to Tidewater, for reimbursement for costs of $7,734 and the second installment of the purchase price of $45,000. On May 6, 2014, the Company paid $104,525 to Tidewater, for reimbursement for costs of $4,424 and the third installment of the purchase price of $100,000.

 

On May 6, 2014, Virtus Oil & Gas Corp., a Nevada corporation (the “Company”), entered into the First Amendment to Letter Agreement (the “Tidewater Amendment”) with Tidewater Oil & Gas Company LLC (“Tidewater”), which amends the letter agreement dated November 14, 2013 between the Company and Tidewater (the “Tidewater Agreement”). Pursuant to the Tidewater Agreement, the Company agreed to purchase an 87.5% working interest in oil and gas leases covering approximately 36,787 acres in Iron County, Utah. A copy of the Tidewater Agreement was attached as Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 31, 2014.

 

Pursuant to the Tidewater Agreement, the Company was required to drill an initial 12,000 foot vertical test well in the Jurassic-Navajo, Permian-Kaibab formation on the leases no later than February 3, 2015. The Tidewater Amendment modifies the Tidewater Agreement by postponing the deadline to drill the initial test well to September 1, 2015. This was done in an effort to give the Company more time to drill and acquire additional seismic data to delineate additional structural elements. Except for the postponement of the drilling deadline described above, the Tidewater Agreement will remain unchanged and in full force and effect.

 

14
 

 

VIRTUS OIL AND GAS CORP.

(FORMERLY CURRY GOLD CORP)

(A Development Stage Company)

Notes to Condensed Financial Statements

(Unaudited)

 

Note 6 – Deposit on Oil and gas properties (cont’d)

 

Pioneer Agreement

 

On October 19, 2013, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with Pioneer Oil and Gas (the “Seller”) pursuant to which the Company has agreed to purchase the Seller’s interest in two separate oil and gas leases issued by the Bureau of Land Management for the United States (the “BLM”), comprising 4,150 acres in Beaver County, Utah, for an aggregate purchase price of $460,000 (the “Purchase Price”). The Company has also agreed to assume all rental payments due on the leases. The Seller intends to convey to the Company a 100% working interest and an 80% net revenue interest in the leases. The Seller and certain other parties have retained an aggregate 20% overriding royalty interest in the leases. Both leases expire on January 1, 2017.

 

The Purchase Price is payable by the Company as follows: $30,000 on or before October 25, 2013, $30,000 on or before December 25, 2013, $100,000 on or before February 25, 2014, $100,000 on or before April 25, 2014, $100,000 on or before June 25, 2014 and $100,000 on or before August 25, 2014. If the Company fails to make a payment on time, the Purchase Agreement will terminate. The Company made the initial $30,000 payment on October 25, 2013. The leases will not be transferred to the Company until the Purchase Price has been paid in full; however, the Company is responsible for all lease payments beginning immediately. All payments made by the Company are non-refundable and will be forfeited to the Seller as liquidated damages if the Company does not pay the full purchase price to acquire the Leases.

 

Upon payment of the final installment of the Purchase Price and no later than September 15, 2014, the Company will file and record with the BLM and relevant county recorder office all of the paperwork necessary to assign the leases to the Company. The Seller represents and warrants that title to the leases will be free and clear of all liens, mortgages, encumbrances and other claims and further represents and warrants title to the leases against the claims of all persons claiming by or through the Seller.

 

In the event that the 1 Falcon Well currently being drilled by Falcon Exploration Company near the acreage subject to these leases is deemed a commercial well producing oil or natural gas in commercial quantities, the Purchase Agreement will automatically terminate and be rendered null and void. The Seller will retain the leases and will return all of the funds previously paid to the Company.

 

On December 23, 2013, the Company delivered written notice to Seller of the Company’s intention to terminate the purchase agreement with Seller dated October 19, 2013 (the “Hinge Line Agreement”).

