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 June 30, 2015

 

[  ] 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 August 12, 2015
Common Stock, $0.001		26,449,868

 

 

 

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	9
Item 4.	Controls and Procedures	9
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	10
Item 4.	Submission of Matters to a Vote of Security Holders	10
Item 5.	Other Information	10
Item 6.	Exhibits	10
Signatures		11

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

PetroTerra Corp.

BALANCE SHEETS

As of June 30, 2015 and March 31, 2015

(Unaudited)

 

		June 30, 2015				March 31, 2015
ASSETS
Current assets
Cash		$	2,322			$	-
Prepaid expenses			-				1,875
Total current assets			2,322				1,875
Oil & Gas Exploration			737,500				737,500
Fixed Assets, net of accumulated depreciation of $693 and $462 as of June 30, 2015 and March 31, 2015, respectively			2,079				2,310
Website, net of accumulated amortization of $13,694 and $11,502, as of June 30, 2015 and March 31, 2015, respectively			16,109				18,301
Total Assets		$	758,010			$	759,986
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY
Current Liabilities
Bank overdraft		$	-			$	435
Accounts payable and accrued expenses			103,970				121,708
Accrued liabilities, director			15,000				25,000
Notes payable, related-party			10,118				10,118
Total current liabilities			129,088				157,261
Total liabilities			129,088				157,261
Shareholders’ Deficiency
Preferred Stock: $0.001 par value, 4,000,000 shares authorized; no shares issued and outstanding as of June 30, 2015 and March 31, 2015.			-				-
Common stock; $0.001 par value, 40,000,000 shares authorized; 26,449,868 and 26,316,922 shares issued and outstanding as of June 30, 2015 and March 31, 2015, respectively			26,450				26,317
Additional paid-in capital			2,063,535				1,943,668
Accumulated deficit			(1,461,063	)			(1,367,260	)
Total shareholders’ equity			628,922				602,725
Total liabilities and shareholders’ equity		$	758,010			$	759,986

 

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

 

 

PETROTERRA CORP.

STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2015 AND 2014

(Unaudited)

 

		Three months ended June 30,
		2015				2014
EXPENSES
Lease property and exploration costs		$	13,417			$	16,830
General and administrative expenses			37,933				39,179
Professional fees			42,453				32,786
Net loss from Operation before Taxes			(93,803	)			(88,795	)
PROVISION FOR INCOME TAXES			-				-
NET LOSS		$	(93,803	)		$	(88,795	)
(LOSS) PER COMMON SHARE -BASIC AND DILUTED		$	(0.00	)		$	(0.00	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING			26,361,403				25,643,116

 

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

 

PETROTERRA CORP.

STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED JUNE 30, 2015 AND 2014

(Unaudited)

 

		Three Months Ended June 30,
		2015				2014
OPERATING ACTIVITIES
Net income (loss)		$	(93,803	)		$	(88,795	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization			2,423				2,325
Increase (decrease) in:
Bank overdraft			(435	)			-
Accounts payables and accrued liabilities			(17,738	)			11,215
Prepaids			1,875				-
Accrued payroll, officer			(10,000	)			(5,000	)
Net cash used in operating activities			(117,678	)			(80,225	)
INVESTING ACTIVITIES
Investment in Oil & Gas Exploration			-				(100,000	)
Net cash used in investing activities			-				(100,000	)
FINANCING ACTIVITIES
Sales of Common stock			120,000				172,500
Net cash provided by financing activities			120,000				172,500
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			2,322				(7,755	)
CASH AND CASH EQUIVALENTS -BEGINNING OF PERIOD			-				9,037
CASH AND CASH EQUIVALENTS -END OF PERIOD		$	2,322			$	1,282
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest		$	–			$	-
Cash paid for taxes		$	–			$	–
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for the acquisition of land lease		$	-			$	187,500

 

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

 

 

PETROTERRA CORP.

Notes To The Financial Statements

June 30, 2015

(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 $1,461,063 as of June 30, 2015 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, 2015 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 date 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

June 30, 2015

(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 July 1, 2015, 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 1 for 2.5 (the “Reverse Stock Split”).

