UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2016
[ ] 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. 001-34970
PetroTerra Corp.
(Exact Name of Issuer 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 |
422 East Vermijo Avenue, Suite 313
Colorado Springs, Colorado 80903
(Address of principal executive offices)
719-219-6404
(Issuer’s telephone number)
(Former name, former address and former fiscal year, if changed since last report.)
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 [X] No [ ]
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 [ ] | Small reporting company [X] |
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
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 August 26, 2016 | |
| Common Stock, $0.001 | 28,323,588 |
FORM 10-Q
PETROTERRA CORP.
INDEX
| Page | ||
| PART I. FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | F-1 |
| Balance Sheets | F-1 | |
| Statements of Operations | F-2 | |
| Statements of Cash Flows | F-3 | |
| Notes to Financial Statements | F-4 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 3 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 8 |
| Item 4. | Controls and Procedures | 8 |
| PART II. OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 8 |
| Item 1A. | Risk Factors | 8 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 8 |
| Item 3. | Defaults Upon Senior Securities | 9 |
| Item 4. | Submission of Matters to a Vote of Security Holders | 9 |
| Item 5. | Other Information | 9 |
| Item 6. | Exhibits | 9 |
| Signatures | 10 | |
| 2 |
PetroTerra Corp.
As of June 30, 2016 and March 31, 2016
(Unaudited)
| June 30, 2016 | March 31, 2016 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | - | $ | - | ||||
| Prepaid expenses | - | 1,875 | ||||||
| Total current assets | - | 1,875 | ||||||
| Oil & Gas Exploration | - | - | ||||||
| Fixed Assets, net of accumulated depreciation of $1,617 and $1,386 as of June 30, 2016 and March 31, 2016, respectively | 1,155 | 1,386 | ||||||
| Website, net of accumulated amortization of $25,153 and $21,436, as of June 30, 2016 and March 31, 2016, respectively | 4,650 | 8,367 | ||||||
| Total Assets | $ | 5,805 | $ | 11,628 | ||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIENCY | ||||||||
| Current Liabilities | ||||||||
| Bank overdraft | $ | 524 | $ | 208 | ||||
| Accounts payable and accrued expenses | 177,847 | 153,384 | ||||||
| Accrued liabilities, director | - | 41,250 | ||||||
| Notes payable, related-party | 1,577 | 10,118 | ||||||
| Total current liabilities | 179,948 | 204,960 | ||||||
| Total liabilities | 179,948 | 204,960 | ||||||
| Shareholders’ Equity | ||||||||
| Preferred Stock: $0.001 par value, 4,000,000 shares authorized; no shares issued and outstanding as of June 30, 2016 and March 31, 2016. | - | - | ||||||
| Common stock; $0.001 par value, 40,000,000 shares authorized; 28,323,588 and 27,251,466 shares issued and outstanding as of June 30, 2016 and March 31, 2016, respectively | 28,324 | 27,252 | ||||||
| Additional paid-in capital | 2,504,852 | 2,409,933 | ||||||
| Accumulated deficit | (2,707,319 | ) | (2,630,517 | ) | ||||
| Total shareholders’ equity | (174,143 | ) | (193,332 | ) | ||||
| Total liabilities and shareholders’ equity | $ | 5,805 | $ | 11,628 | ||||
The accompanying notes are an integral part of these financial statements.
| F-1 |
PETROTERRA CORP.
FOR THE THREE ENDED JUNE 30, 2016 AND 2015
(Unaudited)
| Three Months Ended June 30, | ||||||||
| 2016 | 2015 | |||||||
| EXPENSES | ||||||||
| Lease property and exploration costs | $ | - | $ | 13,417 | ||||
| General and administrative expenses | 34,764 | 37,933 | ||||||
| Professional fees | 27,416 | 42,453 | ||||||
| Stock compensation expense | 4,000 | - | ||||||
| Net loss from Operation | (66,180 | ) | (93,803 | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Loss on conversion of related party debt | (10,622 | ) | - | |||||
Net loss before taxes |
(76,802 | ) | - | |||||
| PROVISION FOR INCOME TAXES | - | - | ||||||
| NET LOSS | $ | (76,802 | ) | $ | (93,803 | ) | ||
| (LOSS) PER COMMON SHARE -BASIC AND DILUTED | $ | (0.00 | ) | $ | (0.00 | ) | ||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | 27,589,348 | 26,361,403 | ||||||
The accompanying notes are an integral part of these financial statements.
| F-2 |
PETROTERRA CORP.
