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 December 31, 2014

 

[  ] 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. 001-34970

 

PetroTerra Corp.

(Exact Name of Issuer as specified in its charter)

 

Nevada		7380		26-3106763
(State or jurisdiction of		Primary Standard Industrial		IRS Employer
incorporation or organization)		Classification Code Number		Identification Number

 

422 East Vermijo Avenue, Suite 313

Colorado Springs, Colorado 80903

(Address of principal executive offices)

 

719-219-6404

(Issuer’s telephone number)

 

 

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

 

Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [X] No [  ]

 

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

 

Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer or a smaller reporting company.

 

Large accelerated filer [  ] Accelerated filer [  ] Non-accelerated filer [  ] Small reporting company [X]

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:

 

Class		Outstanding as of February 13, 2015
Common Stock, $0.001		65,626,364

 

 

 

FORM 10-Q

 

PETROTERRA CORP.

 

INDEX

 

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements		F-1
Balance Sheets		F-1
Statements of Operations		F-2
Statements of Cash Flows		F-3
Notes to Financial Statements		F-4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		3
Item 3. Quantitative and Qualitative Disclosures About Market Risk		8
Item 4. Controls and Procedures		8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		9
Item 1A. Risk Factors		9
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		9
Item 3. Defaults Upon Senior Securities		9
Item 4. Submission of Matters to a Vote of Security Holders		9
Item 5. Other Information		9
Item 6. Exhibits		10
Signatures		11

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

PetroTerra Corp.

BALANCE SHEETS

As of December 31, 2014 And March 31, 2014

(Unaudited)

 

		December 31, 2014				March 31, 2014
ASSETS
Current assets
Cash		$	4,487			$	9,037
Prepaids			3,750				-
Total current assets			8,237				9,037
Oil & Gas Exploration			794,786				450,000
Fixed Assets, net of accumulated depreciation of $807 and $177 as of December 31, 2014 and March 31, 2014, respectively			3,565				1,423
Website, net of accumulated amortization of $9,310 and $2,734, as of December 31, 2014 and March 31, 2014, respectively			20,493				27,069
Total Assets		$	827,081			$	487,529
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY
Current Liabilities
Accounts payable		$	83,203			$	22,873
Accrued liabilities			46,170				14,688
Accrued liabilities, director			20,000				15,000
Notes payable, related-party			10,118				10,118
Total current liabilities			159,491				62,679
Total liabilities			159,491				62,679
Shareholders’ Equity
Preferred Stock: $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding as of December 31, 2014 and March 31, 2014.			-				-
Common stock; $0.001 par value, 100,000,000 shares authorized; 65,029,930 and 63,699,000 shares issued and outstanding as of December 31, 2014 and March 31, 2014, respectively			65,029				63,699
Additional paid-in capital			1,324,456				634,786
Common stock payable			37,500				90,000
Accumulated Deficit			(759,395	)			(363,635	)
Total shareholders’ equity			667,590				424,850
Total liabilities and shareholders’ equity		$	827,081			$	487,529

 

The accompanying notes are an integral part of these financial statements.

 

 

PETROTERRA CORP.

STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS AND NINE MONTHS ENDED DECEMBER 31, 2014 AND 2013

(Unaudited)

 

		Three months ended December 31,								Nine months ended December 31,
		2014				2013				2014				2013
EXPENSES
Lease property and exploration costs		$	39,661			$	-			$	88,608			$	-
General and administrative expenses			43,514				48,291				124,966				48,291
Professional fees			45,648				61,945				141,186				67,485
Stock compensation expense			-				-				41,000				-
Net loss from Operation before Taxes			(128,823	)			(110,236	)			(395,760	)			(115,776	)
PROVISION FOR INCOME TAXES			-				-				-
NET LOSS		$	(128,823	)		$	(110,236	)		$	(395,760	)		$	(115,776	)
(LOSS) PER COMMON SHARE -BASIC AND DILUTED		$	(0.00	)		$	(0.00	)		$	(0.01	)		$	(0.00	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING			64,991,567				62,986,500				64,554,748				56,356,909

 

The accompanying notes are an integral part of these financial statements.

 

 

PETROTERRA CORP.

