U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Mark One
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2013
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File No. 333-159517
PETROTERRA CORP.
(Exact name of registrant as specified in its charter)
| Nevada | 7380 | 26-3106763 | ||
| (State or jurisdiction of | Primary Standard Industrial | IRS Employer | ||
| incorporation or organization) | Classification Code Number | Identification Number |
607 28 1/4 Road
Suite 115
Grand Junction, CO 81506
(Address of principal executive offices)
970-683-5415
(Issuer’s telephone number)
Indicate by checkmark whether the issuer: (1) has 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 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 Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]
Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:
| Class | Outstanding as of February 14, 2014 | |
| Common Stock, $0.001 | 63,499,000 |
PETROTERRA CORP.
Form 10-Q
| Part I. | FINANCIAL INFORMATION | ||
| Item 1 | Financial Statements | 1 | |
| Balance Sheets | 1 | ||
| Statements of Operations | 2 | ||
| Statements of Cash Flows | 3 | ||
| Notes to Financial Statements | 4 | ||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 9 | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 11 | |
| Item 4. | Controls and Procedures | 11 | |
| Part II. | OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 12 | |
| Item 1A. | Risk Factors | 12 | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 12 | |
| Item 3 | Defaults Upon Senior Securities | 12 | |
| Item 4 | Submission of Matters to a Vote of Security Holders | 12 | |
| Item 5 | Other Information | 12 | |
| Item 6 | Exhibits | 12 | |
| Signatures | 13 |
(A Development Stage Company)
Balance Sheets
| (Unaudited) |
| December 31, 2013 | March 31, 2013 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and Cash Equivalents | $ | 33,772 | $ | - | ||||
| Other | 3,500 | - | ||||||
| Total Current Assets | 37,272 | - | ||||||
| Oil & Gas Exploration | 350,000 | - | ||||||
| Fixed Assets, net of accumulated depreciation of $44 and $0 as of December 31, 2013 and March 31, 2013, respectively | 1,556 | - | ||||||
| Website, net of accumulated amortization of $542 and $0 as of December 31, 2013 and March 31, 2013, respectively | 28,711 | - | ||||||
| Total Assets | $ | 417,539 | $ | - | ||||
| Liabilities and Stockholders’ Equity (deficit) | ||||||||
| Current Liabilities | ||||||||
| Accounts payables and accrued liabilities | $ | 37,743 | $ | 5,585 | ||||
| Accrued payroll, director | 10,000 | - | ||||||
| Loan from Director | 9,322 | 44,690 | ||||||
| Total Current Liabilities | 57,065 | 50,275 | ||||||
| Total Liabilities | $ | 57,065 | $ | 50,275 | ||||
| Stockholders’ Equity (deficit) | ||||||||
| Preferred Stock, $0.001 par value, 10,000,000 shares authorized; no shares issues and outstanding as of December 31, 2013 and March 31, 2013, respectively. | - | - | ||||||
| Common stock, $0.001 par value, 100,000,000 shares authorized; 63,499,000 and 53,024,000 shares issued and outstanding as of December 31, 2013 and March 31, 2013, respectively | 63,499 | 53,024 | ||||||
| Additional paid-in-capital | 484,986 | (31,064 | ) | |||||
| Deficit accumulated during the development stage | (188,011 | ) | (72,235 | ) | ||||
| Total stockholders’ equity (deficit) | 360,474 | (50,275 | ) | |||||
| Total liabilities and stockholders’ equity (deficit) | $ | 417,539 | $ | - | ||||
The accompanying notes are an integral part of these financial statements.
| 1 |
(A Development Stage Company)
Statements of Operations
| (Unaudited) |
| Three
months Ended December 31, 2013 | Three
months Ended December 31, 2012 | Nine
months Ended December 31, 2013 | Nine
months Ended December 31, 2012 | From
Inception on July 25, 2008 to December 31, 2013 | ||||||||||||||||
| Expenses | ||||||||||||||||||||
| General and Administrative Expenses | $ | 110,236 | 2,750 | 115,776 | $ | 12,150 | $ | 187,851 | ||||||||||||
| Compensation Consulting Fee Expense - Related | - | - | - | - | 160 | |||||||||||||||
| Net (loss) from Operation before Taxes | (110,236 | ) | (2,750 | ) | (115,776 | ) | (12,150 | ) | (188,011 | ) | ||||||||||
| Provision for Income Taxes | 0 | 0 | 0 | 0 | ||||||||||||||||
| Net (loss) | $ | (110,236 | ) | (2,750 | ) | (115,776 | ) | (12,150 | ) | $ | (188,011 | ) | ||||||||
| (Loss) per common share – Basic and diluted | $ | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | |||||||||||
| Weighted Average Number of Common Shares Outstanding | 62,986,500 | 53,024,000 | 56,356,909 | 53,024,000 | ||||||||||||||||
The accompanying notes are an integral part of these financial statements.
