Breitling Energy (BECC) 10-Q 2011 Q1 Quarterly report

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 June 30, 2011

OR

¨ TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934

From the transition period from ____________ to ___________.

Commission File Number 000-50541

Bering Exploration, Inc.

(Exact name of small business issuer as specified in its charter)

Oncolin Therapeutics, Inc.

(Former Name if Applicable)

Nevada	88-0507007
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)

710 North Post Oak, Suite 410, Houston, Texas 77024

(Address of principal executive offices)

(713) 780-0806

 (Issuer's telephone number)

Check whether the issuer has (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 ¨

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

Large accelerated filer  ¨	Accelerated filer   ¨
Non-accelerated filer  ¨	Smaller reporting company  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

As of August 14, 2011 there were outstanding 24,612,763 shares of common stock, $0.001 par value per share.

BERING EXPLORATION, INC. AND SUBSIDIARIES

INDEX TO FORM 10-QSB

June 30, 2011

Part I	Financial Information
	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets (unaudited)
		June 30, 2011 and March 31, 2011	3
		Condensed Consolidated Statements of Operations (unaudited)
		Three Months Ended June 30, 2011 and 2010, and
		Inception (May 9, 2007) through June 30, 2011	4
		Condensed Consolidated Statements of Cash Flow (unaudited)
		Three Months Ended June 30, 2011 and 2010, and
		Inception (May 9, 2007) through June 30, 2011	5
		Notes to Unaudited Condensed Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	10
	Item 4.	Controls and Procedures	10
Part II	Other Information
	Item 5.	Exhibits	11

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PART I.                FINANCIAL INFORMATION

ITEM 1.                                               FINANCIAL STATEMENTS

BERING EXPLORATION, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2011			March 31, 2011
ASSETS
Cash and cash equivalents	$	391,154		$	531,933
Total current assets		391,154			531,933
Property and equipment, net		1,211			1,641
Oil and gas properties – unproved		356,712			302,304
Total assets	$	749,077			835,878
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	257,701		$	255,731
Accounts payable – related parties		37,947			37,947
Accrued liabilities		67,067			38,967
Notes payable – third parties		72,013			72,013
Short term debt – related parties		369,342			369,342
Convertible note payable – related party		53,302			63,302
Convertible notes, net of discount of $233,014 and $320,274 at June 30, 2011 and March 31, 2011, respectively		266,986			179,726
Total current liabilities		1,124,358			1,017,028
Total liabilities		1,124,358			1,017,028
Shareholders’ deficit:
Common stock, $.001 par value, 500,000,000 shares authorized; 24,462,763 and 24,032,763 shares issued and outstanding at June 30, 2011 and March 31, 2011, respectively		24,463			24,033
Additional paid-in capital		3,745,380			3,197,211
Less - subscription receivable		(180,000	)
Deficit accumulated during the development stage		(3,965,124	)		(3,402,394	)
Total shareholders’ deficit		(375,281	)		(181,150	)
Total liabilities and shareholders' deficit	$	749,077		$	835,878

See accompanying notes to unaudited condensed consolidated financial statements.

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BERING EXPLORATION, INC. AND SUBSIDIARIES

 (A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 (Unaudited)

	Three Months Ended June 30,						Inception  (May 9, 2007) to
	2011			2010			June 30, 2011
Revenue	$	-		$	-		$	-
Costs and expenses:
Compensation and related expenses		238,447			40,000			1,703,932
Office administration		3,700			4,463			28,430
Professional fees		61,873			6,659			1,031,629
Investor relations		128,292			-			439,438
Merger expenses		-			-			8,113
Impairment of license agreement		-			-			80,100
Acquisition costs of subsidiary		-			-			220,000
Depreciation and amortization		430			215			32,823
Other expenses		14,232			-			312,039
Total costs and expenses		446,974			51,337			3,856,504
Interest expense		115,756			3,151			641,626
Gain on deconsolidated subsidiary		-			-			(478,765	)
Other expenses (income)		-			-			(54,241	)
Net loss	$	(562,730	)	$	(54,488	)	$	(3,965,124	)
Net loss per share:
Basic and diluted	$	(0.02	)	$	(0.00	)
Weighted average number of common shares outstanding - Basic and diluted		24,341,884			23,561,884

See accompanying notes to unaudited condensed consolidated financial statements.

