Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - NITRO PETROLEUM INC.Financial_Report.xls
XML - IDEA: XBRL DOCUMENT - NITRO PETROLEUM INC.R2.htm
XML - IDEA: XBRL DOCUMENT - NITRO PETROLEUM INC.R4.htm
XML - IDEA: XBRL DOCUMENT - NITRO PETROLEUM INC.R3.htm
XML - IDEA: XBRL DOCUMENT - NITRO PETROLEUM INC.R8.htm
XML - IDEA: XBRL DOCUMENT - NITRO PETROLEUM INC.R1.htm
XML - IDEA: XBRL DOCUMENT - NITRO PETROLEUM INC.R6.htm
XML - IDEA: XBRL DOCUMENT - NITRO PETROLEUM INC.R7.htm
XML - IDEA: XBRL DOCUMENT - NITRO PETROLEUM INC.R9.htm
XML - IDEA: XBRL DOCUMENT - NITRO PETROLEUM INC.R14.htm
XML - IDEA: XBRL DOCUMENT - NITRO PETROLEUM INC.R10.htm
XML - IDEA: XBRL DOCUMENT - NITRO PETROLEUM INC.R12.htm
XML - IDEA: XBRL DOCUMENT - NITRO PETROLEUM INC.R11.htm
XML - IDEA: XBRL DOCUMENT - NITRO PETROLEUM INC.R13.htm
EX-31.1 - EXHIBIT 31.1 - NITRO PETROLEUM INC.ex31-1.htm
EX-32.1 - EXHIBIT 32.1 - NITRO PETROLEUM INC.ex32-1.htm
XML - IDEA: XBRL DOCUMENT - NITRO PETROLEUM INC.R5.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 October 31, 2012
OR
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)
 
  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
 
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
 
   
October 31, 2012
(Unaudited)
   
January 31, 2012
 
ASSETS
           
CURRENT ASSETS
           
Cash and cash equivalents
  $ 4,083     $ 6,199  
Accounts receivable
    179,074       14,788  
Due from related party
    66,939       34,501  
Total current assets
    250,096       55,488  
PROPERTY AND EQUIPMENT, NET
    38,347       43,819  
OIL AND GAS PROPERTIES, NET
    671,875       836,714  
Total assets
  $ 960,318     $ 936,021  
LIABILITIES AND STOCKHOLDERS' EQUITY
               
CURRENT LIABILITIES
               
Cash overdraft
  $ 70,488     $ 25,671  
Accounts payable
    358,260       312,678  
Accrued liabilities
    276,941       285,174  
Due to related party
    3,016       3,582  
Total current liabilities
    708,705       627,105  
ASSET RETIREMENT OBLIGATION
    61,409       60,101  
Total liabilities
    770,114       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
    2,074       2,074  
Additional paid-in capital
    5,892,820       5,892,820  
Accumulated deficit
    (5,704,690 )     (5,646,079 )
Total stockholders' equity
    190,204       248,815  
Total liabilities and stockholders' equity
  $ 960,318     $ 936,021  
 
See accompanying notes to financial statements.
 
1

 
 
NITRO PETROLEUM INCORPORATED
STATEMENTS OF OPERATIONS
(Unaudited)
 
   
Three Months Ended October 31,
   
Nine Months Ended October 31,
 
 
 
2012
   
2011
   
2012
   
2011
 
REVENUES
                       
Oil and gas production
  $ 39,408     $ 86,380     $ 215,402     $ 245,386  
Production services
    17,160       17,160       51,480       51,920  
Gain on sale of oil and gas properties
    -       -       249,215       -  
Total revenues
    56,568       103,540       516,097       297,306  
COSTS AND EXPENSES
                               
Lease operating expenses
    43,652       87,130       361,479       280,488  
General and administrative
    116,851       128,006       184,659       301,074  
Depletion, depreciation, amortization and accretion
    14,043       14,025       28,570       27,187  
Total expenses
    174,546       229,161       574,708       608,749  
                                 
OPERATING LOSS
    (117,978 )     (125,621 )     (58,611 )     (311,443 )
                                 
OTHER INCOME
    -       18,000       -       18,000  
LOSS BEFORE TAXES
    (117,978 )     (107,621 )     (58,611 )     (293,443 )
PROVISION FOR INCOME TAXES
    -       -       -       -  
NET LOSS
  $ (117,978 )   $ (107,621 )   $ (58,611 )   $ (293,443 )
Net loss per share, basic and diluted
  $ (0.06 )   $ (0.05 )   $ (0.03 )   $ (0.14 )
                                 
Weighted average shares outstanding, basic and diluted
    2,074,242       2,074,242       2,074,242       2,074,242  

See accompanying notes to financial statements.
 
