NITRO PETROLEUM INC. - FORM 10-K

Attached files

file	filename
EX-31.1 - EXHIBIT 31.1 - NITRO PETROLEUM INC.	ex31-1.htm
EX-99.1 - EXHIBIT 99.1 - NITRO PETROLEUM INC.	ex99-1.htm
EX-23.3 - EXHIBIT 23.3 - NITRO PETROLEUM INC.	ex23-3.htm
EX-32.1 - EXHIBIT 32.1 - NITRO PETROLEUM INC.	ex32-1.htm
EX-23.1 - EXHIBIT 23.1 - NITRO PETROLEUM INC.	ex23-1.htm
EX-23.2 - EXHIBIT 23.2 - NITRO PETROLEUM INC.	ex23-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended January 31, 2012

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

For the transition period from ______ to ______

Commission File No. 000-50932

Nitro Petroleum Incorporated

(Exact name of registrant as specified in its charter)

NEVADA (State or other jurisdiction of incorporation or organization)	98-0488493 (I.R.S. Employer Identification No.)

624 W. INDEPENDENCE, SUITE 101 SHAWNEE, OK 74804 (Address of principal executive offices)	74804 (Zip Code)

Registrant's telephone number, including area code: (405) 273-9119

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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 o No þ

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 þ

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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 definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ

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

As of July 31, 2011 (the last business day of the registrant's most recently completed second quarter), the aggregate market value of the voting and non-voting common stock of the registrant held by non-affiliates of the registrant was $2,696,460 (based upon the closing price of the registrant’s common stock as reported by the OTC Bulletin Board Pink Sheets on July 31, 2011).

As of July 31, 2012, there were 2,074,242 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

TABLE OF CONTENTS
		Page No.
PART I

Item 1.	Business	4
Item 1A.	Risk Factors	5
Item 1B.	Unresolved Staff Comments	5
Item 2.	Properties	5
Item 3.	Legal Proceedings	8
Item 4.	Mine Safety Disclosures	8

PART II

Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	9
Item 6.	Selected Financial Data	10
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	10
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	11
Item 8.	Financial Statements and Supplementary Data	11
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	11
Item 9A.	Controls and Procedures	12
Item 9B.	Other Information	12

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	12
Item 11.	Executive Compensation	14
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	14
Item 13.	Certain Relationships and Related Transactions, and Director Independence	15
Item 14.	Principal Accounting Fees and Services	15

PART IV

Item 15.	Exhibits and Financial Statement Schedules	16
Signatures		17

Index to Consolidated Financial Statements of Nitro Petroleum Incorporated		F-1

FORWARD-LOOKING STATEMENTS

This report, including information included in future filings by us with the SEC, as well as information contained in written material, press releases and oral statements issued by us or on our behalf, contain, or may contain, certain statements that are “forward-looking statements” within the meaning of federal securities laws that are subject to a number of risks and uncertainties, many of which are beyond our control. This report modifies and supersedes documents filed by us before this report. In addition, certain information that we file with the SEC in the future will automatically update and supersede information contained in this report. All statements, other than statements of historical fact, included in this report, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.

Forward-looking statements may include statements about our business strategy, reserves, technology, financial strategy, oil and natural gas realized prices, timing and amount of future production of oil and natural gas, the amount, nature and timing of capital expenditures, drilling of wells, competition and government regulations, marketing of oil and natural gas, property acquisitions, costs of developing our properties and conducting other operations, general economic conditions, uncertainty regarding our future operating results and plans, objectives, expectations and intentions contained in this report that are not historical.

All forward-looking statements speak only as of the date of this report, and, except as required by law, we do not intend to update any of these forward-looking statements to reflect changes in events or circumstances that arise after the date of this report. You should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

EXPLANATORY NOTE

This Annual Report on Form 10-K is for the year ended January 31, 2012, with expanded financial and other disclosures in lieu of filing a separate Annual Report on Form 10-K for the year ended January 31, 2012 and Quarterly Reports on Form 10-Q for each of the quarters ended April 30, 2011, July 31, 2011, and October 31, 2011. We believe that the filing of this expanded Annual Report enables us to provide information to investors in a more efficient manner than separately filing each of the annual and quarterly reports described above. In addition, so that the recipients of this Annual Report can better understand the significant changes we have made in our business since January 31, 2011, 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 Annual Report includes information for the periods since January 31, 2011. 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.

PART I

ITEM 1. BUSINESS

Unless the context otherwise requires, all references in this report to “Nitro,” “our,” “us,” and “we” refer to Nitro Petroleum Incorporated.

Overview

Nitro is engaged in the acquisition and exploration of gas and oil properties. We were originally incorporated on October 27, 2003, under the name Ingenium Capital Corp. in the State of Nevada. We changed our name from Ingenium Capital Corp. to Nitro Petroleum Incorporated on February 27, 2006. Our principal offices are located at 624 W. Independence, Suite 101, Shawnee, OK 74804. Our telephone number is (405) 273-9119.

Business

Our business strategy is to acquire interests in the properties of, and working interests in the production owned by, established oil and gas production companies, whether public or private, in the United States oil producing areas. We believe such opportunities exist in the United States. We also believe that these opportunities have considerable future potential for the development of additional oil reserves. Such new reserves might come from the development of existing but as yet undeveloped reserves as well as from future success in exploration.

When and if funding becomes available, we plan to acquire high-quality oil and gas properties, primarily "proved producing and proved undeveloped reserves." We will also explore low-risk development drilling and work-over opportunities with experienced, well-established operators.

Competition

We operate in a highly competitive environment. We compete with major and independent oil and natural gas companies, many of whom have financial and other resources substantially in excess of those available to us. These competitors may be better positioned to take advantage of industry opportunities and to withstand changes affecting the industry, such as fluctuations in oil and natural gas prices and production, the availability of alternative energy sources and the application of government regulation.

Compliance with Government Regulation

The availability of a ready market for future oil and gas production from possible U.S. assets will depend upon numerous factors beyond our control. These factors may include, amongst others, regulation of oil and natural gas production, regulations governing environmental quality and pollution control, and the effects of regulation on the amount of oil and natural gas available for sale, the availability of adequate pipeline and other transportation and processing facilities and the marketing of competitive fuels. These regulations generally are intended to prevent waste of oil and natural gas and control contamination of the environment.

We expect that our sales of crude oil and other hydrocarbon liquids from our future U.S.-based production will not be regulated and will be made at market prices. However, the price we would receive from the sale of these products may be affected by the cost of transporting the products to market via pipeline and marine transport.