FOR THE THREE MONTHS ENDED JUNE 30, 2016 AND 2015
(Unaudited)
| Three months Ended June 30, | ||||||||
| 2016 | 2015 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | (76,802 | ) | $ | (93,803 | ) | ||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 3,948 | 2,423 | ||||||
| Common stock issued for Services | 4,000 | - | ||||||
| Conversion of officer payroll to common stock | 30,000 | - | ||||||
| Loss on conversion of related party debt | 10,622 | - | ||||||
| Increase (decrease) in: | ||||||||
| Bank overdraft | 316 | (435 | ) | |||||
| Accounts payables and accrued liabilities | 24,464 | (17,738 | ) | |||||
| Prepaids | 1,875 | 1,875 | ||||||
| Accrued payroll, officer | - | (10,000 | ) | |||||
| Net cash used in operating activities | (1,577 | ) | (117,678 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Advances from shareholder | 1,577 | - | ||||||
| Sales of Common stock | - | 120,000 | ||||||
| Net cash provided by financing activities | 1,577 | 120,000 | ||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | - | 2,322 | ||||||
| CASH AND CASH EQUIVALENTS -BEGINNING OF PERIOD | - | - | ||||||
| CASH AND CASH EQUIVALENTS -END OF PERIOD | $ | - | $ | 2,322 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for interest | $ | - | $ | - | ||||
| Cash paid for taxes | $ | - | $ | - | ||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Common stock issued for services | $ | 4,000 | $ | - | ||||
| Common stock issued for conversion of shareholder debt | $ | 91,991 | $ | - | ||||
| Common stock issued for the acquisition of land lease | $ | - | $ | 187,500 | ||||
The accompanying notes are an integral part of these financial statements.
| F-3 |
PETROTERRA CORP.
Notes To The Financial Statements
June 30, 2016
(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 an independent exploration and development company focused on the acquisition of property (or property leases enabling us to explore and exploit such property) that we believe may contain extractable oil and/or gas. The Company identified, evaluated and acquired oil and gas exploration and development opportunities primarily within the United States. As a result of the decline in the oil and gas markets, we are now seeking strategic alternatives. 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.
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 $2,707,319 as of June 30, 2016 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, 2016 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 its annual and interim reports.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity date 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.
| F-4 |
PETROTERRA CORP.
Notes To The Financial Statements
June 30, 2016
(Unaudited)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Foreign Currency Translation
The Company’s functional currency and its reporting currency is the United States dollar.
Stock Split
On July 1, 2015, 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 2.5 (the “Reverse Stock Split”).
As a result of the Reverse Stock Split, the Company’s authorized shares of common stock were decreased from 100,000,000 to 40,000,000 shares and its authorized shares of preferred stock were decreased from 10,000,000 to 4,000,000 shares. Upon the effectiveness of the Reverse Stock Split, which occurred on July 1, 2015, the Company’s issued and outstanding shares of common stock was decreased from approximately 66,125,000 to 26,450,000 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.
| F-5 |
PETROTERRA CORP.
Notes To The Financial Statements
June 30, 2016
(Unaudited)
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 three months ended June 30, 2016 and 2015 totaled $3,717 and $2,192, respectively.
Property and Equipment
Property and equipment are carried at cost. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation and amortization of property and equipment is provided using the straight-line method for financial reporting purposes at rates based on the following estimated useful lives:
| Classification | Useful Life | |
| Computer equipment | 3 Years | |
| Website design | 3 Years | |
| Patents and trademarks | 15 Years |
| F-6 |
PETROTERRA CORP.
Notes To The Financial Statements
June 30, 2016
(Unaudited)
Advertising
The Company follows the policy of charging the costs of advertising to expenses incurred. The Company incurred $0 in advertising costs during the three months ended June 30, 2016 and 2015, respectively.
Recent Accounting Pronouncements
In May 2014, the FASB amended the ASC and created Topic 606, Revenue from Contracts with Customers, to clarify the principles for recognizing revenue. This guidance will be effective for the Company beginning January 1, 2017 and must be adopted using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. We have not yet determined the effects of this new guidance on our financial statements.
In August 2014, the FASB issued a new U.S. GAAP accounting standard that provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new accounting standard requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. The new accounting standard is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company does not expect the adoption of this standard to have a material impact on the consolidated financial statements.
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 the Company 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 and currently owned by Pioneer (the “Leases”). Per the terms of the Agreement, we issued to Ardmore an aggregate of 200,000 shares (100,000 share installments) of our common stock on November 18, 2013 and April 12, 2014 in order to complete the assignment. Furthermore, on December 12, 2013, February 12, 2014 and April 12, 2014, the Company made three installment payments of $100,000 each to Pioneer. Upon completion of the final installment the leases were 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 issued to Ardmore was determined based on the price at which the Company’s shares were most recently being sold in a private placement transaction.
Impairment
The Company determined that there was a material impairment of the land lease agreements and recorded an impairment of the asset of $737,500 in the year ended March 31, 2016.
| F-7 |
PETROTERRA
CORP.
Notes To The Financial Statements
June 30, 2016
(Unaudited)
5. COMMON STOCK
The Company’s authorized capital consists of 40,000,000 shares of common stock and 4,000,000 shares of preferred stock, both with a par value of $0.001 per share.
