Company Quick10K Filing
Quick10K
Petrogas
10-Q 2019-06-30 Quarter: 2019-06-30
10-K 2019-03-31 Annual: 2019-03-31
10-Q 2018-12-31 Quarter: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-K 2018-03-31 Annual: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-K 2017-03-31 Annual: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-K 2016-03-31 Annual: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-K 2015-03-31 Annual: 2015-03-31
10-Q 2014-12-31 Quarter: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
8-K 2019-04-03 Sale of Shares
8-K 2019-03-19 Other Events
8-K 2019-02-20 Other Events
XOXO XO Group 906
WCRS Western Capital Resources 40
OPCO Ourpets 16
FHRT First Hartford 6
TWOH Two Hands 5
RLBY Reliability 1
BAJA Baja Custom Design 0
KIRY Kiewit Royalty Trust 0
SVTE Service Team 0
GDFF Global Diversified Futures Fund 0
PTCO 2019-06-30
Part I - Financial Information
Item 1. Financial Statements
Note 1 - Description of Business and Basis of Persentation
Note 2 - Going Concern
Note 3 - Summary of Significant Accounting Policies
Note 4 - Asset Retirement Obligations
Note 5 - Promissory Note - Related Party
Note 6 - Promissory Note
Note 7 - Convertible Promissory Notes
Note 8 - Common Stock
Note 9 - Related Party Transactions
Note 10 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition or Plan of Operation
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ptco_ex311.htm
EX-32.1 ptco_ex321.htm

Petrogas Earnings 2019-06-30

PTCO 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 ptco_10q.htm FORM 10-Q ptco_10q.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

x

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

 

 

For the quarterly period ended June 30, 2019

 

 

or

 

 

¨

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the transition period from _________________ to _________________

 

 

Commission File Number 333-196409

       

PETROGAS COMPANY

(Exact name of registrant as specified in its charter)

  

Nevada

 

98-1153516

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

 

 

 

2800 Post Oak Boulevard, Suite 4100, Houston TX

 

77056

(Address of principal executive offices)

 

(Zip Code)

 

(832) 899-8597

(Registrant’s telephone number, including area code)

 

N/A

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

 

Securities registered pursuant to Section 12(b) of the Act: 

  

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

None

None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x YES     ¨ NO

   

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x YES     ¨ NO

  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

   

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

 

Emerging growth company

x

     

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ¨ YES     x NO

   

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS

  

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. ¨ YES     ¨ NO

  

APPLICABLE ONLY TO CORPORATE ISSUERS

  

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

  

30,099,230 common shares issued and outstanding as of August 9, 2019.

      

 
 
 
 

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION.

 

3

 

 

 

 

 

 

Item 1.

Financial Statements.

 

3

 

 

 

 

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition or Plan of Operation.

 

12

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

18

 

 

 

 

 

 

Item 4.

Controls and Procedures.

 

18

 

 

 

 

 

 

PART II - OTHER INFORMATION.

 

19

 

 

 

 

 

 

Item 1.

Legal Proceedings.

 

19

 

 

 

 

 

 

Item 1A.

Risk Factors.

 

19

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

19

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities.

 

19

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures.

 

19

 

 

 

 

 

 

Item 5.

Other Information.

 

19

 

 

 

 

 

 

Item 6.

Exhibits.

 

20

 

 

 

 

 

 

SIGNATURES.

 

21

 

     

 
2
 
 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

PETROGAS COMPANY

BALANCE SHEETS

(Unaudited)

 

 

 

June 30,

 

 

March 31,

 

 

 

2019

 

 

2019

 

 

 

 

 

 

 

 

ASSET

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$-

 

 

$387

 

Total Current Assets

 

 

-

 

 

 

387

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$-

 

 

$387

 

 

 

 

 

 

 

 

 

 

LIABILITIES & SHAREHOLDERS' EQUITY

Current Liabilities

 

 

 

 

 

 

 

 

Bank indebtedness

 

$310

 

 

$-

 

Accounts payable and accrued liabilities

 

 

11,315

 

 

 

24,320

 

Accrued interest

 

 

40,746

 

 

 

32,544

 

Advances from related party

 

 

28,541

 

 

 

28,541

 

Total Current Liabilities

 

 

80,912

 

 

 

85,405

 

 

 

 

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

 

 

 

Asset retirement obligations

 

 

83,580

 

 

 

83,580

 

Convertible promissory notes, net of discount of $35,128 and $43,696, respectively

 

 

142,858

 

 

 

132,746

 

Promissory note - related party

 

 

42,683

 

 

 

42,683

 

Promissory note

 

 

6,962

 

 

 

-

 

Total long-term liabilities

 

 

276,083

 

 

 

259,009

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

356,995

 

 

 

344,414

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Common stock: 300,000,000 authorized; $0.001 par value 3,874,473 and 300,993 shares issued and outstanding, respectively

 

 

3,874

 

 

 

301

 

Additional paid in capital

 

 

1,425,805

 

 

 

1,326,435

 

Accumulated deficit

 

 

(1,786,674)

 

 

(1,670,763)

TOTAL SHAREHOLDERS' DEFICIT

 

 

(356,995)

 

 

(344,027)