 

Pursuant to the Hinge Line Agreement, the Company agreed to purchase Seller’s interest in two oil and gas leases comprising 4,150 acres in Beaver County, Utah, for an aggregate purchase price of $460,000. The Company made an initial payment of $30,000 to Seller on October 25, 2013, but has not made any subsequent payments. Under the Hinge Line Agreement, title to the oil and gas leases would not be transferred to the Company until the full $460,000 purchase price had been paid to Seller. Accordingly, Seller will retain all rights to the oil and gas leases that are the subject of the Hinge Line Agreement, and Seller is entitled to retain the initial $30,000 payment as liquidated damages in accordance with the terms of the Hinge Line Agreement. The initial payment was capitalized and impaired in October 2013.

 

TJBB Agreement

 

On May 6, 2014, the Company entered into a letter agreement (the “TJBB Agreement”) with Tom Johnson and Bill Berryman (“TJBB”), pursuant to which the Company agreed to purchase an 87.5% working interest in oil and gas leases covering approximately 18,690.50 acres in Iron County, Utah. The subject acreage is located in an area known as the Parowan Prospect, along the same structure where the leases covered by the Tidewater Agreement are located. TJBB have agreed to deliver the leases to the Company with an 80% net revenue interest. TJBB will retain a 12.5% working interest in the leases, although the Company has agreed to pay 100% of the cost of drilling and completing a 12,000 foot vertical test well in the Jurassic-Navajo, Permian-Kaibab formation by September 1, 2015. The Company’s requirement to drill the initial test well is contained in both the Tidewater Agreement and the TJBB Agreement, and by drilling one well in the noted formation, the Company will have satisfied its initial test well drilling obligation under each agreement.

 

15
 

 

VIRTUS OIL AND GAS CORP.

(FORMERLY CURRY GOLD CORP)

(A Development Stage Company)

Notes to Condensed Financial Statements

(Unaudited)

 

Note 6 - Oil and gas properties (cont’d)

 

Pursuant to the TJBB Agreement, the purchase price for the leases is $168,215 and is payable by the Company as follows: $43,000 on or before May 16, 2014, $50,215 on or before June 30, 2014 and $75,000 on or before September 28, 2014. The leases will not be transferred to the Company until the purchase price has been paid in full. After the final payments have been made under both the TJBB Agreement and the Tidewater Agreement, the Company will have an 87.5% working interest in oil and gas leases covering a total of 55,477.50 acres in Iron County, Utah. The Company has also agreed to assume its proportionate share of all rental payments due on the leases. If the Company fails to pay timely any rental payment, it will lose its interest in the underlying lease. Additionally, if the Company fails to drill and complete the initial test well in the Jurassic-Navajo, Permian-Kaibab formation by September 1, 2015, the Company will forfeit its interest in the leases covered by both the TJBB Agreement and the Tidewater Agreement.

 

On June 6, 2014, the Company made the first payment of $43,000 pursuant to the TJBB Agreement.

 

Note 7 - Note Payable, Related Party

 

Note payable, related party consists of the following at May 31, 2014 and November 30, 2013, respectively:

 

    May 31,     November 30,  
    2014     2013  
                 
10% unsecured demand loan from Daniel M. Ferris, CEO bearing interest at 10% per annum.   $ 47,749     $ 47,749  

 

The Company had accrued interest of $8,101, and $4,529 owed to the Company’s CEO as of May 31, 2014 and November 30, 2013, respectively.

 

Interest expense was $1,210 and $1,204 for the three months ended May 31, 2014 and 2013, respectively, and $3,572 and $2,237 for the six months ended May 31, 2014 and 2013, respectively.

 

Note 8 - Stockholders’ Equity

 

The Company has authorized 75,000,000 shares of $0.001 par value common stock.

 

Common Stock

On October 12, 2009, the Company issued 2,000,000 founder’s shares to the Company’s former CEO at the par value of $0.001 in exchange for proceeds of $2,000.

