NITRO PETROLEUM INC. - FORM 10-Q

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EX-32.1 - EXHIBIT 32.1 - NITRO PETROLEUM INC.	ex32-1.htm
EX-31.1 - EXHIBIT 31.1 - NITRO PETROLEUM INC.	ex31-1.htm

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 July 31, 2012

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

For the transition period from __________ to __________

Commission File Number: 000-50932

Nitro Petroleum Incorporated

(Exact name of registrant as specified in its charter)

	Nevada			98-0488493
	(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

624 W. Independence, Suite 101

Shawnee, OK 74804

(Address of principal executive offices)

(405) 273-9119

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve 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 o No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No x

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

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

Smaller reporting company x

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

At October 31, 2012 there were 2,074,242 shares of the registrant’s Common Stock outstanding.

EXPLANATORY NOTE

This Quarterly Report on Form 10-Q is for the quarters ended July 31, 2012 and April 30, 2012, with expanded financial and other disclosures. We believe that the filing of this expanded Quarterly Report enables us to provide information to investors in a more efficient manner than separately filing each of the quarterly reports separately. In addition, so that the recipients of this Quarterly Report can better understand the significant changes we have made in our business since January 31, 2012, the last date for which we filed an Annual Report on Form 10-K, the information relating to our business and related matters in this Quarterly Report includes information for the periods since January 31, 2012 through July 31, 2012. We intend to file timely all reports required under the Securities Exchange Act of 1934 (the “Exchange Act”) in the future.

Effective as of October 31, 2012, we effected a 1-for-100 reverse split (“Reverse Split”) of our common stock. Pursuant to the Reverse Split, the common stock was combined and reclassified based on a ratio of 100 shares of issued and outstanding common stock being combined and reclassified into one share of common stock. Fractional shares were rounded up to the next whole share. All share and per share amounts for common stock have been restated to reflect the Reverse Split on a retro-active basis.

ITEM 1. FINANCIAL STATEMENTS

NITRO PETROLEUM INCORPORATED

BALANCE SHEETS

(Unaudited)

	July 31, 2012			April 30, 2012			January 31, 2012

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	15,087		$	41,438		$	6,199
Accounts receivable		91,569			28,196			14,788
Due to related party		-			-			34,501
Total current assets		106,656			69,634			55,488

PROPERTY AND EQUIPMENT, NET		722,957			707,114			880,533
Total assets	$	829,613		$	776,748		$	936,021

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Cash overdraft	$	50,900			40,851		$	25,671
Accounts payable		210,956			92,797			312,678
Accrued liabilities		196,248			194,801			285,174
Due to related party		3,225			3,016			3,582
Total current liabilities		461,329			331,465			627,105

ASSET RETIREMENT OBLIGATION		60,101			60,101			60,101
Total liabilities		521,430			391,566			687,206

STOCKHOLDERS' EQUITY
Capital stock
Authorized:
20,000,000 common stock, $0.001 par value
10,000,000 preferrred stock, $0.001 par value
Issued and outstanding:
2,074,242 common shares as of 2012		2,074			2,074			2,074
Additional paid-in capital		5,892,820			5,892,820			5,892,820
Accumulated deficit		(5,586,711	)		(5,509,712	)		(5,646,079	)
Total stockholders' equity		308,183			385,182			248,815

Total liabilities and stockholders' equity	$	829,613		$	776,748		$	936,021

See accompanying notes to financial statements.

