VIKING ENERGY GROUP, INC. - Quarter Report: 2013 June (Form 10-Q)

vkin_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

o QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2013

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

For the transition period from _______ to _______

Commission file number 000-29219

VIKING INVESTMENTS GROUP, INC.

(Exact name of registrant as specified in its charter)

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

138 Pinxinguan Road, Suite 906 Shanghai, China, 200070
(Address of principal executive offices)		(Zip Code)

Issuer’s telephone number +86 (21) 6034 0015

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ 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 þ No o

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

Large Accelerated Filer	o	Accelerated Filer	o
Non Accelerated Filer	o	Smaller Reporting Company	þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o

APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares of common stock outstanding as of June 30, 2013 was 16,531,996.

VIKING INVESTMENTS GROUP, INC.

Form 10-Q

PART I – FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS

	Interim Consolidated Balance Sheets (Unaudited)	F-1

	Interim Consolidated Statements of Operations and Comprehensive Loss (Unaudited)	F-2

	Interim Consolidated Statements of Cash Flows (Unaudited)	F-3

	Interim Consolidated Statements of Stockholders' Deficiency (Unaudited)	F-4

	Notes to Interim Consolidated Financial Statements (Unaudited)	2-11

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	12-14

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	14

ITEM 4.	CONTROLS AND PROCEDURES	14

PART II – OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	15

ITEM 1A.	RISK FACTORS	15

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	15

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	15

ITEM 4.	MINE SAFETY DISCLOSURES	15

ITEM 5.	OTHER INFORMATION	15

ITEM 6.	SUBSEQUENT EVENT	15

ITEM 7.	EXHIBITS	16

	SIGNATURES	17

VIKING INVESTMENTS GROUP, INC.

Interim Consolidated Financial Statements

(Unaudited)

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VIKING INVESTMENTS GROUP, INC.

Interim Consolidated Balance Sheets

(Unaudited)

(Amounts expressed in US dollars)

	June 30			December 31
	2013			2012
	(Unaudited)			(Restated)
	$			$
ASSETS
Cash		24,908			159,297
Other receivables		9,706			7,332
Total current assets		34,614			166,629
Leasehold improvements		7,577			-
Long-term Investment		-			-
TOTAL ASSETS		42,191			166,629

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
LIABILITIES
Other payables		60,255			62,641
Amount due to Director		147,504			49,767
Short-term loan (Note 5)		-			79,282
Convertible note payable (Note 9)		102,821
Accrued liabilities		96,444			55,830
TOTAL LIABILITIES		407,024			247,520
Going concern (Note 1)
Related party transactions (Note 3)
Commitment (Note 6)
Subsequent event (Note 10)

STOCKHOLDERS’ DEFICIENCY
Capital Stock
Series C voting Preferred stock, $0.001 par value, 5,000,000 shares authorized, 28,092 shares issued and outstanding as of June 30, 2013 and December 31, 2012		28			28
Common stock, $0.001 par value, 100,000,000 shares authorized and outstanding 16,531,996 shares issued as of June 30, 2013, and 24,683,285 shares issued as of December 31, 2012 (Note 7)		16,533			24,684
Additional Paid-In Capital (Note 7)		5,828,814			5,790,663
Deficit		(6,211,837	)		(5,897,879	)
Foreign currency translation adjustment		1,629			1,613
TOTAL STOCKHOLDERS’ DEFICIENCY		(364,833	)		(80,891	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY		42,191			166,629

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-1

VIKING INVESTMENTS GROUP, INC.

Interim Consolidated Statements Of Operations And Comprehensive Loss

(Unaudited)

(Amounts expressed in US dollars)

	Three months ended,						Six months ended,
	June 30,						June 30,
	2013			2012			2013			2012
	$			$			$			$
Revenue:		-			-			-			-
General and administrative expenses:
Interest expenses		-			6,183			-			6,183
Office supplies and services		15,023			6,774			30,099			31,662
Professional fees		95,187			35,423			132,423			39,913
Rent		9,754			4,985			14,061			11,245
Wages		63,224			64,753			92,617			130,268
Total general and administrative expenses		183,188			118,118			269,200			219,271

Derivative loss		(44,943	)					(44,943	)
Fair value change on convertible note		122						122
Other income		37			19			63			26
Loss from continuing operations		(227,972	)		(118,099	)		(313,958	)		(219,245	)
Foreign currency translation adjustment		71			(19	)		16			(50	)
Net loss and Comprehensive loss		(227,901	)		(118,118	)		(313,942	)		(219,295	)
Loss per common share - Basic and diluted		(0.013	)		(0.006	)		(0.015	)		(0.012	)
Weighted average number of common shares outstanding – basic and diluted		17,763,660			19,482,084			20,894,215			18,813,624