Environmental Regulations

Our U.S. assets could be subject to numerous laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. These laws and regulations may require the acquisition of a permit before drilling commences, restrict the types, quantities and concentration of various substances that can be released into the environment in connection with drilling and production activities, limit or prohibit drilling activities on certain lands within wilderness, wetlands and other protected areas, require remedial measures to mitigate pollution from former operations, such as pit closure and plugging abandoned wells, and impose substantial liabilities for pollution resulting from production and drilling operations. Public interest in the protection of the environment has increased dramatically in recent years. The worldwide trend of more expansive and stricter environmental legislation and regulations applied to the oil and natural gas industry could continue, resulting in increased costs of doing business and consequently affecting profitability. To the extent laws are enacted or other governmental action is taken that restricts drilling or imposes more stringent and costly waste handling, disposal and cleanup requirements, our business and prospects could be adversely affected.

Operating Hazards and Insurance

The oil and natural gas business involves a variety of operating hazards and risks such as well blowouts, craterings, pipe failures, casing collapse, explosions, uncontrollable flows of oil, natural gas or well fluids, fires, formations with abnormal pressures, pipeline ruptures or spills, pollution, releases of toxic gas and other environmental hazards and risks. These hazards and risks could result in substantial losses to us from, among other things, injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, clean-up responsibilities, regulatory investigation and penalties and suspension of operations.

In accordance with customary industry practices, we expect to maintain insurance against some, but not all, of such risks and losses. There can be no assurance that any insurance we obtain would be adequate to cover any losses or liabilities. We cannot predict the continued availability of insurance or the availability of insurance at premium levels that justify its purchase. The occurrence of a significant event not fully insured or indemnified against could materially and adversely affect our financial condition and operations.

Pollution and environmental risks generally are not fully insurable. The occurrence of an event not fully covered by insurance could have a material adverse effect on our future financial condition. If we were unable to obtain adequate insurance, we could be forced to participate in all of our activities on a non-operated basis, which would limit our ability to control the risks associated with oil and natural gas operations.

Employees

At October 31, 2012 we had no full-time employees. All necessary services are performed by contracted parties.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Oil and Natural Gas Reserves

The information below is derived from a reserve report prepared by Ramsey Property Management LLC (“Ramsey”). Copies of the summary reserve report are attached as Exhibit 99.1 to this Annual Report. Ramsey is a well-known petroleum engineering company with experience and knowledge in the oil and gas industry. We believe our controls around the reserve estimates are sufficient for estimates and reporting.

To determine our estimated proved reserves, and as required by the SEC, we used the 12-month unweighted arithmetic average of the first-day-of-the-month price for the months of February 2011 through January 2012 calculated to be $3.83 per Mcf of natural gas and $91.09 per Bbl of oil. These prices were held constant for the life of the properties and adjusted for the appropriate market differentials.

As of January 31, 2012, our proved crude oil and natural gas reserves are presented below by reserve category. All of our proved reserves are located within the United States.

	Oil Bbl		Natural Gas Mcf

Proved developed		19,673		5,656
Proved undeveloped		55,060		0
Proved developed non-producing		5,209		0

Total proved		79,942		5,656

Increases in our proved developed reserves and our proved undeveloped reserves are attributable to acquisitions of working interests in oil and gas properties.

Proved Undeveloped Reserves

As of January 31, 2012, the Company held an estimated 55,060 barrels of oil in reserves in proved undeveloped properties. The properties were obtained during the 2010 year, and have remained classified as undeveloped. The Company plans to begin drilling on the properties, beginning in December 2012. There are no undeveloped properties remaining as undeveloped for 5 years or more.

Net Production, Unit Prices and Costs

The following table presents certain information with respect to our oil and natural gas production and prices and costs attributable to all oil and natural gas properties owned by us for the periods shown.

	Year ended January 31,
	2012		2011		2010
Production volumes:
Oil (Bbls)		5,467		1,230		1,971
Natural gas (Mcf)		8,356		2,363		2,332
Total (Boe)		6,860		1,624		2,360
Average realized prices:
Oil (per Bbl)	$	89.83	$	78.42	$	63.25
Natural gas (per Mcf)	$	6.74	$	4.60	$	4.34
Total per Boe	$	79.96	$	70.79	$	50.87
Average production cost:
Total per Boe	$	46.10	$	66.94	$	63.74

Drilling Activities

The Company did not conduct any exploratory or development drilling activities during the year ended January 31, 2012, 2011, or 2010.

Producing Wells

The following table sets forth the number of productive wells in which we owned an interest as of January 31, 2012. Productive wells consist of producing wells and wells capable of production, including wells awaiting pipeline connections or connection to production facilities. Wells that we complete in more than one producing horizon are counted as one well.

	Gross		Net

Oil		17		5.9
Natural gas		0		0

Total		17		5.9

Oil and Gas Acreage

The following table sets forth our developed and undeveloped gross and net leasehold acreage as of January 31, 2012:

	Gross		Net

Developed		1640		413
Undeveloped		1960		397

Total		3600		810

Our undeveloped acreage includes leased acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and natural gas, regardless of whether or not such acreage is held by production or contains proved reserves. A gross acre is an acre in which we own an interest. A net acre is deemed to exist when the sum of fractional ownership interests in gross acres equals one. The number of net acres is the sum of the fractional interests owned in gross acres.

Participation in Barnett Shale

We entered into an Acreage Participation Agreement effective January 23, 2006, with REO Energy, Ltd. as a holder of approximately 2,000 acres of mineral leases in and around Montague County, Texas (the "Gross Area"). We purchased 50% of the REO Energy’s leasehold interest in the Gross Area (the "Assigned Acreage") for $300,000. We are also entitled (i) to receive a 1% overriding royalty on the entire Gross Area, (ii) to participate in up to a 25% working interest in wells drilled in the Gross Area, and (iii) to receive an acreage fee of $500 per acre from all wells drilled on the Assigned Acreage.

Additionally, we acquired a 10% working interest in four wells (Inglish 4, Inglish 5, Inglish D1 and Inglish D2) and a 5% working interest in two wells (Craig Muncaster 6 and Craig Muncaster 7) drilled by REO Energy Ltd. on Barnett Shale formation leases.

Oklahoma Property

Nowata County

On December 18, 2006, we acquired three producing leases in Oklahoma for $250,000. The funding for this acquisition was derived from a private placement of 5,000 shares of our common stock and warrants to purchase 5,000 of our common stock to Bridge Capital Inc., a private offshore corporation. On February 26, 2010, we sold all of our interest in the leases for $100,000.