NITRO PETROLEUM INCORPORATED

STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended April 30,						Three Months Ended July 31,						Six Months Ended July31,
	2012			2011			2012			2011			2012			2011

REVENUES
Oil and gas production	$	65,810		$	71,102		$	110,184		$	87,904		$	175,994		$	159,006
Production services		17,160			20,680			17,160			14,080			34,320			34,760
Total revenues		82,970			91,782			127,344			101,984			210,314			193,766

COSTS AND EXPENSES
Lease operating expenses		123,297			83,447			194,530			109,911			317,827			193,358
Depletion, depreciation, amortization and accretion		7,263.00			7,264			7,264			5,898			14,527			13,162
General and administrative		14,115			67,585			53,693			105,483			67,808			173,068
Total expenses		144,675			158,296			255,487			221,292			400,162			379,588

OPERATING LOSS		(61,705	)		(66,514	)		(128,143	)		(119,308	)		(189,848	)		(185,822	)

OTHER INCOME
Other income		198,071			-			51,144			-			249,215			-
Total other income		198,071			-			51,144			-			249,215			-

INCOME (LOSS) BEFORE TAXES		136,366			(66,514	)		(76,999	)		(119,308	)		59,367			(185,822	)

PROVISION FOR INCOME TAXES		-			-			-			-			-			-

NET INCOME (LOSS)	$	136,366		$	(66,514	)	$	(76,999	)	$	(119,308	)	$	59,367		$	(185,822	)

Net income (loss) per share, basic and diluted	$	0.07		$	(0.03	)	$	(0.04	)	$	(0.06	)	$	0.03		$	(0.09	)

Weighted average shares outstanding, basic and diluted		2,074,242			2,074,242			2,074,242			2,074,242			2,074,242			2,074,242

See accompanying notes to financial statements.

NITRO PETROLEUM INCORPORATED

STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended July 31, 2012			Six Months Ended July 31, 2011

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	59,367		$	(185,824	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation, and amortization		14,528			13,162
Change in operating assets and liabilities:
Accounts receivable		(76,781	)		101,071
Accounts payable and accrued expenses		(190,647	)		99,295
Net cash provided by (used in) operating activities		(193,533	)		27,704

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of oil and gas properties		143,048			-
Acquisition of property and equipment		-			(125,114	)
Net cash provided by (used in) investing activities		143,048			(125,114	)

CASH FLOWS FROM FINANCING ACTIVITIES
Cash overdraft		25,229			-
Net payments from (to) related parties		34,144			96,588
Net cash provided by (used in) financing activities		59,373			96,588

Net increase (decrease) in cash		8,888			(822	)
Cash at beginning of year		6,199			40,501
Cash at end of year	$	15,087		$	39,679

SUPPLEMENTAL INFORMATION
Cash paid for interest	$	-		$	-
Cash paid for income taxes	$	-		$	-

See accompanying notes to financial statements.

NITRO PETROLEUM INCORPORATED

NOTES TO THE INTERIM FINANCIAL STATEMENTS

(Unaudited)

Note 1

Interim Reporting

The accompanying financial statements of Nitro Petroleum Incorporated (the “Company”) have not been audited by independent public accountants. In the opinion of management, the accompanying financial statements reflect all adjustments necessary to present fairly our financial position at July 31, 2012 and April 30, 2012 and our income and cash flows for the three and six months ended July 31, 2012 and April 30, 2012. All such adjustments are of a normal recurring nature. In preparing the accompanying financial statements, management has made certain estimates and assumptions that affect reported amounts in the financial statements and disclosures of contingencies. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results.

Certain disclosures have been condensed or omitted from these financial statements. Accordingly, these financial statements should be read with the financial statements included in our Annual Report on Form 10-K for the year ended January 31, 2012.

Note 2

Nature and Continuance of Operations

The Company was incorporated in October 2003 in the State of Nevada and has established its corporate offices in Shawnee, Oklahoma. On February 27, 2006, the Company changed its name from Ingenium Capital Corp. to Nitro Petroleum Incorporated. The Company is engaged primarily in the acquisition, development, production, exploration for, and the sale of oil, gas and natural gas liquids. All business activities are conducted in Texas and Oklahoma and the Company sells its oil and gas to a limited number of domestic purchasers.

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next twelve months. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. As of July 31, 2012, the Company has not achieved profitable operations. The Company has accumulated losses of $5,586,711 since its inception, has a working capital deficiency of $354,673 and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related-party advances; however there is no assurance of additional funding being available.