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BERING EXPLORATION, INC. AND SUBSIDIARIES

 (A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (Unaudited)

	Three Months Ended June 30,						Cumulative from Inception (May 9, 2007) through
	2011			2010			June 30, 2011
Cash flows from operating activities:
Net loss	$	(562,730	)	$	(54,488	)	$	(3,965,124	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		430			215			23,934
Amortization of deferred financing costs		-			-			15,000
Non-cash compensation expense relating to license agreement		-			-			119,900
Impairment of license agreement		-			-			80,100
Amortization of debt discount		87,260			-			514,971
Share-based compensation		238,447			40,000			1,608,089
Non-cash acquisition of subsidiary		-			-			220,000
Forgiveness of debt		-			-			(54,241	)
Changes in assets and liabilities:
Other current assets		-			-			15,750
Accounts payable		20,872			5,020			327,682
Accounts payable – related parties		-			-			112,622
Accrued liabilities		28,100			3,151			115,510
Net cash used in operating activities		(187,621	)		(6,102	)		(865,807	)
Cash flows from investing activities:
Investment in option agreement		-			-			(20,000	)
Investment in oil and gas properties		-						(270,304	)
Property and equipment		(54,408	)		-			(59,553	)
Net cash used in investing activities		(54,408	)		-			(349,857	)
Cash flows from financing activities:
Proceeds from notes payable – related parties		-			6,102			585,342
Proceeds from convertible notes		-			-			500,000
Proceeds from notes payable		-			-			72,013
Repayment of convertible note – related party		(10,000	)		-			(23,000	)
Proceeds from issuance of  common stock		-			-			91,165
Proceeds from exercise of stock options		111,250			-			381,298
Net cash provided by financing activities		101,250			6,102			1,606,818
Net change in cash and cash equivalents		(140,779	)		-			391,154
Cash and cash equivalents, beginning of period		531,933			14			-
Cash and cash equivalents, end of period	$	391,154		$	14		$	391,544
Supplemental disclosures:
Interest paid	$	-		$	-		$	5,633
Income taxes paid	$	-		$	-		$	-
Non-cash financing activities:
Discount on convertible notes	$	-		$	-		$	747,985
Cancellation of stock certificate		-			-			300
Issuance of note payable for license agreement		-			-			200,000
Stock issued for prepaid investor relation services		-			-			73,800
Forgiveness of debt by officer		-			-			45,086
Stock issued for purchase of Assets		-						32,000
Conversion of notes payable to common stock		-			-			414,568
Stock issued to settle accounts payable		18,902			-			18,902

See accompanying notes to unaudited condensed consolidated financial statements.

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BERING EXPLORATION, INC. AND SUBSIDIARIES

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2011

Note 1.  Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Bering Exploration, Inc. (the "Company" or "Bering") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X related to smaller reporting companies. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes, which are included as part of the Company's Form 10-K filed with the SEC on July 14, 2011.  In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included in the accompanying unaudited consolidated financial statements.  Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year.  Notes to the condensed consolidated financial statements which substantially duplicate the disclosure contained in the audited consolidated financial statements for fiscal year ended March 31, 2011 as reported in the 10-K have been omitted.

Significant accounting policies

Principles of Consolidation

The consolidated financial statements include the accounts of Bering Exploration, Inc. and its wholly owned subsidiaries, Secure Voice Communications, Inc. (Texas) and Bering TX. All significant inter-company accounts and transactions have been eliminated.

Use of Estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Oil and Natural Gas Properties

We account for our oil and natural gas producing activities using the full cost method of accounting as prescribed by the United States Securities and Exchange Commission (SEC). Under this method, subject to a limitation based on estimated value, all costs incurred in the acquisition, exploration, and development of proved oil and natural gas properties, including internal costs directly associated with acquisition, exploration, and development activities, the costs of abandoned properties, dry holes, geophysical costs, and annual lease rentals are capitalized within a cost center on a country by country basis.  Costs of production and general and administrative corporate costs unrelated to acquisition, exploration, and development activities are expensed as incurred.

Costs associated with unevaluated properties are capitalized as oil and natural gas properties but are excluded from the amortization base during the evaluation period. When we determine whether the property has proved recoverable reserves or not, or if there is an impairment, the costs are transferred into the amortization base and thereby become subject to amortization.  We evaluate unevaluated properties for impairment at least annually.

Capitalized costs included in the amortization base are depleted using the units of production method based on proved reserves.  Depletion is calculated using the capitalized costs included in the amortization base, including estimated asset retirement costs, plus the estimated future expenditures to be incurred in developing proved reserves, net of estimated salvage values.

