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EX-31.1 - CERTIFICATION OF CEO AND INTERIM CFO - NITRO PETROLEUM INC.nitroexh311-121510.htm
EX-32.1 - SECTION 1350 CERTIFICATION - NITRO PETROLEUM INC.nitroexh321-121510.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, 2010
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: 333-118138
 
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)
 
 
7250 NW Expressway Suite 260
OKLAHOMA CITY, OK, 73132
(Address of principal executive offices)
 
(405) 728-3800
(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 x   No o
 
    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 o
 
    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 December 14, 2010 there were 140,024,156 shares of the Registrant’s Common Stock outstanding.


 
 

 


 
ITEM 1. FINANCIAL STATEMENTS
 
NITRO PETROLEUM INCORPORATED
BALANCE SHEETS
             
Unaudited
 
Audited
             
October 31,
 
January 31,
         
ASSETS
2010
 
2010
Current
               
 
Cash
       
$        98,122 
 
$          2,502 
 
Accounts receivable
     
175,316 
 
76,195 
                   
     
Total Current Assets
 
273,438 
 
78,697 
                   
Property and equipment, net
   
48,797 
 
51,978 
Oil and gas properties, net - using full cost accounting
315,538 
 
446,191 
                   
     
Total Assets
   
$      637,773 
 
$      576,866 
                   
LIABILITIES
                   
Current Liabilities
           
 
Accounts payable
     
$      304,737 
 
$      268,946 
 
Lease development liability
   
192,454 
 
 
Revenue payable
     
83,601 
 
60,840 
 
Due to related party
     
8,000 
 
27,180 
 
Short-term notes payable
   
364,275 
 
244,338 
                   
     
Total Liabilities
   
953,067 
 
601,304 
                   
         
STOCKHOLDERS' (DEFICIT)
   
Capital stock
             
 
Authorized:
           
   
2,000,000,000 common stock, $0.001 par value
     
   
  10,000,000 preferred stock, $0.001 par value
     
 
Issued and outstanding:
         
   
140,024,156 and 121,249,157 on October 31 and
     
   
  January 31, 2010, respectively
 
140,024 
 
121,249 
Additional paid-in capital
     
4,746,351 
 
4,687,476 
Accumulated (deficit)
     
(5,201,669)
 
(4,833,163)
                   
     
Total Stockholders' (Deficit)
 
(315,294)
 
(24,438)
                   
     
Total Liabilities And Stockholders' (Deficit)
$      637,773 
 
$      576,866 


See accompanying notes

 
F-1

 


NITRO PETROLEUM INCORPORATED
STATEMENTS OF OPERATIONS
Unaudited
 
                   
     
Three Months Ended
 
Nine Months Ended
     
October 31,
 
October 31,
     
2010
 
2009
 
2010
 
2009
                   
Revenues
               
 
Oil and gas sales
$           27,956 
 
$           34,188 
 
$           78,214 
 
$           89,697 
 
Lease operating income
23,650 
 
 
41,910 
 
 
Other
 
 
 
 
157 
                   
   
Total Revenues
51,606 
 
34,188 
 
120,124 
 
89,854 
Expenses
               
 
Lease operating
17,252 
 
(20,239)
 
40,037 
 
147,519 
 
Production taxes
1,694 
 
2,428 
 
(1,212)
 
6,334 
 
Intangible drilling cost
 
 
8,747 
 
 
Depreciation, depletion and amortization
9,978 
 
8,164 
 
25,233 
 
40,315 
 
Interest expense
7,692 
 
5,558 
 
23,881 
 
11,973 
 
General and administrative
105,234 
 
131,614 
 
391,944 
 
463,870 
 
Impairment
 
 
150,000 
 
 
150,000 
                   
   
Total Expenses
141,850 
 
277,525 
 
488,630 
 
820,011 
                   
Loss before provision for income taxes
(90,244)
 
(243,337)
 
(368,506)
 
(730,157)
                   
 
Loss on sale of oil and gas properties
 
 
 