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-2

VIKING INVESTMENTS GROUP, INC

Interim Consolidated Statements Of Cash Flows

(Unaudited)

(Amounts expressed in US dollars)

	Six months			Six months
	Ended			Ended
	June 30, 2013			June 30, 2012
	$			$
Cash flows from operating activities:
Net loss		(313,958	)		(219,245	)
Amortization		1,516			-
Expenses and service costs assumed by shareholders		-			10,850
Issuance of common shares for expense and service		30,000			-
Derivative loss		44,943
Fair value change on convertible note		(122	)		-
(Decrease) in Other payables		(2,386	)		-
Increase in accrual expenses		40,614			129,436
(Decrease) in other receivables		(2,374	)		(3,328	)
Net cash used in operating activities		(201,767	)		(82,287	)

Cash flows from investing activities:

Leasehold improvements		(9,093	)		-
Net cash used in investing activities		(9,093	)		-

Cash flows from financing activities:
Amount due to Director		97,737
Proceeds from convertible note		58,000
Proceeds from Short-term loan		-			79,282
Repayment of Short-term loan		(79,282	)		-
Net cash provided by (used in) financing activities		76,455			79,282

Effect of exchange rate changes on cash		16			(50	)

Net increase/(decrease) in cash		(134,389	)		(3,055	)

Cash, beginning of period		159,297			7,946

Cash, end of period		24,908			4,891

Supplemental Cash Flow Information (See Note 5)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-3

VIKING INVESTMENTS GROUP, INC.

Interim Consolidated Statements of Stockholders’ deficiency

(Unaudited)

(Amounts expressed in US dollars)

	Common Shares						Preferred Stock				Additional Paid-in			Accumulated Other Comprehensive					Total Stockholders’
	Number			Amount			Number		Amount		Capital			Income		Deficit			Deficiency
	$			$			$		$		$			$		$			$
Balance at December 31, 2011		18,553,778			18,554					-		5,428,460			-		(5,467,089	)		( 20,075	)
Net Loss																	(430,790	)		(430,790	)
Foreign currency translation adjustment															1,613					1,613
Expenses assumed by stockholders		422,778			423					-		46,427			-		-			46,850
Issuance for loan collateral		879,196			879							(879	)							-

Issuance of preferred stock in exchange of the common stock		(28,092	)		(28	)		28,092		28										-,

Issuance of new shares to shareholder		3,205,960			3,206							155,715								158,921
Issuance of new shares to investor		1,649,665			1,649							160,940								162,589
Balance at December 31, 2012		24,683,285			24,684			28,092		28		5,790,663			1,613		(5,897,879	)		(80,891	)
Net loss																	(313,958	)		(313,958	)
Foreign currency translation adjustment		-			-										16		-			16
Issuance of new shares for legal service (Note 7)		200,000			200			-		-		29,800			-		-			30,000
Returned loan collateral		(879,196	)		(879	)						879								-
Cancellation of shares due to repurchase of CNWD (Note 8)		(7,472,093	)		(7,472	)		-		-		7,472			-		-			-
Balance at June 30, 2013		16,531,996			16,533			28,092		28		5,828,814			1,629		(6,211,837	)		(364,833	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-4

VIKING INVESTMENTS GROUP, INC.

Interim Notes to Consolidated Financial Statements

(Unaudited)

(Amounts expressed in US dollars)

1. Nature of Business and Going Concern Assumption

The Company was incorporated under the laws of the State of Florida on May 3, 1989 as Sparta Ventures Corp. and remained inactive until June 27, 1998. The name of the Company was changed to Thermal Ablation Technologies Corporation on October 8, 1998 and then to Poker.com, Inc. on August 10, 1999. On September 15, 2003, the Company changed its name to LegalPlay Entertainment Inc. and on November 8, 2006, the name of the Company was changed to Synthenol Inc. Effective November 3, 2008, the Company merged with and into a wholly-owned subsidiary, SinoCubate, Inc., which remained the surviving entity of the merger. SinoCubate was formed in the State of Nevada on September 11, 2008. The merger resulted in a change of name of the Company from Synthenol Inc. to SinoCubate, Inc. and a change in the state of incorporation of the Company from Florida to Nevada. On June 13, 2012, the Company changed its name to Viking Investments Group, Inc., and effective July 16, 2012, the Financial Industry Regulatory Authority (“FINRA”) approved this name change, and the Company’s ticker symbol was changed to “VKIN.”

Since November 2008, the Company has sought to enter into contractual arrangements with entities that allow the Company to either purchase outright the assets and/or business operations of such entities or to enter into business arrangements, such as joint ventures or similar combinations with such entities to manage and operate such entities.