| 2 |
(A Development Stage Company)
Statements of Cash Flows
| (Unaudited) |
| Nine
months Ended December 31, 2013 | Nine
months Ended December 31, 2012 | From
Inception on July 25, 2008 to December 31, 2013 | ||||||||||
| Operating Activities | ||||||||||||
| Net (loss) | $ | (115,776 | ) | $ | (12,150 | ) | $ | (188,011 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Common stock Issued for Services | - | 160 | ||||||||||
| Depreciation and amortization expense | 586 | - | 586 | |||||||||
| Changes in assets and liabilities: | ||||||||||||
| Other receivables | (3,500 | ) | - | (3,500 | ) | |||||||
| Accounts payables and accrued liabilities | 32,158 | 1,500 | 37,743 | |||||||||
| Accrued payroll, Director | 10,000 | - | 10,000 | |||||||||
| Related Party Loans – paid directly to vendors on behalf of the Company | 16,157 | 10,650 | 40,347 | |||||||||
| Net cash (used) for operating activities | (60,375 | ) | - | (102,675 | ) | |||||||
| Investing Activities | ||||||||||||
| Investment in Oil & Gas Exploration | (100,000 | ) | - | (100,000 | ) | |||||||
| Investment in fixed assets and website | (30,853 | ) | - | (30,853 | ) | |||||||
| Net cash used in investing activities | (130,853 | ) | - | (130,853 | ) | |||||||
| Financing Activities | ||||||||||||
| Loans from Director | - | - | 20,500 | |||||||||
| Sale of common stock | 225,000 | - | 246,800 | |||||||||
| Net cash provided by financing activities | 225,000 | - | 267,300 | |||||||||
| Net increase (decrease) in cash and equivalents | 33,772 | - | 33,772 | |||||||||
| Cash and equivalents at beginning of the period | - | 32 | - | |||||||||
| Cash and equivalents at end of the period | $ | 33,772 | $ | 32 | $ | 33,772 | ||||||
| Supplemental cash flow information: | ||||||||||||
| Cash paid for: | ||||||||||||
| Interest | $ | - | $ | - | $ | - | ||||||
| Taxes | $ | - | $ | - | $ | - | ||||||
| Non-Cash Activity | ||||||||||||
| Common Stock Issued for Services | $ | - | $ | - | $ | 160 | ||||||
| Conversion of debt to equity | $ | 51,525 | $ | - | $ | 51,525 | ||||||
The accompanying notes are an integral part of these financial statements
| 3 |
(A Development Stage Company)
Notes To The Financial Statements
December 31, 2013
(Unaudited)
1. ORGANIZATION AND BUSINESS OPERATIONS
PetroTerra Corp. (the “Company”) was incorporated under the laws of the State of Nevada, on July 25, 2008. The Company is in the development stage as defined under Accounting Codification Standard or ACS, Development Stage Entities (“ASC-915”) and plans to identify, evaluate and acquire oil and gas exploration and development opportunities primarily within the United States. The Company has not generated any revenue to date and consequently its operations are subject to all risks inherent in the establishment of a new business enterprise. For the period from inception on July 25, 2008 through December 31, 2013, the Company has accumulated losses of $188,011.
2. GOING CONCERN
The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses since inception resulting in an accumulated deficit of $188,011 as of December 31, 2013 and further losses are anticipated in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities which have arisen from normal business operations as they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand loans from our director and/or private placements of common stock.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.
These statements reflect all adjustments, including of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these unaudited interim financial statements be read in conjunction with the financial statements of the Company for the year ended March 31, 2013 and notes thereto included in the Company’s annual report on Form 10-K. The Company follows the same accounting policies in the preparation of interim reports.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
Use of Estimates and Assumptions
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, 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. In management’s opinion, all adjustments necessary for a fair statement of the results for the interim periods have been made and all adjustments are of a normal recurring nature.
