petrorivers1_feb2015.htm
As filed with the Securities and Exchange Commission on February 2, 2015
Registration No. 333- _____________
 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
 
UNDER
THE SECURITIES ACT OF 1933
 
PETRO RIVER OIL CORP.
(Exact name of registrant as specified in its charter)

Delaware
 
1311
 
98-0611188
(State or other jurisdiction of
incorporation or organization)
 
(Primary Standard Industrial
Classification Code Number)
 
(I.R.S. Employer
Identification Number)
 
1980 Post Oak Blvd., Suite 2020
Houston, TX 77056
(469) 828-3900
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
Scot Cohen
Executive Chairman
Petro River Oil Corp.
1980 Post Oak Blvd., Suite 2020
Houston, TX 77056
(469) 828-3900
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
Copies of all communications to:
 
Daniel W. Rumsey, Esq.
Jessica R. Sudweeks, Esq.
Disclosure Law Group, LLP
600 West Broadway, Suite 700
San Diego, CA 92101
Tel: (619) 795-1134
Fax: (619) 330-2101
 
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
 
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box.   [X]
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   [   ]
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   [   ] 

 
 

 
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   [   ]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer 
  [   ] Accelerated filer
  [   ] 
Non-accelerated filer 
  [   ] Smaller reporting company
  [X] 
(Do not check if a smaller reporting company)

 
 



 

CALCULATION OF REGISTRATION FEE
 
Title Of Each Class Of
Securities To Be Registered
 
Amount
To Be
Registered
 
Proposed Maximum
Aggregate Offering
Price Per Share(1)
 
Proposed Maximum
Aggregate
Offering Price
   
Amount Of
Registration Fee
 
Common stock, par value $0.00001 per share to be sold by the registrant (2)
 
 
      $ 10,000,000     $ 1,162  
 
(1)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2)
This Registration Statement covers, under one prospectus, our direct offering of an indeterminate number of shares of our common stock that may be sold by us from time to time, for a maximum aggregate offering price of all securities not to exceed $10,000,000.
 
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 
 

 
 
     
  The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.  
     
 
SUBJECT TO COMPLETION, DATED FEBRUARY 2, 2015
PRELIMINARY PROSPECTUS

 
PETRO RIVER OIL CORP.

[__________] Shares of Common Stock
OFFERED BY PETRO RIVER OIL CORP.
 
Offering Made Without an Underwriter
 
We are offering [_________] shares of our common stock, par value $0.00001 per share, in a self-underwritten public offering (the “Offering”).
 
This Offering will be conducted on a self-underwritten, best efforts basis, which means this prospectus will permit our officers and directors to sell the shares directly to the public, with no commission or other remuneration payable to them for any shares they may sell. There is no minimum number of shares that must be sold by us for the Offering to close, and therefore we may receive no proceeds or very minimal proceeds from the Offering. The aggregate offering price of all securities sold under this Offering may not exceed [___________]. We will retain the proceeds from the sale of any of the offered shares that are sold. However, we may not sell the shares to the public until the Registration Statement, of which this prospectus is a part, is declared effective by the Securities and Exchange Commission (“SEC”).
 
We have no arrangement to place the proceeds from this Offering in an escrow, trust or similar account. Any funds raised from sales of shares to the public pursuant to this Offering will be immediately available to us for our use and retained by us regardless of whether or not there are any additional sales under this Offering. You will not have the right to withdraw your funds during the Offering. We may offer and sell these securities through any method described under “Plan of Distribution” in this prospectus.
 
The Offering will terminate upon the earlier to occur of: (i) the sale of all [________] shares being offered, or (ii) 365 days after the Registration Statement containing this prospectus is declared effective by the SEC.
 
Investing in our securities involves a high degree of risk.  See "Risk factors" beginning on page __ of this prospectus.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus.  Any representation to the contrary is a criminal offense.
 
   
The date of this prospectus is _____________ __, 2015

 
 

 
 
Table of Contents
 
ABOUT THIS PROSPECTUS   1
PROSPECTUS SUMMARY   2
RISK FACTORS   5
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS   14
USE OF PROCEEDS   15
DIVIDEND POLICY   15
DILUTION   16
DESCRIPTION OF SECURITIES TO BE REGISTERED   17
PLAN OF DISTRIBUTION   19
BUSINESS   21
DESCRIPTION OF PROPERTIES   24
LEGAL PROCEEDINGS   25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   27
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE   39
EXECUTIVE COMPENSATION   44
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS   47
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE   48
PRINCIPAL ACCOUNTING FEES AND SERVICES   51
LEGAL MATTERS   52
EXPERTS   52
INTEREST OF NAMED EXPERTS AND COUNSEL   52
WHERE YOU CAN FIND MORE INFORMATION   52
PART II   II-1
SIGNATURES   II-7
FINANCIAL STATEMENTS   F-1
 
 
-i-

 
ABOUT THIS PROSPECTUS
 
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with additional information or information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of our common stock and warrants only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our common stock and warrants.
 
