10-Q/A 1 form10-qa.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

(Amendment No. 1)

 

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

 

For the quarterly period ended December 31, 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   Primary Standard Industrial   IRS Employer
of 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 February 14, 2017
Common Stock, $0.001  28,323,588

 

 

 

   

 

 

FORM 10-Q

 

PETROTERRA CORP.

 

EXPLANATORY NOTE

 

This quarterly report on Form 10-Q/A is being filed as Amendment No. 1 to our Quarterly report on Form 10-Q which was originally filed on February 14, 2017. On August 18, 2017, the Board of Directors (the “Board”) of PetroTerra Corp. (the “Company”), upon the recommendation of management, determined that the unaudited financial statements as of and for the quarterly period ended December 31, 2016, and the interim financial period ended March 31 2017, previously filed by the Company with the Securities and Exchange Commission, should no longer be relied upon.

 

The Company has determined that the financial statements referenced above should no longer be relied upon because they reference a November 22, 2016, reverse stock split of the Company’s outstanding shares of common stock at a ratio of 1 for 30 (the “Reverse Stock Split”) that was approved by the Board and the requisite shareholders of the Company; however, although it was filed with and processed by the Financial Industry Regulatory Authority (“FINRA”), the prior management of the Company did not follow through and obtain ultimate approval of the Reverse Stock Split by FINRA. Accordingly, the Reverse Stock Split never became effective.

 

Furthermore, the Company has corrected Note 8 Subsequent Event to correct the investor name that purchased the 51% of the Company shares on January 9, 2017 and to disclose the sale by the Company of new Series A convertible preferred shares.

 

This Amendment No. 1 to the Form 10-Q for the period ended December 31, 2016 contains currently dated certifications as Exhibits 31.1, 31.2, and 32.1, and 32.2. No attempt has been made in this Amendment No. 1 to the Form 10-Q for the period ended December 31, 2016 to modify or update the other disclosures presented in the Form 10-Q as previously filed, except as required by the restatement. This Amendment No. 1 on Form 10-Q/A does not reflect events occurring after the filing of the original Form 10-Q or modify or update those disclosures that may be affected by subsequent events. Accordingly, this Amendment No. 1 should be read in conjunction with our other filings with the Securities and Exchange Commission.

 

   

 

 

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 9
Item 1A. Risk Factors 9
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 9
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 

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

PetroTerra Corp.

BALANCE SHEETS

As of December 31, 2016 and March 31, 2016

 

   December 31, 2016   March 31, 2016 
  

(Restated)

(Unaudited)

     
ASSETS          
           
Current assets          
Cash  $-   $- 
Prepaid expenses   -    1,875 
Total current assets   -    1,875 
           
Oil & Gas Exploration   -    - 
           
Fixed Assets, net of accumulated depreciation of $2,079 and $1,386 as of December 31, 2016 and March 31, 2016, respectively   693    1,386 
           
Website, net of accumulated amortization of $29,803 and $21,436, as of December 31, 2016 and March 31, 2016, respectively   -    8,367 
           
Total Assets  $693   $11,628 
           
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY          
           
Current Liabilities          
Bank overdraft  $78   $208 
Accounts payable and accrued expenses   211,075    153,384 
Accrued liabilities, director   54,000    41,250 
Notes payable, related-party   15,187    10,118 
Total current liabilities   280,340    204,960 
           
Total liabilities   280,340    204,960 
           
Shareholders’ Equity          
Preferred Stock: $0.001 par value, 4,000,000 shares authorized; no shares issued and outstanding as of December 31, 2016 and March 31, 2016.   -    - 
Common stock; $0.001 par value, 500,000,000 shares authorized; 28,323,588 ,and 27,251,466 shares issued and outstanding as of December 31, 2016 and March 31, 2016, respectively   28,324    27,252 
Additional paid-in capital   2,504,852    2,409,933 
Accumulated deficit   (2,812,823)   (2,630,517)
Total shareholders’ equity   (279,647)   (193,332)
           
Total liabilities and shareholders’ equity  $693   $11,628 

 

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

 

  F-1 

 

 

PETROTERRA CORP.

STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2016 AND 2015

(Unaudited)

 

   Three months ended December 31   Nine months ended
December 31,
 
   2016   2015   2016   2015 
                 
EXPENSES                    
                     
Lease property and exploration costs  $-   $24,000   $-   $70,686 
General and administrative expenses   32,659    60,136    102,500    140,974 
Professional fees   26,970    31,888    75,183    123,711 
Stock compensation expense   -    48,000    4,000    65,600 
TOTAL OPERATING EXPENSES   (59,629)   (164,024)   (181,683)   (400,971)
                     
OTHER INCOME (EXPENSE)                    
Gain on sale of land leases   10,000    -    10,000    - 
Loss on conversion of related party debt   -    -    (10,622)   - 
Other Income (Expense)   10,000    -    (622)   - 
Net loss from Operation before Taxes   (49,629)   (164,024)   (182,305)   (400,971)
                     
PROVISION FOR INCOME TAXES   -    -    -    - 
NET LOSS  $(49,629)  $(164,024)  $(182,305)  $(400,971)
                     
(LOSS) PER COMMON SHARE - BASIC AND DILUTED (Restated)  $(0.00)  $(0.01)  $(0.01)  $(0.02)
                     
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (Restated)   28,323,588    26,967,599    28,080,621    26,640,652 

 

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

 

  F-2 

 

 

PETROTERRA CORP.

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2016 AND 2015

(Unaudited)

 

   Nine months Ended December 31, 
   2016   2015 
         
OPERATING ACTIVITIES          
Net income (loss)  $(182,305)  $(400,971)
Adjustments to reconcile net income (loss) to net cash used in operating activities:          
Depreciation and amortization   9,060    7,853 
Common stock issued for services   4,000    65,600 
Conversion of officer payroll to common stock   30,000    - 
Loss on conversion of related party debt   10,622    - 
Increase (decrease) in:          
Bank overdraft   (130)   (84)
Accounts payables and accrued liabilities   57,691    (23,773)
Prepaids   1,875    (1,875)
Accrued payroll, officer   54,000    1,250 
Net cash used in operating activities   (15,187)   (352,000)
           
FINANCING ACTIVITIES          
Advances from shareholder   15,187    - 
Sales of Common stock   -    352,000 
Net cash provided by financing activities   15,187    352,000 
           
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   -    - 
           
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD   -    - 
CASH AND CASH EQUIVALENTS - END OF PERIOD  $-   $- 
           
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   $65,600 
Common stock issued for conversion of related party debt  $91,991   $- 

 

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

 

  F-3 

 

 

PETROTERRA CORP.

Notes To The Financial Statements

December 31, 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 $2,812,823 as of December 31, 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 

 

 

ETROTERRA CORP.

Notes To The Financial Statements

December 31, 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.

 

Reverse Stock Split Not Effectuated

 

On February 14, 2017, after Board and shareholder approval obtained on November 22, 2016, 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 30 (the “Reverse Stock Split”), however, although it was filed with and processed by the Financial Industry Regulatory Authority (“FINRA”), the prior management of the Company did not follow through and obtain ultimate approval of the Reverse Stock Split by FINRA. Accordingly, the Reverse Stock Split never became effective.

 

On February 14, 2017, the Company increased authorized shares of common stock from 40,000,000 to 500,000,000 shares and its authorized shares of preferred stock remained at 4,000,000 shares.

 

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

December 31, 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 nine months ended December 31, 2016 and 2015 totaled $8,367 and $7,160, 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

December 31, 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 nine months ended December 31, 2016 and 2015, respectively.