Foreign Currency Translation
The Company’s functional currency and its reporting currency is the United States dollar.
| 4 |
PETROTERRA CORP.
(A Development Stage Company)
Notes To The Financial Statements
December 31, 2013
(Unaudited)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock Split
On December 18, 2013, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada to effect a reverse stock split of its outstanding and authorized shares of common stock at a ratio of 1 for 2 (the “Reverse Stock Split”).
As a result of the Reverse Stock Split, the Company’s authorized shares of common stock were decreased from 200,000,000 to 100,000,000 shares and its authorized shares of preferred stock were decreased from 20,000,000 to 10,000,000 shares. Upon the effectiveness of the Reverse Stock Split, which occurred on December 20, 2013, the Company’s issued and outstanding shares of common stock was decreased from 126,698,000 to 63,349,000 shares, all with a par value of $0.001. The Company has no outstanding shares of preferred stock. Accordingly, all share and per share information has been restated to retroactively show the effect of the Reverse Stock Split.
Stock-based Compensation
In September 2009, the FASB issued ASC-718, “Stock Compensation”. ASC-718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. Under ASC-718, the Company must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption.
Income Taxes
Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.
Basic and Diluted Loss Per Share
The Company computes loss per share in accordance with ASC-260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of outstanding shares of common stock during the period. Diluted loss per share gives effect to all dilutive potential shares of common stock outstanding during the period. Dilutive loss per share excludes all potential shares of common stock if their effect is anti-dilutive. The Company has no potential dilutive instruments and accordingly basic loss and diluted loss per share are equal.
Fiscal Periods
The Company’s fiscal year end is March 31.
Recent accounting pronouncements
We have reviewed all the recent accounting pronouncements issued to date, and we do not believe any of these pronouncements will have a material impact on the Company.
Revenue Recognition
The Company will recognize revenue in accordance with ACS - 605, “Revenue recognition”, ASC-605 requires that four basic criteria be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. 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 will defer 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.
Oil and Gas
The Company complies with ASC 932, “Extractive Activities - Oil and Gas”. The Company has capitalized exploratory well costs, and has determined that there are no suspended well costs that should be impaired. The Company reviews its long-lived assets for impairments when events or changes in circumstances indicate that impairment may have occurred.
Website
The Company capitalizes the costs associated with the development of the Company’s website pursuant to ASC - 350, “Goodwill and Other”. Other costs related to the maintenance of the website are expensed as incurred. Amortization is provided over the estimated useful lives of three years using the straight-line method for financial statement purposes. The Company commenced amortization upon completion of the Company’s fully operational website. Amortization expense for the nine months ended December 31, 2013 and 2012 totaled $542 and $0, respectively.
Equipment
Equipment is recorded at cost. Depreciation is computed for financial reporting purposes utilizing the straight-line method over the estimated useful lives of the related asset.
Advertising
The Company follows the policy of charging the costs of advertising to expenses incurred. The Company incurred $0 in advertising costs during the period July 25, 2008 (inception) to December 31, 2013.
| 5 |
PETROTERRA CORP.
(A Development Stage Company)
Notes To The Financial Statements
December 31, 2013
(Unaudited)
4. ACQUISITION OF OIL AND GAS PROPERTIES
On November 18, 2013, the Company entered into an assignment of lease (the “Agreement”) whereby Ardmore Investments Inc. (“Ardmore”) assigned to us its rights under a certain purchase agreement (the “Purchase Agreement”), dated August 8, 2013, between Ardmore and Pioneer Oil and Gas (“Pioneer”) involving the sale of 5,905.54 acres of oil and gas leases located in the Central Utah Thrust Belt in Beaver County and Sevier County, Utah, respectively, and currently owned by Pioneer (the “Leases”). Per the terms of the Agreement, we issued to Ardmore 500,000 shares of our common stock on November 18, 2013, and, in order to complete the assignment contemplated by the Agreement, we will issue to Ardmore an additional 500,000 shares of our common stock upon the transfer to us of ownership in the Leases which must occur on or before April 12, 2014. Furthermore, on December 12, 2013, the Company made an installment payment of $100,000 to Pioneer with two additional $100,000 installment payments required on February 12, 2014 and April 12, 2014. Upon completion of the final installment the leases will be conveyed to the Company.
Due to the lack of an active market of the Company’s common stock, the fair value of the common stock transferred was determined based on the price at which the Company’s shares were being sold in a private placement active during the time period.