 
2

 
 
NITRO PETROLEUM INCORPORATED
STATEMENTS OF CASH FLOWS
(Unaudited)
 
   
Nine Months Ended
October 31, 2012
   
Nine Months Ended
October 31, 2011
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net loss
  $ (58,611 )   $ (293,443 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
               
Depletion, depreciation, and amortization
    27,262       27,185  
Gain on sale of oil and gas properties
    (249,215 )     9,382  
Accretion on asset retirement obligation
    1,308       -  
Change in operating assets and liabilities:
               
Accounts receivable
    (164,286 )     64,108  
Accounts payable and accrued expenses
    37,349       272,185  
Net cash provided by (used in) operating activities
    (406,193 )     79,417  
CASH FLOWS FROM INVESTING ACTIVITIES
               
Proceeds from sale of oil and gas properties
    392,264       148,705  
Purchases of oil and gas properties
    -       (169,794 )
Purchases of equipment
    -       (5,385 )
Net cash provided by (used in) investing activities
    392,264       (26,474 )
CASH FLOWS FROM FINANCING ACTIVITIES
               
Cash overdraft
    44,817       -  
Net payments to related parties
    (33,004 )     (1,918 )
Net cash provided by (used in) financing activities
    11,813       (1,918 )
Net increase (decrease) in cash
    (2,116 )     51,025  
Cash at beginning of period
    6,199       40,501  
Cash at end of period
  $ 4,083     $ 91,526  
                 
SUPPLEMENTAL INFORMATION
               
Cash paid for interest
  $ -     $ -  
Cash paid for income taxes
  $ -     $ -  
                 
NON-CASH TRANSACTIONS
               
Sale of assets in exchange for forgiven payables
  $ -     $ 39,759  
 
See accompanying notes to financial statements.
 
 
3

 

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 October 31, 2012 and our income and cash flows for the three and nine months ended October 31, 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 October 31, 2012, the Company has not achieved profitable operations. The Company has accumulated losses of $5,704,690 since its inception, has a working capital deficiency of $458,609 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.
 
 
4

 

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.
 
Note 5            Related Party Transactions
 
The Company paid management fees to a company under the control of the President of the Company totaling $35,167, for the quarter ended October 31, 2012. These management fees are included in general and administrative expenses.
 
Note 6            Subsequent Events
 
The Company evaluated events through December 17, 2012 that warrant disclosure in the financial statements. The Company obtained additional financing of approximately $291,300 after October 31, 2012, but before the date of this filing.

 
5

 
 
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 nine month period ended October 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.

 
6

 

Financial Condition and Results of Operations

Revenues
 
For the three months ended October 31, 2012, the Company’s revenue was $56,568, a decrease of 45% compared to the three months ended October 31, 2011 of $103,540. Approximately $41,000 of this decrease is a result of a decrease in oil and gas production during the third quarter of 2012.
 
For the nine months ended October 31, 2012, the Company’s revenue, excluding the gain on sales of oil and gas properties, was $266,882, a decrease of 10% compared to the nine months ended October 31, 2011 of $297,306.  Approximately $19,000 of this increase is a result of an increase in the price of oil and gas during 2012.
 
Lease operating expenses
 
For the three months ended October 31, 2012, the Company’s lease operating expenses were $43,652, a decrease of 50% compared to the three months ended October 31, 2011 of $87,130. This decrease was a result of well overhaul maintenance performed in the second quarter of 2012 that reduced third quarter maintenance expenses.
 
For the nine months ended October 31, 2012, the Company’s lease operating expenses were $361,479, an increase of 29% compared to the nine months ended October 31, 2011 of $280,488. This increase is a result of well overhaul maintenance performed during the second quarter of 2012.
 
 General and administrative expenses
 
For the three months ended October 31, 2012, the Company’s general administrative expenses were $116,851, a decrease of 9% compared to the three months ended October 31, 2011 of $128,005.  This decrease is a result of significant legal and administrative expenses incurred during the third quarter of 2011 related to the increase in operations. Operations were significantly less during the third quarter of 2012.
 
For the nine months ended October 31, 2012, the Company’s general administrative expenses were $184,659, a decrease of 39% compared to the nine months ended October 31, 2011 of $301,073.  This decrease is a result of significant administrative and legal fees incurred during the second and third quarters of 2011 in regards to the sale of oil and gas well working interests. These expenses did not re-occur during 2012.
 
Liquidity and Capital Resources
 
As of October 31, 2012 and January 31, 2012, the Company’s cash balances were $4,083 and $6,199, respectively.  The decrease in cash for the nine months ended October 31, 2012 of $2,116 relates primarily to increased accounts receivable balances of $164,286, primarily resulting from unpaid joint interest billings due to the Company.  The cash decrease was offset by an increase in accounts payable and accrued liabilities balances, of $37,349, primarily resulting from limited cash available within the Company.  These cash changes were also offset by proceeds from sale of oil and gas properties of $143,049 and cash overdraft of $44,818.
 
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 for the year ended January 31, 2012 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. The Company obtained additional financing of approximately $291,300 during the fourth quarter of 2012.

 
7

 
 
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 October  31, 2012, pursuant to Rule 13a-15(b) under the Securities Exchange Act. Our Certifying Officer concluded that, as of October 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 October 31, 2012, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.  Management has concluded that the design and operations of our internal controls over financial reporting at October 31, 2012 were not effective due to lack of segregation of duties 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, to the knowledge of the Company, contemplated.
 
Item 1.A.  Risk Factors.
 
Not applicable. 
 
 
8

 
 
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
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document

 
 
9

 
 
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:  December 17, 2012
 
 
 
 
10