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES & SHAREHOLDERS' DEFICIT

 

$-

 

 

$387

 

 

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

 

 
3
 
Table of Contents

 

PETROGAS COMPANY

STATEMENTS OF OPERATIONS

 

 

 

Three Months Ended

 

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

ROYALTY REVENUE

 

$166

 

 

$665

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Stock based compensation

 

 

90,000

 

 

 

-

 

General and administrative expense

 

 

2,063

 

 

 

3,451

 

TOTAL OPERATING EXPENSES

 

 

92,063

 

 

 

3,451

 

 

 

 

 

 

 

 

 

 

Loss from Operations

 

 

(91,897)

 

 

(2,786)

 

 

 

 

 

 

 

 

 

OTHER EXPENSE

 

 

 

 

 

 

 

 

Impairment of oil and gas leases

 

 

-

 

 

 

29,158

 

Interest expense

 

 

24,014

 

 

 

23,707

 

Total other expense

 

 

24,014

 

 

 

52,865

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

$(115,911)

 

$(55,651)

 

 

 

 

 

 

 

 

 

NET LOSS PER SHARE, BASIC AND DILUTED

 

$(0.03)

 

$(0.18)

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED

 

 

3,587,660

 

 

 

300,993

 

 

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

 

 
4
 
Table of Contents

 

PETROGAS COMPANY

STATEMENTS OF SHAREHOLDERS’ DEFICIT

THREE MONTHS ENDED JUNE 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

 

 

Total

 

 

 

Number of

Shares

 

 

Amount

 

 

Paid in

Capital

 

 

Accumulated

Deficit

 

 

Stockholder's

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - March 31, 2019

 

 

300,993

 

 

$301

 

 

$1,326,435

 

 

$(1,670,763)

 

$(344,027)

Rounding off of reverse stock split

 

 

3,480

 

 

 

3

 

 

 

(3)

 

 

-

 

 

 

-

 

Common stock issued for compensation

 

 

3,000,000

 

 

 

3,000

 

 

 

87,000

 

 

 

-

 

 

 

90,000

 

Conversion of convertible notes into common stock

 

 

570,000

 

 

 

570

 

 

 

5,130

 

 

 

-

 

 

 

5,700

 

Convertible notes debt discount

 

 

-

 

 

 

-

 

 

 

7,243

 

 

 

-

 

 

 

7,243

 

Net loss

 

 

-

 

 

 

-

 

 

 

 

 

 

 

(115,911)

 

 

(115,911)

Balance - June 30, 2019

 

 

3,874,473

 

 

$3,874

 

 

$1,425,805

 

 

$(1,786,674)

 

$(356,995)

 

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

 

PETROGAS COMPANY

STATEMENTS OF SHAREHOLDERS’ DEFICIT

THREE MONTHS ENDED JUNE 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

 

 

Total

 

 

 

Number of

Shares

 

 

Amount

 

 

Paid in

Capital

 

 

Accumulated

Deficit

 

 

Stockholder's

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Balance - March 31, 2018

 

 

300,993

 

 

$301

 

 

$1,295,996

 

 

$(1,513,590)

 

$(217,293)

Convertible notes debt discount

 

 

-

 

 

 

-

 

 

 

10,667

 

 

 

-

 

 

 

10,667

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(55,651)

 

 

(55,651)

*Balance - June 30, 2018

 

 

300,993

 

 

$301

 

 

$1,306,663

 

 

$(1,569,241)

 

$(262,277)

_________

* Retrospectively reflecting reverse-stock split

 

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

 

 
5
 
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PETROGAS COMPANY

STATEMENT OF CASH FLOWS

 

 

 

Three Months Ended

 

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net Loss

 

$(115,911)

 

$(55,651)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Impairment of oil and gas leases

 

 

-

 

 

 

29,158

 

Amortization of debt discount

 

 

15,811

 

 

 

19,235

 

Share based compensation

 

 

90,000

 

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Bank indebtedness

 

 

310

 

 

 

-

 

Accounts payable and accrued liabilities

 

 

(6,042)

 

 

(7,459)

Accrued interest

 

 

8,202

 

 

 

4,472

 

Net cash used in Operating Activities

 

 

(7,630)

 

 

(10,245)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Issuance of convertible promissory notes

 

 

7,243

 

 

 

10,667

 

Net cash provided by Financing Activities

 

 

7,243

 

 

 

10,667

 

 

 

 

 

 

 

 

 

 

Net changes in cash and cash equivalents

 

 

(387)

 

 

422

 

Cash and cash equivalents, beginning of period

 

 

387

 

 

 

5,176

 

Cash and cash equivalents, end of period

 

$-

 

 

$5,598

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

 

-

 

 

 

-

 

Cash paid for taxes

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Non-cash transactions:

 

 

 

 

 

 

 

 

Conversion of convertible notes into common shares

 

$5,700

 

 

$-

 

Reclass from accounts payable to promissory note payable

 

$6,692

 

 

$-

 

 

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

 

 
6
 
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PETROGAS COMPANY

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2019

(UNAUDITED)

 

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PERSENTATION

 

Organization and nature of business

 

PetroGas Company (Formerly America Resources Exploration Inc. (the “Company”)), was incorporated in the State of Nevada on January 24, 2014. The Company was incorporated under the name Alazzio Entertainment Corp. and changed its name to America Resources Exploration Inc. on April 17, 2015. Subsequently, on January 20, 2016, the Company changed its name to PetroGas Company. On June 12, 2015, the Company completed an acquisition of working interests in certain oil & gas properties. All share amounts in these financial statements have been adjusted to reflect this stock split.