On July 1, 2015, the Company effectuated a reverse stock split of its outstanding and authorized shares of common stock at a ratio of 1 for 2.5. As a result of the Reverse Stock Split, the Company’s authorized shares of common stock were decreased from 100,000,000 to 40,000,000 shares and its authorized shares of preferred stock were decreased from 10,000,000 to 4,000,000 shares. Upon the effectiveness of the Reverse Stock Split, which occurred on July 1, 2015, the Company’s issued and outstanding shares of common stock was decreased from 66,124,593 to 26,449,868 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 in this Report to retroactively show the effect of the Reverse Stock Split.
On April 27, 2016, the Company authorized the issuance of 50,000 shares of common stock to the Company’s Chief Operating Officer for consulting services. The fair value of the shares of common stock was $4,000.
On June 3, 2016, the Company issued 1,022,122 shares in exchange for the conversion of $10,119 of shareholder loans and $71,250 of accrued officer payroll and recorded a loss on conversion of debt expense of $10,622 during the period ending June 30, 2016 (See Note 5).
As of June 30, 2016, the Company had 28,323,588 shares of common stock issued and outstanding.
| F-8 |
PETROTERRA CORP.
Notes To The Financial Statements
June 30, 2016
(Unaudited)
6. INCOME TAXES
As of June 30, 2016, the Company had net operating loss carry forwards of approximately $2,707,319 that may be available to reduce future years’ taxable income through 2034. 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.
7. RELATED PARTY TRANSACTIONS
Chief Executive Officer
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 June 30, 2016 and March 31, 2016, the total amount loaned to the Company by a director was $1,577 and $10,119, respectively. The loan is non-interest bearing, due upon demand and unsecured. On June 3, 2016, Mr. Barton converted the loan balance of $10,119 into shares 127,106 shares of common stock.
On February 4, 2014, the Company entered into a three year employment agreement with the Company’s Chief Executive Officer whereby the Company provides for compensation of $10,000 per month. A total salary of $90,000 was expensed during the three months ended June 30, 2016 and 2015. The total balance due to the Chief Executive Officer for accrued salaries at June 30, 2016 and March 31, 2016, was $0 and $41,250, respectively. Additionally, on each anniversary of the Employment Agreement, beginning on the first anniversary, Mr. Barton has received and will continue to receive for the duration of the employment agreement a restricted stock grant of 160,000 shares of the Company’s common stock. The restricted stock grants vest 10 months following the issuance. On June 3, 2016, Mr. Barton converted $71,250 of accrued salary into shares 895,106 shares of common stock.
Chief Operating Officer
On October 26, 2015, the Company renewed its independent contractor agreement with Arrow Peak Minerals and Royalty LLC (“Arrow”) so that Kurt Reinecke would continue to act in the role of the Company’s Chief Operating Officer. The agreement is for a term of one year and will pay Arrow an aggregate of $90,000 over the term. Arrow is also entitled to receive an aggregate of 150,000 shares of common stock to be earned as follows: (i) 50,000 shares were issued upon execution of the agreement; (ii) 50,000 shares will be issued upon the six month anniversary of the commencement of the agreement; and (iii) 50,000 shares will be issued upon the one year anniversary of the commencement of the agreement.
As of April 1, 2016, the Company and Mr. Reinecke suspended services provided and the only compensation expense was stock based of 50,000 shares issued with a fair value of $4,000.
8. SUBSEQUENT EVENT
The Company has evaluated subsequent events from June 30, 2016 through the filing of these financial statements. There are no significant subsequent events, except as disclosed below;
In July 2016, the Company has received $10,000 in 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.
| F-9 |
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 of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (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.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
GENERAL
We are a development stage company that identified, evaluated and acquired oil and gas exploration and development opportunities primarily in the United States. As a result of the decline in the oil and gas markets, we are now seeking other strategic alternatives.
We were incorporated under the laws of the State of Nevada on July 25, 2008 as “Loran Connection Corp.” We were formed to provide a variety of services in the area of individual and group tourism and business support in Ukraine. We subsequently filed a resale registration statement with the Securities and Exchange Commission on May 28, 2009, which was declared effective on October 28, 2009. On January 25, 2012, we filed an amendment to our articles of incorporation to, among other things, change our name to “PetroTerra Corp.” and effect a thirty-two-for-one reverse split. We changed our name to reflect a proposed change in our business operations. On October 2, 2013, in connection with a change of control in the management of the Company, the Company began its current business operations in the oil and gas sector. On December 18, 2013, we filed a certificate of change to effect a one-for-two reverse stock split of our authorized and our outstanding shares of common stock and preferred stock. On April 12, 2014, we completed our acquisition of certain property leases (the “Leases”) held by Ardmore Investments Inc. (“Ardmore”) for property owned by Pioneer Oil and Gas (“Pioneer”) covering 5,905.54 acres of land located in the Central Utah Thrust Belt in Beaver County and Sevier County, Utah (the “Utah Properties”). Since January 2016, as a result of the decline in the oil and gas markets, we ceased investing in the Utah Properties and began seeking a strategic alternative both inside and outside of the oil and gas market.