 

As a result of the Reverse Stock Split, the Company’s authorized shares of common stock were decreased from 100,000,000 to 40,000,000 shares and its authorized shares of preferred stock were decreased from 10,000,000 to 4,000,000 shares. Upon the effectiveness of the Reverse Stock Split, which occurred on July 1, 2015, the Company’s issued and outstanding shares of common stock was decreased from approximately 66,125,000 to 26,450,000 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

June 30, 2015

(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 three months ended June 30, 2015 and 2014 totaled $2,192 and $2,192, 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

June 30, 2015

(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 three months ended June 30, 2015 and 2014, respectively.

 

Recent Accounting Pronouncements

 

In May 2014, the FASB amended the ASC and created Topic 606, Revenue from Contracts with Customers, to clarify the principles for recognizing revenue. This guidance will be effective for the Company beginning January 1, 2017and must be adopted using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. We have not yet determined the effects of this new guidance on our financial statements.

 

In August 2014, the FASB issued a new U.S. GAAP accounting standard that provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new accounting standard requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. The new accounting standard is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company does not expect the adoption of this standard to have a material impact on the consolidated 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 of 200,000 shares (100,000 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 being sold in a private placement transaction.

 

5. COMMON STOCK

 

The Company’s authorized capital consists of 40,000,000 shares of common stock and 4,000,000 shares of preferred stock, both with a par value of $0.001 per share.

 

On July 1, 2015, the Company effectuated a reverse stock split of its outstanding and authorized shares of common stock at a ratio of 1 for 2.5. As a result of the Reverse Stock Split, the Company’s authorized shares of common stock were decreased from 100,000,000 to 40,000,000 shares and its authorized shares of preferred stock were decreased from 10,000,000 to 4,000,000 shares. Upon the effectiveness of the Reverse Stock Split, which occurred on July 1, 2015, the Company’s issued and outstanding shares of common stock was decreased from 66,124,593 to 26,449,868 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 in this Report to retroactively show the effect of the Reverse Stock Split.

 

On April 27, 2015, the Company sold a total of 21,918 shares of common stock to an investor for gross proceeds of $40,000.

 

On June 1, 2015, the Company sold a total of 58,823 shares of common stock to an investor for gross proceeds of $50,000.

 

On June 12, 2015, the Company sold a total of 52,174 shares of common stock to an investor for gross proceeds of $30,000.

 

As of June 30, 2015, the Company had 26,449,868 shares of common stock issued and outstanding.

 

 

PETROTERRA CORP.

Notes To The Financial Statements

June 30, 2015

(Unaudited)

 

6. INCOME TAXES

 

As of June 30, 2015, the Company had net operating loss carry forwards of approximately $1,461,063 that may be available to reduce future years’ taxable income through 2034. 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 June 30, 2015 and March 31, 2015, 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 has an employment agreement with the Company’s Chief Executive Officer whereby the Company provides for compensation of $10,000 per month. A total salary of $30,000 expensed during the three months ended June 30, 2015 and 2014. The total balance due to the Chief Executive Officer for accrued salaries at June 30, 2015 and March 31, 2015, was $15,000 and $25,000, respectively.

 

8. SUBSEQUENT EVENT

 

The Company has evaluated subsequent events from June 30, 2015 through the filing of these financial statements. There are no significant subsequent events, except as disclosed below;

 

Common Stock

 

On August 5, 2015 the Company completed a private placement for the sale of approximately 76,125 shares of the Company’s common stock in exchange for gross proceeds of approximately $22,000.

 

 

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 a development stage 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.” 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 April 12, 2014, we completed our acquisition of certain property Leases held by Ardmore Investments Inc. for property owned by Pioneer Oil and Gas covering 5,905.54 acres of land located in the Central Utah Thrust Belt in Beaver County and Sevier County, Utah (the “Utah Properties”).

 

On July 1, 2015, we filed a certificate of change to effect a 1 for 2.5 reverse stock split of our authorized and our outstanding shares of common stock and preferred stock.

 

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.

 

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. In September 2014, we engaged a third party independent contractor to review and process both the public domain gravity and aeromagnetic datasets that existed on our leased Utah Properties. In November 2014, we engaged a third party independent contractor to perform a comprehensive gravity survey on our Utah Properties which was completed in December 2014 and the results of such survey were interpreted in February 2015. We have since engaged a third party contractor to create a geologic model of the Utah Properties. Each of the foregoing actions have been implemented as part of our continuing effort to conduct a full evaluation of the Utah Properties. For more information, see “Recent Developments” below.