 

NOTE 2 – GOING CONCERN

 

The Company had no significant revenues from the inception through June 30, 2019. As of June 30, 2019, the Company has an accumulated deficit of $1,786,674. We will need additional working capital to service debt and for ongoing operations, which raises substantial doubt about its ability to continue as a going concern. Management of the Company has developed a strategy to meet operational shortfalls which may include equity funding, short term or long term financing or debt financing, to enable the Company to reach profitable operations.

 

The accompanying financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. If we fail to generate positive cash flow or obtain additional financing, when required, we may have to modify, delay, or abandon some or all of our business and expansion plans.

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation of Interim Financial Statements

 

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 210 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. Operating results for the three months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2020. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019 as filed with the Securities and Exchange Commission on June 26, 2019.

 

Use of Estimates

 

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 and the 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. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known. The estimates on depreciation were based on the estimated useful lives of the Company’s assets. Any estimates during the period have had an immaterial effect on earnings.

 

Cash and Cash Equivalents

 

Cash and cash equivalents consist of commercial accounts and interest-bearing bank deposits and are carried at cost, which approximates current value. Items are considered to be cash equivalents if the original maturity is three months or less.

 

 
7
 
Table of Contents

 

Oil and Gas Properties – Full Cost Method

 

The Company follows the full cost accounting method to account for oil and natural gas properties, whereby costs incurred in the acquisition, exploration and development of oil and gas reserves are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on nonproducing leases, drilling, completing and equipping of oil and gas wells and administrative costs directly attributable to those activities and asset retirement costs. Disposition of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves of oil and gas, in which case the gain or loss is recognized to operations.

 

The capitalized costs of oil and gas properties, excluding unevaluated and unproved properties, are amortized as depreciation, depletion and amortization expense using the units-of-production method based on estimated proved recoverable oil and gas reserves.

 

The costs associated with unevaluated and unproved properties, initially excluded from the amortization base, relate to unproved leasehold acreage, wells and production facilities in progress and wells pending determination of the existence of proved reserves, together with capitalized interest costs for these projects. Unproved leasehold costs are transferred to the amortization base with the costs of drilling the related well once a determination of the existence of proved reserves has been made or upon impairment of a lease. Costs associated with wells in progress and completed wells that have yet to be evaluated are transferred to the amortization base once a determination is made whether or not proved reserves can be assigned to the property. Costs of dry wells are transferred to the amortization base immediately upon determination that the well is unsuccessful.

 

All items classified as unproved property are assessed on a quarterly basis for possible impairment or reduction in value. Properties are assessed on an individual basis or as a group if properties are individually insignificant. The assessment includes consideration of various factors, including, but not limited to, the following: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; assignment of proved reserves; and economic viability of development if proved reserves are assigned. During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full cost pool and become subject to amortization.

 

Under full cost accounting rules for each cost center, capitalized costs of evaluated oil and gas properties, including asset retirement costs, less accumulated amortization and related deferred income taxes, may not exceed an amount (the “cost ceiling”) equal to the sum of (a) the present value of future net cash flows from estimated production of proved oil and gas reserves, based on current prices and operating conditions, discounted at ten percent (10%), plus (b) the cost of properties not being amortized, plus (c) the lower of cost or estimated fair value of any unproved properties included in the costs being amortized, less (d) any income tax effects related to differences between the book and tax basis of the properties involved. If capitalized costs exceed this limit, the excess is charged to operations. For purposes of the ceiling test calculation, current prices are defined as the unweighted arithmetic average of the first day of the month price for each month within the 12-month period prior to the end of the reporting period. Prices are adjusted for basis or location differentials. Unless sales contracts specify otherwise, prices are held constant for the productive life of each well. Similarly, current costs are assumed to remain constant over the entire calculation period.

 

Revenue Recognition

 

Oil and gas sales result from undivided interests held by the Company in oil and gas properties and royalty revenues. Sales of oil and gas produced from oil and gas operations are recognized when the product is delivered to the purchaser and title transfers to the purchaser. Charges for gathering and transportation are included in production expenses.

 

Revenue from royalties is recognized as they are earned, when collection is reasonably assured. Royalty revenue is recorded in the same period as the sales that generate the royalty payment.

 

Asset Retirement Obligations

 

The Company records a liability for asset retirement obligations (“ARO”) associated with its oil and gas wells when those assets are placed in service. The corresponding cost is capitalized as an asset and included in the carrying amount of oil and gas properties and is depleted over the useful life of the properties. Subsequently, the ARO liability is accreted to its then-present value.

 

Inherent in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement.

 

 
8
 
Table of Contents

 

Fair Value of Financial Instruments

 

The Company measures its financial assets and liabilities in accordance with the requirements of ASC 820, Fair Value Measurements and Disclosures. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

 

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

 

Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information,

 

The carrying value of all assets and liabilities approximated their fair values as March 31, 2019 and March 31, 2018, respectively.