(44,351)
                   
Loss before provision for income taxes
(90,244)
 
(243,337)
 
(368,506)
 
(774,508)
                   
 
Provision for income taxes
 
 
 
                   
Net Loss
 
$          (90,244)
 
$         (243,337)
 
$          (368,506)
 
$          (774,508)
                   
                   
Basic and diluted loss per share
$              (0.00)
 
$               (0.00)
 
$                (0.00)
 
$                (0.01)
                   
Weighted average number of shares
             
 
outstanding-basic and diluted
140,024,156 
 
101,449,158 
 
131,759,156 
 
101,449,158 


See accompanying notes

 
F-2

 


NITRO PETROLEUM INCORPORATED
STATEMENTS OF CASH FLOWS
Unaudited
                     
               
Nine Months Ended
               
October 31,
               
2010
 
2009
                     
Operating Activities
               
 
Net loss for the period
       
$       (368,506)
 
$       (774,508)
 
Adjustments for items not effecting cash:
         
   
Depletion, depreciation and amortization
   
25,233 
 
40,315 
   
Share based compensation
     
52,650 
 
201,500 
   
Loss on sale of oil and gas properties
   
 
44,352 
   
Impairment
       
 
150,000 
 
Change in non-cash working capital balances related to operations
   
   
Accounts receivable
       
(99,121)
 
8,483 
   
Accounts payable and accrued liabilities
   
40,728 
 
1,446 
   
Estimated lease operating expenses
   
192,454 
 
   
Revenue payable
       
22,761 
 
21,315 
                     
Cash used in operating activities
     
(133,801)
 
(307,097)
                     
Investing Activities
               
 
Acquisition of oil and gas properties
     
(11,699)
 
(60,567)
 
Proceeds from sale of oil and gas properties
   
120,300 
 
200,000 
                     
Cash provided by investing activities
     
108,601 
 
139,433 
                     
Financing Activities
               
 
Proceeds from related party note
     
500 
 
 
Payments on related party note
     
(19,680)
 
 
Cash overdraft
         
 
(2,987)
 
Decrease in other assets
       
 
26,152 
 
Payments on short term note payable
   
 
(13,295)
 
Proceeds from short note payable
     
140,000 
 
160,350 
                     
Cash provided by financing activities
     
120,820 
 
170,220 
                     
Increase in cash during the period
     
95,620 
 
2,556 
                     
Cash, beginning of the period
       
2,502 
 
930 
                     
Cash, end of the period
       
$          98,122 
 
$            3,486 
                     


See accompanying notes

 
F-3

 


NITRO PETROLEUM INCORPORATED
STATEMENTS OF CASH FLOWS
Unaudited
                     
Supplemental cash flow disclosures
           
 
Cash paid during the period for:
           
 
Interest
         
$                    - 
 
$                    - 
                     
 
Income taxes
         
$                    - 
 
$                    - 
                     
Non-cash investing and financing activities:
         
 
Accrued interest
       
$          (4,937)
 
$                    - 
 
Short term notes payable
       
(20,063)
 
 
Common stock issued for debt settlement
   
10,000 
 
 
Additional paid in capital for debt settlement
   
15,000 
 
                     
               
$                    - 
 
$                    - 


 
See accompanying notes


 
F-4

 
NITRO PETROLEUM INCORPORATED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
October 31, 2010
 (Unaudited)


Note 1
Interim Reporting

The accompanying financial statements of Nitro Petroleum Incorporated 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, 2010 and our income and cash flows for the nine months ended October 31, 2010 and 2009. 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 2009 Annual Report on Form 10-K/A.