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2014 AND 2013

(Unaudited)

 

		Nine Months Ended December 31,
		2014				2013
OPERATING ACTIVITIES
Net income (loss)		$	(395,760	)		$	(115,776	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Common stock issued for services			41,000				-
Depreciation and amortization			7,206				586
Increase (decrease) in:
Other Receivables			-				(3,500	)
Prepaids			(3,750	)			-
Accounts payables and accrued liabilities			3,044				32,158
Accrued expenses			31,482				-
Related Party Loans – paid directly to vendors on behalf of the Company.			-				16,157
Accrued payroll, officer			5,000				10,000
Net cash used in operating activities			(311,778	)			(60,375	)
INVESTING ACTIVITIES
Investment in Oil & Gas Exploration			(100,000	)			(100,000	)
Investment in fixed assets			(2,772	)			(30,853	)
Net cash used in investing activities			(102,772	)			(130,853	)
FINANCING ACTIVITIES
Sales of Common stock			410,000				225,000
Net cash provided by financing activities			410,000				225,000
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(4,550	)			33,772
CASH AND CASH EQUIVALENTS -BEGINNING OF PERIOD			9,037				-
CASH AND CASH EQUIVALENTS -END OF PERIOD		$	4,487			$	33,772
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest		$	-			$	-
Cash paid for taxes		$	-			$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for services		$	41,000			$	-
Conversion of Debt to equity			-				51,525
Common stock issued for the acquisition of land lease		$	187,500			$	250,000
Oil & Gas Exploration costs payable		$	57,286				-

 

The accompanying notes are an integral part of these financial statements.

 

 

PETROTERRA CORP.

Notes To The Financial Statements

December 31, 2014

(Unaudited)

 

1. ORGANIZATION AND BUSINESS OPERATIONS

 

PetroTerra Corp. (the “Company”) was incorporated under the laws of the State of Nevada, on July 25, 2008. The Company is an independent exploration and development company focused on the acquisition of property (or property leases enabling us to explore and exploit such property) that we believe may contain extractable oil and/or gas. The Company plans to identify, evaluate and acquire oil and gas exploration and development opportunities primarily within the United States. The Company has not generated any revenue to date and consequently its operations are subject to all risks inherent in the establishment of a new business enterprise.

 

2. GOING CONCERN

 

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses since inception resulting in an accumulated deficit of $759,395 as of December 31, 2014 and further losses are anticipated in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities which have arisen from normal business operations as they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand loans from our director and/or private placements of common stock.

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.

 

These statements reflect all adjustments, including of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these unaudited interim financial statements be read in conjunction with the financial statements of the Company for the year ended March 31, 2014 and notes thereto included in the Company’s annual report on Form 10-K. The Company follows the same accounting policies in the preparation of its annual and interim reports.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In management’s opinion, all adjustments necessary for a fair statement of the results for the interim periods have been made and all adjustments are of a normal recurring nature.

 

 

PETROTERRA CORP.

Notes To The Financial Statements

December 31, 2014

(Unaudited)

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Foreign Currency Translation

 

The Company’s functional currency and its reporting currency is the United States dollar.

 

Stock Split

 

On December 18, 2013, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada to effect a reverse stock split of its outstanding and authorized shares of common stock at a ratio of one for two (the “Reverse Stock Split”).

 

As a result of the Reverse Stock Split, the Company’s authorized shares of common stock were decreased from 200,000,000 to 100,000,000 shares and its authorized shares of preferred stock were decreased from 20,000,000 to 10,000,000 shares. Upon the effectiveness of the Reverse Stock Split, which occurred on December 20, 2013, the Company’s issued and outstanding shares of common stock was decreased from 126,698,000 to 63,349,000 shares, all with a par value of $0.001. The Company has no outstanding shares of preferred stock. Accordingly, all share and per share information has been restated to retroactively show the effect of the Reverse Stock Split.

 

Stock-based Compensation

 

In September 2009, the FASB issued ASC-718, “Stock Compensation”. ASC-718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. Under ASC-718, the Company must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption.

 

Income Taxes

 

Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

 

Basic and Diluted Loss Per Share

 

The Company computes loss per share in accordance with ASC-260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of outstanding shares of common stock during the period. Diluted loss per share gives effect to all dilutive potential shares of common stock outstanding during the period. Dilutive loss per share excludes all potential shares of common stock if their effect is anti-dilutive. The Company has no potential dilutive instruments and accordingly basic loss and diluted loss per share are equal.

 

Fiscal Periods

 

The Company’s fiscal year end is March 31.

 

 

PETROTERRA CORP.

Notes To The Financial Statements

December 31, 2014

(Unaudited)

 

Revenue Recognition

 

The Company will recognize revenue in accordance with ACS - 605, “Revenue recognition”, ASC-605 requires that four basic criteria be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.