 

Stock-Based Compensation

 

The Company follows the guidance included in ASC 718 Compensation-Stock Compensation (“ASC 718”) using the modified prospective transition method. The Company recognizes compensation expense in the financial statements for share-based awards based on the grant date fair value of those awards. For the three months ended June 30, 2019 and 2018, the Company incurred stock based compensation of $90,000 and $0, respectively.

 

Income Taxes

 

The Company accounts for income taxes pursuant to ASC 740, Income Taxes. Deferred tax assets and liabilities are recorded for differences between the financial statements and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.

 

Earnings or Loss Per Share

 

In accordance with ASC Topic 280 – “Earnings Per Share”, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

 

Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. The Company regularly reviews and analyses the recent accounting pronouncements.

 

NOTE 4 – ASSET RETIREMENT OBLIGATIONS

 

The Company has asset retirement obligations for any wells that are permanently removed from service. The primary obligations involve the removal and disposal of surface equipment, plugging and abandoning the wells and site restoration. For the purpose of determining the fair value of ARO incurred during the fiscal year ended March 31, 2016, the Company used the following assumptions.

 

Inflation Rate

 

 

3%

Estimated asset life

 

20 years

 

Credit adjusted risk free interest rate

 

 

18%

 

 
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As at March 31, 2016, the Company determined to fully impair its shut in wells given a lack of production over a period in excess of two years, and the uncertainty in returning the wells to production in the future. As a result, the Company has recorded a long term liability equal to the full value of the ARO.

 

As at June 30, 2019 and March 31, 2019, a total of $83,580 is recorded as asset retirement obligations, respectively

 

NOTE 5 – PROMISSORY NOTE – RELATED PARTY

 

On December 31, 2016, the Company entered into a promissory note with a majority shareholder, Rise Fast Limited, for an amount of $240,683. The promissory note bears interest at a rate of 2% per annum, and is payable on December 31, 2019.

 

On July 10, 2017, the Company, along with the holder of the promissory note to assigned $174,000 of the promissory note to four individuals not related to the Company. Refer to Note 7 for further details. On October 6, 2017, the Company issued 24,000,000 common shares to the holder of the promissory note for the assignment of the notes of $24,000.

 

As of June 30, 2019, the promissory note payable was $42,683 and accrued interest payable was $4,319.

 

NOTE 6 – PROMISSORY NOTE

 

On May 31, 2019, the Company issued a promissory note to a legal firm at principal amount of $6,963 for the payable amount to a vendor. The note has a three month term and bears interest at 2% per annum compounded monthly.

 

As of June 30, 2019, the promissory note payable was $6,963 and accrued interest payable was $11.

 

NOTE 7 – CONVERTIBLE PROMISSORY NOTES

 

On July 10, 2017, a total of $174,000 was assigned from a promissory note to four individuals not related to the Company. Each of the convertible promissory notes has a principal value of $43,500, maturity date of July 10, 2019, bears interest at 4% per annum, and are convertible at a rate of $0.03 per share. On October 6, 2017, the four convertible promissory notes were amended to an interest rate of 0.5% per annum, the maturity date was amended to July 10, 2020, and the conversion price was amended to $0.01 per share.

 

On October 11, 2017, four individual holders that have $174,000 of convertible promissory notes, converted a total of $58,000, or $14,500 each, for a total of 5,800,000, or 1,450,000 common shares each.

 

A debt discount on the notes was recognized of $174,000. During the year ended March 31, 2019, a total of $34,272 of the debt discount has been amortized and recorded in interest expense. As of March 31, 2019, the unamortized amount of the debt discounts is $43,696.

 

On December 31, 2017, the Company entered into a convertible promissory note for $9,230 with an individual not related to the Company. The convertible promissory note is due on demand, bears interest at 55% per annum, and is convertible at $0.01 per share. The debt discount of $9,230 was expensed upon issuance of the note. On March 12, 2019, the note holder sold to three unaffiliated parties an interest in the note equal to the principal amount of $1,900 each. On May 1 2019, total principal amount of $5,700 of the three $1,900 convertible notes was converted to 570,000 shares of common stock.

 

On March 31, 2018, the Company entered into a convertible promissory note for $20,773 with an individual not related to the Company. The convertible promissory note is due on demand, bears interest at 55% per annum, and is convertible at $0.01 per share. The debt discount of $20,773 was expensed upon issuance of the note.

 

On June 30, 2018, the Company entered into a convertible promissory note for $10,667 with an individual not related to the Company. The convertible promissory note is due on demand, bears interest at 55% per annum, and is convertible at $0.01 per share. The debt discount of $10,667 was expensed upon issuance of the note.

 

On September 30, 2018, the Company entered into a convertible promissory note for $7,167 with an individual not related to the Company. The convertible promissory note is due on demand, bears interest at 55% per annum, and is convertible at $0.01 per share. The debt discount of $7,167 was expensed upon issuance of the note.

 

 
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On December 31, 2018, the Company entered into a convertible promissory note for $2,411 with an individual not related to the Company. The convertible promissory note is due on demand, bears interest at 55% per annum, and is convertible at $0.01 per share. The debt discount of $2,411 was expensed upon issuance of the note.