Garvin County

On February 1, 2008, we purchased producing properties located in Garvin County and Pottawatomie County, Oklahoma in a transaction that resulted in the distribution of 13,061 shares in exchange for an 12.25% to a 29.44% gross working interest in producing wells and in undeveloped proved properties. The Sarah No. 1-4, Teresa No. 1, Thompson No. 1-18, Ward/McNeil and Mason-Burns wells are all located in Garvin County. The Quinlan well is located in Pottawatomie County.

On September 1, 2010, we acquired a 25% working interest in a 7 well package located in Garvin County, Oklahoma. We acquired this interest by first purchasing the prospect and then selling off 55% of the ownership in the working interest to third party investors, giving a 20% carried working interest to the seller and retaining the balance of the working interest. Currently, we own a 25% working interest in these wells.

On September 29, 2010, we purchased a 20.83333% working interest in the Thompson #2-18 located in Garvin County, Oklahoma. We paid $10,417 for this working interest. On November 17, 2010, we sold 13.46774% of their interest, realizing $35,516. Currently, we own a 7.36559% working interest in this well.

Pottawatomie County

We acquired the Crown No. 1, No. 2 and No. 3 and the Gloria salt water disposal (“SWD”) wells located in Pottawatomie County, Oklahoma, on February 1, 2008 and turnkeyed the rework of these wells to outside investors, retaining a 15% carried working interest and operations of the wells.

During 2008 we drilled the Quinlan No. 3 and the Quinlan No. 4, both located in Pottawatomie County, Oklahoma, retaining a 15% carried working interest in both wells. The Quinlan No. 4 was later converted into a saltwater disposal well. We also reworked the Quinlan No. 2, located in Pottawatomie County, Oklahoma, initially as a saltwater disposal well, but later converted it into a producing well.

Effective January 1, 2011, we negotiated purchase agreements in which certain owners of working interest in the Crown and Quinlan leases would sell all rights in said leases to us in exchange for shares of our common stock. Pursuant to the terms of the purchase agreements, we assumed $113,159 of joint interest billings and issued a total of 581,060 shares of common stock to the sellers in the Quinlan Nos. 1, 2, 3 and 4 and the Crown Nos. 1, 2 and 3 as the purchase price for the working interests. We recognized an aggregate cost of $694,219 for this transaction.

As a result of this transaction, our working interest in these leases increased as indicated in the following table.

Ownership Interest
Lease Name	Before Acquisition	After Acquisition

Crown 1&2	15.00%	88.75%
Crown 3	15.00%	88.75%
Quinlan 1	12.25%	62.111328%
Quinlan 2	29.44%	99.64%
Quinlan 3	15.00%	85.00%
Quinlan 4	15.00%	83.34%

On February 1, 2008, we acquired a 50% working interest in the Nancy Hubbard, Walker, State SWD and Krouch 1 and 2 leases, all located in Pottawatomie County, Oklahoma. We have performed major rework on these leases. On April 22, 2010, we sold all of our interest in the Nancy Hubbard, Walker and Crouch’s 1 and 2 wells for $20,300.

Seminole County

On April 8, 2008, we acquired a 10% working interest in the Jessica No. 23, located in Seminole County, Oklahoma.

Corporate Office

Our corporate office is located at 624 W. Independence, Suite 101, Shawnee, OK 74804. Our corporate office is approximately 1,235 square feet and our annual rent was $6,606.25. The Company also leases an office in Tulsa, OK. For the year ended January 31, 2012, the rents were included in management fees paid to a related company, with no rent expense, and rent for the year ended January 31, 2011 was $6,400.

ITEM 3. LEGAL PROCEEDINGS

We are not currently a party to any material legal proceedings and, to our knowledge, no such proceedings are threatened or contemplated.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for the Common Stock

Our common stock is traded on the OTC Bulletin Board – Pink Sheets and is quoted under the symbol “NTRO.” The following quotations were obtained from Yahoo Finance and reflect interdealer prices, without retail markup, markdown, or commission, and may not represent actual transactions. There have been no reported transactions in our stock for certain of the trading days during the periods reported below. The following table sets forth the high and low bid prices for our common stock on the OTC Bulletin Board – Pink Sheets for the periods indicated (as adjusted for stock splits):

	High	Low

Fiscal Year ended January 31, 2012 :
Quarter ended January 31, 2012	0.01	0.01
Quarter ended October 31, 2011	0.01	0.01
Quarter ended July 31, 2011	0.01	0.01
Quarter ended April 30, 2011	0.02	0.02

Fiscal Year Ended January 31, 2011 :
Quarter ended January 31, 2011	0.01	0.01
Quarter ended October 31, 2010	0.01	0.01
Quarter ended July 31, 2010	0.02	0.01
Quarter ended April 30, 2010	0.02	0.01

Holders of the Common Stock

At January 31, 2012, we had approximately 70 stockholders of record.

Dividends

Our dividend policy for holders of common stock is to retain earnings to support the expansion of operations through organic growth or by strategic acquisitions. We have not previously paid any cash dividends, and we do not intend to pay cash dividends in the near future. Any future cash dividends will depend on our future earnings, capital requirements, financial condition and other factors deemed relevant by the Board of Directors.

Equity Compensation Plan Information

The following table provides information for all equity compensation plans as of January 31, 2012, under which our equity securities were authorized for issuance:

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)	Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (b)	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)
Equity compensation plans approved by security holders	—	—	—
Equity compensation plans not approved by security holders
2008 Stock Incentive Plan	—	—	7,000
2010 Stock Incentive Plan	—	—	49,500
Total	—	—	56,500

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

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

We are continuing our efforts to identify and assess investment opportunities in oil and natural gas properties, utilizing free labor of our 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 2012. We may also use various debt instruments to raise needed capital during 2012.

As oil and gas properties become available and appear attractive to our management, funds, when and if 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 us to possibly position ourself with sellers that wish to divest themselves of production or proven undeveloped properties in order to provide liquidity. Our management believes that current market conditions are creating situations that could result in the opportunity for such production acquisitions.

We 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 to 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 we undertake our 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 fiscal year ended January 31, 2012, we had revenue of $331,604 from production of oil and gas, as compared to $144,112 for the fiscal year ended January 31, 2011.

Cost of continued operations for the fiscal year ended January 31, 2012 was $676,344 resulting in a net loss for the period of $276,100.

Cost of continued operations for the fiscal year ended January 31, 2011 was $743,078, resulting in a net loss for the period of $536,816.

Selected Quarterly Results of Operations – for the year ended January 31, 2012

The information set forth below is provided to enable the reader to analyze quarterly trends in the Company’s operations for the year ended January 31, 2012.

The following table shows selected results of operations for each quarter during the year ended January 31, 2012.