 

Oil and Gas

 

The Company complies with ASC 932, “Extractive Activities - Oil and Gas”. The Company has capitalized exploratory well costs, and has determined that there are no suspended well costs that should be impaired. The Company reviews its long-lived assets for impairments when events or changes in circumstances indicate that impairment may have occurred.

 

Website

 

The Company capitalizes the costs associated with the development of the Company’s website pursuant to ASC - 350, “Goodwill and Other”. Other costs related to the maintenance of the website are expensed as incurred. Amortization is provided over the estimated useful lives of three years using the straight-line method for financial statement purposes. The Company commenced amortization upon completion of the Company’s fully operational website. Amortization expense for the nine months ended December 31, 2014 and 2013 totaled $6,576 and $542, respectively.

 

Property and Equipment

 

Property and equipment are carried at cost. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation and amortization of property and equipment is provided using the straight-line method for financial reporting purposes at rates based on the following estimated useful lives:

 

Classification		Useful Life
Computer equipment		3 Years
Website design		3 Years
Patents and trademarks		15 Years

 

 

PETROTERRA CORP.

Notes To The Financial Statements

December 31, 2014

(Unaudited)

 

Advertising

 

The Company follows the policy of charging the costs of advertising to expenses incurred. The Company incurred $0 in advertising costs during the nine months ended December 31, 2014.

 

Recent Accounting Pronouncements

 

ASU 2014-10, Development Stage Entities

 

On June 10, 2014, the Financial Accounting Standards Board (“FASB”) issued update ASU 2014-10, Development Stage Entities (Topic 915). Amongst other things, the amendments in this update removed the definition of development stage entity from Topic 915, thereby removing the distinction between development stage entities and other reporting entities from US GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information on the statements of income, cash flows and shareholders equity, (2) label the financial statements as those of a development stage entity; (3) disclose a description of the development stage activities in which the entity is engaged and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments are effective for annual reporting periods beginning after December 31, 2014 and interim reporting periods beginning after December 15, 2015, however entities are permitted to early adopt for any annual or interim reporting period for which the financial statements have yet to be issued. The Company has elected to early adopt these amendments and accordingly have not labeled the financial statements as those of a development stage entity and have not presented inception-to-date information on the respective financial statements.

 

4. ACQUISITION OF OIL AND GAS PROPERTIES

 

On November 18, 2013, the Company entered into an assignment of lease (the “Agreement”) whereby Ardmore Investments Inc. (“Ardmore”) assigned to the Company its rights under a certain purchase agreement (the “Purchase Agreement”), dated August 8, 2013, between Ardmore and Pioneer Oil and Gas (“Pioneer”) involving the sale of 5,905.54 acres of oil and gas leases located in the Central Utah Thrust Belt in Beaver County and Sevier County, Utah and currently owned by Pioneer (the “Leases”). Per the terms of the Agreement, we issued to Ardmore an aggregate 500,000 shares (250,000 share installments) of our common stock on November 18, 2013, and April 12, 2014, in order to complete the assignment. Furthermore, on December 12, 2013, February 12, 2014, and April 12, 2014, the Company made three installment payments of $100,000 each to Pioneer. Upon completion of the final installment the leases were conveyed to the Company.

 

Due to the lack of an active market of the Company’s common stock, the fair value of the common stock issued to Ardmore was determined based on the price at which the Company’s shares were most recently sold in a private placement transaction.

 

5. COMMON STOCK

 

The Company’s authorized capital consist of 100,000,000 shares of common stock and 10,000,000 shares of preferred stock, both with a par value of $0.001 per share.

 

This gives effect to the Company’s 32 for 1 forward stock split that was effected on January 3, 2012 and the Company’s subsequent Reverse Stock Split that was effected on December 18, 2013. All share and per share information has been restated in this Report to retroactively show the effect of the two stock splits.

 

On December 18, 2013, the Company effectuated a Reverse Stock Split of its outstanding and authorized shares of common stock at a ratio of one for two. As a result of the Reverse Stock Split, the Company’s authorized shares of common stock were decreased from 200,000,000 to 100,000,000 shares and its authorized shares of preferred stock were decreased from 20,000,000 to 10,000,000 shares. Upon the effectiveness of the Reverse Stock Split, which occurred on December 20, 2013, the Company’s issued and outstanding shares of common stock was decreased from 126,698,000 to 63,349,000 shares, all with a par value of $0.001. The Company has no outstanding shares of preferred stock. Accordingly, all share and per share information has been restated to retroactively show the effect of the Reverse Stock Split.