 

On March 31, 2019, the Company entered into a convertible promissory note for $10,194 with an individual not related to the Company. The convertible promissory note is due on demand, bears interest at 55% per annum, and is convertible at $0.01 per share. The debt discount of $10,194 was expensed upon issuance of the note.

 

On June 30, 2019, the Company entered into a convertible promissory note for $7,243 with an individual not related to the Company. The convertible promissory note is due on demand, bears interest at 55% per annum, and is convertible at $0.01 per share. The debt discount of $7,243 was expensed upon issuance of the note.

 

As of June 30, 2019, the convertible note payable was $142,858 and accrued interest payable was $35,275.

 

NOTE 8 – COMMON STOCK

 

The Company has 300,000,000 authorized common shares at $0.001 par value.

 

Three Months Ended June 30, 2019

 

On April 4, 2019, the Company issued 3,000,000 shares of common stock to the President of the Company as compensation for management services valued at $0.03 per share.

 

On May 1, 2019, principal amount of $5,700 of the convertible notes was converted to 570,000 shares of common stock.

 

Year Ended March 31, 2019

 

On March 4, 2019, a majority of our shareholders approved a reverse stock split on a basis of 100 old shares for 1 new share of our issued and outstanding common stock. No fractional shares of common stock will be issued as a result of the reverse split. Any fractional shares that would have resulted from the reverse split will be rounded up to the next whole number. As a result of the reverse split, our issued and outstanding shares of common stock will decrease from 30,099,230 to 300,993 shares of common stock. We confirm that our authorized capital will remain unchanged.

 

The reverse split has been reviewed by the Financial Industry Regulatory Authority (FINRA) and has been approved for filing with an effective date of March 19, 2019.

 

As at June 30, 2019 and March 31, 2019, the Company had a total of 3,874,473 and 300,993 common shares issued and outstanding, respectively.

 

NOTE 9 – RELATED PARTY TRANSACTIONS

 

During the year ended March 31, 2018, the Company received advances totaling $24,156 from its majority shareholder, Rise Fast Limited, in order to fund ongoing operations in the normal course.

 

As at June 30, 2019 and March 31, 2019, the Company had advances from related party of $28,541 and $28,541, respectively.

 

NOTE 10 – SUBSEQUENT EVENTS

 

Management has evaluated subsequent events through the date these financial statements were available to be issued. Based on our evaluation, no material events have occurred that require disclosure.

 

 
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Item 2. Management's Discussion and Analysis of Financial Condition or Plan of Operation

 

FORWARD-LOOKING STATEMENTS

 

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our consolidated unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

 

Unless otherwise specified in this quarterly report, all dollar amounts are expressed in United States dollars and all references to “common stock” refer to shares of our common stock.

 

As used in this quarterly report, the terms “we”, “us”, “our” and “our company” means PetroGas Company , unless otherwise indicated.

 

Corporate Overview

 

We were incorporated under the name Alazzio Entertainment Corp. on January 24, 2014, under the laws of the State of Nevada. Our original business plan was to operate photo booth rentals.

 

On April 3, 2015, a change in control occurred by virtue of our company’s largest shareholder, Dmitri Kapsumun selling 900,000 shares (split adjusted) of our common stock to Rise Fast Limited, a Hong Kong corporation. Such shares represented 71.77% of our total issued and outstanding shares of common stock. As part of the sale of the shares, Rise Fast Limited arranged with the resigning member of our company’s Board of Directors, to appoint Mr. Huang Yu as the sole officer and director of our company.

 

On April 16, 2015, we filed a Certificate of Amendment with the Nevada Secretary of State (the “Nevada SOS”) whereby we amended our Articles of Incorporation by increasing our authorized number of shares of common stock from 75 million to 300 million (not adjusted for the one (1) for one hundred (100) stock split) and increasing all of our issued and outstanding shares of common stock at a ratio of fifteen (15) shares for every one (1) share held. Our Board of Directors approved this amendment on April 15, 2015 and shareholders holding 71.77% of our issued and outstanding shares approved this amendment via a written consent executed on April 16, 2015.

 

Effective April 29, 2015 we changed our name to America Resources Exploration Inc. by way of a merger with our wholly-owned subsidiary, incorporated solely for the purpose of the change of name.

 

 
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On June 10, 2015, we entered into an Asset Purchase Agreement with Zheng Xiangwu, a resident of Guang Dong Province, China, whereby we issued 40,000 million shares of its common stock in exchange for rights to certain oil and gas leases located in Frio and Atascosa Counties, Texas, consisting of a total of 714 total acres of land, two (2) working wells and a total of seven (7) wells (the “Leases”). The acquisition of the Leases pursuant to the Asset Purchase Agreement was completed on June 1, 2015. As a result of the completion of this acquisition, 40,000 shares of our company’s common stock were issued to Mr. Zheng Xiangwu, who owns our company’s largest shareholder, Rise Fast Limited. The number of shares issued to Mr. Zheng was determined by valuing the Leases at $160,000 and valuing our company’s stock at $0.04 per share. At the completion of the Asset Purchase Agreement, we entered into the oil and gas industry.