 

On October 12, 2009, the Company issued 50,000 founder’s shares to a former Director of the Company at $0.01 in exchange for proceeds of $500.

 

During the month of October, 2009, the Company issued 1,300,000 founder’s shares at the $0.01 in exchange for proceeds of $13,000.

 

On July 19, 2013, the Company entered into a Securities Purchase Agreement with Fieldstone Industries, Inc., pursuant to which the Company agreed to issue 150,000 shares of Common Stock to the investor for an aggregate purchase price of $50,000, or $0.3333 per share.

 

16
 

 

VIRTUS OIL AND GAS CORP.

(FORMERLY CURRY GOLD CORP)

(A Development Stage Company)

Notes to Condensed Financial Statements

(Unaudited)

 

Note 8 - Stockholders’ Equity (cont’d)

 

On August 20, 2013, the Company entered into a Securities Purchase Agreement with Fieldstone Industries, Inc., pursuant to which the Company agreed to issue 150,000 shares of Common Stock to the investor for an aggregate purchase price of $50,000, or $0.3333 per share.

 

On October 7, 2013, the Company entered into a Securities Purchase Agreement with Fieldstone Industries, Inc., pursuant to which the Company agreed to issue 250,000 shares of Common Stock to the investor for an aggregate purchase price of $100,000, or $0.40 per share. On February 27, 2014 the Company issued 150,000 shares valued at $60,000 to the investor and on March 19, 2014 the Company issued the remaining 100,000 shares, valued at $40,000 to the investor.

 

On January 9, 2014, the Company entered into a Securities Purchase Agreement with Fieldstone Industries, Inc., pursuant to which the Company agreed to issue 250,000 shares of Common Stock to the investor for an aggregate purchase price of $100,000, or $0.40 per share.

 

On February 6, 2014, the Company entered into a Securities Purchase Agreement with Fieldstone Industries, Inc., pursuant to which the Company agreed to issue 250,000 shares of Common Stock to the investor for an aggregate purchase price of $100,000, or $0.40 per share. The proceeds were received, but the shares have not been issued and as of May 31, 2014 recorded as a stock payable. On March 19, 2014, the Company issued 100,000 shares valued at $40,000 to the investor. The remaining 150,000 shares, having a value of $60,000 are recorded as a stock payable at May 31, 2014.

 

On February 27, 2014, the Company entered into a Securities Purchase Agreement with Fieldstone Industries, Inc., pursuant to which the Company agreed to issue 250,000 shares of Common Stock to the investor for an aggregate purchase price of $100,000, or $0.40 per share.

 

On April 20, 2014, the Company entered into a Securities Purchase Agreement with Fieldstone Industries, Inc., pursuant to which the Company agreed to issue 125,000 shares of Common Stock to the investor for an aggregate purchase price of $50,000, or $0.40 per share. The proceeds were received, but the shares have not been issued and as of May 31, 2014 the proceeds were recorded as a stock payable.

 

On April 25, 2014, the Company entered into a Securities Purchase Agreement with Fieldstone Industries, Inc., pursuant to which the Company agreed to issue 300,000 shares of Common Stock to the investor for an aggregate purchase price of $120,000, or $0.40 per share. The proceeds were received, but the shares have not been issued and as of May 31, 2014 the proceeds were recorded as a stock payable.

 

On May 27, 2014, the Company entered into a Securities Purchase Agreement with Fieldstone Industries, Inc., pursuant to which the Company agreed to issue 250,000 shares of Common Stock to the investor for an aggregate purchase price of $100,000, or $0.40 per share. The proceeds were received, but the shares have not been issued and as of May 31, 2014 the proceeds were recorded as a stock payable.

 

On March 19, 2014, the Company issued 250,000 shares of its $0.001 par value common stock to a consultant. The fair market value of the common stock on the date of issuance was $200,000.

 

Contributed Capital

On July 6, 2012, a total of $40,307 of debts, including accrued interest of $5,954, owed to the former CEO were forgiven and contributed to capital.