On August 29, 2011, the Company acquired from Tom Simeo, the Company’s Chairman, Chief Executive Officer and President, Viking Investments LLC, incorporated in Delaware (“Viking Delaware”) for a nominal value of One Hundred Dollars ($100). At the time of the acquisition, except for a lease obligation related to the Company’s office, Viking Delaware had no assets and no liabilities. The lease expired in the year of 2011. Also in 2011, the Company began providing incubation and consulting services to emerging market companies. Commencing from the third quarter of the year 2012, the Company is no longer a development stage enterprise and began generating revenue.

On June 29, 2011, and on August 29, 2011, Viking Investments Group, LLC, a company controlled and managed by the Company’s Chairman, Chief Executive Officer and President, Tom Simeo, incorporated under the laws of The Federation of St. Kitts and Nevis, (“Viking Nevis”) sold 100,000 and 466,813 shares respectively of China Wood, Inc., publicly listed in the United States with the ticker “CNWD”, (the “China Wood Shares”) owned by Viking Nevis, in exchange for 1,912,000 and 12,569,420 newly issued restricted shares of SinoCubate respectively (the SinoCubate Shares”). By August 29, 2011, Viking Nevis completed the purchase of the China Wood Shares by having delivered a total of 566,813 shares of common stock in China Wood, Inc. to the Company. The China Wood Shares were registered in a Form S-1 Registration Statement declared effective by the SEC on April 7, 2011. The China Wood Shares are subject to a “Leak-Out Provision” whereby only a certain amount of shares can be sold per month up and until the first anniversary of the effective day of the aforementioned registration statement, April 7, 2012. The Company accounted the exchange of shares under ASC 845 - Nonmonetary transactions. Due to the fact that the exchange of shares had no commercial substance, the Company recorded the China Wood Shares as a long-term investment and valued the shares at the carrying value on the transaction date. The shares were fully impaired as of December 31, 2011. See Note 2 and 4 for additional information.

On September 26, 2011, the Company entered into a non-competition agreement with Viking Investments Group LLC, a Nevis and St. Kitts corporation (“Viking Nevis”) whereby Viking Nevis agreed to cease all operations in China and transfer all rights, title and interest related to its business in China to the Company and its wholly owned subsidiary, Viking Investments Group LLC, a Nevada corporation, in exchange for the Company issuing registered shares of its common stock under a Form S-8 to Viking’s staff.

The Company incurred recurring losses and had a net loss of $313,958 and $219,245 for the six months ended June 30, 2013 and June 30, 2012 respectively. As at June 30, 2013, the Company’s cumulative deficit and stockholders’ deficiency amounted to $6,211,837 and $364,833, and the Company had a cash balance of $24,908 and a working capital deficiency of $372,410. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances; however there is no assurance of additional funding being available.

VIKING INVESTMENTS GROUP, INC.

Interim Notes to Consolidated Financial Statements

(Unaudited)

(Amounts expressed in US dollars)

2. Summary of Significant Accounting Policies

a) Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in United States or “U.S. GAAP” for interim financial information and with the instructions to Form 10-Q as promulgated by the Securities and Exchange Commission or the SEC. Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles for complete financial statements. The accompanying unaudited financial statements and related notes should be read in conjunction with the audited financial statements and the Form 10-K of the Company for the year ended December 31, 2012. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

b) Consolidated Financial Statements

The financial statements presented herein reflect the consolidated financial results of the Company and its wholly owned subsidiary Viking Delaware. All significant intercompany transactions and balances have been eliminated upon consolidation.

The foregoing interim unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles or GAAP for consolidated financial information and with the instructions to Form 10-Q as promulgated by the Securities and Exchange Commission or the SEC. Accordingly, these consolidated financial statements include all of the disclosures required by generally accepted accounting principles for complete consolidated financial statements.

c) Use of Estimates

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

VIKING INVESTMENTS GROUP, INC.

Interim Notes to Consolidated Financial Statements

(Unaudited)

(Amounts expressed in US dollars)

d) Financial Instruments

ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 820, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measurements. The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

·	Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

·	Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

·	Level 3: inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company measures fair value as an exit price using the procedures described below for all instruments measured at fair value. If quoted market prices are not available, fair value is based upon external valuation and internally developed models that use, where possible, current market-based or independently-sourced market parameters such as interest rates and stock prices. Items valued using internally developed models are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be inputs that are readily observable. The determination of fair value considers various factors including interest rate yield curves and time value underlying the financial instruments.

e) Revenue recognition

Revenues from contracts for consulting services with fees based on time and materials are recognized as the services are performed and amounts are earned in accordance with the Securities and Exchange Commission (the “SEC”) Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements” (“SAB 101”), as amended by SAB No. 104, “Revenue Recognition” (“SAB 104”). The Company considers amounts to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable, and collectability is reasonably assured. In such contracts, the Company’s efforts, measured by time incurred, typically represent the contractual milestones or output measure, which is the contractual earnings pattern. For consulting contracts with fixed fees, the Company recognizes revenues in accordance with contract terms, and when the services are delivered, price is determinable and the revenue is earned or collectable.

f) Cash

Cash includes bank deposits and cash on hand.