 

On June 11, 2015, we entered into various assignment agreements with Mr. Zheng for the acquisition of multiple oil and gas leases and overriding royalty interests (“ORR’s”) as set out in the table below. From July 6, 2015 through July 9, 2015, we completed the acquisition of such oil and gas leases and ORR’s, whereby we issued a total of 6,500 shares of our common stock to Mr. Zheng.

 

Assignment Date

Name of The Property

Type of Property

Location

June 11th, 2015

Ellis County

Overriding Royalty Int.

Oklahoma

June 11th, 2015

Hemphill County

Overriding Royalty Int.

Texas

June 11th, 2015

Madison County

Wellbore Interest

Texas

June 11th, 2015

Shelby County

Wellbore Interest

Texas

June 11th, 2015

Emergy County

Lease Purchase

Utah

 

On August 13, 2015 we entered into an Asset Purchase Agreement with Inceptus Resources, LLC whereby our company acquired a 78% net revenue interest in 200 acres located in Callahan County, Texas, and a 78% net revenue interest in 522 acres also located in Callahan County, Texas.

 

On January 20, 2016, we changed our name to PetroGas Company, by way of a merger with our wholly-owned subsidiary, incorporated solely for the purpose of the change of name. In addition, we amended our Articles of Incorporation for a reverse stock split by decreasing all of our issued and outstanding shares of common stock at a ratio one (1) new for one hundred (100) old shares of common stock. The reverse stock split was approved by our directors and shareholders holding 68.65% of our issued and outstanding shares of common stock on January 13, 2016 and the reverse stock split became effective with FINRA on March 7, 2016. The change of name resulted in a change of trading symbol to “PTCO”.

 

On September 13, 2017, we filed a Certificate of Amendment with the Nevada Secretary of State whereby we amended our Articles of Incorporation by decreasing all of our issued and outstanding shares of common stock at a ratio of one (1) share for every one hundred (100) shares held. Our Board of Directors approved the Amendment on July 21, 2017 and Shareholders holding 75.95% of our company’s shares approved the Amendment via written consent executed on July 21, 2017, with an effective date of October 5, 2017.

 

On February 20, 2019 a majority of our shareholders and our board of directors approved a resolution to effect a reverse stock split of our issued and outstanding shares of common stock on a one (1) new for 100 old basis. The reverse split was approved by FINRA with an effective date of March 19, 2019. As a result of the reverse split, our issued and outstanding shares of common stock decreased from 30,099,230 to 300,993 shares of common stock. Our authorized capital remained unchanged.

 

Our principal executive offices are located at 2800 Post Oak Boulevard, Suite 4100, Houston, Texas 77056. Our telephone number is (832) 899-8597.

 

We have never declared bankruptcy, been in receivership, or involved in any kind of legal proceeding.

 

We hold a 94% interest in Seabourn Oil Company, LLC, a Texas LLC.

 

 
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CURRENT INVESTMENTS

 

On June 12, 2015, we acquired three (3) producing leases covering 714 acres situated in Atascosa and Frio Counties, Texas, located in the Eagle Ford Shale formation - the Jane Burns “C” (“Burns”), the Theo Rogers “C”, and the Theo Rogers “A” & “D” (“Rogers”) Leases. We acquired a 99.5% working interest (74.625% net revenue interest) in each lease.

 

The Burns and Rogers Leases provide exploration and production opportunities in the Kyote Field pay zone, very near the Eagle Ford Shale play with access to available rig crews and other vendor-servicers, due to their close proximity to San Antonio, Texas.

 

The Burns and Rogers Leases hold collectively seven (7) oil wells, but none of which are operating wells. Although our company’s management and industry professionals believed at the time that they were acquired that our company could double or triple previous production on these wells, depressed oil prices indicate that the cost to bring these wells online an uneconomical venture.

 

On November 30, 2016, we acquired various royalty interests in Texas for $10,485. On December 14, 2016, we acquired two oil and gas leases in Ohio for $2,705. On January 1, 2017, our company acquired the lease for three oil and gas properties for $4,975.

 

Future Operations

 

We are actively seeking to acquire producing and non-producing leases that will allow us to explore and drill in high-profile pay zones.

 

We intend to raise capital at a low cost from private placements so that we may acquire numerous additional leases, and to commence drilling, and taking advantage of the inevitable uptick in oil prices to come.

 

In the current climate, our company believes that there are a very large number of oil & gas leases under distress due to the depressed gas prices and that we can strategically position our company to acquire as many of these leases as possible at a discount to market value, hence creating shareholder value.

 

We are planning an exploration strategy to drill new wells on the current Leases, as well as acquire deeper rights in order to drill some of the wells at great depths. We expect that reservoirs at those depths could yield a very high daily output of oil.

 

Results of Operations

 

We have earned limited royalty revenues since inception.

 

Three months ended June 30, 2019 compared to three months ended June 30, 2018.