5. COMMON STOCK
The Company’s authorized capital is 110,000,000 shares consisting of 100,000,000 shares of common stock and 10,000,000 shares of preferred stock, both with a par value of $0.001 per share.
This gives effect to the Company 32 for 1 forward stock split that was effected on January 3, 2012 and the Company’s subsequent Reverse Stock Split. All share and per share information has been restated in this Quarterly Report to retroactively show the effect of the two stock splits.
On November 28, 2008, the Company issued 14,400,000 reverse split shares of common stock at a price of $0.0000625 per share for total cash proceeds of $900.
On December 4, 2008, the Company issued 32,000,000 reverse split shares of common stock at a price of $0.0000625 per share for total cash proceeds of $2,000.
During the period December 10, 2008 to March 19, 2009, the Company issued 30,240,000 reverse split shares of common stock at a price of $0.000625 per share for total cash proceeds of $18,900.
On December 14, 2011, in connection with a change in the Company’s directors, two controlling stockholders cancelled an aggregate of 23,872,000 shares of common stock. On the same day, 256,000 shares of common stock were issued to a director for services rendered. The common stock was valued at $0.000625 per share.
On October 2, 2013, John Barton purchased 43.0% of the issued and outstanding shares of the Company from previous stockholders. Concurrently with Mr. Barton’s purchase, the Board of Directors of the Company determined that it was in the best interest of the Company to settle a portion of an outstanding loan from Mr. Barton to the Company in the period ending December 31, 2013. In exchange for the settlement of the outstanding debt, the Company issued Mr. Barton 10,000,000 shares of common stock. Upon completion of the above transactions, Mr. Barton became the beneficial owner of 52.01% of the issued and outstanding shares of common stock of the Company.
On November 1, 2013, the Company sold a total of 150,000 shares of common stock for gross proceeds of $75,000.
On November 20, 2013, the Company issued 500,000 shares of common stock in conjunction with a land lease assignment with a value of $250,000.
On December 19, 2013, the Company sold a total of 300,000 shares of common stock for gross proceeds of $150,000.
As of and December 31, 2013, the Company had 63,499,000 shares of common stock issued and outstanding.
6. INCOME TAXES
As of December 31, 2013, the Company had net operating loss carry forwards of approximately $188,011 that may be available to reduce future years’ taxable income through 2033. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur. Accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.
| 6 |
PETROTERRA CORP.
(A Development Stage Company)
Notes To The Financial Statements
December 31, 2013
(Unaudited)
7. RELATED PARTY TRANSACTIONS
The Company has received advances from certain of its officers and other related parties to meet short term working capital needs. These advances may not have formal repayment terms or arrangements. As of December 31, 2013 and March 31, 2013, the total amount loaned to the Company by a director was $9,322 and $44,690, respectively. The loan is non-interest bearing, due upon demand and unsecured.
On October 2, 2013, the Company settled an outstanding loan with a principal amount of $20,000 due to the Company’s chief executive officer in exchange for 10,000,000 shares of common.
For the period from October 2, 2013 through December 31, 2013, the Company has paid its chief executive officer $20,000 in compensation and he has accrued an additional $10,000.
8. COMMITMENTS AND CONTINGENCIES
Land Lease Agreements
As detailed in the “Acquisition of Oil and Gas Properties” - Note 4, the Company is obligated to issue Ardmore Investments an additional 500,000 shares of common stock upon the transfer of ownership of the Leases on or before April 12, 2014. Furthermore, installment payments are due to Pioneer in the amount of $100,000 on February 12, 2014 and April 12, 2014. Upon completion of the final installment the leases will be conveyed to the Company.
9. SUBSEQUENT EVENT
The Company has evaluated subsequent events from December 31, 2013 through the filing of these financial statements. There are no significant subsequent events, except as disclosed below;
Securities Purchase Agreement
On February 14, 2014, the Company entered into securities purchase agreement with an investor pursuant to Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to which the Company sold an aggregate of 200,000 shares of the Company’s common stock for gross proceeds of $150,000.
Land lease installment
The Company made an installment payment of $100,000 to Pioneer on February 12, 2014 as detailed in the “Acquisition of Oil and Gas Properties” - Note 4.
| 7 |
FORWARD LOOKING STATEMENTS
Statements made in this Form 10-Q that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
| 8 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
GENERAL
The Company incorporated under the laws of the State of Nevada, on July 25, 2008. Our registration statement was filed with the Securities and Exchange Commission on May 28, 2009 and was declared effective on October 28, 2009.