 

Recent Developments

 

On November 18, 2013, the Company entered into the Agreement whereby Ardmore assigned to us its rights under a certain Purchase Agreement, dated August 8, 2013, between Ardmore and Pioneer involving the sale of 5,905.54 acres of three separate BLM Management oil and gas Leases located in the Central Utah Thrust Belt in Beaver County and Sevier County, Utah and currently owned by Pioneer. Per the terms of the Agreement, we issued to Ardmore 100,000 shares of our common stock on November 18, 2013, and, in order to complete the assignment contemplated by the Agreement, we issued to Ardmore an additional 100,000 shares of our common stock upon the transfer to us of ownership in the Leases, which occurred on April 12, 2014. Furthermore, the Company made three installment payments of $100,000 each to Pioneer pursuant to the terms of the Purchase Agreement. The Leases were conveyed to the Company on April 10, 2014.

 

 

On September 16, 2014, the Company appointed Kurt Reinecke as its Chief Operating Officer pursuant to an independent contractor agreement (the “Reinecke Agreement”) with Arrow Peak Minerals and Royalty LLC (“Arrow”). Under the Reinecke Agreement, Mr. Reinecke will perform the following services for the Company in his role as Chief Operating Officer: (i) oversee and coordinate the Company’s exploration plan; (ii) coordinate any other land related task as may be identified from time to time by John Barton, the Company’s Chief Executive Officer; and (iii) perform any other services that a chief operating officer may perform. The Reinecke Agreement is for a term of one year and will pay Arrow an aggregate of $90,000 over the term. Arrow is also entitled to receive an aggregate of 80,000 shares of common stock to be earned as follows: (i) 20,000 shares upon execution of the Reinecke Agreement; (ii) 20,000 shares upon the six month anniversary of the commencement of the Reinecke Agreement; and (iii) 40,000 shares upon the one year anniversary of the commencement of the Reinecke Agreement.

 

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 Utah Properties. The purpose of this review was to identify major structures and geologic trends of interest on the Utah 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 Utah 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 identified 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.

 

On February 2, 2015 the Company engaged PRISEM Geoscience Consulting LLC (“PRISEM”) to provide recommendations on a work plan for creating a geologic model of the Utah Properties. This structural analysis will include, but not be limited to, collecting well data from relevant wells in the area and construction of possibly 1 to 2 balanced cross sections through and/or near the prospective acreage. PRISEM will also make a seismic database search and provide recommendations for licensing of existing 2-D datasets. If seismic data is purchased PRISEM will recommend processors to reprocess the data using modern techniques relevant to complex structural environment as the Utah Properties.

 

The Company initiated these technical steps in line with our business plan of evaluating our properties step by step before proceeding to the next phase of extraction. The Company plans to co-ordinate its technical efforts towards selecting an initial potential drillsite that management believes may be capable of producing oil or natural gas in commercial quantities on the Utah Properties.

 

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 June 30, 2015 Compared to the Three Month Period Ended June 30, 2014.

 

Our net loss for the three-month period ended June 30, 2015 was $93,803 compared to a net loss of $88,795 during the three-month period ended June 30, 2014. We did not generate any revenue during the three month period ended June 30, 2015 and 2014.

 

 

This change in net loss was primarily the result of the following:

 

Lease property and exploration costs

 

During the three months ended June 30, 2015, we incurred lease property and exploration costs of $13,417, a decrease of $3,413 compared to the prior year period amount of $16,830 resulting primarily from a decrease in consulting costs.

 

General and administrative costs

 

During the three month period ended June 30, 2015, we incurred general and administrative expenses of $37,933 compared to $39,179 incurred during the three-month period ended June 30, 2014. The general and administrative expense incurred during the three months ended June 30, 2015 and 2014 was primarily related to compensation to our Chief Executive Officer of $30,000, with a nominal difference between corporate overhead and travel costs between periods.

 

Professional Fees

 

During the three months ended June 30, 2015, we incurred professional fees of $42,453 relating to our equity financings, operations and public company compliance. The legal and accounting fees associated with these activities amounted to $20,374 and $9,046, respectively, and the corporate and investor relations fees associated with these activities amounted to $13,033. During the three months ended June 30, 2014, we incurred professional fees of $32,786 relating to our equity financings, the acquisition of the Leases from Ardmore and public company compliance. The legal and accounting fees associated with these activities amounted to $25,423 and $3,710, respectively, and the corporate and investor relations fees associated with these activities amounted to $3,653.