Note 3

Oil and Gas Properties

The Company follows the full cost method of accounting for oil and gas operations whereby all costs of exploring for and developing oil and gas reserves are initially capitalized on an aggregate (one cost center) basis. Such costs include land acquisition costs, geological and geophysical expenses, carrying charges on non-producing properties, costs of drilling and overhead charges directly related to acquisition and exploration activities.

Costs of acquiring and evaluating unproved properties are initially excluded from depletion calculations. These unevaluated properties are assessed annually to ascertain whether impairment has occurred. When proved reserves are assigned or the property is considered to be impaired, the cost of the property or the amount of the impairment is added to costs subject to depletion calculations.

Future net cash flows from proved reserves using average monthly prices, non-escalated and net of future operating and development costs are discounted to present value and compared to the carrying value of oil and gas properties.

Proceeds from a sale of petroleum and natural gas properties are applied against capitalized costs, with no gain or loss recognized, unless such a sale would alter the rate of depletion by more than twenty-five percent (25%).

NITRO PETROLEUM INCORPORATED

NOTES TO THE INTERIM FINANCIAL STATEMENTS

(Unaudited)

Note 4

Reverse Stock Split

Effective as of October 31, 2012, the Company effected a 1-for-100 reverse split (“Reverse Split”) of the Company’s common stock. Pursuant to the Reverse Split, the common stock was combined and reclassified based on a ratio of 100 shares of issued and outstanding common stock being combined and reclassified into one share of common stock. Fractional shares were rounded up to the next whole share. All share and per share amounts for common stock have been restated to reflect the Reverse Split on a retro-active basis.

NITRO PETROLEUM INCORPORATED

NOTES TO THE INTERIM FINANCIAL STATEMENTS

(Unaudited)

Note 5

Related Party Transactions

The Company paid management fees to a company under the control of the President of the Company totaling $16,697 and $11,488, for the quarters ended July 31, 2012 and April 30, 2012, respectively. These management fees are included in general and administrative expenses.

Note 6

Subsequent Events

Effective as of October 31, 2012, the Company effected a 1-for-100 reverse stock split of the Company’s common stock, as discussed in Note 4.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION

The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. This discussion and analysis should be read in conjunction with our financial statements and the accompanying notes included in this report, as well as our audited financial statements and the accompanying notes included in our Annual Report on Form 10-K for the year ended January 31, 2012. The following discussion contains forward-looking statements that are dependent upon events, risks and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, market prices for natural gas and crude oil, economic and competitive conditions, regulatory changes, estimates of proved reserves, potential failure to achieve production from development projects, capital expenditures and other uncertainties, as well as those factors discussed below and elsewhere in this report and in our Annual Report on Form 10-K for the year ended January 31, 2012, all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur.

The financial information with respect to the three and six month periods ended April 30, 2012 and July 31, 2012 that is discussed below is unaudited. In the opinion of management, this information contains all adjustments, consisting only of normal recurring accruals, necessary to state fairly the unaudited financial statements. The results of operations for the interim periods are not necessarily indicative of the results of operations for the full fiscal year.

The Company intends to continue to acquire high quality oil and gas properties, primarily “proved producing and proved undeveloped reserves” in the United States. The Company sees significant opportunities in acquiring properties with proved producing reserves and undeveloped acreage in fields that have a long history of production. The Company will also explore low-risk development drilling and work-over opportunities with experienced, strong operators. The Company will attempt to finance oil and gas operations through a combination of privately placed debt and/or equity. There can be no assurance that the Company will be successful in finding financing, or even if financing is found, that the Company will be successful in acquiring oil and/or gas assets that result in profitable operations.