Our principal executive offices are located at 422 East Vermijo Avenue, Suite 313, Colorado Springs, CO 80903. The telephone number at our principal executive offices is (719) 219-6404. Our web site is www.petroterracorp.com.
Our Business Plan
The Company was an independent exploration and development company focused on the acquisition of property (or property leases enabling us to explore and exploit such property) that we believed may contain extractable oil and/or gas.
On November 18, 2013, we entered into an assignment of lease agreement whereby Ardmore assigned to us its rights under a certain Purchase Agreement, dated August 8, 2013, between Ardmore and Pioneer involving the sale of 5,905.54 acres of three separate BLM Management oil and gas Leases located in the Central Utah Thrust Belt in Beaver County and Sevier County, Utah and currently owned by Pioneer. Per the terms of the Agreement, we issued to Ardmore 100,000 shares of our common stock on November 18, 2013, and, in order to complete the assignment contemplated by the Agreement, we issued to Ardmore an additional 100,000 shares of our common stock upon the transfer to us of ownership in the Leases, which occurred on April 12, 2014. Furthermore, the Company made three installment payments of $100,000 each to Pioneer pursuant to the terms of the Purchase Agreement. The Leases were conveyed to the Company on April 10, 2014.
| 3 |
In January 2014 we hired a third party independent contractor to provide insight and to assist in the development of a plan regarding the exploration of any properties that we acquire. In March 2014, we engaged a third party independent contractor to provide geologic consulting services to the Company. In March 2014 we also obtained an MHA Technical Report on the Utah Properties. In September 2014, we engaged a third party independent contractor to review and process both the public domain gravity and aeromagnetic datasets that existed on our leased Utah Properties. In November 2014, we engaged a third party independent contractor to perform a comprehensive gravity survey on our Utah Properties which was completed in December 2014 and the results of such survey were interpreted in February 2015.
On September 28, 2014, the Company engaged Thompson Solutions, LLC (“Thompson”) to review and process both the public domain gravity and aeromagnetic datasets that existed on our leased Utah Properties. The purpose of this review was to identify major structures and geologic trends of interest on the Utah Properties. Based on the results of this analysis, on November 21, 2014, the Company engaged Magee Geophysical Services LLC (“Magee”) to perform a comprehensive gravity survey on our Utah Properties. The gravity survey was conducted from November 22, 2014 through December 9, 2014 and cost the Company approximately $55,000. Pursuant to the survey, a total of 737 new gravity stations were identified on a nominal quarter mile grid and the data acquired was merged with re-processed public domain data including about 630 stations located in and around the main grid. Upon completion of Magee’s gravity survey, on December 8, 2014, the Company engaged Thompson to further process the data obtained by Magee and to provide custom processing and mapping of such data. On February 6, 2015, Thompson completed their interpretation of the gravity survey. The Company will pay to Thompson $15,500 for its services.
On February 2, 2015 the Company engaged PRISEM Geoscience Consulting LLC (“PRISEM”) to provide recommendations on a work plan for creating a geologic model of the Utah Properties. Due to the volatility of the oil and gas market, the geologic model was never completed.
Our Properties
As described above, the Company holds oil and gas leases for property in Sevier and Beaver Counties, Utah. On April 10th 2014, we acquired the Leases pursuant to the Agreement. These three Leases cover 5,950.54 gross acres in Sevier and Beaver counties in southwest Utah. The two Sevier leases, UTU-89243 and UTU-89244, each have a term through 02/01/2023 (hereinafter, the “Sevier Prospect”). Our Beaver county lease, UTU-86466, has an expiration date of 02/01/2021 (hereinafter, the “Beaver Prospect” and together with the Sevier Prospect, the “Sevier and Beaver Oil Project”). Pursuant to the Purchase Agreement which governs the terms under which we can use the Utah Properties, we have a 100% Working Interest (WI) and an 80% Net Revenue Interest (NRI) in the Leases.
| 4 |
Oil and Gas Industry-Specific Disclosures
As described above, the Company had only recently begun its oil and gas business operations before operations were halted in order to identify other strategic alternatives, not necessarily limited to the oil and gas industry. Accordingly, the disclosure required by Subpart 1200 of Regulation S-K (Section 229.1200 of this chapter) is not applicable to our Company as of the date hereof. The Company has obtained Leases in the Central Utah Thrust Belt in Beaver County and Sevier County, Utah consisting of 5,950.54 gross acres of undeveloped acreage.
Current Business Plan
Given the current climate in the oil and gas industry, on or about January 2016, management determined to cease development of our oil and gas leases and instead seek a strategic alternative, whether in the oil and gas industry or otherwise.
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.
Three Month Period Ended June 30, 2016 Compared to the Three Month Period Ended June 30, 2015.
Our net loss for the three-month period ended June 30, 2016 was $76,802 compared to a net loss of $93,803 during the three-month period ended June 30, 2015. We did not generate any revenue during the three-month period ended June 30, 2016 and 2015.
| 5 |
This change in net loss was primarily the result of the following:
Lease property and exploration costs
During the three months ended June 30, 2016, we incurred lease property and exploration costs of 0, a decrease of $13,417 compared to the prior year period amount of $13,417 resulting primarily from a decrease in exploration costs. As a result of the decline in the oil and gas markets, we ceased investing in the Utah Properties and began seeking a strategic alternative both inside and outside of the oil and gas market.