	Quarters Ended											Years Ended
	April 30, 2011			July 31, 2011			October 31, 2011			January 31, 2012		January 31, 2012			January 31, 2011

REVENUE
Oil and gas production	$	71,102		$	87,904		$	86,380		$	86,218	$	331,604		$	144,112
Production services		20,680			14,080			17,160			16,720		68,640			80,555
Total revenues		91,782			101,984			103,540			102,938		400,244			224,667

COSTS AND EXPENSES
Lease operating expenses		83,447			109,911			87,130			35,761		316,249			111,954
Depletion, depreciation, amortization and accretion		7,263			5,899			14,025			34,365		61,552			25,356
General and administrative		67,584			105,485			128,005			27,320		328,394			577,690
Total expenses		158,294			221,295			229,160			97,446		706,195			715,000

OPERATING PROFIT (LOSS)		(66,512	)		(119,311	)		(125,620	)		5,492		(305,951	)		(490,333	)

OTHER INCOME (EXPENSE)
Other income		-			-			18,000			11,851		29,851			-
Interest expense		-			-			-			-		-			(46,483	)
Total other income (expense)		-			-			18,000			11,851		29,851			(46,483	)

INCOME (LOSS) BEFORE TAXES		(66,512	)		(119,311	)		(107,620	)		17,343		(276,100	)		(536,816	)

PROVISION FOR INCOME TAXES		-			-			-			-		-			-

NET INCOME (LOSS)	$	(66,512	)	$	(119,311	)	$	(107,620	)	$	17,343	$	(276,100	)	$	(536,816	)

Net income (loss) per share	$	(0.03	)	$	(0.06	)	$	(0.05	)	$	0.01	$	(0.13	)	$	(0.39	)

Weighted average shares outstanding		2,074,242			2,074,242			2,074,242			2,074,242		2,074,242			1,391,737

Liquidity and Capital Resources

We had a cash balance of $6,199 as of January 31, 2012, compared to cash balance of $40,501 as of January 31, 2011. We had a working capital deficiency of $571,617 as of January 31, 2012, compared to working capital deficiency of $246,973 as of January 31, 2011.

On January 1, 2011, we entered into separate Promissory Note Settlement Agreements (the “2011 Settlement Agreements”) with the holders of certain of our outstanding demand promissory notes (the “2011 Demand Notes”). Pursuant to the terms of the Settlement Agreements, we issued a total of 154,940 shares of our common stock to the holders of the 2011 Demand Notes in full payment of all principal and accrued and unpaid interest due on the 2011 Demand Notes.

Going Concern

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

Future Financings

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

Off-Balance Sheet Arrangements

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

ITEM 7A. QUANTITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial Statements and Financial Statement Schedules - See Index to Consolidated Financial Statements and Schedules immediately following the signature page of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit 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 our management, including our principal executive and principal financial officers (whom we refer to in this periodic report as our Certifying Officers), as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our Certifying Officers, the effectiveness of our disclosure controls and procedures as of January 31, 2012, pursuant to Rule 13a-15 under the Securities Exchange Act. Due to our inability to file this annual report in a timely manner, our Certifying Officer concluded that, as of January 31, 2012, our disclosure controls and procedures were not effective. We are taking steps to remedy these deficiencies as quickly as possible.

Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements. Our controls are designed to provide reasonable assurance that our assets are protected from unauthorized use and that transactions are executed in accordance with established authorizations and properly recorded. Management used the framework set forth in the report entitled "Internal Control-Integrated Framework" published by the Committee of Sponsoring Organizations of the Treadway Commission (referred to as "COSO") to evaluate the effectiveness of our internal control over financial reporting as of January 31, 2012. Due to our inability to file this annual report in a timely manner, management has concluded that the design and operations of our internal controls over financial reporting at January 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.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Our Board of Directors is currently composed of three (3) persons. The term of each director is one-year or until he resigns or is succeeded by another qualified director who has been elected. The following is a list of our executive officers and the current members of our Board of Directors, including each member’s age, the year he became a director of the Company and his current position with the Company:

Name	Age	Director Since	Position
James G. Borem	64	2009	Director, Chief Executive Officer and Interim Chief Financial Officer
Larry Wise	58	2007	Director, Chief Operating Officer
Gunther Weisbrich	59	2008	Director

Set forth below is a brief description of the background and business experience of our executive officers and directors.

James G. Borem

James G. Borem was appointed to the Board and as our Chief Executive Officer and Interim Chief Financial Officer effective October 1, 2009. Mr. Borem 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 Providian Reserves Inc., two Oklahoma oil and gas service and production companies that are not affiliated with Nitro Petroleum Incorporated.

Larry Wise

Larry Wise was appointed as our President and Treasurer and appointed to the board of directors as of February 21, 2007. Mr. Wise resigned his positions as President and Treasurer effective October 1, 2009 but remains on our Board of Directors. Mr. Wise has been involved in the oil & gas industry for 30 years. Mr. Wise started as a junior field engineer with Phillips 66 Petroleum Company in 1977. In 1979 he became the Completion Superintendent for Jerry Scott Company, overseeing 14 drilling rigs and over 300 producing properties up to the early 1980's. During the 1980's and 1990's Mr. Wise was the President and Chief Operating Officer for JOMC Oil Co; Texas United Petroleum and Pottawatomie County Energy. Over the past 7 years Mr. Wise has operated Wise Oil & Gas Company, LLC and served as an independent Engineering Consultant responsible for all operations of Morris E. Stewart Oil Company, OKC, OK; Kirrie Oil Company, OKC, OK; Hoko, Inc. Oil Company, Wichita Falls, TX; and Buccaneer Energy Corporation, Tampa Bay, FL.

Gunther Weisbrich

Gunther Weisbrich was appointed to our board of directors effective May 19, 2008. Mr. Weisbrich began his oil and gas career as a Production Geologist with Exxon Company, USA in Louisiana, then as a Frontier Exploration Geologist with Tenneco (Houston), Sr. Explorationist with North Central Oil Company (Houston) and finally as a Senior Exploration Geologist with Hunt Oil Company in Dallas, Texas working both internationally (Yemen and South America) and domestically (West Texas, Texas Gulf Coast, East Texas Basin, Mid-continent and Miss-Ala-Fla). Over the years Mr. Weisbrich generated and participated in the discovery of many oil and gas fields. He additionally received the BEST POSTER AWARD at the 1994 Mexico City Joint AAPG/AMPG research conference.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of our common stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. For the fiscal year ending January 31, 2012, Messrs. Borem, Weisbrich and Wise each filed one late Form 5.