As oil and gas properties become available and appear attractive to the Company’s management, funds, when they become available, will be spent on due diligence and research to determine if said prospects could be purchased to provide income for the Company. Established oil companies continue to strive to reduce costs and debt. This causes significant market opportunities for the Company to possibly position itself with sellers that wish to divest themselves of production or proved undeveloped properties in order to provide liquidity. The Company’s management believes that current market conditions are creating situations that could result in the opportunity for such production acquisitions.

The Company may also hedge price risk by selling forward a portion of future production acquired under fixed-price contracts to minimize risk associated with commodity prices. In some cases the future value of such fixed-price contracts may be greater that the initial investments, thereby hedging the inherent acquisition risk, without limiting the upside available the stockholders and investors. There can be no assurance, however, that any of these methods of financing will be successful in helping fund the Company.

The operating expenses will increase as the Company undertakes its plan of operations. The increase will be attributable to the continuing geological exploration and acquisition programs and continued professional fees that will be incurred.

Financial Condition and Results of Operations

For the three months ended July 31, 2012, the Company had revenue of $127,344, as compared to $82,970 for the three months ended April 30, 2012. For the six months ended July 31, 2012, the Company had revenue of $210,314, as compared to $193,766 for the six months ended July 31, 2011.

Cost of continued operations for the three months ended April 30, 2012 was $137,411 resulting in a net loss for the period of $54,442.

Cost of continued operations for the six months ended July 31, 2012 was $385,635 resulting in a net loss for the period of $175,321.

The Company expects to continue to receive revenues from the Oklahoma properties and the Company expects for these revenues to increase. Planned exploration ventures should increase revenues for the fiscal year ending January 31, 2013.

Liquidity and Capital Resources

The Company had cash of $41,438 as of April 30, 2012 compared to cash balance of $15,087 as of July 31, 2012.

The Company will continue to utilize the free labor of its directors and a stockholder until such time as funding is sourced from the capital markets. It is anticipated that additional funding for the next twelve months will be required to maintain the Company’s operations.

Going Concern

The Company has not attained profitable operations and is dependent upon obtaining financing to pursue any acquisitions and exploration activities. For these reasons, the Company’s auditors stated in their report on the Company’s audited financial statements that they have substantial doubt the Company will be able to continue as a going concern without further financing.

Future Financings

The Company will continue to rely on equity sales of the common shares in order to continue to fund the Company’s business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that the Company will achieve any additional sales its equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.

Off-Balance Sheet Arrangements

The Company has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by it in the reports that it files or submits to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that information is accumulated and communicated to the Company’s management, including its principal executive and principal financial officer (referred to in this periodic report as the Certifying Officer), as appropriate to allow timely decisions regarding required disclosure. The Company’s management evaluated, with the participation of its Certifying Officer, the effectiveness of the Company’s disclosure controls and procedures as of July 31, 2012, pursuant to Rule 13a-15(b) under the Securities Exchange Act. Due to our inability to file this quarterly report in a timely manner, our Certifying Officer concluded that, as of July 31, 2012, our disclosure controls and procedures were not effective. We are taking steps to remedy these deficiencies as quickly as possible.

Changes in Internal Controls

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended July 31, 2012, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Due to our inability to file this quarterly report in a timely manner, management has concluded that the design and operations of our internal controls over financial reporting at July 31, 2012 were not effective and did not provide reasonable assurance that the books and records accurately reflected our transactions. We are taking steps to remedy these deficiencies as quickly as possible.

PART II

Item 1. Legal Proceedings.

The Company is not currently a party to any legal proceedings and, to the knowledge of the Company’s management, no such proceedings are threatened or contemplated.

Item 1.A. Risk Factors.

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit No.	Description of Exhibit

31.1	Rule 13a-14 Certification of Chief Executive Officer and Chief Financial Officer

32.1	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to signed on its behalf by the undersigned, thereunto duly authorized.

NITRO PETROLEUM INCORPORATED

By: /s/ James G. Borem

James G. Borem,

President, Chief Executive Officer and Interim Chief Financial Officer

Date: November 5, 2012

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