 

On November 28, 2008, the Company issued 14,400,000 shares of common stock at a price of $0.0000625 per share for total cash proceeds of $900.

 

On December 4, 2008, the Company issued 32,000,000 shares of common stock at a price of $0.0000625 per share for total cash proceeds of $2,000.

 

 

PETROTERRA CORP.

Notes To The Financial Statements

December 31, 2014

(Unaudited)

 

5. COMMON STOCK (continued)

 

During the period December 10, 2008 to March 19, 2009, the Company issued 30,240,000 shares of common stock at a price of $0.000625 per share for total cash proceeds of $18,900.

 

On December 14, 2011, in connection with a change in the Company’s directors, two controlling stockholders cancelled an aggregate of 23,872,000 shares of common stock. On the same day, 256,000 shares of common stock were issued to a director for services rendered. The common stock was valued at $0.000625 per share.

 

On October 2, 2013, John Barton purchased 43.0% of the issued and outstanding shares of common stock of the Company from former stockholders. Concurrently with Mr. Barton’s purchase, the Board of Directors of the Company determined that it was in the best interest of the Company to settle a portion of an outstanding loan from Mr. Barton to the Company. In exchange for the settlement of the outstanding debt, the Company issued Mr. Barton 10,000,000 shares of common stock. Upon completion of the above transactions, Mr. Barton became the beneficial owner of 52.01% of the issued and outstanding shares of common stock .

 

On November 1, 2013, the Company sold a total of 75,000 shares of common stock for gross proceeds of $75,000.

 

On November 20, 2013, the Company issued 250,000 shares of common stock in conjunction with a land lease assignment with a value of $250,000.

 

On December 19, 2013, the Company sold a total of 150,000 shares of common stock for gross proceeds of $150,000.

 

On February 14, 2014, the Company sold a total of 200,000 shares of common stock for gross proceeds of $150,000.

 

On March 6, 2014, the Company authorized the issuance of 50,000 shares of common stock to a third party entity for consulting services. The fair value of the shares of common stock was $37,500. On March 31, 2014, the $37,500 was recorded to common stock payable and a stock certificate representing the shares of common stock was issued on June 30, 2014.

 

On March 10, 2014, the Company entered into a private placement for 100,000 shares of common stock for gross proceeds of $75,000. On March 10, 2014 and March 25, 2014, the Company received an aggregate of $52,500 of the proceeds. The remaining $22,500 of proceeds was received on April 24, 2014. A certificate representing the shares of common stock payable was issued on April 24 2014.

 

On April 12, 2014, in connection with the Agreement, the Company issued to Ardmore 250,000 shares of our common stock.

 

On May 7, 2014, the Company sold a total of 200,000 shares of common stock for gross proceeds of $150,000.

 

On August 22, 2014 the Company sold a total of 483,871 shares of common stock for gross proceeds of $150,000.

 

 

PETROTERRA CORP.

Notes To The Financial Statements

December 31, 2014

(Unaudited)

 

On September 2, 2014, the Company authorized the issuance of 50,000 shares of common stock to a third party entity for consulting services. The fair value of the shares of common stock was $20,500.

 

On September 16, 2014, the Company authorized the issuance of 50,000 shares of common stock to the Company’s newly appointed Chief Operating Officer for consulting services. The fair value of the shares of common stock was $20,500.

 

On October 24, 2014 the Company sold 147,059 shares of common stock for gross proceeds of $50,000.

 

On November 17, 2014, the Company entered into a private placement for 80,645 shares of common stock for gross proceeds of $50,000. On December 8, 2014, the Company received $37,500 of the proceeds, however, the remaining $12,500 was received on January 8, 2015, wherein, the Company issued the shares. As the December 31, 2014, the $37,500 is recorded to common stock payable.

 

As of December 31, 2014, the Company had 65,029,930 shares of common stock issued and outstanding.

 

6. INCOME TAXES

 

As of December 31, 2014, the Company had net operating loss carry forwards of approximately $759,395 that may be available to reduce future years’ taxable income through 2033. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur. Accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.

 

7. RELATED PARTY TRANSACTIONS

 

The Company has received advances from certain of its officers and other related parties to meet short term working capital needs. These advances may not have formal repayment terms or arrangements. As of December 31, 2014 and March 31, 2014, the total amount loaned to the Company by a director was $10,118. The loan is non-interest bearing, due upon demand and unsecured.