 

Weighted average number of shares

 

The weighted average number of shares outstanding was 26,361,403 and 25,643,116 for the three-month periods ended June 30, 2015 and 2014, respectively. The weighted average number of shares is an average calculation incorporating changes to the shares outstanding within the period reported and has been restated to retroactively show the effect of the Reverse Stock Split on July 1, 2015.

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of June, 2015, we had cash and cash equivalents of $2,322. As of March 31, 2015, we had no cash and cash equivalents.

 

We have experienced losses of $93,803 and $88,795 for the three months ended June 30, 2015 and 2014, respectively, and have an accumulated deficit of $1,461,063 at June 30, 2015. In addition, we have not completed our efforts to establish a stable recurring source of revenues sufficient to cover our operating costs and expect to continue to generate losses for the foreseeable future. There is no assurances that we will be able to obtain an adequate level of financing needed for our near term requirements or the long-term development and exploration of our Leases. These conditions raise substantial doubt about our ability to continue as a “going concern”.

 

Since inception, we have financed our operations primarily through private placements of our common stock, receiving aggregate net proceeds totaling $1,087,500 from the period beginning October 1, 2013 through June 30, 2015, including the current fiscal year securities purchase agreements described in more details below.

 

 

Securities Purchase Agreements

 

The Company entered into several securities purchase agreements with a single investor pursuant to Regulation S promulgated under the Securities Act whereby the Company sold shares of its common stock to the investor. A list of the securities purchase agreements that were entered into during this quarter is below:

 

On April 27, 2015, the Company sold a total of 21,918 shares of common stock to an investor for gross proceeds of $40,000.

 

On June 1, 2015, the Company sold a total of 58,823 shares of common stock to an investor for gross proceeds of $50,000.

 

On June 12, 2015, the Company sold a total of 52,174 shares of common stock to an investor for gross proceeds of $30,000.

 

Three Months Ended June 30, 2015 Compared with Three Months Ended June 30, 2014

 

Cash Flows from Operating Activities

 

We have generated negative cash flows from operating activities. For the three months ended June 30, 2015, net cash flows used in operating activities was $117,678 consisting of a net loss of $93,803, offset by depreciation and amortization of $2,423, a decrease of $17,738 in accounts payables and accrued liabilities, a decrease of $10,000 for accrued officer compensation, and an increase in prepaid expenses of $1,875. Furthermore, as of March 31, 2015 we had a cash overdraft repayment of $435.

 

For the three months ended June 30, 2014, net cash flows used in operating activities was $80,225 consisting of a net loss of $88,795, offset by depreciation and amortization of $2,325, an increase in accounts payable of $11,215 and a decrease of $5,000 for accrued officer compensation. These differences were primarily the result of the operations of the Company increasing upon the acquisition of the leases and business formation as an Oil and Gas company.

 

Cash Flows from Investing Activities

 

We used cash from investing activities in the three months ended June 30, 2014 for the lease installment of $100,000. There were no investing activities in the three months ended June 30, 2015.

 

Cash Flows from Financing Activities

 

We have financed our operations primarily from either cash advances or the issuance of equity instruments. We generated cash from financing activities of $120,000 and $172,500 in the three months ended June 30, 2015 and 2014, 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.

 

 

Our existing working capital, further advances and debt instruments, and anticipated cash flow are not adequate to fund our operations over the next twelve 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. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) development and exploration expenses through independent consultants; and (ii) financing related costs. We believe that we will need $800,000 in additional capital to meet long-term operating requirements for the next twelve months. 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 that 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, 2015 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 June 30, 2015. 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 June 30, 2015.

 

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 entered into securities purchase agreements with two investors pursuant to Regulation S promulgated under the Securities Act whereby the Company sold shares of its common stock to the investors. A list of the securities purchase agreements is below:

 

	●	On August 5, 2015, the Company sold a total of 76,125 shares of common stock to an investor for gross proceeds of $22,000.
	●	On June 12, 2015, the Company sold a total of 52,174 shares of common stock to an investor for gross proceeds of $30,000.
	●	On June 1, 2015, the Company sold a total of 58,823 shares of common stock to an investor for gross proceeds of $50,000.
	●	On April 27, 2015, the Company sold a total of 21,918 shares of common stock to an investor for gross proceeds of $40,000.

 

 

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

 

No report required.

 

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: August 12, 2015	By:	/s/ John Barton
		John Barton,
		President and Chief Executive Officer and Chief Financial Officer