VIKING INVESTMENTS GROUP, INC.

Interim Notes to Consolidated Financial Statements

(Unaudited)

(Amounts expressed in US dollars)

g) Loss per share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding and, adjusted by any effects of warrants and options outstanding, if dilutive, that may add to the number of common shares outstanding during the period.

h) Comprehensive income

FASB ASC 220 “Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in the consolidated financial statements. For the six months ended June 30, 2013 and 2012, comprehensive loss was $313,942 and $219,295 respectively.

i) Income taxes

The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, 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. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets likely. The Company did not incur any material impact to its financial condition or results of operations due to the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company is subject to U.S federal jurisdiction income tax examinations for the tax years 2006 through 2012. In addition, the Company is subject to state and local income tax examinations for the tax years 2006 through 2012.

j) Stock-based compensation

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

The fair value of stock warrants was determined at the date of grant using the Black-Scholes option pricing model. The Black-Scholes option model requires management to make various estimates and assumptions, including expected term, expected volatility, risk-free rate, and dividend yield. The expected term represents the period of time that stock-based compensation awards granted are expected to be outstanding and is estimated based on considerations including the vesting period, contractual term and anticipated employee exercise patterns. Expected volatility is based on the historical volatility of the Company’s stock. The risk-free rate is based on the U.S. Treasury yield curve in relation to the contractual life of stock-based compensation instrument. The dividend yield assumption is based on historical patterns and future expectations for the Company to declare dividends.

VIKING INVESTMENTS GROUP, INC.

Interim Notes to Consolidated Financial Statements

(Unaudited)

(Amounts expressed in US dollars)

k) Leasehold Improvements

Leasehold improvements represent the office decoration expense, and are amortized over the lease term. Leasehold improvements are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. An impairment loss is recognized if the carrying amount of the asset exceeds its fair value.

l) Long-term investment

Management determines the appropriate classification of investment securities at the time of purchase. Securities are classified held-to-maturity when the Company has both the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost. Securities that are bought and held principally for the purpose of selling in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings. Securities not classified as held-to-maturity or trading are classified as available-for-sale. Available-for-sale securities are stated at fair value, with the impairment losses, net of income taxes, charged to net income in the period in which it occurs.

The fair value of securities is based on quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. A decline in the market value of any available-for-sale or held-for-maturity security below cost that is deemed to be other-then-temporary results in a reduction in carrying amount to fair value.

Impairments that are considered other-than-temporary are recognized as a loss in the consolidated statements of operations. The Company considers various factors in reviewing impairments, including the length of time and extent to which fair value has been less than the Company’s cost basis, the financial condition and near-term prospects of the issuer, and the Company’s intent and ability to hold the investments for a period of time sufficient to allow for any anticipated recovery in market value.

As of June 30, 2013 and 2012, the Company had no trading and held-to-maturity securities. The Company’s long-term investment in the China Wood Shares was written off as of December 31, 2011. See Note 3 for more information regarding the China Wood Shares.

m) Foreign currency exchange

The company’s presentation currency is USD and the functional currency is the local currency, RMB. Monetary assets and liabilities are translated into USD at the balance sheet date exchange rate and nonmonetary assets and liabilities are translated at historical exchange rates. Income and expenses are translated at average exchange rates for the year. Foreign currency translation adjustments are recorded directly as other comprehensive income, a component of stockholders’ equity.

n) Short-term loan

Short-term loan is obligation which is to be repaid within one year of the date issued.

VIKING INVESTMENTS GROUP, INC.

Interim Notes to Consolidated Financial Statements

(Unaudited)

(Amounts expressed in US dollars)

o) Convertible notes payable

The Company accounts for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free standing derivative financial instruments.

The Company has evaluated the terms and conditions of the convertible note under the guidance of ASC 815. The conversion feature did not meet the definition of “indexed to a company’s own stock” provided for in ASC 815 due to the down round protection feature. Therefore, the conversion feature requires bifurcation and liability classification. Additionally, the default put requires bifurcation because it is indexed to risks that are not associated with credit or interest risk. As a result, the compound embedded derivative comprises of (i) the embedded conversion feature and (i) the default put. Rather than bifurcating and recording the compound embedded derivative as a derivative liability, the Company elected to initially and subsequently measure the convertible note in its entirety at fair value, with changes in fair value recognized in earnings in accordance with ASC 815-15-25-4.