We are a development stage company that plans to identify, evaluate and acquire oil and gas exploration and development opportunities primarily in the United States.
CURRENT BUSINESS OPERATIONS
The Company plans to concentrate its development efforts on early stage onshore oil and gas opportunities in North America, for potential access to oil and unconventional gas reserves and the availability of technological improvements. Apart from the above-mentioned lease agreement we have not started our planned business operations. To date our operations have primarily been devoted to forming the entity and developing our business plan.
RESULTS OF OPERATIONS
Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue our operation.
We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
Nine Month Period Ended December 31, 2013 Compared to the Nine Month Period Ended December 31, 2012.
Our net loss for the nine month period ended December 31, 2013 was $115,776 compared to a net loss of $12,150 during the nine month period ended December 31, 2012. During the nine month period ended December 31, 2013, we did not generate any revenue.
During the nine month period ended December 31, 2013, we incurred general and administrative expenses of $115,776 compared to $12,150 incurred during the nine month period ended December 31, 2012. General and administrative expenses incurred during the nine month period ended December 31, 2013 were generally related to corporate overhead, financial and administrative contracted services, such as legal and accounting, developmental costs, and marketing expenses.
The weighted average number of shares outstanding was 56,356,909 and 53,624,000 for the nine month periods ended December 31, 2013 and 2012, respectively. The weighted average number of shares is an average calculation incorporating changes to the shares outstanding within the period reported.
Three Month Period Ended December 31, 2013 Compared to the Three Month Period Ended December 31, 2012.
Our net loss for the three month period ended December 31, 2013 was $110,236 compared to a net loss of $2,750 during the three month period ended December 31, 2012. During the three month period ended December 31, 2013, we did not generate any revenue.
During the three month period ended December 31, 2013, we incurred general and administrative expenses of $110,236 compared to $2,750 incurred during the three month period ended December 31, 2012. General and administrative expenses incurred during the three month period ended December 31, 2013 were generally related to corporate overhead, financial and administrative contracted services, such as legal and accounting, developmental costs, and marketing expenses.
The weighted average number of shares outstanding was 62,986,500 and 53,024,000 for the three month periods ended December 31, 2013 and 2012, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Nine month Period Ended December 31, 2013
As of December 31, 2013, the Company had assets worth $417,539 compared to $0 on March 31, 2013. Assets as of December 31, 2013 comprised of $33,772 in cash, $30,853 in fixed assets and website development costs and $350,000 for the land lease. As of December 31, 2013, our current liabilities were $57,065. Current liabilities were comprised of $9,322 in loan from director, $37,743 in accounts payable and $10,000 in accrued payroll.
Stockholders’ deficit increased from negative $50,275 as of March 31, 2013 to $360,474 as of December 31, 2013. The $410,749 increase is due to the exchange of $51,525 of director loans for common stock, the issuance of common stock for gross proceeds of $225,000, the issuance of common stock for the land lease assignment rights installment of $250,000, and is offset by losses for the nine month period ending December 31, 2013 of $115,776.
| 9 |
Securities Purchase Agreement
On November 1, 2013 and December 19, 2013, the Company entered into securities purchase agreements with an investor pursuant to Regulation S promulgated under the Securities Act, pursuant to which the Company sold an aggregate of 150,000 and 300,000 shares of the Company’s common stock, respectively, for gross proceeds of $75,000 and $150,000, respectively.
Cash Flows from Operating Activities
We have generated negative cash flows from operating activities. For the nine month period ended December 31, 2013, net cash flows used in operating activities was $60,375 consisting of a net loss of $115,776, an increase of $32,158 in accounts payables and accrued liabilities, an increase of $10,000 for accrued salary - officer and an increase of $16,157 related party loans paid directly to vendors on the Company’s behalf. For the nine month period ended December 31, 2012, net cash flows used in operating activities was $0 consisting of a net loss of $12,150, an increase in accounts payable of $1,500 and $10,650 of related party loans paid directly to vendors on the Company’s behalf. Net cash flows used in operating activities was $102,675 for the period from inception (July 25, 2008) to December 31, 2013.
Cash Flows from Investing Activities
We have used cash from investing activities in the nine month period ended December 31, 2013 for the land lease installment of $100,000 and fixed asset and website costs of $30,853. There are no other investing activities from inception (July 25, 2008) to the date hereof.