General and administrative costs
During the three month period ended June 30, 2016, we incurred general and administrative expenses of $34,764 compared to $37,933 incurred during the three-month period ended June 30, 2015. The general and administrative expense incurred during the three months ended June 30, 2016 and 2015 was primarily related to compensation to our Chief Executive Officer of $30,000, with differences in corporate overhead and travel costs between periods.
Professional Fees
During the three months ended June 30, 2016, we incurred professional fees of $27,416 relating to our equity financings, operations and public company compliance. The legal and accounting fees associated with these activities amounted to $12,718 and $10,796, respectively, and the corporate fees associated with these activities amounted to $3,901. During the three months ended June 30, 2015, we incurred professional fees of $42,453 relating to our equity financings, operations and public company compliance. The legal and accounting fees associated with these activities amounted to $20,374 and $9,046, respectively, and the corporate and investor relations fees associated with these activities amounted to $13,033.
Non-Employee Stock Based Compensation
During the three months ended June 30, 2016, we incurred expense of $4,000 for stock issuances for compensation to our Chief Operating Officer. During the three months ended June 30, 2015, we did not incur non-employee stock based compensation charges.
Weighted average number of shares
The weighted average number of shares outstanding was 27,589,348 and 26,361,403 for the three-month periods ended June 30, 2016 and 2015, respectively.
| 6 |
LIQUIDITY AND CAPITAL RESOURCES
We had no cash and cash equivalents as of June 30, 2016 and March 31, 2016.
We have experienced losses of $76,802 and $93,803 for the three months ended June 30, 2016 and 2015, respectively, and had an accumulated deficit of $2,707,319 at June 30, 2016. In addition, we have not completed our efforts to establish a stable recurring source of revenues sufficient to cover our operating costs and expect to continue to generate losses for the foreseeable future. There are no assurances that we will be able to obtain an adequate level of financing needed for our near term requirements or the long-term development and exploration of our Leases or any other strategic alternative that we may pursuit. These conditions raise substantial doubt about our ability to continue as a “going concern”.
Since inception, we have financed our operations primarily through private placements of our common stock, receiving aggregate net proceeds totaling $1,359,500 from the period beginning October 1, 2013 through June 30, 2016.
Three months Ended June 30, 2016 Compared with Three months Ended June 30, 2015
Cash Flows from Operating Activities
We have generated negative cash flows from operating activities. For the three months ended June 30, 2016, net cash flows used in operating activities was $1,577 consisting of a net loss of $76,802, offset by non-cash stock compensation of $4,000, non-cash conversion of debt of $40,622, depreciation and amortization of $3,948, an increase of $24,464 in accounts payables and accrued liabilities, and a decrease in prepaid expenses of $1,875. Furthermore, as of June 30, 2016 we had net cash overdraft repayments of $316.
For the three months ended June 30, 2015, net cash flows used in operating activities was $117,678 consisting of a net loss of $93,803, offset by depreciation and amortization of $2,423, a decrease of $17,738 in accounts payables and accrued liabilities, a decrease of $10,000 for accrued officer compensation, and an increase in prepaid expenses of $1,875. Furthermore, as of March 31, 2015 we had a cash overdraft repayment of $435.
Cash Flows from Financing Activities
We have financed our operations primarily from either cash advances or the issuance of equity instruments. We generated cash from financing activities of $1,577 from shareholder loans and $120,000 from the issuance of common stock in the three months ended June 30, 2016 and 2015, respectively.
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.
Our existing working capital, further advances and debt instruments, and anticipated cash flow are not adequate to fund our operations over the next twelve 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. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to our pursuit of a strategic alternative from the development of our oil and gas leases. We believe that we will need $250,000 in additional capital to operate for the next twelve months. 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 that 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, 2016 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.
| 7 |
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 June 30, 2016. 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 assessed 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 June 30, 2016.
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.
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
The Company issued securities to certain of its officers.