Recently Adopted Accounting Pronouncements

In December 2011, the Financial Accounting Standard Board (“FASB’) issued ASU 2011-11, “Balance sheet (Topic 210), Disclosure about Offsetting Assets and Liabilities”. The guidance in this update requires the Company to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The pronouncement is effective for fiscal years and interim periods beginning on or after January 1, 2013 with retrospective application for all comparative periods presented. The Company adopted this new standard on January 1, 2013 and it had no material effect on the Company’s financial position or results of operations.

In Oct 2012, FASB issued ASU 2012-04, Technical Corrections and Improvements. 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 adoption of ASU 2012-04 has no material impact on the Company’s financial position or results of operations.

In Aug 2012, the FASB issued ASU2012-03，Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC SAB No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22(SEC update)” in accounting standards update No.2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114 The adoption of ASU 2012-03 has no material impact on the Company’s financial position or result of operations.

In Feb 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” The amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The adoption of ASU 2013-02 has no material impact on the Company’s financial position or results of operations.

VIKING INVESTMENTS GROUP, INC.

Interim Notes to Consolidated Financial Statements

(Unaudited)

(Amounts expressed in US dollars)

Recent Accounting Pronouncements

In March 2013, the FASB issued ASU 2013-05, “Foreign Currency Matter (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon the recognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity a consensus of the FASB Emerging Issues Task Force” The amendments in this Update are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. Early adoption is permitted. If an entity elects to early adopt the amendments, it should apply them as of the beginning of the entity’s fiscal year of adoption.

In April 2013, the FASB issued ASU 2013-07, “Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting. The amendments require an entity to present its financial statements using the liquidation basis of accounting when liquidation is imminent unless the liquidation follows a plan that was specified in the entity’s governing documents at the entity’s inception. Liquidation is imminent when the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan effective or (b) a plan for liquidation is being imposed by other forces. The amendments require financial statements prepared using the liquidation basis of accounting to present relevant information about an entity’s expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation. The amendments in this Update are effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. Entities should apply the requirements prospectively from the day that liquidation becomes imminent. Early adoption is permitted.

3. Related Party Transactions

On April 3, 2009, the Company entered into an agreement with Viking Investments Group, LLC, a Delaware limited liability company (“Viking Delaware”) owned by Viking Investments Group, LLC, a company controlled and managed by the Company’s Chairman, Chief Executive Officer and President, Tom Simeo, incorporated under the laws of The Federation of St. Kitts and Nevis, (“Viking Nevis”), providing that effective August 15, 2008, Viking Delaware would pay for any services performed on behalf of the Company by third parties until such time that Viking Delaware (or Viking Nevis) is no longer the majority shareholder of the Company. On August 2, 2011, effective as of April 1, 2011, Viking Delaware agreed to advance and pay all third party costs for the Company as needed, but the Company had an obligation to reimburse Viking Delaware at a later stage upon demand from Viking Delaware. As of August 29, 2011, Viking Delaware’s rights and obligations were transferred to Viking Nevis.

On June 29, 2011, and on August 29, 2011, Viking Investments, LLC, a company controlled and managed by the Company’s Chairman, Chief Executive Officer and President, Tom Simeo, incorporated under the laws of The Federation of St. Kitts and Nevis, (“Viking Nevis”) sold 100,000 and 466,813 shares respectively of China Wood, Inc., publicly listed in the United States with the ticker “CNWD”, (the “China Wood Shares”) owned by Viking Nevis, in exchange for 1,912,000 and 12,569,420 newly issued restricted shares of the Company respectively. By August 29, 2011, Viking Nevis completed the purchase of the China Wood Shares by having delivered a total of 566,813 shares of common stock in China Wood, Inc. to the Company. The China Wood Shares were registered in a Form S-1 Registration Statement declared effective by the SEC on April 7, 2011. The China Wood Shares were subject to a “Leak-Out Provision” whereby only a certain amount of shares could be sold per month up and until the first anniversary of the effective day of the aforementioned registration statement (April 7, 2012).

These investments were repurchased by Viking Nevis on April 15, 2013 pursuant to Repurchase Agreement. (See Note 8)

VIKING INVESTMENTS GROUP, INC.

Interim Notes to Consolidated Financial Statements

(Unaudited)

(Amounts expressed in US dollars)

On November 16, 2012, Viking Nevis purchased 3,205,960 restricted shares of common stock of the Company for an aggregate purchase price of $158,921. The purchase price has been paid, and the shares were issued on December 27, 2012.