Cash Flows from Financing Activities
We have financed our operations primarily from either cash advances or the issuance of equity and debt instruments. For the nine month period ended December 31, 2013, we generated cash from financing activities of $225,000. For the nine month period ended December 31, 2012, we did not generate any cash through financing activities. For the period from inception (July 25, 2008) to December 31, 2013, net cash received through financing activities was $246,800 and we received $20,500 from director loan.
PLAN OF OPERATION AND FUNDING
We expect that our working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business.
Existing working capital, further advances and debt instruments, and anticipated cash flow are not adequate to fund our operations over the next three months and the company is dependent upon additional equity raises. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of our private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with a start-up business; and (ii) marketing expenses. We intend to finance these expenses with further issuances of securities and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current stockholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities which could significantly and materially restrict our business operations. We will have to raise additional funds in the next twelve months in order to sustain and expand our operations. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock. We have and will continue to seek to obtain short-term loans from our director, although no future arrangement for additional loans has been made. We do not have any agreements with our director concerning these loans. We do not have any arrangements in place for any future equity financing.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
GOING CONCERN
The independent auditors’ report accompanying our March 31, 2013 financial statements contained an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
No report required.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, consisting of our sole officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Rule 13a-15(e)) as of December 31, 2013. Management recognizes that any disclosure controls and procedures no matter how well designed and operated, can only provide reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management has reassessed the effectiveness of our disclosure controls and procedures and based upon that evaluation, our sole officer concluded that our disclosure controls and procedures were not effective as of December 31, 2013 because of the items set forth below:
| 1) | lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; | |
| 2) | The Company lacks segregation of duties as our sole director is also our sole officer. | |
| 3) | Our Chief Executive Officer does not have significant financial experience resulting in the Company's use of an outside consultant to assist in financial expertise. |
We do not believe the material weaknesses described above caused any meaningful or significant misreporting of our financial condition and results of operations for the period ended December 31, 2013. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
Management Plan to Remediate Material Weaknesses
Management is pursuing the implementation of corrective measures to address the material weaknesses described above. In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:
We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. We plan to appoint one or more outside directors to our Board of Directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.
We believe the remediation measures described above will remediate the material weaknesses we have identified and strengthen our internal control over financial reporting. We are committed to continuing to improve our internal control processes and will continue to diligently and vigorously review our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
This Quarterly Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only the management’s report in this Quarterly Report.
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Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.
No report required.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On November 1, 2013, the Company sold a total of 150,000 shares of common stock for gross proceeds of $75,000. These securities qualified for exemption promulgated under Regulation S of the Securities Act.
On November 20, 2013, the Company issued 500,000 shares of our common stock in order in conjunction with a land lease assignment for a value of $250,000. These securities qualified for exemption promulgated under Regulation S of the Securities Act.
On December 19, 2013, the Company sold a total of 300,000 shares of common stock for gross proceeds of $150,000. These securities qualified for exemption promulgated under Regulation S of the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No report required.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No report required.
No report required.
| Exhibits: | ||
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act* | |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act* | |
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer Under Section 1350 as Adopted Pursuant Section 906 of the Sarbanes-Oxley Act.* | |
| 101 | Interactive data files pursuant to Rule 405 of Regulation S-T.* |
* Filed Herewith
| 12 |
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PETROTERRA CORP. | ||
| Dated: February 19, 2014 | By: | /s/ John Barton |
| John Barton, | ||
| President and Chief Executive Officer and Chief Financial Officer | ||
| 13 |
Exhibit 31.1
CERTIFICATION
I, John Barton, Chief Executive Officer of PETROTERRA CORP., certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q PETROTERRA CORP.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by quarterly report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | I am the only certifying officer responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d- 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | designed such disclosure controls and procedures, or caused such disclosure control and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: February 19, 2014 | |
| /s/ John Barton | |
| John Barton, | |
| Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, John Barton, Chief Financial Officer of PETROTERRA CORP., certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q PETROTERRA CORP.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by quarterly report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | I am the only certifying officer responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d- 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | designed such disclosure controls and procedures, or caused such disclosure control and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: February 19, 2014 | |
| /s/ John Barton | |
| John Barton | |
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of PETROTERRA CORP. (the “Company”) on Form 10-Q for the period ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: February 19, 2014 | |
| /s/ John Barton | |
| John Barton, President, | |
| Chief Executive Officer and Chief Financial Officer |