The net book value of all capitalized oil and natural gas properties within a cost center, less related deferred income taxes, is subject to a full cost ceiling limitation which is calculated quarterly.  Under the ceiling limitation, costs may not exceed an aggregate of the present value of future net revenues attributable to proved oil and natural gas reserves discounted at 10 percent using current prices, plus the lower of cost or market value of unproved properties included in the amortization base, plus the cost of unevaluated properties, less any associated tax effects.  Any excess of the net book value, less related deferred tax benefits, over the ceiling is written off as expense. Impairment expense recorded in one period may not be reversed in a subsequent period even though higher oil and gas prices may have increased the ceiling applicable to the subsequent period.

Sales or other dispositions of oil and natural gas properties are accounted for as adjustments to capitalized costs, with no gain or loss recorded unless the ratio of cost to proved reserves would significantly change. 

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Note 2.  Going Concern

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business.  The Company has not generated revenue since its inception and is unlikely to 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 and the ability of the Company to obtain necessary equity financing to continue operations and the attainment of profitable operations.  As of June 30, 2011, the Company has accumulated losses of $3,965,124 since inception and negative working capital of $733,204.  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.  

Note 3. Related Party Transactions

In April 2010, the Company amended a note payable in the amount of $63,302 to the chief executive officer to include a conversion feature which would allow the holder to convert the note payable and associated accrued interest into shares of the Company’s common stock at a conversion rate of $1.00 per share. The convertible note payable is due upon demand and has an interest rate of 10% per annum.  In May 2011, the Company made a $10,000 principal payment on this note.

Note 4.  Common Stock

In April 2011, the Company issued 30,000 shares of its common stock to a law firm as payment for services rendered.  The fair market value of the common stock on the date of issuance was $37,800 which was offset against accounts payable of $18,902.  The balance of $18,898  was recognized by the Company as additional stock based compensation expense for the three months ended June 30, 2011.

In April and May 2011, the Company issued 400,000 shares from the exercise of options for total consideration of $291,250 of which $180,000 remains in subscription receivable.

Note 5. Stock Options and Warrants

In April and May 2011, the Company granted 300,000 stock options for consulting services at exercise prices ranging from $0.60 to $0.80.  These options have a term of 2 years and vested immediately.  The options have a fair value of $188,890 which was recorded immediately to expense and was calculated using the Black-Scholes option-pricing model.  Variables used in the valuation include (1) discount rates of 0.56% and 0.65%, (2) expected life of 2 years, (3) expected volatility of 133.88% and 134.86% and (4) zero expected dividends.

In April 2011, the Company repriced 250,000 options that were previously issued to reduce the exercise prices ranging from $0.65 to $1.16.  The options were remeasured at the date of modification and an incremental compensation expense of $10,263 was recognized.

In May 2011, the Company issued 460,000 stock warrants to a consultant representing 50% of  a quarterly retainer.  The warrants are exercisable at  $0.75 per share, have a term of 5 years and vests over a period of 3 years beginning May 1, 2011.  The warrants have a fair value of $367,136 which was calculated using the Black-Scholes option pricing model.  Variables used in the valuation include (1) discount rate of 1.97%,  (2) expected life of 5 years, (3) expected volatility of 152.9% and (4) zero expected dividends.  Stock-based compensation expense recognized for these warrants amounted to $20,396 for the three months ended June 30, 2011 and the unamortized expense as of the same date amounted to $346,740.

A summary of option activity for the three months ended June 30, 2011 is presented below:

						Weighted
				Weighted		average
				average		remaining		Aggregate
				exercise		contracutal		intrinsic
	Options			price		life (years)		value
Outstanding March 31, 2011		100,000		$	1.36
Granted		300,000			0.60
Exercised		(400,000	)		0.73
Forfeited		-			-
Expired		-			-
Outstanding June 30, 2011		-		$	-		-		-

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The weighted average grant date fair value for the options granted during the period was $0.63.

A summary of warrant activity for the three months ended June 30, 2011 is presented below:

					Weighted
			Weighted		average
			average		remaining		Aggregate
			exercise		contracutal		intrinsic
	Warrants		price		life (years)		value
Outstanding March 31, 2011		150,000	$	0.50
Granted		460,000		0.75
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding June 30, 2011		610,000	$	0.69		4.81	$	30,000

The weighted average grant date fair value for the warrants granted during the period was $0.80.

Note 5.  Subsequent Event

In July 2011, the Company made a $5,302 principal payment to an officer of the Company on his outstanding convertible note payable.