Code of Ethics

Our code of ethics applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the Code of Ethics was filed as an exhibit to the 2006 Annual Report and is incorporated by reference herein. We will provide to any person, without charge, a copy of our Code of Ethics upon receipt of a written request addressed to Nitro Petroleum Incorporated, Attn: Corporate Secretary, 624 W. Independence, Suite 101, Shawnee, OK 74804.

Corporate Governance

We do not presently have any committees of our board of directors, including an audit committee, because our size makes it impractical to implement board committees at this point.

Leadership Structure of the Board

The chairman of our Board of Directors has the power to preside at all meetings of the Board. James G. Borem, our Chief Executive Officer and Interim Chief Financial Officer, serves as the chairman of our Board of Directors. Although our Board believes that the combination of the chairman and chief executive officer positions is appropriate for our company in the current circumstances, there is no corporate policy requiring those positions to be held by the same person.

Our Chief Executive Officer is appointed by the Board to manage our daily affairs and operations. We believe that Mr. Borem’s extensive industry experience and direct involvement in our operations make him best suited to serve as chairman in order to (i) lead the Board in productive, strategic planning, (ii) determine necessary and appropriate agenda items for meetings of the Board with input from both our independent directors and management, and (iii) determine and manage the amount of time and information devoted to discussion and analysis of agenda items and other matters that may come before the Board.

Risk Oversight

The Board considers oversight of our risk management efforts to be a responsibility of the entire Board. The Board’s role in risk oversight includes receiving regular reports from members of senior management on areas of material risk to us, including operational, financial, personnel, information technology, environmental, legal and regulatory, strategic and reputational risks. The full Board receives these reports from the appropriate members of management to enable the Board to understand our risk identification, risk management, and risk mitigation strategies.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The table below summarizes the total compensation paid to our named executive officers for the last two fiscal years.

Name & Principal Position	Year	Salary ($)	Stock Awards (1) ($)	Total ($)
James G. Borem, CEO and Interim CFO	2012	0	0	0
	2011	84,000	36,000	120,000

Larry Wise, Chief Operating Officer	2012	0	0	0
	2011	80,000	15,000	95,000

(1)	The amounts in the “Stock Awards” column reflect the grant date fair value computed in accordance with FASB ASC Topic 718 of restricted stock awards pursuant to the 2010 Stock Incentive Plan.

Outstanding Equity Awards at January 31, 2012

We had no outstanding equity awards as of January 31, 2012.

Director Compensation for the Year Ended January 31, 2012

There were no compensation changes in the year ended January 31, 2012.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

As of October 31, 2012, based upon ownership filings with the SEC, we have no shareholders that beneficially own more than 5% of our outstanding shares of common stock. The following table sets forth the number of shares of our common stock beneficially owned as of October 31, 2012, by each director, the named executive officers and all of our directors and executive officers as a group, and the percentage represented by such shares of the total common stock outstanding on that date.

Name or Group	Number of Shares Common Stock Beneficially Owned	Percent of Class
James G. Borem	60,000	3%
Larry Wise	25,000	1%
Gunther Weisbrich	750	Less than 1%
All directors and executive officers as a group, including those named above (3 persons)	85,750	4%

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Director Independence

The Board of Directors has determined that Gunther Weisbrich is an independent director under the definition found in Nasdaq Rule 5605(a)(2).

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth information regarding the amount billed to us by our independent auditors, Montgomery Coscia Greilich, LLP for the fiscal year ended January 31, 2012, and Killman, Murrell & Company PC for the fiscal year ended January 31, 2011:

	Years Ended January 31
	2012	2011

Audit Fees (1)	$30,000	$27,906
Audit-Related Fees	-	-
Tax Fees	-	-
All Other Fees	-	-

(1)	Audit Fees are the aggregate fees billed by the independent auditor for the audit of the consolidated annual financial statements, reviews of interim financial statements, and attestation services that are provided in connection with statutory and regulatory filings or engagements.

Generally, the board of directors approves in advance audit and non-audit services to be provided by our independent auditors. In other cases, in accordance with Rule 2-01(c)(7) of Securities and Exchange Commission Regulation S-X, the board of directors has delegated preapproval authority to our Chief Executive Officer for matters that arise or otherwise require approval between regularly scheduled meetings of the board of directors, provided that such approvals are reported to the board of directors at its next regularly scheduled meeting.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Exhibit No.	Description of Exhibit

3.1	Articles of Incorporation (filed as exhibit to our Form SB-2 Registration Statement filed on April 21, 2004 and incorporated by reference herein)

3.2	Bylaws (filed as exhibit to our Form SB-2 Registration Statement filed on April 21, 2004 and incorporated by reference herein)

3.3	Amendment to the Articles of Incorporation changing the name to Nitro Petroleum Incorporated (filed as exhibit to our Form 10-KSB filed on May 15, 2006 and incorporated by reference herein)

3.4	Certificate of Change to the Articles of Incorporation of the Company (filed as Exhibit 3.1 to our Form 8-K filed on October 29, 2012)

10.1	Nitro Petroleum Incorporated 2008 Stock Incentive Plan (filed as exhibit to our Form 8-K filed on July 16, 2008)

10.2	Nitro Petroleum Incorporated 2009 Stock Incentive Plan (filed as exhibit 4.01 to our Registration Statement on Form S-8 filed on August 25, 2009)

10.3	Nitro Petroleum Incorporated 2010 Stock Incentive Plan (filed as exhibit 99 to our Registration Statement on Form S-8 filed on July 30, 2010)

14	Code of Ethics (filed as exhibit to our Form 10-KSB filed on May 15, 2006 and incorporated by reference herein)

23.1	Consent of Independent Registered Public Accounting Firm

23.2	Consent of Independent Registered Public Accounting Firm

23.3	Consent of Independent Petroleum Engineers

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

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

99.1	Report of Ramsey Property Management LLC

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NITRO PETROLEUM INCORPORATED

By: /s/ James G. Borem
James G. Borem
Chief Executive Officer and Interim Financial Officer

Date: November 2, 2012

Pursuant to the requirements of the Securities Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date

/s/ James G. Borem	Director, Chief Executive	November 2, 2012
	Officer and Interim Chief Financial Officer

/s/ Larry Wise	Director	November 2, 2012

/s/ Gunther Weisbrich	Director	November 2, 2012

PART I – FINANCIAL INFORMATION NITRO PETROLEUM INCORPORATED FINANCIAL INFORMATION

	Page

Reports of Independent Registered Public Accounting Firms	F-2 – F-3

Balance Sheets as of January 31, 2012 and 2011	F-4

Statements of Operations for the Years Ended January 31, 2012 and 2011	F-5

Statements of Stockholders’ (Deficit) for the Years Ended January 31, 2012 and 2011	F-6