 

Recent Accounting Pronouncements

 

In February 2016, FASB issued ASU-2016-02, “Leases (Topic 842).” The guidance requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right of use asset representing its right to use the underlying asset for the lease term. For finance leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; interest on the lease liability will be recognized separately from amortization of the right-of-use asset in the statement of comprehensive income; and repayments of the principal portion of the lease liability will be classified within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows. For operating leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; a single lease cost will be recognized, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis; and all cash payments will be classified within operating activities in the statement of cash flows. Under Topic 842 the accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The amendments in Topic 842 are effective for the Company beginning January 1, 2019, including interim periods within that fiscal year. The Company is currently evaluating the impact of adopting this standard.

 

In January 2016, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”) 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” which amends the guidance in U.S. generally accepted accounting principles on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and are to be adopted by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this standard.

 

In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” which simplifies the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This ASU is effective for financial statements issued for annual periods beginning after December 16, 2016, and interim periods within those annual periods. The adoption of this standard will not have any impact on the Company’s financial position, results of operations and disclosures.

 

  F-7 

 

 

PETROTERRA CORP.

Notes To The Financial Statements

December 31, 2016

(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 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.

 

Conveyance of Leases to Pioneer Oil & Gas

 

On November 3, 2016, Pioneer agreed to purchase all of the right, title and interest of our property Leases for the amount of $10,000. In addition, all geological, geophysical and any and all other data were transferred to Pioneer.

 

5. COMMON STOCK

 

The Company’s authorized capital consists of 500,000,000 shares of common stock and 4,000,000 shares of preferred stock, both with a par value of $0.001 per share.

 

On February 14, 2017, The Company increased its authorized shares of common stock from 40,000,000 to 500,000,000 shares and its authorized shares of preferred stock remained at 4,000,000 shares.

 

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 December 31, 2016 (See Note 7).

 

As of December 31, 2016, the Company had 28,323,588 shares of common stock issued and outstanding.

 

  F-8 

 

 

PETROTERRA CORP.

Notes To The Financial Statements

December 31, 2016

(Unaudited)

 

6. INCOME TAXES

 

As of December 31, 2016, the Company had net operating loss carry forwards of approximately $2,812,823 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 December 31, 2016 and March 31, 2016, the total amount loaned to the Company by a director was $15,187 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 127,016 shares of common stock. As of December 31, 2016 and March 31, 2016, the total amount loaned to the Company by a director was $15,187 and $10,118, respectively.

 

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 nine months ended December 31, 2016 and 2015. The total balance due to the Chief Executive Officer for accrued salaries at December 31, 2016 and March 31, 2016, was $54,000 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.

 

On January 9, 2017, Mr. Barton resigned as Chief Executive Officer and sole director in conjunction with the sale of his ownership of the Company.

 

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.

 

In the nine months ended December 31, 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.

 

On January 9, 2017, Mr. Reinecke resigned as Chief Operating Officer.

 

 

  F-9 

 

 

PETROTERRA CORP.

Notes To The Financial Statements

December 31, 2016

(Unaudited)

 

8. SUBSEQUENT EVENT

 

The Company has evaluated subsequent events from December 31, 2016 through the filing of these financial statements. There are no significant subsequent events, except as disclosed below;

 

Under purchase agreements executed in November 2016, on January 9, 2017, SCS, LLC purchased 2,900,000 shares of newly issued Series A convertible preferred stock and RDW Capital, LLC. purchased 1,100,000 shares of Series A preferred stock for an aggregate $146,091. In addition, on January 12, 2017, SCS, LLC purchased 14,455,722 common shares or 51% of the total outstanding shares from the former Chief Executive Officer/majority shareholder for $63,909 which amount was contributed to the Company to pay off existing liabilities totaling $200,000 and $10,000 was held in escrow.

 

9. RESTATEMENT OF FINANCIAL STATEMENT

 

We have restated our previously issued consolidated financial statements as of and for the three and nine months ended December 31, 2016 to correct the outstanding shares for the reverse stock split that was never effectuated.