In August 2011, the Company entered into a participation agreement wherein the Company acquired a 10% working interest in an oil and gas drilling prospect in exchange for consideration of $40,000 which is equivalent to the Company’s proportionate share of the drilling cost of a test well.

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ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company’s financial condition as of June 30, 2011 and 2010, and its results of operations for the three months ended June 30, 2011 and 2010, and for period inception (May 9, 2007) through June 30, 2011, should be read in conjunction with the audited consolidated financial statements and notes included in Bering’s Form 10-K for the year ended March 31, 2011, filed with the Securities and Exchange Commission.

Overview

In July 2010, the Company determined to primarily focus its business on the exploration, acquisition, development, production and sale of natural gas, crude oil and natural gas liquids from conventional reservoirs within the United States.   We have a 5% back end after payout working interest in a single well being drilled in South Texas, along the Texas Gulf Coast.

In addition, the Company owns 25% of Intertech Bio, which is developing products to treat cancer, infectious diseases and other medical conditions associated with compromised immune systems.  The Company is not actively involved in the management of Intertech Bio.

Results of Operations – Inception (May 9, 2007) to June 30, 2011

The Company has had no revenue for period from inception (May 9, 2007) through June 30, 2011.

The Company’s expenses were $3,856,504 since inception, which were primarily comprised of compensation and related expenses of $1,703,932, professional fees of $1,031,629, investor relations expenses of $439,438, and other miscellaneous expenses of $312,039. In addition, we had $641,626 of interest expense since inception.

In addition to the foregoing expenses, the Company performed an impairment test on the carrying value of the license agreement it had acquired from Secure Voice Communications, Inc. (Florida) and determined that an impairment charge for the full carrying value of $80,100 was warranted.  In connection with the license agreement acquisition, Secure Voice Communications, Inc. (Texas) issued a promissory note to Secure Voice Communications, Inc. (Florida) in the principal amount of $200,000.  This amount exceeded the estimated fair value of the license agreement of $80,100 and the excess amount of $119,900 was charged to compensation expense.

In November 2007, the Company issued 500,000 shares of its restricted common stock to the shareholders of Intertech Bio Corporation for 100% of the capital stock of Intertech Bio, with Intertech Bio becoming a wholly-owned subsidiary of the Company.  Based upon the fair market value on the date of acquisition, the Company valued the common stock issued at $220,000 and charged the entire amount to acquisition costs during the quarter ended June 30, 2008.

As a result of the foregoing, the Company’s net loss for the period inception (May 9, 2007) through June 30, 2011 was $3,965,124.

Comparison of Three Months Ended June 30, 2011 and 2010.

The Company has had no revenue for the three months ended June 30, 2011 and 2010.

The Company’s expenses increased from $51,337 for three months ended June 30, 2010 to $446,974 for three months ended June 30, 2011.  The increase of $395,637 was mainly due to higher expenses to compensation, $238,447, investor relations, $128,292 and to professional fees, $61,873

As a result of the foregoing, the Company’s net loss for the three months ended June 30, 2011 and 2010 was $562,730 and $54,488, respectively.

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Liquidity and Capital Resources

As of June 30, 2011, the Company had $391,154 in cash and negative working capital of $733,204.

Net cash used in operating activities for the three months ended June 30, 2011 and 2010 was $187,621 and $6,102, respectively.

ITEM 3.             QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

ITEM 4.                               CONTROLS AND PROCEDURES

                        (a)                        Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of our disclosure controls and procedures (as defined in Rules13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were not effective as of June 30, 2011 due to a lack of segregation of duties and an overreliance on consultants in the accounting and financial reporting process.

                        (b)                        Changes in Internal Controls Over Financial Reporting

There were no changes that occurred during the quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II.  OTHER INFORMATION

ITEM 6. EXHIBITS

Exhibit No.	Description
31.1	Certification of J. Leonard Ivins.
31.2	Certification of Steven M. Plumb
32.1	Certification for Sarbanes-Oxley Act of J. Leonard Ivins.
32.2	Certification for Sarbanes-Oxley Act of Steven M. Plumb

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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

	BERING EXPLORATION, INC.
By:	/s/ J. Leonard Ivins
	J. Leonard Ivins, Chief Executive Officer
	Date: August 14, 2011

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

Signature	Title	Date
/s/J. Leonard Ivins	Chief Executive Officer and	August 14, 2011
J. Leonard Ivins	Chairman of the Board
/s/Steven M. Plumb	Principal Financial and	August 14, 2011
Steven M. Plumb	Accounting Officer

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