 

The Company incurred expense of $90,000 and $30,000 of compensation to the Chief Executive Officer for the nine months ending December 31, 2014 and 2013, respectively. As of December 31, 2014 and March 31, 2014, the Company had an outstanding compensation payable to the Chief Executive Officer of $20,000 and $15,000, respectively.

 

On October 2, 2013, the Company settled an outstanding loan with a principal amount of $51,525 by exchanging 10,000,000 shares of common stock for conversion of outstanding debt of $20,000 due to the Company’s chief executive officer and the remaining $31,525 of outstanding debt due to the previous chief executive officer was extinguished to Additional paid-in capital.

 

On October 2, 2013, the Company settled an outstanding loan with a principal amount of $20,000 due to the Company’s Chief Executive Officer in exchange for 10,000,000 shares of common stock.

 

 

PETROTERRA CORP.

Notes To The Financial Statements

December 31, 2014

(Unaudited)

 

8. SUBSEQUENT EVENT

 

The Company has evaluated subsequent events from December 31, 2014 through the filing of these financial statements. There are no significant subsequent events, except as disclosed below:

  

Securities Purchase Agreement

 

The Company entered into securities purchase agreement with a foreign investor (the “Investor”) exempt pursuant to Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to which the Company sold an aggregate of 80,645 shares of the Company’s common stock for gross proceeds of $50,000. As of December 31, 2014, $37,500 of the consideration for the shares is recorded to common stock payable until the securities purchase agreement was completed on January 21, 2015. See disclosure in Note 5.

 

On January 29, 2015, the Company entered into securities purchase agreement with the Investor exempt pursuant to Regulation S promulgated under the Securities Act pursuant to which the Company sold an aggregate of 65,789 shares of the Company’s common stock for gross proceeds of $37,500.

 

On February 2, 2015, the Company authorized the sale of securities for a purchase price of $80,000 from the Investor pursuant to Regulation S promulgated under the Securities Act pursuant to which the Company sold an aggregate of 115,942 shares of the Company’s common stock. On February 10, 2015, the Company received $60,000 of the gross proceeds.

 

Consulting Services

 

On January 31, 2015, the Company authorized the issuance of 50,000 shares of common stock in accordance with a January 2014 consulting agreement.

 

Restricted Share Issuance

On February 13, 2015, the Company issued our Chief Executive Officer a restricted stock grant of 400,000 shares of the Company’s common stock in accordance with the employment agreement dated February 4, 2014. The issuance occurs on each anniversary of the employment agreement, beginning on the first anniversary February 4, 2015. The restricted stock grant will vest 10 months following issuance.

 

 
FORWARD LOOKING STATEMENTS

 

Statements made in this Form 10-Q that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

 

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

 

GENERAL

 

We are an independent exploration and development company that plans to identify, evaluate and acquire oil and gas exploration and development opportunities primarily in the United States.

 

We were incorporated under the laws of the State of Nevada on July 25, 2008 as “Loran Connection Corp.” We were formed to provide a variety of services in the area of individual and group tourism and business support in Ukraine. We subsequently filed a resale registration statement with the Securities and Exchange Commission on May 28, 2009 which was declared effective on October 28, 2009. On January 25, 2012, we filed an amendment to our articles of incorporation to, among other things, change our name to “PetroTerra Corp.” and effect a thirty-two-for-one forward stock split. We changed our name to reflect a proposed change in our business operations. On October 2, 2013, in connection with a change of control in the management of the Company, the Company began its current business operations in the oil and gas sector. On December 18, 2013, we filed a certificate of change to effect a one-for-two reverse stock split of our authorized and our outstanding shares of common stock and preferred stock. On April 12, 2014, we completed our acquisition of certain property Leases held by Ardmore for property owned by Pioneer covering 5,905.54 acres of land located in the Central Utah Thrust Belt in Beaver County and Sevier County, Utah.

 

Our principal executive offices are located at 422 East Vermijo Avenue, Suite 313, Colorado Springs, CO 80903. The telephone number at our principal executive offices is (719) 219-6404. Our web site is www.petroterracorp.com.

 

CURRENT BUSINESS OPERATIONS

 

The Company is an independent exploration and development company focused on the acquisition of property (or property leases enabling us to explore and exploit such property) that we believe may contain extractable oil and/or gas. We will seek to acquire property in the United States and will initially focus on properties in the Central Utah Thrust Belt, including the Utah Properties.