Note 2            Nature and Continuance of Operations

Nitro Petroleum Incorporated (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, 2010, the Company had not yet achieved profitable operations, has accumulated losses of $5,201,669 since its inception, has a working capital deficiency of $679,629 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

 
a)
Effective July 1 2007, the Company acquired a 6.375% working interest of a 79.125% net revenue interest in an oil and gas lease located in Garvin County, Oklahoma.

b)    
On February 1, 2008, the Company purchased producing properties located in Garvin County and Pottawatomie County, Oklahoma in a transaction that resulted in the distribution of 1,306,054 shares in exchange for a 25% gross working interest in producing wells and in undeveloped proved properties.  The shares exchanged have restrictions to sell such shares, varying from six months to one year.  Management has assigned a value of said properties at 40 cents per share for a total purchase price of $522,422.  On March 27, 2009, the Company sold a one-half of their interest in these wells to Encore Renaissance Resources Corporation for two hundred thousand dollars ($200,000).  The Company has the option and right within one year of closing to purchase back the working interest in the properties sold for two hundred fifty thousand dollars ($250,000).
 

 
F-5

 
NITRO PETROLEUM INCORPORATED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
October 31, 2010
 (Unaudited)

c)    
By agreement dated September 1, 2006, as extended November 1, 2006 and February 28, 2007, the Company entered into an agreement whereby the Company disposed of 50% of the Company’s interest in certain oil and gas properties located in the Barnett Shale play in consideration for proceeds of $400,000 payable by way of a promissory note, due October 31, 2007, which bares interest at 10% per annum and is secured by a general security agreement.  As part of the extension, the purchaser agreed to issue 250,000 common shares to the Company.  125,000 common shares may be returned to the purchaser if the purchaser performs all its covenants.  The Company and the purchaser have a director in common.  As the risks and other incidents of ownership have not transferred to the purchaser with sufficient certainty, this transaction has not been reflected in these financial statements.

d)    
On January 26, 2009, the Company entered into a Memorandum of Understanding (the “Memorandum of Understanding”) with REDS, LLC (“REDS”) pursuant to which the Company will acquire oil and gas leases from REDS covering 1,600 acres in Montana and will have two additional options to acquire an additional 1,600 acres per option from REDS.  The Company will own 100% of the coal, coal bed methane, and oil and natural gas rights to the acreage being acquired pursuant to the Memorandum of Understanding.  The Company will pay a 20% net royalty on production.

Pursuant to the terms of the Memorandum of Understanding, the Company will acquire leases covering the initial 1600 acres and drill 10 wells on such acreage.  The drilling of the initial 10 wells pursuant to the Memorandum of Understanding is referred to as “Phase One” of the development project contemplated by the Memorandum of Understanding.  As consideration for assignment of leases covering the 1,600 acres that will be drilled in Phase One, the Company will pay REDS a $75,000 bonus.  The payment of the bonus is contingent upon the Company’s receipt of title status reports for the Phase One tract and the assignment of unencumbered leases making up the Phase One tract to the Company.
 
Additionally, the Company will deposit $250,000 with an escrow agent immediately after the Phase One leases have been deemed unencumbered and assigned to the Company.  The escrowed amount will be released on a pro rata basis to REDS as each Phase One well lease and permit is approved by the Bureau of Indian Affairs (“BIA”) and a Bureau of Land Management (“BLM”) permit for each well is issued.  If the BIA and/or the BLM have not approved the Phase One leases and the wells with 90 days from the date of the Memorandum of Understanding, the escrow agent will refund the escrowed funds to the Company.

Upon the completion of Phase One, the Company will have the option to acquire leases covering an additional 1,600 acres to drill 10 additional “Phase Two” wells.  The Phase Two wells will be drilled on the same terms and conditions as the Phase One wells, except that the Company will pay REDS $300,000 for the right to drill the Phase Two wells.  However, if the Company determines that the Phase One wells will not reach payout in a fair and reasonable period, then REDS will allow the Company to drill the Phase Two wells for no additional fee.