 

 

 

Three

Months

 

 

Three

Months

 

 

 

 

 

Ended

 

 

Ended

 

 

 

 

 

June 30,

 

 

June 30,

 

 

 

 

 

2019

 

 

2018

 

 

Changes

 

 

 

 

 

 

 

 

 

 

 

Royalty Revenue

 

$166

 

 

$665

 

 

$(499)

Operating Expenses

 

$92,063

 

 

$3,451

 

 

$88,612

 

Other Expenses

 

$24,014

 

 

$52,865

 

 

$(28,851)

Net Loss

 

$(115,911)

 

$(55,651)

 

$(60,260)

 

Revenue for the three months ended June 30, 2019 was $166 compared to $665 for the three months ended June 30, 2018. Revenue was comprised of royalty revenue.

 

 
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Our operating expenses for the three months ended June 30, 2019 increased to $92,063 from $3,451 for the three months ended June 30, 2018 as we incurred stock based compensation of $90,000 for the issuance of 3,000,000 shares of common stock to the President of the Company for management services valued at $0.03 per share during the three months ended June 30, 2019.

 

Other expenses for the three months ended June 30, 2019 decreased to $24,014 from $52,865 for the three months ended June 30, 2019 as we incurred impairment of oil and gas leases of $29,158 during the three months ended June 30, 2018.

 

Liquidity and Capital Resources

 

The following table provides selected financial data about our company as of June 30, 2019 and March 31, 2019, respectively.

 

Working Capital

 

 

 

As of

 

 

As of

 

 

 

 

 

June 30,

 

 

March 31,

 

 

 

 

 

2019

 

 

2019

 

 

Changes

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

$-

 

 

$387

 

 

$(387)

Current Liabilities

 

$80,912

 

 

$85,405

 

 

$(4,493)

Working Capital (Deficiency)

 

$(80,912)

 

$(85,018)

 

$4,106

 

 

Cash Flows

 

 

 

Three

Months

 

 

Three

Months

 

 

 

 

 

Ended

 

 

Ended

 

 

 

 

 

June 30,

 

 

June 30,

 

 

 

 

 

2019

 

 

2018

 

 

Changes

 

 

 

 

 

 

 

 

 

 

 

Net cash used in Operating Activities

 

$(7,630)

 

$(10,245)

 

$2,615

 

Net cash used in Investing Activities

 

$-

 

 

$-

 

 

$-

 

Net cash provided by Financing Activities

 

$7,243

 

 

$10,667

 

 

$(3,424)

Net (decrease) increase in cash and cash equivalents

 

$(387)

 

$422

 

 

$(809)

 

As of June 30, 2019, we had bank indebtedness of $310 and a negative working capital of 80,912, as compared to cash and cash equivalents of $387 and a negative working capital of $85,018 as of March 31, 2019.

 

Cash Flow from Operating Activities

 

For the three months ended June 30, 2019, we used $7,630 of cash for operations primarily as a result of the net loss of $115,911, increased by a decrease in accounts payable and accrued liabilities of $6,042, offset by amortization of debt discount of $15,811, stock based compensation of $90,000, an increase in bank indebtedness of $310 and an increase in accrued interest of $8,202.

 

For the three months ended June 30, 2018, we used $10,245 of cash for operations primarily as a result of the net loss of $55,651, increased by a decrease in accounts payable and accrued liabilities of $7,459, and was offset by the impairment of oil and gas leases of $29,158, amortization of debt discount of $19,235, and an increase in accrued interest of $4,472.

 

 
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Cash Flow from Investing Activities

 

The Company did not use any funds for investing activities during the three months ended June 30, 2019 and June 30, 2018.

 

Cash Flow from Financing Activities

 

For the three months ended June 30, 2019, we had $7,243 in net cash provided by financing activities for cash proceeds from issuance of a convertible promissory note.

 

For the three ended June 30, 2018, we had $10,667 in net cash provided by financing activities for cash proceeds from issuance of a convertible promissory note.

 

Off-Balance Sheet Arrangements

 

We have no 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, and capital expenditures or capital resources that are material to stockholders.

 

Critical Accounting Policies

 

Use of Estimates

 

The preparation of consolidated 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 and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known. The estimates on depreciation were based on the estimated useful lives of our company's assets. Any estimates during the period have had an immaterial effect on earnings.

 

Oil and Gas Properties – Full Cost Method

 

Our company follows the full cost accounting method to account for oil and natural gas properties, whereby costs incurred in the acquisition, exploration and development of oil and gas reserves are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on nonproducing leases, drilling, completing and equipping of oil and gas wells and administrative costs directly attributable to those activities and asset retirement costs. Disposition of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves of oil and gas, in which case the gain or loss is recognized to operations.

 

The capitalized costs of oil and gas properties, excluding unevaluated and unproved properties, are amortized as depreciation, depletion and amortization expense using the units-of-production method based on estimated proved recoverable oil and gas reserves.

 

The costs associated with unevaluated and unproved properties, initially excluded from the amortization base, relate to unproved leasehold acreage, wells and production facilities in progress and wells pending determination of the existence of proved reserves, together with capitalized interest costs for these projects. Unproved leasehold costs are transferred to the amortization base with the costs of drilling the related well once a determination of the existence of proved reserves has been made or upon impairment of a lease. Costs associated with wells in progress and completed wells that have yet to be evaluated are transferred to the amortization base once a determination is made whether or not proved reserves can be assigned to the property. Costs of dry wells are transferred to the amortization base immediately upon determination that the well is unsuccessful.