A list of officer issuances is below:
| ● | On April 27, 2016, the Company issued 50,000 shares of common stock to the Company’s Chief Operating Officer for consulting services. The fair value of the shares of common stock was $4,000. Such issuance was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act. |
| ● | On June 3, 2016, the Company issued 1,022,122 shares in exchange for $10,119 of shareholder loans and $71,250 of accrued officer payroll. The fair value of the shares common stock was $91,991. Such sale was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act. |
| 8 |
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
| 9 |
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 August 29, 2016 | By: | /s/ John Barton |
| John Barton, | ||
| President and Chief Executive Officer and Chief Financial Officer | ||
| 10 |
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: August 29, 2016 | |
| /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: August 29, 2016 | |
| /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 June 30, 2016 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: August 29, 2016 | |
| /s/ John Barton | |
| John Barton, President, | |
| Chief Executive Officer and Chief Financial Officer |
Document and Entity Information - shares |
3 Months Ended | |
|---|---|---|
Jun. 30, 2016 |
Aug. 26, 2016 |
|
| Document And Entity Information | ||
| Entity Registrant Name | PETROTERRA CORP. | |
| Entity Central Index Key | 0001463208 | |
| Document Type | 10-Q | |
| Document Period End Date | Jun. 30, 2016 | |
| Amendment Flag | false | |
| Current Fiscal Year End Date | --03-31 | |
| Entity Filer Category | Smaller Reporting Company | |
| Entity Common Stock, Shares Outstanding | 28,323,588 | |
| Trading Symbol | PTRA | |
| Document Fiscal Period Focus | Q1 | |
| Document Fiscal Year Focus | 2017 |
Balance Sheets (Unaudited) (Parenthetical) - USD ($) |
Jun. 30, 2016 |
Mar. 31, 2016 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Fixed Assets, accumulated depreciation | $ 1,617 | $ 1,386 |
| Website, accumulated amortization | $ 25,153 | $ 21,436 |
| Preferred Stock, par value | $ 0.001 | $ 0.001 |
| Preferred Stock, shares authorized | 4,000,000 | 4,000,000 |
| Preferred Stock, shares issued | ||
| Preferred stock, shares outstanding | ||
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 40,000,000 | 4,000,000 |
| Common stock, shares issued | 28,323,588 | 27,251,466 |
| Common Stock, shares outstanding | 28,323,588 | 27,251,466 |
Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
| EXPENSES | ||
| Lease property and exploration costs | $ 13,417 | |
| General and administrative expenses | 34,764 | 37,933 |
| Professional fees | 27,416 | 42,453 |
| Stock compensation expense | 4,000 | |
| Net loss from Operation | (66,180) | (93,803) |
| OTHER INCOME (EXPENSE) | ||
| Loss on conversion of related party debt | (10,622) | |
| Net loss before taxes | (76,802) | |
| PROVISION FOR INCOME TAXES | ||
| NET LOSS | $ (76,802) | $ (93,803) |
| (LOSS) PER COMMON SHARE -BASIC AND DILUTED | $ (0.00) | $ (0.00) |
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | 27,589,348 | 26,361,403 |
Organization and Business Operations |
3 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Organization and Business Operations |
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 an independent exploration and development company focused on the acquisition of property (or property leases enabling us to explore and exploit such property) that we believe may contain extractable oil and/or gas. The Company identified, evaluated and acquired oil and gas exploration and development opportunities primarily within the United States. As a result of the decline in the oil and gas markets, we are now seeking strategic alternatives. 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. |
Going Concern |
3 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Going Concern |
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 $2,707,319 as of June 30, 2016 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. |
Summary of Significant Accounting Policies |
3 Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||
| Accounting Policies [Abstract] | |||||||||||||
| Summary of Significant Accounting Policies |
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, 2016 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 its annual and interim reports.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity date 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.
Stock Split
On July 1, 2015, 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 2.5 (the “Reverse Stock Split”).
As a result of the Reverse Stock Split, the Company’s authorized shares of common stock were decreased from 100,000,000 to 40,000,000 shares and its authorized shares of preferred stock were decreased from 10,000,000 to 4,000,000 shares. Upon the effectiveness of the Reverse Stock Split, which occurred on July 1, 2015, the Company’s issued and outstanding shares of common stock was decreased from approximately 66,125,000 to 26,450,000 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.
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 three months ended June 30, 2016 and 2015 totaled $3,717 and $2,192, respectively.
Property and Equipment
Property and equipment are carried at cost. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation and amortization of property and equipment is provided using the straight-line method for financial reporting purposes at rates based on the following estimated useful lives:
Advertising
The Company follows the policy of charging the costs of advertising to expenses incurred. The Company incurred $0 in advertising costs during the three months ended June 30, 2016 and 2015, respectively.
Recent Accounting Pronouncements
In May 2014, the FASB amended the ASC and created Topic 606, Revenue from Contracts with Customers, to clarify the principles for recognizing revenue. This guidance will be effective for the Company beginning January 1, 2017 and must be adopted using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. We have not yet determined the effects of this new guidance on our financial statements.
In August 2014, the FASB issued a new U.S. GAAP accounting standard that provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new accounting standard requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. The new accounting standard is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company does not expect the adoption of this standard to have a material impact on the consolidated financial statements. |
Acquisition of Oil and Gas Properties |
3 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Business Combinations [Abstract] | |
| Acquisition of Oil and Gas Properties |
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 the Company 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 and currently owned by Pioneer (the “Leases”). Per the terms of the Agreement, we issued to Ardmore an aggregate of 200,000 shares (100,000 share installments) of our common stock on November 18, 2013 and April 12, 2014 in order to complete the assignment. Furthermore, on December 12, 2013, February 12, 2014 and April 12, 2014, the Company made three installment payments of $100,000 each to Pioneer. Upon completion of the final installment the leases were 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 issued to Ardmore was determined based on the price at which the Company’s shares were most recently being sold in a private placement transaction.