Upon the completion of Phase Two, the Company will have the option to acquire leases covering an additional 1,600 acres to drill 10 additional “Phase Three” wells.  The Phase Three wells will be drilled on the same terms and conditions as the Phase Two wells, except that the Company will pay REDS $400,000 for the right to drill the Phase Three wells, unless Phase Two is deemed economically unfeasible as a result of the drilling the Phase Two wells.  The Company has the option of drilling development wells on the leases acquired in Phase One, Phase Two and Phase Three.

e)   
On February 26, 2010, the Company sold all of its interest in the Moreland and Farley leases for $100,000.

f)   
On September 1, 2010, the Company acquired a 25% working interest in 7 well package located in Garvin County, Oklahoma.  The Company acquired this interest by first purchasing the prospect and then selling off 55% of the ownership in the working interest to third party investors, gave a 20% carried working interest to the seller, retaining the balance of the working interest.  The Company has lease development liability recorded at $192,454 at October 31, 2010 for recompletion of the wells.

g)   
On September 29, 2010, the Company purchased a 20.83333% working interest in the Thompson #2-18 located in Garvin County, Oklahoma.  The Company paid $10,417 for this working interest.
 

 
F-6

 
NITRO PETROLEUM INCORPORATED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
October 31, 2010
 (Unaudited)

Note 4                 Notes Payable
 
 
On April 13, 2009, the Company entered into an agreement with C.U. Your Oil Rig Corporation, in which C.U. Your Oil Rig Corporation advanced the Company a total of $150,000 with a term of 18 months at 15% interest.  At October 31, 2010, this note had a balance of $121,274 and has accrued interest in the amount of $10,217.

 
The Company also has various short term obligations with different entities, all of which bear zero percent interest rates and are due upon demand.

Note 5                 Property and Equipment
 
   
October 31, 2010
   
Cost
 
Accumulated
Amortization
         
Land
 
$       30,769
 
$                 -
Office furniture
 
1,930
 
1,174
Computer
 
1,420
 
519
2007 Chevy Truck
 
26,749
 
10,379
   
$       60,868
 
$       12,072
 
 
The Company has acquired property in Shawnee, Oklahoma in anticipation of building offices and a warehouse/yard facility.

Note 6             Stock Incentive Plan

The Board of Directors adopted the Nitro Petroleum Incorporated 2008 Stock Incentive Plan (the “Plan”) on July 10, 2008.  The Plan will be administered by the Board of Directors, or a committee of the Board of Directors and all officers, employees, directors and individual consultants of the Corporation will be allowed to participate in the Plan.  The Plan has a term of ten years.  Accordingly, no grants may be made under the Plan after July 10, 2018, but the Plan will continue thereafter while previous grants remain subject to the Plan.

The aggregate number of shares of common stock available under the Plan is 2,500,000 shares. The Plan authorizes the Board of Directors to grant restricted stock award and stock options. The Board of Directors may not grant incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended under the Plan until such time that the Plan is approved by the Corporation’s stockholders. Until such time, the Board may only grant nonstatutory stock options (any stock option that is not an incentive stock option), and restricted stock under the Plan. All grants under the Plan will be made in the discretion of the Board of Directors.

On July 10, 2008, the Corporation granted 1,800,000 shares of restricted stock to the management.  The Company has accounted for the cost of the Plan utilizing the Black-Scholes option pricing formula, which includes a computed volatility rate of 133.72% obtained through the historical price data of the Company’s stock beginning July 11, 2006 and ending July 10, 2008, the date this Plan was adopted.  A risk-free rate of return of 2.57% was also used in the compensation expense as provided by the U.S. Treasury constant maturities.  Other factors in computing the Plan’s valuation include a per option price of $0.18 per share, as this was the closing price of the Company’s stock on the date this Plan was adopted.  Also, a 0% forfeiture rate has been assumed for all periods up to June 30, 2011, the final month of vesting.
 
 
On June 11, 2009, the Board of Directors of the Company approved the accelerated vesting of all unvested restricted stock which was previously granted to the Company’s directors and officers pursuant to the Company’s plan.  As a result of the accelerated vesting, all 1,199,999 shares of unvested restricted stock became immediately vested and issuable.

 
On August 25, 2009 the Company filed with the Securities and Exchange Commission Form S-8 changing the amount of shares available for the Plan to 10,000,000 shares.