As at June 30, 2013, the net amount due to the Company’s CEO and Director, Mr. Simeo, is $147,504 (December 31, 2012: $49,767). The balance was subsequently converted into common shares of the Company. (See Note 10)

During the period ended June 30 2013, the Company paid accommodation charges of $ 2,741 for the CEO and director of the Company. (2012: Nil)

4. Supplemental Cash Flow Information

	Six months ended
	June 30
	2013			2012
	$			$
Cash paid for:
Interest		-			-
Income taxes (recovery)		-			-
Issuance of new shares for expense and service		30,000			10,693
Non-cash transaction:
Increase in additional paid in capital - repurchase of CNWD shares		7,472
Decrease in share capital – repurchase of CNWD shares		(7,472	)

5. Short-term Loan

On March 22, 2012, the Company entered into a six-month loan agreement with a third party for the amount of $79,282 (RMB500,000 equivalents) repayable on September 20, 2012. The due date of the loan was extended and was settled on January 10, 2013, and the collateral for the loan, 879,196 shares of the Company’s common stock which was issued to the creditor and reflected as issued and outstanding as of December 31, 2012, was returned to the Company for cancellation.

6. Lease Commitment

On January 20, 2013, the Company entered into a two year contract to lease an approximately 65 square meter office facility in Shanghai, China for RMB 15,600 (approximately $2,500 per month) including a management fee. The total rental commitment for the two years is RMB 374,400 (approximately $60,000).

VIKING INVESTMENTS GROUP, INC.

Interim Notes to Consolidated Financial Statements

(Unaudited)

(Amounts expressed in US dollars)

7. Capital Stock and Additional Paid-in Capital

On Jan 11, 2013, the Company authorized and approved the issuance of 200,000 free trading shares of common stock to David Rees for the provision of $30,000 in legal services rendered to the Company, at a fair value of $0.15 per share.

On January 10, 2013, 879,196 shares of the Company’s common stock which was issued to the creditor as the collateral for the loan were returned to the Company for cancellation. (Note 6)

On June 6, 2013, 7,472,093 shares of the Company’s common stock were returned by Viking Nevis to the Company for cancellation, pursuant to the Guaranty and Repurchase Agreement. (Note 8)

8. Repurchase Agreement (Disposal of long-term investment)

On April 11, 2012, Viking Investments Group, LLC (“Viking Nevis”) guaranteed that the price of the 566,813 shares of China Wood Inc., publicly listed in the United States with the ticker symbol “CNWD” (the “China Wood Shares”) (that it had previously sold to the Company in consideration of the Company issuing Viking Nevis 14,481,420 shares of Company common stock), would not be less than $4.50 per share and agreed to repurchase the China Wood Shares by tendering shares of common stock of Buyer owned by Guarantor to Buyer if the 45-day volume weighted average price (“VWAP”) of the China Wood Shares was equal to or less than US$4.00 per share. As the 45-day VWAP of the China Wood Shares has been $4.00/share since the fourth quarter of 2012, the Company demanded Viking Nevis repurchase the China Wood Shares, and in a written repurchase agreement executed on April 15, 2013 by both parties, it agreed to do so by returning 7,472,093 shares of the Company’s common stock to the Company for cancellation.

As stated in Note 2, the Company, in valuing of the China Wood Shares, had initially relied upon Viking Nevis’s Guaranty and Repurchase Agreement, to value the China Wood Shares at $4.00/share in its financial statements for the year ended December 31, 2011. During the three month period ended June 30, 2013, the Company restated its financial statements as of December 31, 2011, and all financial statements subsequent to that date, to record the China Wood Shares at carrying value on the transaction date, and such value was fully impaired as of December 31, 2011.

On April 15, 2013, pursuant to the Guaranty and Repurchase Agreement, Viking Nevis agreed to repurchase the China Wood Shares from the Company by returning 7,472,093 shares of the Company’s common stock to the Company’s transfer agent for cancellation. Those 7,472,093 shares were cancelled on June 7, 2013.

9. Convertible Note

On May 21, 2013, the Company issued a $58,000 8% convertible note with a term expiring on February 28, 2014 (the “Maturity Date”). The principal amount of the note and interest is payable on the maturity date. The note is convertible into common stock beginning 180 days after the issuance date, at the holder’s option, at a 58% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. In the event the Company prepays the note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 130% if prepaid during the period commencing on the closing date through 60 days thereafter, (ii) 135% if prepaid 61 days following the closing through 90 days following the closing, (iii) 140% if prepaid 91 days following the closing through 120 days following the closing, (iv) 150% if prepaid 121 days following the closing through 180 days following the closing, and (v) 175% if prepaid 181 days following the closing through the maturity date. The terms of the convertible note provide for certain redemption features which include features indexed to equity risks. In the event of default, the amount of principal and interest not paid when due bear interest at the rate of 22% per annum and the note becomes immediately due and payable.