Impairment
The Company determined that there was a material impairment of the land lease agreements and recorded an impairment of the asset of $737,500 in the year ended March 31, 2016. |
Common Stock |
3 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Equity [Abstract] | |
| Common Stock |
5. COMMON STOCK
The Company’s authorized capital consists of 40,000,000 shares of common stock and 4,000,000 shares of preferred stock, both with a par value of $0.001 per share.
On July 1, 2015, the Company effectuated a reverse stock split of its outstanding and authorized shares of common stock at a ratio of 1 for 2.5. As a result of the Reverse Stock Split, the Company’s authorized shares of common stock were decreased from 100,000,000 to 40,000,000 shares and its authorized shares of preferred stock were decreased from 10,000,000 to 4,000,000 shares. Upon the effectiveness of the Reverse Stock Split, which occurred on July 1, 2015, the Company’s issued and outstanding shares of common stock was decreased from 66,124,593 to 26,449,868 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 in this Report to retroactively show the effect of the Reverse Stock Split.
On April 27, 2016, the Company authorized the issuance of 50,000 shares of common stock to the Company’s Chief Operating Officer for consulting services. The fair value of the shares of common stock was $4,000.
On June 3, 2016, the Company issued 1,022,122 shares in exchange for the conversion of $10,119 of shareholder loans and $71,250 of accrued officer payroll and recorded a loss on conversion of debt expense of $10,622 during the period ending June 30, 2016 (See Note 5).
As of June 30, 2016, the Company had 28,323,588 shares of common stock issued and outstanding. |
Income Taxes |
3 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes |
6. INCOME TAXES
As of June 30, 2016, the Company had net operating loss carry forwards of approximately $2,707,319 that may be available to reduce future years’ taxable income through 2034. 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. |
Related Party Transactions |
3 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions |
7. RELATED PARTY TRANSACTIONS
Chief Executive Officer
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 June 30, 2016 and March 31, 2016, the total amount loaned to the Company by a director was $1,577 and $10,119, respectively. The loan is non-interest bearing, due upon demand and unsecured. On June 3, 2016, Mr. Barton converted the loan balance of $10,119 into shares 127,106 shares of common stock.
On February 4, 2014, the Company entered into a three year employment agreement with the Company’s Chief Executive Officer whereby the Company provides for compensation of $10,000 per month. A total salary of $90,000 was expensed during the three months ended June 30, 2016 and 2015. The total balance due to the Chief Executive Officer for accrued salaries at June 30, 2016 and March 31, 2016, was $0 and $41,250, respectively. Additionally, on each anniversary of the Employment Agreement, beginning on the first anniversary, Mr. Barton has received and will continue to receive for the duration of the employment agreement a restricted stock grant of 160,000 shares of the Company’s common stock. The restricted stock grants vest 10 months following the issuance. On June 3, 2016, Mr. Barton converted $71,250 of accrued salary into shares 895,106 shares of common stock.
Chief Operating Officer
On October 26, 2015, the Company renewed its independent contractor agreement with Arrow Peak Minerals and Royalty LLC (“Arrow”) so that Kurt Reinecke would continue to act in the role of the Company’s Chief Operating Officer. The agreement is for a term of one year and will pay Arrow an aggregate of $90,000 over the term. Arrow is also entitled to receive an aggregate of 150,000 shares of common stock to be earned as follows: (i) 50,000 shares were issued upon execution of the agreement; (ii) 50,000 shares will be issued upon the six month anniversary of the commencement of the agreement; and (iii) 50,000 shares will be issued upon the one year anniversary of the commencement of the agreement.
As of April 1, 2016, the Company and Mr. Reinecke suspended services provided and the only compensation expense was stock based of 50,000 shares issued with a fair value of $4,000. |
Subsequent Event |
3 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Subsequent Events [Abstract] | |
| Subsequent Event |
8. SUBSEQUENT EVENT
The Company has evaluated subsequent events from June 30, 2016 through the filing of these financial statements. There are no significant subsequent events, except as disclosed below;
In July 2016, the Company has received $10,000 in 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. |
Summary of Significant Accounting Policies (Policies) |
3 Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||
| Accounting Policies [Abstract] | |||||||||||||
| Basis of Presentation |
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, 2016 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 its annual and interim reports. |
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| Cash and Cash Equivalents |
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity date of three months or less at the time of issuance to be cash equivalents. |
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| Use of Estimates and Assumptions |
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. |
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| Foreign Currency Translation |
Foreign Currency Translation
The Company’s functional currency and its reporting currency is the United States dollar. |
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| Stock Split |
Stock Split
On July 1, 2015, 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 2.5 (the “Reverse Stock Split”).