 
On August 28, 2009, the Company issued 2,000,000 shares of common stock to James Mitchell and 2,000,000 shares of common stock to Lorne Torhjelm in exchange for consulting services from each for a six month term.

 
F-7

 
NITRO PETROLEUM INCORPORATED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
October 31, 2010
 (Unaudited)

 
On January 21, 2010, the Company issued 6,000,000 shares of common stock to Richard Smith in exchange for consulting services. Mr. Smith will assist the Company in evaluating requirements for growth and expansion of the Company’s operations and assist in identifying potential business opportunities.  The expense related to this issuance was $60,000 for the year ended January 31, 2010.
 
The Board of Directors adopted the Nitro Petroleum Incorporated 2010 Stock Incentive Plan (the “Plan”) on July 30, 2010.  The Plan will be administered by the Board of Directors, or a committee of the Board of Directors and all officers, employees, directors and individual consultants of the Corporation will be allowed to participate in the Plan.  The Plan has a term of ten years.  Accordingly, no grants may be made under the Plan after July 30, 2020, but the Plan will continue thereafter while previous grants remain subject to the Plan.

The aggregate number of shares of common stock available under the Plan is 17,500,000 shares. The Plan authorizes the Board of Directors to grant restricted stock award and stock options. The Board of Directors may not grant incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended under the Plan until such time that the Plan is approved by the Corporation’s stockholders. Until such time, the Board may only grant nonstatutory stock options (any stock option that is not an incentive stock option), and restricted stock under the Plan. All grants under the Plan will be made in the discretion of the Board of Directors.

On July 1, 2010, the Company issued 8,750,000 shares to management for consulting services and 25,000 shares to one director of the Company.  The expense related to this issuance was $52,650 for the nine months ended October 31, 2010.

Note 7
Related Party Transactions

By a management agreement dated July 31, 2010, the Company agreed to pay a director of the company management fees of $4,500 per month for management services and a vehicle allowance of $500 per month for a term of one year.  The company shall also issue a total of 2,500,000 shares of the Company’s common stock to the director. The term may be renewed for further one year terms at the option of the Company.

During the nine months ended October 31, 2010, the Company incurred management fees charged by a director of the Company totalling $61,500 (2009: $44,000).

By a management agreement dated July 31, 2010, the Company agreed to pay the President of the company management fees of $5,500 per month for management services and a vehicle allowance of $700 per month for a term of one year.  The company shall also issue a total of 6,000,000 shares of the Company’s common stock to the President.  The term may be renewed for further one year terms at the option of the Company.

During the nine months ended October 31, 2010, the Company incurred management fees charged by the President of the Company totaling $85,500 (2009: $0).

Included in accounts payable at October 31, 2010 is $7,500 (January 31, 2010: $16,000) due to a director of the Company for management services.
 
Note 8
Departure of Directors or Certain Officers, Election of Directors and Appointment of Certain Officers
 
 
On September 16, 2009, James Kirby and Sharon Farris resigned as members of the Board of Directors of the Company, effective immediately.

 
Effective October 1, 2009, Mr. Larry Wise resigned from his position as President and Chief Executive Officer of the Company and Mr. Shane Broesky resigned from his position as Chief Financial officer of the Company.

 
Effective October 1, 2009, Mr. James G. Borem has been appointed as Director, President and Interim Chief Financial Officer of the Company, effective as of October 1, 2009.
 

 
F-8

 
NITRO PETROLEUM INCORPORATED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
October 31, 2010
 (Unaudited)

Note 9
Comparative Figures

Certain of the comparative figures have been reclassified to conform with the current period’s presentation.

Note 10           Subsequent Events

The Company has determined that there were no subsequent events through December 10, 2010 that warrant disclosure or recognition in the financial statements.


 
F-9

 

 
 
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/A for the year ended January 31, 2010 (the “2009 Form 10-K/A”).  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 Form 10-K/A, 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 periods ended October 31, 2010 and October 31, 2009 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 proven 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.