 

 

In order to determine whether to acquire a property, our management team will consider, among other things, whether oil and/or gas had previously been discovered at or near the property, whether the property is located atop a proven oil and natural gas basin and whether oil and/or gas has been exploited from the property. We will also review any materials that are made available to us by the owner of the property, including well logs, production records, and other seismic, geological and geophysical information. Additionally, we will compare analogues of successes and failures from seismic and drilling data in the region. Once we have completed our initial review, we will determine whether to acquire the property. Once we acquire a property (or the right to explore and exploit a property) we will conduct a full evaluation of the property, including, without limitation, obtaining an MHA Petroleum Consultants, LLC technical report (an “MHA Technical Report”). We expect that the cost of such an evaluation will be approximately $30,000. Using the data from the evaluation, and with the assistance of third party geophysicists, petroleum engineers, geologists and other third party technical consultants that we may hire, we will determine whether further exploration of the property should be undertaken. If management elects to continue the exploration of the property, we will conduct additional due diligence, including, but not limited to, potentially obtaining existing 2-D seismic lines on and around our properties and commencing an integrated geologic-geophysical evaluation and mapping effort. Following our due diligence analysis, management will determine if the Company should attempt to conduct its own 2-D or 3-D seismic coverage to evaluate the properties further. Thereafter, management will determine if the Company should attempt to extract oil and/or gas from the property. If management elects to do so, we will engage a separate third party to extract (whether by conventional means, horizontal drilling and/or fracturing) the oil and/or gas. We expect that recent improvements in drilling and fracturing methods will augment our ability to discover and extract oil and gas.

 

By utilizing this business model, we believe that we can reduce the risks involved in each exploration project. Specifically, we believe that by compartmentalizing each step of the extraction process we will be able to limit the costs associated with each project and maintain the flexibility to abandon any projects that management believes will not yield sufficient amounts of oil and/or gas.

 

We have only recently begun to implement our business plan. In January 2014 we hired a third party independent contractor to provide insight and to assist in the development of a plan regarding the exploration of any properties that we acquire. In March 2014, we engaged a third party independent contractor to provide geologic consulting services to the Company. In March 2014 we also obtained an MHA Technical Report on the Utah Properties. We expect to conduct a full evaluation of the Utah Properties by the fourth quarter of this fiscal year.

 

RESULTS OF OPERATIONS

 

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue our operation.

 

We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

 

Three Month Period Ended December 31, 2014 Compared to the Three Month Period Ended December 31, 2013.

 

Our net loss for the three month period ended December 31, 2014 was $128,823 compared to a net loss of $110,236 during the three month period ended December 31, 2013 as the Company incurred consulting costs related to exploration costs and professional fees related to public company requirements. During the three month periods ended December 31, 2014 and December 31, 2013, we did not generate any revenue.

 

Lease property and exploration costs

 

During the three month period ended December 31, 2014, we incurred an increase in lease property and exploration costs of $39,661 compared to the $0 in the prior year, consisting primarily of consulting costs for exploration study costs, project consultant costs and annual rental costs. As the acquisition of the Leases was not initiated until November 2013, we did not incur any costs relating to lease property and exploration costs for the three month period ended December 31, 2013.

 

 

General and administrative costs

 

During the three month period ended December 31, 2014, we incurred general and administrative expenses of $43,514 compared to $48,291 incurred during the three month period ended December 31, 2013. The change in general and administrative expense incurred during the three months ended December 31, 2014 was primarily related to less corporate overhead and travel costs compared to the prior year period.

 

Professional Fees

 

During the three months ended December 31, 2014, we incurred professional fees of $45,648 compared to $61,945 incurred during the three months ended December 31, 2013. The reduction in professional fees is primarily due to the decrease in legal fees compared to the prior year period related to the acquisition of the Leases from Ardmore in the earlier period.

 

The weighted average number of shares outstanding was 64,991,567 and 62,986,500 for the three month periods ended December 31, 2014 and 2013, respectively.

 

Nine Month Period Ended December 31, 2014 Compared to the Nine Month Period Ended December 31, 2013.

 

Our net loss for the nine month period ended December 31, 2014 was $395,760 compared to a net loss of $115,776 during the nine month period ended December 31, 2013. The Company began implementing our business plan upon the acquisition of property in November 2013 and the expenses incurred in the nine month period ended December 31, 2014 are primarily attributable to increase exploration costs and professional fees related to public company requirements. During the nine month periods ended December 31, 2014 and December 31, 2013, we did not generate any revenue.

 

Lease property and exploration costs

 

During the nine month period ended December 31, 2014, we incurred an increase in lease property and exploration costs of $88,608 compared to the $0 in the prior year, consisting primarily of consulting costs. As the acquisition of the Leases was not initiated until November 2013, we did not incur any costs relating to lease property and exploration costs for the nine month period ended December 31, 2013.