 

On June 26, 2012, a total of $22,672 of debt, including accrued interest of $1,237 was forgiven and contributed to capital.

 

Note 9 - Subsequent Events

 

On June 6, 2014, the Company made the first payment of $43,000 pursuant to the TJBB Agreement.

 

On July 10, 2014, the former CEO, Dan Ferris, forgave the debt of $47,749 and related interest of $8,101, owed to him by the Company.

 

17
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

OVERVIEW AND OUTLOOK

 

We are currently a development stage company evaluating alternative business opportunities. The Company is in the process of identifying alternatives in several industries, but the Company has not entered into any agreements regarding any such business opportunities.

 

We were incorporated in the State of Nevada on September 30, 2009. Our principal administrative office is located at 1517 San Jacinto, Houston, Texas 77002. Our telephone number is (281) 806-5000. Our fiscal year end is November 30.

 

We are a development stage company and have not significantly commenced our planned principal operations. Our operations to date have been devoted primarily to startup and development activities, which include forming our entity, developing our business plan, registering with the SEC and listing our Common Stock on the OTCBB exchange under the symbol, “VOIL”. In October 2013, the Company acquired an interest in an oil and gas property and is focusing its efforts on developing this property and identifying additional properties in which to invest.

 

In order for us to commence substantive operations, we will require additional capital. It was our expectation that registration with the SEC and subsequent public listing of our Common Stock might facilitate our efforts in attracting additional capital. Thus far we have been unsuccessful in identifying credible sources of financing despite our efforts.

 

Since the Company’s inception on September 30, 2009 to May 31, 2014, we have not generated any substantive revenues and have incurred a cumulative net loss of $1,663,057.

 

Results of Operations for the Three Months Ended May 31, 2014 and 2013:

 

The following table summarizes selected items from the statement of operations for the three month periods ended May 31, 2014 and May 31, 2013.

 

   For the Three Months Ended     
   May 31,   May 31,   Increase / 
   2014   2013   (Decrease) 
Revenues  $   $   $ 
                
General and Administrative   501,929    2,815    499,114 
Professional Fees   59,675    4,606    55,069 
Total Operating Expenses   561,604    7,421    554,183 
                
Net Operating (Loss)   (561,604)   (7,421)   (554,183)
                
Total Other Income (Expense)   (1,210)   (1,204)   (6)
                
Net (Loss)  $(562,814)  $(8,625)  $(554,189)

 

Revenues:

 

The Company was established on September 30, 2009 and is in the development stage and had no revenue during the three month periods ended May 31, 2014 and May 31, 2013.

 

General and Administrative:

 

General and administrative expense was $501,929 for the three months ended May 31, 2014 compared to $2,815 for the three months ended May 31, 2013, an increase of $499,114. Our general and administrative expenses consisted of share based compensation expense, rents, bank fees, postage and delivery, stock services and travel expenses. The increase in our general and administrative expenses was primarily due to share based compensation of $435,415, officer’s salary of $45,000, travel expenses of $13,462 and web site design of $6,000.

 

18
 

 

Professional Fees:

 

Professional fees expense was $59,675 for the three months ended May 31, 2014 compared to $4,606 for the three months ended May 31, 2013, an increase of $55,069. The increase in our professional fees was a result of increased legal fees incurred in the three months ended May 31, 2014 related to compliance and reporting services of $25,641 that were not incurred during the comparative three months ended May 31, 2013, oil and gas consulting fees of $16,794 and accounting fees paid to our CFO of $14,532 during the three months ended May 31, 2014.

 

Net Operating Loss:

 

The net operating loss for the three months ended May 31, 2014 was $561,604 or ($0.01) per share, compared to a net operating loss of $7,421, or ($0.00) per share for the three months ended May 31, 2013, an increase of $554,183. Our net operating loss increased primarily due to the increased share based compensation expense and professional fees incurred in the three months ended May 31, 2014 compared to the three months ended May 31, 2013.