The Company has now directed its attention to different areas outside of Oklahoma.

Montana

The company located and was successful in obtaining an exploration opportunity in the Montana Powder River Basin. The company will farm out the exploration and development rights while maintaining a 10 percent carried interest. Prospective farm – in partners are presently examining the project.

The Company is continuing its efforts to identify and assess investment opportunities in oil and natural gas properties, utilizing free labor of its directors and stockholders until such time as funding is sourced from the capital markets.  It is anticipated that funding for the next twelve months will be required to maintain the Company.  Attempts are ongoing to raise funds through private placements and said attempts will continue throughout 2010.  The Company may also use various debt instruments as well as public offerings to raise needed capital during 2010.
 

 
 
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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 proven 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 finance acquisition of “proven producing reserves” with predictable production levels and cash flow by offering the secure investors with the mineral interests acquired.  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 October 31, 2010, the Company had revenue of $51,606, as compared to $34,188 for the three months ended October 31, 2009.

For the nine months ended October 31, 2010, the Company had revenue of $120,124, as compared to $89,854 for the nine months ended October 31, 2009.

Cost of continued operations for the three months ended October 31, 2010 was $141,850 resulting in a net loss for the period of $90,244.

Cost of continued operations for the three months ended October 31, 2009 was $277,525 resulting in a net loss for the period of $243,337.

Cost of continued operations for the nine months ended October 31, 2010 was $488,630 resulting in a net loss for the period of $368,506.

Cost of continued operations for the nine months ended October 31, 2009 was $820,011 resulting in a net loss for the period of $774,508.

The Company expects to continue to receive revenues from the properties on 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, 2011.

Liquidity and Capital Resources

The Company had cash of $98,122 as of October 31, 2010, compared to cash of $2,502 as of January 31, 2010.  The Company had a working capital deficiency of $679,629 as of October 31, 2010, compared to working capital deficiency of $522,607 as of January 31, 2010.

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

Going Concern

The Company has not attained profitable operations and is dependent upon obtaining financing to pursue any extensive 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 of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.
 
 
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Departure of Directors or Certain Officers, Election of Directors and Appointment of Certain Officers

On September 16, 2009, James Kirby and Sharon Farris resigned as members of the Board of Directors of the Company, effective immediately.

Effective October 1, 2009, Mr. Larry Wise resigned from his position as President and Chief Executive Officer of the Company and Mr. Shane Broesky resigned from his position as Chief Financial Officer of the Company.  Mr. Wise will continue to be in charge of all field operations for Oklahoma, Texas and Montana and will also remain on the Board of Directors of the Company.

Effective October 1, 2009, Mr. James G. Borem has been appointed as Director, President, Chief Executive Officer and Interim Chief Financial Officer of the Company, effective as of October 1, 2009.  Mr. Borem, age 62, has over 40 years of experience in the Petroleum Industry. He has vast experience in the areas of Petroleum Valuations, Development, Financing, Budgeting, Marketing, Materials Procurement and Risk Management. Mr. Borem currently serves, and has served for the past five years, as President of Premier Operating Inc. and Providen Reserves Inc., two Oklahoma oil and gas service and production companies that are not affiliated with Nitro Petroleum Incorporated.

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, 2010, pursuant to Rule 13a-15(b) under the Securities Exchange Act. Based upon that evaluation, the Company’s Certifying Officer concluded that, as of October 31, 2010, the Company’s disclosure controls and procedures were effective.
 
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, 2010, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
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.
 
 
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Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.
 
None.
 
Item 3.  Defaults upon Senior Securities.
 
None.
 
Item 4.  [RESERVED AND REMOVED]
 
 
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

 
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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 15, 2010
 
 
 
EXHIBIT INDEX
     
Exhibit No.
Description
Method of Filing
     
31.1
Rule 13a-14 Certification of Chief Executive Officer and Chief Financial Officer
Filed herewith electronically
     
32.1
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
Filed herewith electronically


 
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