 

 
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All items classified as unproved property are assessed on a quarterly basis for possible impairment or reduction in value. Properties are assessed on an individual basis or as a group if properties are individually insignificant. The assessment includes consideration of various factors, including, but not limited to, the following: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; assignment of proved reserves; and economic viability of development if proved reserves are assigned. During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full cost pool and become subject to amortization.

 

Under full cost accounting rules for each cost center, capitalized costs of evaluated oil and gas properties, including asset retirement costs, less accumulated amortization and related deferred income taxes, may not exceed an amount (the "cost ceiling") equal to the sum of (a) the present value of future net cash flows from estimated production of proved oil and gas reserves, based on current prices and operating conditions, discounted at ten percent (10%), plus (b) the cost of properties not being amortized, plus (c) the lower of cost or estimated fair value of any unproved properties included in the costs being amortized, less (d) any income tax effects related to differences between the book and tax basis of the properties involved. If capitalized costs exceed this limit, the excess is charged to operations. For purposes of the ceiling test calculation, current prices are defined as the unweighted arithmetic average of the first day of the month price for each month within the 12-month period prior to the end of the reporting period. Prices are adjusted for basis or location differentials. Unless sales contracts specify otherwise, prices are held constant for the productive life of each well. Similarly, current costs are assumed to remain constant over the entire calculation period.

 

Revenue Recognition

 

Oil and gas sales result from undivided interests held by our company in oil and gas properties and royalty revenues. Sales of oil and gas produced from oil and gas operations are recognized when the product is delivered to the purchaser and title transfers to the purchaser. Charges for gathering and transportation are included in production expenses.

 

Revenue from royalties is recognized as they are earned, when collection is reasonably assured. Royalty revenue is recorded in the same period as the sales that generate the royalty payment.

 

Asset Retirement Obligations

 

Our company records a liability for asset retirement obligations ("ARO") associated with our oil and gas wells when those assets are placed in service. The corresponding cost is capitalized as an asset and included in the carrying amount of oil and gas properties and is depleted over the useful life of the properties. Subsequently, the ARO liability is accreted to its then-present value.

 

Inherent in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement.

 

Fair Value of Financial Instruments

 

Our company measures our financial assets and liabilities in accordance with the requirements of ASC 820, Fair Value Measurements and Disclosures. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

 

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

 

Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information,

 

 
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The carrying value of all assets and liabilities approximated their fair values as December 31, 2018 and March 31, 2018, respectively.

 

Stock-Based Compensation

 

The Company follows the guidance included in ASC 718 Compensation-Stock Compensation (“ASC 718”) using the modified prospective transition method. The Company recognizes compensation expense in the financial statements for share-based awards based on the grant date fair value of those awards. For the three months ended June 30, 2019 and 2018, the Company incurred stock based compensation of $90,000 and $0, respectively.

 

Recent Accounting Pronouncements

 

We have implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations. Our company regularly reviews and analyses the recent accounting pronouncements.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2019. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Such officer also confirmed that there was no change in our internal control over financial reporting during the three-month period ended June 30, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

Item 1A. Risk Factors

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

Item 5. Other Information

 

On May 31, 2019, the Company issued a promissory note to a legal firm at principal amount of $6,963 for the payable amount to a vendor. The note has a three month term and bears interest at 2% per annum compounded monthly.

 

 
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Item 6. Exhibits

 

Certain of the following exhibits are incorporated by reference from prior filings. The form with which each exhibit was filed and the date of filing are as indicated below; the reports described below are filed as Commission File No. 333-196409 unless otherwise indicated.

 

3.1

 

Articles of Incorporation of the Registrant incorporated by reference to Exhibit 3.1 to the Registrant’s registration statement on Form S-1 filed with the SEC on May 20, 2014, file number 333-196409.

 

3.2

 

Bylaws of Registrant incorporated by reference to Exhibit 3.2 to the Registrant’s registration statement on Form S-1 filed with the SEC on May 20, 2014, file number 333-196409.

 

10.1

 

Asset Purchase Agreement, among the Registrant, Zheng Xiangwu and Nelaco Operating Inc., dated June 10, 2015 incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 16, 2015, file number 333-196409.

 

31.1*

 

Certification of the Principal Executive Officer and Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

32.1**

 

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).

 

101.INS**

 

XBRL INSTANCE DOCUMENT

 

101.INS**

 

XBRL TAXONOMY EXTENSION SCHEMA

 

101.INS**

 

XBRL TAXONOMY EXTENSION CALCULATION LINKBASE

 

101.INS**

 

XBRL TAXONOMY EXTENSION DEFINITION LINKBASE

 

101.INS**

 

XBRL TAXONOMY EXTENSION LABEL LINKBASE

 

101.INS**

 

XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

______________

*

Filed herewith

**

Furnished herewith

 

 
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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

PETROGAS COMPANY

 

 

(Registrant)

 

 

 

 

Dated: August 12, 2019

 

/s/ Huang Yu

 

 

Huang Yu

 

 

President and Chief Financial Officer

 

 

(Principal Executive Officer, Principal Financial Officer

an Principal Accounting Officer)

 

 

 
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