 

Other Expense:

 

Other expense was $1,210 for the three months ended May 31, 2014, compared to $1,204 for the three months ended May 31, 2013, an increase of $6. The increase was due to higher note payable to a related party, resulting in higher interest expense.

 

Net Loss:

 

The net loss for the three months ended May 31, 2014 was $562,814, or ($0.01) per share, compared to a net loss of $8,625, or ($0.00) for the three months ended May 31, 2013, an increase of $554,189. Our net loss increased primarily due to the increased share based compensation expense, legal fees associated with our compliance and reporting services, increased travel expenses and additional accounting fees.

 

Results of Operations for the Six Months Ended May 31, 2014 and 2013:

 

The following table summarizes selected items from the statement of operations for the six month periods ended May 31, 2014 and May 31, 2013.

 

   For the Six Months Ended     
   May 31,   May 31,   Increase / 
   2014   2013   (Decrease) 
Revenues  $   $   $ 
                
General and Administrative   1,159,267    7,701    1,151,566 
Professional Fees   116,747    18,751    97,996 
Total Operating Expenses   1,276,014    26,452    1,249,562 
                
Net Operating (Loss)   (1,276,014)   (26,452)   (1,249,562)
                
Total Other Income (Expense)   (3,572)   (2,237)   (1,335)
                
Net (Loss)  $(1,279,586)  $(28,689)  $(1,250,897)

 

Revenues:

 

The Company was established on September 30, 2009 and is in the development stage and had no revenue during the six month periods ended May 31, 2014 and May 31, 2013.

 

General and Administrative:

 

General and administrative expense was $1,159,267 for the six months ended May 31, 2014 compared to $7,701 for the three months ended May 31, 2013, an increase of $1,151,566. Our general and administrative expenses consisted of share based compensation expense, rents, bank fees, postage and delivery, stock services and travel expenses. The increase in our general and administrative expenses was primarily due to share based compensation of $1,002,082, officer’s salary of $75,000, travel expenses of $50,160 and web site design of $19,325, rent of $8,807 and filing fees of $1,509.

 

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Professional Fees:

 

Professional fees expense was $116,747 for the six months ended May 31, 2014 compared to $18,751 for the six months ended May 31, 2013, an increase of $97,996. The increase in our professional fees was a result of increased legal fees of $32,224 incurred in the six months ended May 31, 2014 related to compliance and reporting services that were not incurred during the comparative six months ended May 31, 2013 and accounting fees paid to our CFO of $32,500, and $36,794 in oil and gas consulting fees paid during the six months ended May 31, 2014.

 

Net Operating Loss:

 

The net operating loss for the six months ended May 31, 2013 was $1,276,014 or ($0.03) per share, compared to a net operating loss of $26,452, or ($0.00) per share for the six months ended May 31, 2013, an increase of $1,249,562. Our net operating loss increased primarily due to the increased share based compensation expense and professional fees incurred in the six months ended May 31, 2014 compared to the six months ended May 31, 2013.

 

Other Expense:

 

Other expense was $3,572 for the six months ended May 31, 2014, compared to $2,237 for the six months ended May 31, 2013, an increase of $1,335. The increase was due to higher note payable to a related party, resulting in higher interest expense.

 

Net Loss:

 

The net loss for the six months ended May 31, 2014 was $1,779,586, or ($0.03) per share, compared to a net loss of $28,689, or ($0.00) for the six months ended May 31, 2013, an increase of $1,750,897. Our net loss increased primarily due to the increased share based compensation expense, legal fees associated with our compliance and reporting services, increased travel expenses and additional accounting fees.

 

Liquidity and Capital Resources

 

The following table summarizes total assets, accumulated deficit, stockholders’ equity (deficit) and working capital at May 31, 2014 compared to November 30, 2013.