As a result of the Reverse Stock Split, the Company’s authorized shares of common stock were decreased from 100,000,000 to 40,000,000 shares and its authorized shares of preferred stock were decreased from 10,000,000 to 4,000,000 shares. Upon the effectiveness of the Reverse Stock Split, which occurred on July 1, 2015, the Company’s issued and outstanding shares of common stock was decreased from approximately 66,125,000 to 26,450,000 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. |
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| Stock-based Compensation |
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. |
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| Income Taxes |
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. |
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| Basic and Diluted Loss Per Share |
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. |
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| Fiscal Periods |
Fiscal Periods
The Company’s fiscal year end is March 31. |
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| Revenue Recognition |
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. |
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| Oil and Gas |
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. |
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| Website |
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 three months ended June 30, 2016 and 2015 totaled $3,717 and $2,192, respectively. |
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| Property and Equipment |
Property and Equipment
Property and equipment are carried at cost. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation and amortization of property and equipment is provided using the straight-line method for financial reporting purposes at rates based on the following estimated useful lives:
|
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| Advertising |
Advertising
The Company follows the policy of charging the costs of advertising to expenses incurred. The Company incurred $0 in advertising costs during the three months ended June 30, 2016 and 2015, respectively. |
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| Recent Accounting Pronouncements |
Recent Accounting Pronouncements
In May 2014, the FASB amended the ASC and created Topic 606, Revenue from Contracts with Customers, to clarify the principles for recognizing revenue. This guidance will be effective for the Company beginning January 1, 2017 and must be adopted using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. We have not yet determined the effects of this new guidance on our financial statements.
In August 2014, the FASB issued a new U.S. GAAP accounting standard that provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new accounting standard requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. The new accounting standard is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company does not expect the adoption of this standard to have a material impact on the consolidated financial statements. |
Summary of Significant Accounting Policies (Tables) |
3 Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||
| Accounting Policies [Abstract] | |||||||||||||
| Estimated Useful Life of Property and Equipment |
Depreciation and amortization of property and equipment is provided using the straight-line method for financial reporting purposes at rates based on the following estimated useful lives:
|
Going Concern (Details Narrative) - USD ($) |
Jun. 30, 2016 |
Mar. 31, 2016 |
|---|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Accumulated deficit | $ 2,707,319 | $ 2,630,517 |
Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
3 Months Ended | |||
|---|---|---|---|---|
Jul. 02, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Mar. 31, 2016 |
|
| Reverse stock split | ratio of 1 for 2.5 | |||
| Common stock, shares authorized | 40,000,000 | 4,000,000 | ||
| Preferred stock, shares authorized | 4,000,000 | 4,000,000 | ||
| Common stock, shares issued | 28,323,588 | 27,251,466 | ||
| Common stock, shares outstanding | 28,323,588 | 27,251,466 | ||
| Common stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | |
| Preferred stock, outstanding | 0 | |||
| Website estimated useful life | 3 years | |||
| Amortization expense | $ 3,717 | $ 2,192 | ||
| Advertising cost | $ 0 | $ 0 | ||
| Maximum [Member] | ||||
| Common stock, shares authorized | 100,000,000 | |||
| Preferred stock, shares authorized | 10,000,000 | |||
| Common stock, shares issued | 66,124,593 | |||
| Common stock, shares outstanding | 66,124,593 | |||
| Minimum [Member] | ||||
| Common stock, shares authorized | 40,000,000 | |||
| Preferred stock, shares authorized | 4,000,000 | |||
| Common stock, shares issued | 26,449,868 | |||
| Common stock, shares outstanding | 26,449,868 | |||
Summary of Significant Accounting Policies - Estimated Useful Life of Property and Equipment (Details) |
3 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Computer Equipment [Member] | |
| Useful Life | 3 years |
| Website Design [Member] | |
| Useful Life | 3 years |
| Patents and Trademarks [Member] | |
| Useful Life | 15 years |
Acquisition of Oil and Gas Properties (Details Narrative) |
3 Months Ended | |
|---|---|---|
|
Nov. 18, 2013
USD ($)
a
shares
|
Mar. 31, 2016
USD ($)
|
|
| Impairment of the asset | $ | $ 737,500 | |
| Ardmore And Pioneer Oil And Gas [Member] | ||
| Acres of oil and gas selling | a | 5,905.54 | |
| Ardmore [Member] | ||
| Issuance of stock | shares | 200,000 | |
| Number of shares issued in installments | shares | 100,000 | |
| Ardmore [Member] | December 12, 2013, February 12, 2014 And April 12, 2014 [Member] | ||
| Installment payment to acquire oil and gas | $ | $ 100,000 |
Income Taxes (Details Narrative) |
3 Months Ended |
|---|---|
|
Jun. 30, 2016
USD ($)
| |
| Income Tax Disclosure [Abstract] | |
| Net operating loss carry forwards | $ 2,707,319 |
| Operating loss carry forward expiration year | 2034 |
Subsequent Event (Details Narrative) |
1 Months Ended |
|---|---|
|
Jul. 31, 2016
USD ($)
| |
| Subsequent Event [Member] | Officers And Other Related Parties [Member] | |
| Received advances from officers and other related parties | $ 10,000 |