Statements of Cash Flows for the Years Ended January 31, 2012 and 2011	F-7

Notes to Financial Statements	F-7 – F-16

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Nitro Petroleum Incorporated

We have audited the accompanying balance sheet of Nitro Petroleum Incorporated as of January 31, 2012, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the year then ended. Nitro Petroleum Incorporated’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nitro Petroleum Incorporated as of January 31, 2012, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has generated revenues from operations but has substantial accumulated deficit and working capital deficiency and this raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Montgomery Coscia Greilich, LLP

Montgomery Coscia Greilich, LLP

Plano, Texas

November 5, 2012

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Nitro Petroleum Incorporated

624 W. Independence, Suite 101

Shawnee, OK 74804

We have audited the accompanying balance sheets of Nitro Petroleum Incorporated as of January 31, 2011, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended. Nitro Petroleum Incorporated’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nitro Petroleum Incorporated as of January 31, 2011, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has generated revenues from operations but has substantial accumulated deficit and working capital deficiency and this raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The 2011 financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Killman, Murrell & Company, P.C.

Killman, Murrell & Company, P.C.

Odessa, Texas

August 8, 2011

F-3

NITRO PETROLEUM INCORPORATED

BALANCE SHEETS

	January 31, 2012			January 31, 2011

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	6,199		$	40,501
Accounts receivable		14,788			106,173
Due to related party		34,501			-
Total current assets		55,488			146,674

PROPERTY AND EQUIPMENT, NET		43,819			44,622
OIL AND GAS PROPERTIES, NET - USING FULL COST ACCOUNTING		836,714			727,266
Total assets	$	936,021		$	918,562

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Cash overdraft	$	25,671		$	-
Accounts payable		312,678			283,987
Accrued liabilities		285,174			92,736
Due to related party		3,582			16,924
Total current liabilities		627,105			393,647

ASSET RETIREMENT OBLIGATION		60,101			-
Total liabilities		687,206			393,647


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 at January 31, 2012 and 2011		2,074			2,074
Additional paid-in capital		5,892,820			5,892,820
Accumulated deficit		(5,646,079	)		(5,369,979	)
Total stockholders' equity		248,815			524,915

Total liabilities and stockholders' equity	$	936,021		$	918,562

F-4

NITRO PETROLEUM INCORPORATED

STATEMENTS OF OPERATIONS

For the Years Ended

	January 31, 2012			January 31, 2011

REVENUES
Oil and gas production	$	331,604		$	144,112
Production services		68,640			80,555
Total revenues		400,244			224,667

COSTS AND EXPENSES
Lease operating expenses		316,249			111,954
Depletion, depreciation, amortization and accretion		61,552			25,356
General and administrative		328,394			577,690
Total expenses		706,195			715,000

OPERATING LOSS		(305,951	)		(490,333	)

OTHER INCOME (EXPENSE)
Other income		29,851			-
Interest expense		-			(46,483	)
Total other income (expense)		29,851			(46,483	)

LOSS BEFORE TAXES		(276,100	)		(536,816	)

PROVISION (BENEFIT) FOR INCOME TAXES		-			-

NET LOSS	$	(276,100	)	$	(536,816	)

Net loss per share, basic and diluted	$	(0.13	)	$	(0.39	)

Weighted average shares outstanding, basic and diluted		2,074,242			1,391,737

F-5

NITRO PETROLEUM INCORPORATED

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

For the Years Ended January 31, 2012 and 2011

	Common Shares Number		Common Shares Value		Additional Paid-in Capital		Accumulated Deficit			Total

Balance, January 31, 2010		1,212,492	$	1,212	$	4,807,513	$	(4,833,163	)	$	(24,438	)

Common stock issued for consulting fees		38,000		38		37,962		-			38,000

Stock incentive plan		87,750		88		52,562		-			52,650

Common stock issued for settlement of notes payable		154,940		155		414,304		-			414,459

Common stock issued for oil and gas working interest		581,060		581		580,479		-			581,060

Net loss		-		-		-		(536,816	)		(536,816	)

Balance, January 31, 2011		2,074,242		2,074		5,892,820		(5,369,979	)		524,915

Net loss		-		-		-		(276,100	)		(276,100	)

Balance, January 31, 2012		2,074,242	$	2,074	$	5,892,820	$	(5,646,079	)	$	248,815

F-6

NITRO PETROLEUM INCORPORATED
STATEMENTS OF CASH FLOWS For the Years Ended

	January 31, 2012			January 31, 2011

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(276,100	)	$	(536,816	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depletion, depreciation, and amortization		59,749			25,356
Share based compensation		-			90,650
Accretion of interest expense on asset retirement obligation		1,803			-
Change in operating assets and liabilities:
Accounts receivable		91,385			(143,137	)
Accounts payable and accrued expenses		260,888			45,162
Revenue payable		-			31,896
Net cash provided by (used in) operating activities		137,725			(486,889	)

CASH FLOWS FROM INVESTING ACTIVITIES
Oil and gas investor funds, net of acquisition costs		-			275,844
Proceeds from sale of oil and gas properties		148,705			120,300
Acquisition of oil and gas properties		(293,175	)		-
Acquisition of property and equipment		(5,385	)		(1,000	)
Net cash provided by (used in) investing activities		(149,855	)		395,144

CASH FLOWS FROM FINANCING ACTIVITIES
Cash overdraft		25,671			-
Proceeds from short term note payable		-			140,000
Net payments to related parties		(47,843	)		(10,256	)
Net cash provided by (used in) financing activities		(22,172	)		129,744

Net change in cash and cash eqivalents		(34,302	)		37,999
Cash and cash equivalents at beginning of year		40,501			2,502
Cash and cash equivalents at end of year	$	6,199		$	40,501

SUPPLEMENTAL INFORMATION
Cash paid for insterest	$	-		$	-
Cash paid for income taxes	$	-		$	-
NON-CASH TRANSACTIONS
Acquisition of oil and gas properties	$	-		$	(694,219	)
Issuance of common stock	$	-		$	73,600
Additional paid-in capital	$	-		$	921,919
Settlement of promissory notes payable	$	-		$	(414,459	)
Accounts receivable	$	-		$	113,159
Asset retirement obligation additions	$	58,298		$	-
Sale of assets in exchange for forgiven payables	$	39,759		$	-

F-7

NITRO PETROLEUM INCORPORATED

NOTES TO THE FINANCIAL STATEMENTS

January 31, 2012 and 2011

Note 1

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. 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 fiscal year. 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 classifications of assets and liabilities should the Company be unable to continue as a going concern. At January 31, 2012 the Company had not yet achieved profitable operations, has accumulated losses of $5,646,079 since its inception, has a working capital deficiency of $571,617 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 2

Summary of Significant Accounting Policies

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates, which have been made using careful judgment. Actual results may vary from these estimates.