 

   May 31,   November 30, 
   2014   2013 
           
Total Assets  $226,237   $2,718 
           
Accumulated (Deficit)  $(1,663,057)  $(383,471)
           
Stockholders’ Equity (Deficit)  $87,501   $(104,992)
           
Working Capital (Deficit)  $(137,913)  $(33,088)

 

Our principal source of operating capital has been provided from private sales of our Common Stock and debt financing. At May 31, 2014, we had a negative working capital position of $(137,913). As we continue to develop our business and attempt to expand operational activities, we expect to continue to experience net negative cash flows from operations in amounts not now determinable, and will be required to obtain additional financing to fund operations through Common Stock offerings and debt borrowings to the extent necessary to provide working capital. We have and expect to continue to have substantial capital expenditure and working capital needs. We do not now have funds sufficient to fund our operations at their current level for the next twelve months. We need to raise additional cash to fund our operations and implement our business plan. We expect that the additional financing will (if available) take the form of a private placement of equity, although we may be constrained to obtain additional debt financing in lieu thereof. We are maintaining an on-going effort to locate sources of additional funding, without which we will not be able to remain a viable entity. No financing arrangements are currently under contract, and there are no assurances that we will be able to obtain adequate financing. If we are able to obtain the financing required to remain in business, eventually achieving operating profits will require substantially increasing revenues or drastically reducing expenses from their current levels or both. If we are able to obtain the required financing to remain in business, future operating results depend upon a number of factors that are outside of our control.

 

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We anticipate that we may incur operating losses in the next twelve months. Our revenues are not expected to exceed our investment and operating costs in the next twelve months. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of operations. To address these risks, we must, among other things, seek growth opportunities through investment, implement and successfully execute our business strategy, respond to competitive developments, and attract, retain and motivate qualified personnel. We cannot assure that we will be successful in addressing such risks, and the failure to do so could have a material adverse effect on our business prospects, financial condition and results of operations.

 

Satisfaction of our cash obligations for the next 12 months.

 

As of May 31, 2014, our balance of cash on hand was $632. Our plan for satisfying our cash requirements for the next twelve months is through the sale of shares of our Common Stock.

 

Going concern.

 

Our financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. We incurred continuous losses from operations, had an accumulated deficit of $1,663,057 and $383,471 at May 31, 2014 and November 30, 2013, respectively, and a working capital deficit of $137,913 and $33,088 at May 31, 2014 and November 30, 2013, respectively. In addition, we do not currently have the cash resources to meet our operating commitments for the next twelve months. The Company’s ability to continue as a going concern must be considered in light of the problems, expenses, and complications frequently encountered by entrance into established markets and the competitive nature in which we operate.

 

Our ability to continue as a going concern is dependent on our ability to generate sufficient cash from operations to meet our cash needs and/or to raise funds to finance ongoing operations and repay debt. There can be no assurance, however, that we will be successful in our efforts to raise additional debt or equity capital and/or that our cash generated by our future operations will be adequate to meet our needs. These factors, among others, indicate that we may be unable to continue as a going concern for a reasonable period of time.

 

Contractual obligations and commitments.

 

As of May 31, 2014, we lease an office for $500 per month. The lease terms are on a month to month basis.

 

On August 1, 2013, the Company, entered into an engagement letter with Clear Financial Solutions, Inc., a Texas corporation (Clear Financial). On December 5, 2013, the Company and Clear Financial entered into Amendment No.1 to Engagement Letter. Under the engagement letter and the amendment (collectively, the “Engagement Letter”) Clear Financial will provide certain financial consulting services to the Company and Mr. Steven M. Plumb, founder and President of Clear Financial, will serve as the Chief Financial Officer of the Company. Clear Financial will, among other things, prepare and review the Company’s financial statements, oversee internal accounting controls and provide advice on generally accepted accounting principles. In addition, As compensation for the services provided, the Company will pay Clear Financial a fee of $4,500 per month.