 

On November 22, 2016, reverse stock split of the Company’s outstanding shares of common stock at a ratio of 1 for 30 (the “Reverse Stock Split”) that was approved by the Board and the requisite shareholders of the Company; however, although it was filed with and processed by the Financial Industry Regulatory Authority (“FINRA”), the prior management of the Company did not follow through and obtain ultimate approval of the Reverse Stock Split by FINRA. Accordingly, the Reverse Stock Split never became effective therefore the common stock outstanding as of December 31, 2016 was 28,323,588 rather than 944,120 and common stock was increased by $27,380 and offset against additional paid-in capital to reflect 28,323,588 shares outstanding as of December 31, 2016.

 

  F-10 

 

 

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 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.

 

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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.

 

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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.

 

On November 3, 2016, Pioneer Oil and Gas agreed to purchase all of the right, title and interest of our property leases.

 

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 December 31, 2016 Compared to the Three Month Period Ended December 31, 2015.

 

Our net loss for the three-month period ended December 31, 2016 was $49,629 compared to a net loss of $164,024 during the three-month period ended December 31, 2015. We did not generate any revenue during the three month periods ended December 31, 2016 and 2015.

 

This change in net loss was primarily the result of the following:

 

Lease property and exploration costs

 

During the three months ended December 31, 2016, we incurred lease property and exploration costs of $0 compared to the prior year period amount of $24,000 as the Company ceased incurring consulting costs in the current year,

 

General and administrative costs

 

During the three month period ended December 31, 2016, we incurred general and administrative expenses of $32,659 compared to $60,136 incurred during the three-month period ended December 31, 2015. The general and administrative expense incurred during the three months ended December 31, 2016 and 2015 was primarily related to compensation to our Chief Executive Officer of $30,000, with a difference between corporate overhead and travel costs between periods.

 

Professional Fees

 

During the three months ended December 31, 2016, we incurred professional fees of $26,970 relating to our equity financings, operations and public company compliance. The legal and accounting fees associated with these activities amounted to $20,809 and $4,235, respectively, and the corporate and investor relations fees associated with these activities amounted to $1,926. During the three months ended December 31, 2015, we incurred professional fees of $31,888 relating to the legal and accounting fees of $17,525 and $5,814, respectively, and the corporate and investor relations fees associated with these activities amounted to $8,549.

 

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Non-Employee Stock Based Compensation

 

During the three months ended December 31, 2016 and 2015, we incurred expense of $0 and $48,000 for stock issuances for compensation to our Chief Operating Officer and for professional and advisory services, respectively.

 

Other Income (Expense)

 

On November 3, 2016, Pioneer Oil and Gas agreed to purchase all of the right, title and interest of our property leases for the amount of $10,000. These leases related to property owned by Pioneer Oil and Gas covering 5,905.54 acres of land located in the Central Utah Thrust Belt in Beaver County and Sevier County, Utah. In addition, all geological, geophysical and any and all other data were transferred to Pioneer.

 

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 nine months ending December 31, 2016.

 

Weighted average number of shares

 

The weighted average number of shares outstanding was 28,323,588 and 26,967,599 for the three-month periods ended December 31, 2016 and 2015, respectively.

 

Nine month Period Ended December 31, 2016 Compared to the Nine month Period Ended December 31, 2015.

 

Our net loss for the nine month period ended December 31, 2016 was $182,305 compared to a net loss of $400,971 during the nine month period ended December 31, 2015 for the reasons described below. During the nine month periods ended December 31, 2016 and 2015, we did not generate any revenue.

 

Lease property and exploration costs

 

During the nine months ended December 31, 2016, we incurred lease property and exploration costs of $0 compared to the prior year period amount of $70,686 as the Company ceased incurring consulting costs in the current year.

 

General and administrative costs

 

During the nine month period ended December 31, 2016, we incurred general and administrative expenses of $102,500 compared to $140,974 incurred during the nine month period ended December 31, 2015. The general and administrative expense incurred during the nine months ended December 31, 2016 and 2015 were primarily related to compensation to our Chief Executive Officer of $90,000, corporate overhead and travel costs.

