UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10 - Q

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

For the quarterly period ended July 31, 2013

OR

☐      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)

624 W. Independence, Suite 101

Shawnee, OK  74804

(Address of principal executive offices, including zip code)

(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 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 ☐    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 Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☐    No ☒

     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.

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

At September 11, 2013 there were 7,097,707 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.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements, as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, are forward-looking statements. These forward-looking statements relate to, among other things, the following: our future financial and operating performance and results; our business strategy; market prices; and our plans and forecasts.

Forward-looking statements are identified by use of terms and phrases such as “may,” “expect,” “estimate,” “project,” “plan,” “believe,” “intend,” “achievable,” “anticipate,” “will,” “continue,” “potential,” “should,” “could” and similar words and phrases. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements. You should consider carefully the statements in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended January 31, 2013, as well as other sections of this report, which describe factors that could cause our actual results to differ from those set forth in the forward-looking statements, including, but not limited to, the following factors:

All forward-looking statements are expressly qualified in their entirety by the cautionary statements in this special note and elsewhere in this document. Other than as required under the securities laws, we do not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NITRO PETROLEUM INCORPORATED

CONDENSED BALANCE SHEETS

See accompanying notes to financial statements.

NITRO PETROLEUM INCORPORATED

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

See accompanying notes to financial statements.

NITRO PETROLEUM INCORPORATED

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes to financial statements.

NITRO PETROLEUM INCORPORATED

NOTES TO THE INTERIM CONDENSED 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, 2013, our results of operations for the three and six months ended July 31, 2013 and our cash flows for the six months ended July 31, 2013. 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 in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended January 31, 2013.

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 and properties.  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, 2013, the Company has not achieved profitable operations. The Company has accumulated losses of $6,554,177 since its inception and expects to incur further losses in the development of its business, 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 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.

Note 4     Note Payable

On May 9, 2013, the Company entered into a promissory note. The promissory note bears interest at 9% on the outstanding balance, with interest paid semi-annually. No principal payments are required until the maturity date at which time the term note is due in full; maturity date of the promissory note is June 30, 2016. The promissory note also contains a conversion feature, allowing the lender, at any time prior to maturity date, a one-time basis to convert all or a portion of the principal amount of the note into common stock at a price per share of $0.55. At execution of the agreement, no value was assigned to the conversion feature. At July 31, 2013, the outstanding balance was $175,000.

Note 5     Common Stock Subscriptions

During the six months ended July 31, 2013, the Company received net proceeds of $401,907 for the sale of 497,265 shares of common stock at $0.55 and $0.90 per share as part of private offerings. The Company also received net proceeds of $38,300 for the sale of 87,500 shares of common stock as part of the Giant Well Private Offering. Per the Giant Well Private Offering, one Unit of Working Interest in the Giant #1 well plus 2,500 shares of common stock were sold for $27,500 (per Unit). The Company has not issued these shares as of July 31, 2013, and has recorded these proceeds as Common stock, subscribed.

Note 6      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 7      Related Party Transactions

The Company paid management fees to various companies under the control of executive officers of the Company totaling $49,500 and $16,697 for the quarters ended July 31, 2013 and 2012, respectively, and $99,000 and $28,185 for the six months ended July 31, 2013 and 2012, respectively. These management fees are included in general and administrative expenses.

Note 8      Subsequent Events

The Company evaluated events through September 16, 2013 that warrant disclosure in the financial statements. The Company obtained additional financing of approximately $323,375  from sales of working interests and equity subscriptions after July 31, 2013, but before September 16, 2013.

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

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, 2013.  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, 2013, 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 July 31, 2013 and 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.  The Company believes that this results in 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 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 than 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.

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

Lease operating expenses

General and administrative expenses

Liquidity and Capital Resources

The Company will continue to utilize the labor of its directors and a stockholder until such time as funding is sourced from the capital markets. At the present time, these directors and stockholder are not being paid cash compensation, but have been compensated in the form of equity grants, and through management fees paid to related party management firms.  It is anticipated that additional funding for the next twelve months will be required to maintain the Company’s operations.

Going Concern

Future Financing

The Company will continue to rely on sales of the Company’s 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 of its equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities. The Company obtained additional financing of approximately $1,345,020 in equity securities, and $175,000 through a note payable,  to acquire a 7.88% working interest in the Razorback #1 drilling project, during the quarter ended July 31, 2013.

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, 2013, pursuant to Rule 13a-15(b) under the Securities Exchange Act. Our Certifying Officer concluded that, as of July 31, 2013, 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, 2013, 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 July 31, 2013 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 party to lawsuits arising in the normal course of business. In the normal course of our business, title defects and lease issues of various degrees will arise and, if practicable, reasonable efforts will be made to cure any such defects and issues. 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. 

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

During the three months ended July 31, 2013, the Company issued 1,112,000 shares of the Company's common stock to investors, at a share price of $0.90. Proceeds from sale of shares were used to fund the drilling of the Giant #1 well.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 .   MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 .   OTHER INFORMATION

None.

ITEM 6 .   EXHIBITS

  * Furnished herewith. In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

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.

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