The financial statements have, in management’s opinion been properly prepared within the framework of the significant accounting policies summarized below:

Cash and Cash Equivalents

The Company considers cash and cash equivalents to be all highly liquid debt instruments with a maturity when purchased of three months or less.

The Company maintains its cash balances in two financial institutions in Shawnee and Tulsa, Oklahoma. As of January 31, 2012 and 2011, the balances at these institutions do not exceed the Federal Deposit Insurance Corporation (FDIC) insured limits.

Allowance for doubtful accounts

Accounts receivable are stated at the amount management expects to collect from balances outstanding at year end. Management provides for probable uncollectible amounts through a charge to earnings and a credit to an allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance. Changes in the allowance have not been material to the financial statements.

Property and equipment

Equipment is recorded at cost and consists of office furniture, computers and a vehicle. Depreciation is provided using the straight-line method over the estimated useful life of the assets.

F-8

Note 2

Summary of Significant Accounting Policies (Continued)

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 capitalized, together with the costs of production equipment, are depleted and amortized on the unit-of-production method based on the estimated net proved reserves. Petroleum products and reserves are converted to a common unit of measure, using six (6) MCF of natural gas to one barrel of oil.

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%).

Assets Retirement Obligations

The Company recognizes the fair value of a liability for an assets retirement obligation in the year in which it is incurred when a reasonable estimate of fair value can be made. The carrying amount of the related long-lived asset is increased by the same amount as the liability.

Changes in the liability for an asset retirement obligation due to the passage of time will be measured by applying an interest method of allocation. The amount will be recognized as an increase in the liability and an accretion expense in the statement of operations. Changes resulting from revisions to the timing or the amount of the original estimate of undiscounted cash flows are recognized as an increase or a decrease in the carrying amount of the liability for an asset retirement obligation and the related asset retirement cost capitalized as part of the carrying amount of the related long-lived asset. At January 31, 2012 and 2011, the Company recorded an asset retirement obligation of $60,101 and $0, respectively.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Oil and gas properties accounted for using the full cost method of accounting, a method utilized by the Company, are excluded from this requirement, but will continue to be subject to the ceiling test limitations. At January 31, 2012 and 2011, the Company did not recognize an impairment charge related to long-lived assets or to the ceiling test limitations.

Income Taxes

Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

F-9

Basic and Diluted Loss Per Share

Basic earnings per share is computed by dividing reported earnings available to common stockholders by the weighted average common shares outstanding. Diluted earnings per share give effect to dilutive potential common shares. No dilutive potential shares were issued or outstanding during the year ended January 31, 2012 or 2011.

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.

Financial Instruments

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and due to or from related party approximates their fair value because of the short maturity of these instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.

Revenue Recognition

Revenue from the sale of the oil and gas production is recognized when title passes from the operator of the oil and gas properties to purchasers.

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Note 3

Oil and Gas Properties

At January 31, 2012 and 2011 the producing and undeveloped oil and gas properties were as follows:

	2012			2011

Cost of properties	$	1,069,275		$	906,266

Less: Accumulated depletion		(232,561	)		(179,000	)

Oil and gas properties, net	$	836,714		$	727,266

Depletion expense for the years ended January 31, 2012 and 2011, was $53,561 and $17,000, respectively.

F-11

Note 4

Property and Equipment

The following is a summary of property and equipment:

	January 31, 2012			January 31, 2011

Land	$	30,769		$	30,769
Vehicle		26,749			26,749
Field equipment		6,384			1,000
Office furniture and equipment		3,350			3,350

Total property and equipment		67,252			61,868

Less accumulated depreciation		(23,433	)		(17,246	)

Property and equipment, net	$	43,819		$	44,622

Depreciation expense for the years ended January 31, 2012 and 2011 was $6,188 and $8,356, respectively.

Note 5

Notes Payable and Short-Term Financing

During 2011, the Company repaid its outstanding notes payable in exchange for 154,940 shares of common stock. As of January 31, 2012 and 2011, there were no notes payable outstanding.

Note 6

Income Taxes

At January 31, 2012, the Company has accumulated net operating loss carry forwards totaling $4,225,366, which may be applied against future years income and begin to expire in 2025.

Significant components of the Company’s future tax assets and liabilities, after applying enacted corporate income tax rates, are as follows:

	2012			2011

Future income tax assets
Net tax operating loss carryforward	$	1,369,064		$	1,194,748
Oil and gas properties		20,434			175,288
Other		4,509			381
Less: Valuation allowance		(1,394,007	)		(1,370,417	)

	$	-		$	-

The Company recorded no income tax expense for the years ended January 31, 2012 and 2011, as a result of the net loss recognized in each of these years. Further, an income tax benefit was not recognized in either of the years due to the uncertainty of the Company’s ability to recognize the benefit from the net operating losses and, therefore, has recorded a full valuation allowance against the deferred tax assets.

F-12

Note 6

Income Taxes (Continued)

The benefit for income taxes is different from the amount computed by applying the U.S. statutory corporate federal income tax rate to pre-tax loss as follows:

	2012			2011

Income tax benefit computed at the statutory rate of 34%	$	93,874		$	182,519
Increase (reduction ) in tax benefit resulting from:

Permanent items		(70,284	)		(32,133	)
Valuation allowance		(23,590	)		(150,386	)

Income tax benefit	$	-		$	-

Note 7

Stock Incentive Plans

2008 Stock Incentive Plan

On July 10, 2008, the Board of Directors adopted the Nitro Petroleum Incorporated 2008 Stock Incentive Plan (the “2008 Stock Incentive Plan”), expiring July 10, 2018. The 2008 Stock Incentive Plan authorizes the Board of Directors to issue up to 25,000 restricted stock or non-incentive stock options. All officers, employees, directors and individual consultants of the Corporation are eligible to receive awards under the plan.

As of January 31, 2012, 18,000 shares of restricted stock and no stock options have been granted under the 2008 Stock Incentive Plan, all of which are fully vested as of January 31, 2012. 7,000 shares of restricted stock or non-incentive stock options remain available for grant under the 2008 Stock Incentive Plan.