 

Professional Fees

 

During the nine months ended December 31, 2016, we incurred professional fees of $75,183 relating to our equity financings, operations and public company compliance. The legal and accounting fees associated with these activities amounted to $39,164 and $24,031, respectively, and the corporate and investor relations fees associated with these activities amounted to $11,988. During the nine months ended December 31, 2015, we incurred professional fees of $123,711 relating to our equity financings, operations and public company compliance. The legal and accounting fees associated with these activities amounted to $52,899 and $23,860, respectively, and the corporate and investor relations fees associated with these activities amounted to $46,952.

 

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Non-Employee Stock Based Compensation

 

During the nine months ended December 31, 2016 and 2015, we incurred expense of $4,000 and $65,600 for stock issuances for compensation to our Chief Operating Officer and for professional and advisory services, respectively.

 

Other Income

 

On November 3, 2016, Pioneer Oil and Gas agreed to purchase all of the right, title and interest of our property leases for the amount of $10,000. These leases related to property owned by Pioneer Oil and Gas covering 5,905.54 acres of land located in the Central Utah Thrust Belt in Beaver County and Sevier County, Utah. In addition, all geological, geophysical and any and all other data were transferred to Pioneer.

 

The weighted average number of shares outstanding was 28,080,621 and 26,640,652 for the nine month periods ended December 31, 2016 and 2015, respectively.

 

LIQUIDITY AND CAPITAL RESOURCES

 

We had no cash and cash equivalents as of December 31, 2016 and March 31, 2016.

 

We have experienced losses of $182,305 and $400,971 for the nine months ended December 31, 2016 and 2015, respectively, and had an accumulated deficit of $2,812,823 at December 31, 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 December 31, 2016.

 

Nine months Ended December 31, 2016 Compared with nine months Ended December 31, 2015

 

Cash Flows from Operating Activities

 

We have generated negative cash flows from operating activities. For the nine months ended December 31, 2016, net cash flows used in operating activities was $15,187 consisting of a net loss of $182,305, adjusted by non-cash stock compensation of $4,000, non-cash conversion of debt of $40,622, depreciation and amortization of $9,060, an increase of $57,691 in accounts payables and accrued liabilities, an increase in accrued officer payroll of $54,000, and a decrease in prepaid expenses of $1,875. Furthermore, as of December 31, 2016 we had net cash overdraft repayments of $130.

 

For the nine months ended December 31, 2015, net cash flows used in operating activities was $352,000 consisting of a net loss of $400,971, adjusted by non-cash stock compensation of $65,600, depreciation and amortization of $7,853, a decrease of $23,733 in accounts payables and accrued liabilities, an increase of $1,250 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 $84.

 

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 $15,187 from shareholder loans and $352,000 from the issuance of common stock in the nine months ended December 31, 2016 and 2015, respectively.

 

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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 amended 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.

 

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, 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 December 31, 2016.

 

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, 2016 because of the items set forth below:

 

The Company did not have proper controls in place to track the progression of corporate actions specifically related to the November 22, 2016, Reverse Stock Split.

 

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.

 

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

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 amended 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.

 

ITEM 1A. RISK FACTORS

 

No report required.

 

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

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

No report required.

 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

No report required.

 

ITEM 5. OTHER INFORMATION

 

On November 3, 2016, Pioneer Oil and Gas agreed to purchase all of the right, title and interest of our property leases for the amount of $10,000. These leases related to property owned by Pioneer Oil and Gas covering 5,905.54 acres of land located in the Central Utah Thrust Belt in Beaver County and Sevier County, Utah.

 

ITEM 6. EXHIBITS

 

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

 

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SIGNATURES

 

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 22, 2017 By: /s/ Steve Yariv
    Steve Yariv,
    Chief Executive Officer and Chief Financial Officer

 

 

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