VIKING INVESTMENTS GROUP, INC.

Interim Notes to Consolidated Financial Statements

(Unaudited)

(Amounts expressed in US dollars)

The following table reflects the allocation of the purchase on the financing dates:

Convertible Notes, Face Value	$	58,000

Convertible promissory notes, Fair Value		102,943

Day-one derivative loss		(44,943	)

On June 30, 2013, the fair value of the convertible note was $102,821, therefore, a gain of $122 associated with the changes in the fair value of convertible note was recorded for the three and six months ended June 30, 2013.

10. Subsequent event

On August 15, 2013, the balance due to the CEO and director of the Company, $147,504, was converted into 1,134,646 restricted shares of common stock of the Company at $0.13 per share.

VIKING INVESTMENTS GROUP, INC.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In preparing the management’s discussion and analysis, the registrant presumes that you have read or have access to the discussion and analysis for the preceding fiscal year.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 or the Reform Act. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earning, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions of performance; and statements of belief; and any statements of assumptions underlying any of the foregoing. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: our ability to raise capital and the terms thereof; ability to gain an adequate player base to generate the expected revenue; competition with established gaming websites; adverse changes in government regulations or polices; and other factors referenced in this Form 10-Q.

The use in this Form 10-Q of such words as “believes”, “plans”, “anticipates”, “expects”, “intends”, and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. These forward-looking statements present the Company’s estimates and assumptions only as of the date of this Report. Except for the Company’s ongoing obligation to disclose material information as required by the federal securities laws, the Company does not intend, and undertakes no obligation, to update any forward-looking statements.

Although the Company believes that the expectations reflected in any of the forward-looking statements are reasonable, actual results could differ materially from those projected or assumed or any of the Company’s forward-looking statements. The Company’s future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.

PLAN OF OPERATIONS

Overview

The Company’s current business plan comprises two parts:

One part is to incubate and develop in a cost effective and risk adverse approach, a diversified portfolio a number of Internet based successful Internet based start-up companies in the emerging growth countries, with emphasize on The People’s Republic of China, with the ultimate goal for them to become publicly listed companies in the United States or elsewhere. After an initial incubating period of 3-6 months, the Company will evaluate each project through testing, marketing and research, and determine the potential for success and commercial viability, or, to close it down. If, after additional testing the Company determines to continue its development, the Company will provide, either through in-house resources, or by inviting third party investors and / or strategic partners resources to participate in the future development in consideration for equity or debt financing, as the case may be.

By inviting students from various parts of the world to participate in the Company’s Internship’s program, the Company will have access to the latest trends and technologies in a cost efficient manner, while at the same time offering a challenging environment to the students, thereby providing a great learning experience. It is anticipated that the Company at any given time will have 3-6 projects on various stages and between 10-40 students working on these projects. It is believed that successful completion of a business incubation program increases the likelihood that a company will stay in business for the long term. There are, however, no guarantee that any of these projects will be fully developed, and if fully developed, that they will become commercial viable and profitable.

Second part of the Company’s business is to provide professional advisory services before and after financing, board member services, accounting, pre-audit and CFO services, corporate governance advice and general corporate management advisory services to entrepreneurs and their advisers in the People’s Republic of China, interested in becoming publicly listed companies in the United States and elsewhere, in consideration for a fee, comprised of either cash or equity, or a combination of both (hereinafter referred to as a “Transaction” or plural “Transactions”). The Company is neither an underwriter as the term is defined in Section 2(a)(11) of the Securities Act of 1933. The Company is not an investment company pursuant to the Investment Company Act of 1940. The Company is not an investment adviser pursuant to the Investment Advisers Act of 1940 nor is it registered with FINRA or SIPC.

Going Concern Qualification

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

RESULTS OF CONTINUING OPERATIONS

The following discussion of the financial condition and results of operation of the Company should be read in conjunction with the Financial Statements and the related Notes included elsewhere in this Report.

Three months ended June 30, 2013 compared to the three months ended June 30, 2012

Liquidity and Capital Resources

At June 30, 2013 and 2012, the Company respectively had US$ 24,908 and US$ 4,891 in cash holdings.

Revenue

During three months ended June 30, 2013 and June 30, 2012, the Company had no revenue.