2009 Stock Incentive Plan

On August 25, 2009, the Board of Directors adopted the Nitro Petroleum Incorporated 2009 Stock Incentive Plan (the “2009 Stock Incentive Plan”), expiring August 25, 2019. The 2009 Stock Incentive Plan authorizes the Board of Directors to issue up to 100,000 restricted stock or non-incentive stock options. All officers, employees, directors and individual consultants of the Corporation are eligible to receive awards under the plan.

As of January 31, 2012, all 100,000 shares of restricted stock and no stock options have been granted under the 2009 Stock Incentive Plan, all of which are fully vested as of January 31, 2012. No shares of restricted stock or non-incentive stock options remain available for grant under the 2009 Stock Incentive Plan.

2010 Stock Incentive Plan

On July 30, 2010, the Board of Directors adopted the Nitro Petroleum Incorporated 2010 Stock Incentive Plan (the “2010 Stock Incentive Plan”), expiring July 30, 2020. The 2010 Stock Incentive Plan authorizes the Board of Directors to issue up to 175,000 restricted stock or non-incentive stock options. All officers, employees, directors and individual consultants of the Corporation are eligible to receive awards under the plan.

On July 30, 2010, the Company issued 87,500 shares to management for consulting services and 250 shares to one director of the Company. The expense related to this issuance was $52,650 for the year ended January 31, 2011.

On January 1, 2011, the Company issued 38,000 shares of common stock for services rendered by a third party in assisting with the conversion of debt to equity shares and the exchange of stock for various working interest in wells operated by the Company. The expense related to this issuance was $38,000 for the year ended January 31, 2011.

As of January 31, 2012, 125,750 shares of restricted stock and no stock options have been granted under the 2010 Stock Incentive Plan, all of which are fully vested as of January 31, 2012. 49,250 shares of restricted stock or non-incentive stock options remain available for grant under the 2010 Stock Incentive Plan.

F-13

Note 8

Related Party Transactions

The Company paid management fees to a company under the control of the President of the Company totaling $66,000 and $131,000, for the years ended January 31, 2012 and 2011, respectively. These management fees are included in general and administrative expenses.

Note 9

Subsequent Events

Effective as of October 31, 2012, the Company effected a 1-for-100 reverse split of the Company’s common stock, as discussed in Note 2.

F-14

Note 10

Supplemental Oil and Gas Information (Unaudited)

	Full Cost
	2012			2011

Capitalized Costs Relating to Oil and Gas Producing Activities at January 31, 2012 and 2011
Unproved oil and gas properties	$	-		$	-
Proved oil and gas properties		1,069,275			906,266
Support equipment and facilities		-			-
		1,069,275			906,266

Less accumulated depreciation, depletion, amortization, and impairment		(232,561	)		(179,000	)
Net capitalized costs	$	836,714		$	727,266

Costs Incurred in Oil and Gas Producing Activities for the Year Ended January 31, 2012 and 2011
Property acquisition costs
Proved	$	634,007		$	418,375
Unproved	$	-		$	-
Exploration costs	$	-		$	-
Development costs	$	-		$	-
Amortization rate per equivalent barrel of production	$	8		$	10

Results of Operations for Oil and Gas Producing Activities for the Year Ended January 31, 2012
Oil and gas sales	$	331,604		$	144,112
Production costs		316,249			111,954
Impairment loss		-			-
Depreciation, depletion, and amortization		53,561			17,000
		(38,206	)		15,158
Income tax expense		-			-
Results of operations for oil and gas producing activities (excluding corporate overhead and financing costs)	$	(38,206	)	$	15,158

Reserve Information

The following estimates of proved developed and undeveloped reserve quantities and related standardized measure of discounted net cash flow are estimates only, and do not purport to reflect realizable values or fair market values of the Company’s reserves. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of producing oil and gas properties. Accordingly, these estimates are expected to change as future information becomes available. All of the Company’s reserves are located in the United States.

Proved reserves are estimated reserves of crude oil (including condensate and natural gas liquids) and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are those expected to be recovered through existing wells, equipment, and operating methods.

F-15

The following is a summary of a standardized measure of discounted net cash flows related to the Company’s proved oil and natural gas reserves. For these calculations, estimated future cash flows from estimated future production of proved reserves for the years ended January 31, 2012 and 2011 were computed using benchmark prices based on the unweighted arithmetic average of the first-day-of-the-month prices for oil and natural gas during each month of such fiscal years, as required by SEC Release No. 33-8995, “Modernization of Oil and Gas Reporting,” effective December 31, 2009. Future expenditures to be incurred in developing and producing the proved reserves were estimated assuming that existing conditions would continue over the economic lives of the individual leases and costs were not escalated for the future. Estimated future income tax expenses were calculated by applying future statutory tax rates (based on the current tax law adjusted for permanent differences and tax credits) to the estimated future pretax net cash flows related to proved oil and natural gas reserves, less the tax basis of the properties involved. The estimated future net cash flows are then discounted using a rate of 10 percent a year to reflect the estimated timing of the future cash flows.

	2012						2011
	Oil (Bbls)			Gas (Mcf)			Oil (Bbls)			Gas (Mcf)

Proved developed and undeveloped reserves
Beginning of year		79,766			89,098			16,250			28,959
Revisions of previous estimates		10,829			(75,086	)		3,173			2,907
Purchases of minerals in place		-			-			61,573			59,595
Production		(5,467	)		(8,356	)		(1,230	)		(2.363	)
Sales of minerals in place		(5,186	)		-			-			-
End of year		79,942			5,656			79,766			89,098
Proved developed reserves
Beginning of year		50,238			48,019			10,213			13,968
End of year		19,673			5,656			50,238			48,019
Standardized Measure of Discounted Future Net Cash Flows at January 31, 2012 and 2011
Future cash flows				$	7,303,528					$	6,665,166
Future production costs					1,894,010						2,469,649
Future development costs					692,540						202,375
Future income tax expenses					-						-

Future net cash flows					4,716,978						3,993,142
10% annual discount for estimated timing of cash flows					(1,880,434	)					(1,140,158	)
Standardized measures of discounted future net cash flows relating to proved oil and gas reserves				$	2,836,544					$	2,852,984
The following reconciles the change in the standardized measure of discounted Future net cash flow during 2012 and 2011
Beginning of year				$	2,852,984					$	537,921
Sales of oil and gas produced, net of production costs					(15,355	)					(32,158	)
Net changes in prices and production costs					(439,000	)					158,372
Net change in estimated future development costs					490,165						(155,625	)
Revisions of previous quantity estimates					82,000						200,199
Net change from purchases and sales of minerals in place					(172,852	)					3,028,665
Change of discount					38,602						(884,390	)
Net change in income taxes					-						-
End of year				$	2,836,544					$	2,852,984

F-16

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