 

General and administrative costs

 

During the nine month period ended December 31, 2014, we incurred general and administrative expenses of $124,966 compared to $48,291 incurred during the nine month period ended December 31, 2013. The change in general and administrative expense incurred during the nine months ended December 31, 2014 was primarily related to compensation to our Chief Executive Officer, corporate overhead and travel costs.

 

Professional Fees

 

During the nine months ended December 31, 2014, we incurred professional fees of $141,186 compared to $67,485 incurred during the nine month period ended December 31, 2013. The increase compared to the prior year period is due to the corporate costs occurred over a full year. The legal and accounting fees associated with these activities amounted to $60,436 and $23,256, respectively, and the corporate and investor relations fees associated with these activities amounted to $57,494 in 2014.

 

 

Non-Employee Stock Based Compensation

 

During the nine month period ended December 31, 2014, we incurred $41,000 in stock based compensation charges for stock issuances for professional and advisory services. We did not incur any costs relating to stock based compensation during the nine months ended December 31, 2014.

 

The weighted average number of shares outstanding was 64,554,748 and 56,356,909 for the nine month periods ended December 31, 2014 and 2013, respectively.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Nine month Period Ended December 31, 2014

 

As of December 31, 2014, the Company had assets of $827,021 compared to $487,529 on March 31, 2014. Assets as of December 31, 2014 comprised of $4,487 in cash, $24,058 in fixed assets and website development costs and $737,500 for the Leases and accumulated Oil & Gas exploration costs of $57,286. As of December 31, 2014, our current liabilities were $159,491. Current liabilities were comprised of a $10,118 loan from our sole director and chief executive officer, $129,373 in accounts payable and accrued liabilities and $20,000 in accrued payroll.

 

Stockholders’ equity increased from $424,850 as of March 31, 2014 to $667,590 as of December 31, 2014. The $242,740 increase is due to the issuance of common stock for gross proceeds of $410,000 and the issuance of common stock for the land lease assignment rights installment of $187,500, services for common stock of $41,000 and is offset by losses for the nine month period ending December 31, 2014 of $395,760.

 

Securities Purchase Agreement

 

On November 17, 2014, the Company entered into a securities purchase agreement with the Investor exempt pursuant to Regulation S promulgated under the Securities Act for 80,645 shares of common stock for gross proceeds of $50,000. On December 8, 2014, the Company received $37,500 of the consideration for the shares, however, the remaining $12,500 was received on January 8, 2015, wherein, the Company issued the shares. As of December 31, 2014, the $37,500 is recorded to common stock payable.

 

On October 24, 2014, the Company entered into securities purchase agreements with the Investor exempt pursuant to Regulation S promulgated under the Securities Act, pursuant to which the Company sold an aggregate of 147,059 shares of the Company’s common stock for gross proceeds in the current period at $50,000.

 

On August 22, 2014, the Company entered into securities purchase agreements with the Investor exempt pursuant to Regulation S promulgated under the Securities Act, pursuant to which the Company sold an aggregate of 483,871 shares of the Company’s common stock for gross proceeds in the current period at $150,000.

 

On May 7, 2014 and March 6, 2014, the Company entered into securities purchase agreements with the Investor pursuant to Regulation S promulgated under the Securities Act, pursuant to which the Company sold an aggregate of 200,000 and 100,000 shares of the Company’s common stock, respectively, for gross proceeds in the first quarter of $150,000 and $75,000. Of the $75,000 gross proceeds received for the issuance of 100,000 shares, $52,500 was received during the year ended March 31, 2014.

 

Cash Flows from Operating Activities

 

We have generated negative cash flows from operating activities. For the nine month period ended December 31, 2014, net cash flows used in operating activities was $311,778 consisting of a net loss of $395,760, an increase of prepaids of $3,750 for annual dues, an increase of $34,526 in accounts payables and accrued liabilities and, an increase of $5,000 for accrued salary – officer. For the nine month period ended December 31, 2013, net cash flows used in operating activities was $60,375 consisting of a net loss of $115,776, an increase in accounts payable and accrued expenses of $32,158 and an increase of $16,157 of related party loans paid directly to vendors on the Company’s behalf and an increase of $10,000 for accrued salary - officer.

 

Cash Flows from Investing Activities

 

We have used cash from investing activities in the nine month period ended December 31, 2014 for the land lease installment of $100,000 and the cost of certain computer equipment amounting to $2,772. The investing activities in the prior year period was $100,000 from a land lease installment in December 2013 and fixed asset and website costs of $30,853.