 

On November 14, 2013, the Company, entered into a purchase agreement (the “Tidewater Agreement”) with Tidewater Oil & Gas Company LLC (“Tidewater”) pursuant to which the Company agreed to purchase an 87.5% working interest in oil and gas leases covering approximately 36,787 acres in Iron County, Utah. Tidewater has agreed to deliver the leases to the Company with an 80% net revenue interest. Tidewater’s sale of the leases was subject to the approval of the U.S. District Court for the District of Colorado (the “Bankruptcy Court”), which is presiding over Tidewater’s Chapter 11 bankruptcy proceedings. The Bankruptcy Court approved the sale of the leases on December 11, 2013.

 

Pursuant to the Tidewater Agreement, the purchase price for the leases is $290,000 and is payable by the Company as follows: $45,000 on or before December 21, 2013, $45,000 on or before February 4, 2014, $100,000 on or before May 5, 2014 and $100,000 on or before August 3, 2014. The Company made the initial $45,000 payment on December 17, 2013. The leases will not be transferred to the Company until the purchase price has been paid in full. The Company has also agreed to assume its proportionate share of all rental payments due on the leases, beginning immediately. If the Company fails to pay timely any rental payment, it will lose its interest in the underlying lease.

 

The Tidewater Agreement contemplates the drilling of an initial 12,000 foot vertical test well in the Jurassic-Navajo, Permian-Kaibab formation on the leases. Although Tidewater will retain a 12.5% working interest in the leases, the Company has agreed to pay 100% of the cost of drilling and completing this test well, which is estimated to be approximately $2.5 million. The Company has agreed to pre-pay such costs at least 30 days prior to the spud date, which is expected to be no later than February 3, 2015. If the Company fails to prepay such costs, it will forfeit its interests in the oil and gas leases and Tidewater will retain the purchase price. On January 30, 2014, the Company paid $52,734 to Tidewater, for reimbursement for costs of $7,734 and the second installment of the purchase price of $45,000.

 

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On May 6, 2014, the Company entered into a letter agreement (the “TJBB Agreement”) with Tom Johnson and Bill Berryman (“TJBB”), pursuant to which the Company agreed to purchase an 87.5% working interest in oil and gas leases covering approximately 18,690.50 acres in Iron County, Utah. The subject acreage is located in an area known as the Parowan Prospect, along the same structure where the leases covered by the Tidewater Agreement are located. TJBB have agreed to deliver the leases to the Company with an 80% net revenue interest. TJBB will retain a 12.5% working interest in the leases, although the Company has agreed to pay 100% of the cost of drilling and completing a 12,000 foot vertical test well in the Jurassic-Navajo, Permian-Kaibab formation by September 1, 2015. The Company’s requirement to drill the initial test well is contained in both the Tidewater Agreement and the TJBB Agreement, and by drilling one well in the noted formation, the Company will have satisfied its initial test well drilling obligation under each agreement.

 

Pursuant to the TJBB Agreement, the purchase price for the leases is $168,215 and is payable by the Company as follows: $43,000 on or before May 16, 2014, $50,215 on or before June 30, 2014 and $75,000 on or before September 28, 2014. The leases will not be transferred to the Company until the purchase price has been paid in full. After the final payments have been made under both the TJBB Agreement and the Tidewater Agreement, the Company will have an 87.5% working interest in oil and gas leases covering a total of 55,477.50 acres in Iron County, Utah. The Company has also agreed to assume its proportionate share of all rental payments due on the leases. If the Company fails to pay timely any rental payment, it will lose its interest in the underlying lease. Additionally, if the Company fails to drill and complete the initial test well in the Jurassic-Navajo, Permian-Kaibab formation by September 1, 2015, the Company will forfeit its interest in the leases covered by both the TJBB Agreement and the Tidewater Agreement.

 

On June 6, 2014, the Company made the first payment of $43,000 pursuant to the TJBB Agreement.