Expenses

The operating expenses increased by $65,070 to $183,188 in the three months period ended June 30, 2013 from $118,118 in the corresponding period in 2012. The increase was mainly due to the increase of accounting fees and legal fees incurred during the period.

Net Loss

The Company incurred a net loss of $227,972 during the three months ended June 30, 2013 compared with net loss of $118,099 for June 30, 2012. The increase in net loss was mainly due to the increase of accounting fees, legal fees incurred during the period, and the derivative loss on the convertible note.

China Wood Shares

The Company initially recorded the China Wood Shares at its fair value of $5,065,838 at the date of the transaction, and the Company relied upon Viking Nevis’s Guaranty and Repurchase Agreement to determine the value of China Wood shares, in which Viking Nevis, on April 11, 2012, guaranteed that the price per share of the China Wood Shares that it had previously sold to the Company in consideration of the Company issuing Viking Nevis 14,481,420 shares of Company common stock, would not be less than $4.50 per share and agreed to repurchase the China Wood Shares by tendering shares of common stock of the Company owned by Viking Nevis to the Company if the 45-day volume weighted average price (“VWAP”) of the China Wood Shares was equal to or less than US$4.00 per share. Accordingly, the Company valued the China Wood Shares at $4.00/share and an impairment loss of $2,798,586 was recognized in the Company’s previously issued consolidated financial statements for the year ended December 31, 2011.

During the three month period ended June 30, 2013, the Company re-visited the accounting treatment for the above transactions, and determined that the exchange of China Wood shares was a nonmonetary transaction and, therefore, should be accounted under ASC 845, "Nonmonetary Transactions." The Company further determined that the exchange of shares had no commercial substance due to fact that the Company’s future cash flows were not expected to significantly change as a result of the exchange of shares. Therefore, the Company has now recorded the value of the China Wood Shares at their carrying value on the transaction date, and the excess of the fair value of purchase consideration over the assets purchased was charged to additional paid in capital. On December 31, 2011, the China Wood shares were fully impaired and charged to the income statements.

The Company amended its Annual Report on Form 10-K for the year ending December 31, 2012 to restate its financial statements for the years ended December 31, 2011 and 2012, and will be amending its Form 10-Q for the periods ended September 30, 2011, March 31, 2012, June 30, 2012 and September 30, 2012, as well as its Annual Report on Form 10-K for the year ending December 31, 2011.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company has adopted various accounting policies that govern the application of accounting principles generally accepted in the United States of America in the preparation of the Company’s financial statements which requires it to make estimates and assumptions that affect the amounts reported in the financial state,ments and accompanying notes.

Although these estimates are based on management’s knowledge of current events and actions the Company may undertake in the future, the final results may ultimately differ from actual results. Certain accounting policies involve significant judgments and assumptions, which have a material impact on the Company’s financial condition and results. Management believes its critical accounting policies reflect its most significant estimates and assumptions used in the presentation of the Company’s financial statements. The Company’s critical accounting policies include debt management and accounting for stock-based compensation. The Company does not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities”

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, the Company is not required to provide the information under this item.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company does not currently maintain controls and procedures that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified by the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of management, including the Company’s Chief Executive Officer, the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2013 have been evaluated, and, based upon this evaluation, the Company’s Chief Executive Officer has concluded that these controls and procedures are not effective in providing reasonable assurance of compliance.

Changes in Internal Control over Financial Reporting

Management and directors will continue to monitor and evaluate the effectiveness of the Company's internal controls and procedures and the Company's internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

As a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, the Company is not required to provide the information under this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Since March 31, 2013, there have been no unregistered sales of equity securities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. SUBSEQUENT EVENT

On August 15, 2013, the Company’s Chairman, Chief Executive Officer and President, Tom Simeo converted $147,504 owed to him by the Company in consideration for 1,134,646 restricted shares of the Company’s common stock, calculated as fair value equal the bid price for the Company’s common stock for the past 30 days.

ITEM 7. EXHIBITS

Exhibit Number		Description

31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32.1		Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.2		Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101.INS **		XBRL Instance Document

101.SCH **		XBRL Taxonomy Extension Schema Document

101.CAL **		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF **		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB **		XBRL Taxonomy Extension Label Linkbase Document

101.PRE **		XBRL Taxonomy Extension Presentation Linkbase Document

___________

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

In accordance with the requirements of Section 13 or 15(d) of the Securities Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

VIKING INVESTMENTS GROUP, INC. (Registrant)

/s/ Tom Simeo		Date: August 19, 2013
Tom Simeo Chief Executive Officer, Director and Treasurer

In accordance with the Securities Exchange Act this report has been signed below by the following person(s) on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Guangfeng Yang		Date: August 19, 2013
Guangfeng Yang Chief Financial Officer & Director