 

Cash Flows from Financing Activities

 

We have financed our operations primarily from either cash advances or the issuance of equity and debt instruments. We generated cash from financing activities of $410,000 and $225,000 in the nine month period ended December 31, 2014 and 2013, respectively, from the issuance of common stock.

 

 

PLAN OF OPERATION AND FUNDING

 

We expect that our working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business.

 

Existing working capital, further advances and debt instruments, and anticipated cash flow are not adequate to fund our operations over the next three months and the company is dependent upon additional equity raises. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of our private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with a start-up business; and (ii) marketing expenses. We intend to finance these expenses with further issuances of securities and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current stockholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities which could significantly and materially restrict our business operations. We will have to raise additional funds in the next twelve months in order to sustain and expand our operations. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock. We have and will continue to seek to obtain short-term loans from our director, although no future arrangement for additional loans has been made. We do not have any agreements with our director concerning these loans. We do not have any arrangements in place for any future equity financing.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

As of the date of this Quarterly Report, we do not have any 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 investors.

 

GOING CONCERN

 

The independent auditors’ report accompanying our March 31, 2014 financial statements contained an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

No report required.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management, consisting of our sole officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Rule 13a-15(e)) as of December 31, 2014. Management recognizes that any disclosure controls and procedures no matter how well designed and operated, can only provide reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management has reassessed the effectiveness of our disclosure controls and procedures and based upon that evaluation, our sole officer concluded that our disclosure controls and procedures were not effective as of December 31, 2014.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.

 

ITEM 1A. RISK FACTORS

 

No report required.

 

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

 

The Company has evaluated subsequent events from December 31, 2014 through the filing of these financial statements. There are no significant subsequent events, except as discussed below:

 

On February 2, 2015, the Company authorized for issuance a total of 115,942 shares of common stock to the Investor for gross proceeds of $80,000 of which $60,000 was received on February 10, 2015. Such sale was exempt from the registration requirements of the Securities Act pursuant to Regulation S promulgated under the Securities Act.

 

On January 31, 2015, the Company authorized the issuance of 50,000 shares of common stock to a third party entity for consulting services. Such issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

 

On January 29, 2015, the Company sold a total of 65,789 shares of common stock to the Investor for gross proceeds of $37,500. Such sale was exempt from the registration requirements of the Securities Act pursuant to Regulation S promulgated under the Securities Act.

 

On January 9, 2015, the Company sold a total of 80,645 shares of common stock to the Investor for gross proceeds of $50,000. Such sale was exempt from the registration requirements of the Securities Act pursuant to Regulation S promulgated under the Securities Act.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

No report required.

 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

No report required.

 

ITEM 5. OTHER INFORMATION

 

On September 28, 2014, the Company engaged Thompson Solutions, LLC (“Thompson”) to review and process both the public domain gravity and aeromagnetic datasets that existed on our leased property in the Central Utah Thrust Belt in Beaver County and Sevier County, Utah (the “Properties”). The purpose of this review was to identify major structures and geologic trends of interest on the Properties. Based on the results of this analysis, on November 21, 2014, the Company engaged Magee Geophysical Services LLC (“Magee”) to perform a comprehensive gravity survey on our Properties. The gravity survey was conducted from November 22, 2014 through December 9, 2014 and cost the Company approximately $55,000. Pursuant to the survey, a total of 737 new gravity stations were acquired on a nominal quarter mile grid and the data acquired was merged with re-processed public domain data including about 630 stations located in and around the main grid.  Upon completion of Magee’s gravity survey, on December 8, 2014, the Company engaged Thompson to further process the data obtained by Magee and to provide custom processing and mapping of such data. On February 6, 2015, Thompson completed their interpretation of the gravity survey. The Company will pay to Thompson $15,500 for its services.

 

 

ITEM 6. EXHIBITS

 

Exhibits:
31.1		Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act*
31.2		Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act*
32.1		Certification of Chief Executive Officer and Chief Financial Officer Under Section 1350 as Adopted Pursuant Section 906 of the Sarbanes-Oxley Act.*
101		Interactive data files pursuant to Rule 405 of Regulation S-T.*

 

* Filed Herewith

 

 

SIGNATURES

 

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

 

	PETROTERRA CORP.
Dated: February 17, 2015	By:	/s/ John Barton
		John Barton,
		President and Chief Executive Officer and Principal Financial Officer