 

On May 13, 2014, the Company appointed Rupert Ireland to serve as President, Chief Executive Officer, Secretary and Treasurer of the Company, effective immediately. In connection with Mr. Ireland’s appointment as President and Chief Executive Officer, the Company entered into an Employment Agreement, dated May 13, 2014, with Mr. Ireland. Pursuant to the Employment Agreement, Mr. Ireland will be paid a base salary of $120,000 per year and a signing bonus of $5,000.

 

Summary of product and research and development that we will perform for the term of our plan.

 

We are currently engaged in the process of analyzing the seismic data covering our leases.

 

Expected purchase or sale of plant and significant equipment.

 

We do not anticipate the purchase of significant property and equipment in the near future.

 

Off-balance sheet arrangements.

 

None.

 

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Recently issued accounting standards.

 

In February 2013, Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:

 

  - Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and
  - Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

 

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected to have a material impact on our financial position or results of operations.

 

In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities , which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not expected to have a material impact on our financial position or results of operations.

 

In October 2012, the FASB issued ASU 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.

 

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Item 3. Quantitative and Qualitative Disclosure About Market Risk.

 

This item in not applicable as we are currently considered a smaller reporting company.

 

Item 4. Controls and Procedures

 

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s officers and directors, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(f) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, in consideration of the fact that the Company has no employees besides the President, the President concluded that the Company’s disclosure controls and procedures are not effective at May 31, 2014 or November 30, 2013. Through the use of external consultants, the Company believes that the financial statements and the other information presented herewith are not materially misstated.

 

Management’s Report on Internal Controls over Financial Reporting

 

We carried out an evaluation of the effectiveness of our disclosure controls and procedures as of May 31, 2014 (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods.

 

The Company’s officers and directors do not expect that the Company’s disclosure controls and procedures or the Company’s 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. 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 the controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the quarter ended May 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

There are no known legal proceedings pending or threatened against us.

 

Item 1A. Risk Factors

 

As a smaller reporting company, we are not required to provide the information required by this item. 

 

Item 2. Unregistered sales of Equity securities and Use of Proceeds

 

On April 20, 2014, the Company entered into a Securities Purchase Agreement with Fieldstone Industries, Inc., pursuant to which the Company agreed to issue 125,000 shares of Common Stock to the investor for an aggregate purchase price of $50,000, or $0.40 per share. The proceeds were received, but the shares have not been issued and as of May 31, 2014 the proceeds were recorded as a stock payable.

 

On April 25, 2014, the Company entered into a Securities Purchase Agreement with Fieldstone Industries, Inc., pursuant to which the Company agreed to issue 300,000 shares of Common Stock to the investor for an aggregate purchase price of $120,000, or $0.40 per share. The proceeds were received, but the shares have not been issued and as of May 31, 2014 the proceeds were recorded as a stock payable.

 

On May 27, 2014, the Company entered into a Securities Purchase Agreement with Fieldstone Industries, Inc., pursuant to which the Company agreed to issue 250,000 shares of Common Stock to the investor for an aggregate purchase price of $100,000, or $0.40 per share. The proceeds were received, but the shares have not been issued and as of May 31, 2014 the proceeds were recorded as a stock payable.

 

All of the transactions listed above were issued in reliance of Reg S.

  

Item 3. Defaults Upon Senior Securities

 

None. 

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

Exhibit   Description
     
10.1   Form of Officer Demand Note
31.1   Section 302 Certification of Chief Executive Officer
31.2   Section 302 Certification of Chief Financial Officer
32.1   Section 906 Certification of Chief Executive Officer
32.2   Section 906 Certification of Chief Financial Officer
101.INS   XBRL Instance Document
101.SCH   XBRL Schema Document
101.CAL   XBRL Calculation Linkbase Document
101.DEF   XBRL Definition Linkbase Document
101.LAB   XBRL Labels Linkbase Document
101.PRE   XBRL Presentation Linkbase Document

 

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SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

VIRTUS OIL AND GAS CORP

 

 

By: /s/ Rupert Ireland
  Rupert Ireland
  President
  Dated: July 15, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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