We may affect a reverse split of our authorized, and issued and outstanding shares of common stock prior to consummation of the Offering (the “Reverse Split”), pending review and acceptance of the Reverse Split from the Financial Industry Regulatory Authority (“FINRA”).  Each reference to shares of common stock in this prospectus is pre-Reverse Split, and does not reflect adjustment that will occur as a result of the Reverse Split.  See also “Risk Factors” beginning on page ______.

Unless the context otherwise requires, the words “Petro River Oil,” “we,” “us,” “our” refers to Petro River Oil Corporation, a Delaware corporation.
 
 
-1-


PROSPECTUS SUMMARY

This summary highlights selected information appearing elsewhere in this prospectus and does not contain all the information you should consider before investing in our common stock.  You should carefully read this prospectus in its entirety before investing in our common stock, including the section entitled “Risk factors” and our financial statements and related notes included elsewhere in this prospectus.
 
Overview
 
We are an enterprise engaged in the exploration and exploitation of conventional and unconventional oil and gas assets with a focus on drilling, completion, recompletions and applying modern technologies. Our core holdings and principal operations are in the mid-continent region of the United States in Oklahoma, Kansas and Missouri. We are driven to utilize our expertise both in the mid-continent region and in similar formations to exploit hydrocarbon prone resources with tight and/or challenging characteristics in order to create value for the Company and our shareholders. Our principal administrative office is located in Houston, Texas and its principal operations are in Oklahoma, Kansas and Western Missouri. The Company also has an office in New York, New York. 
 
Our operations are currently focused on exploring and producing in the Mississippian Lime play. Our heavy oil reservoirs in this area are currently in technical review. We have an extensive amount of technical and reservoir information on our Missouri, Oklahoma and Kentucky positions. The data is being utilized in the understanding and test phases to develop an economic heavy oil production reserve base. In addition to our current research and development efforts, we are in discussions with industry partners to capitalize on and develop acreage in the Mississippian Lime, including possible joint venture partners and acquisition targets.
 
Recent Developments

Acquisition of Interest in Bandolier Energy, LLC.   On May 30, 2014, we entered into a Subscription Agreement, pursuant to which we received a 50% interest in Bandolier Energy, LLC (“Bandolier”) in exchange for a capital contribution of $5,000,000 (the “Bandolier Acquisition”).

After the Bandolier Acquisition, Bandolier acquired all of the issued and outstanding equity of Spyglass Energy Group, LLC (“Spyglass”), the owner of oil and gas leases, leaseholds, lands, and options and concessions thereto located in Osage County, Oklahoma, effective January 1, 2014, for a purchase price of approximately $8.7 million. Spyglass comprises the largest contiguous oil and gas acreage position in Northeastern Oklahoma, approximately 106,000 acres, with substantial original oil in place, stacked reservoirs, as well as exploratory and development opportunities that can be accessed through both horizontal and vertical drilling. Significant infrastructure is already in place including 32 square miles of 3D seismic, 3 phase power, a dedicated sub-station as well as multiple oil producing horizontal wells.
 
As a result of the Bandolier Acquisition and Bandolier’s subsequent acquisition of Spyglass, we now have both proven developed and proven undeveloped oil and gas assets.

Where You Can Find Us

Our corporate headquarters are located at 1980 Post Oak Blvd., Suite 2020, Houston, Texas, 77056. Our telephone number is (469) 828-3900. Our website address is www.petroriveroil.com. The information on our website is not part of this prospectus. We have included our website address as a factual reference and do not intend it to be an active link to our website.

 
-2-


Summary of the Offering
 
Common stock offered by Petro River Oil Corp.
 
[__________] shares of common stock, par value $0.00001 per share
     
Offering price:
 
[$____ ] per share
     
Number of shares issued and outstanding prior to the Offering:
 
 [__________] shares of common stock
     
Number of shares issued and outstanding after the Offering:
 
 [________] shares of common stock
     
OTC Markets (OTCQB) Symbol:
 
PRTC
     
Use of Proceeds:
 
We will receive approximately [$________ ] in gross proceeds and estimated net proceeds of approximately [$_________ ] if we sell all shares registered in connection with the Offering. See “Use of Proceeds” for a more detailed explanation of how the proceeds from the Offering will be used.
     
Risk Factors:
 
See “Risk Factors‚” and the other information in this prospectus for a discussion of the factors you should consider before deciding to invest in shares of our common stock.
     
 
Summary Financial Information

   
As of
   
As of
 
   
October 31,
   
April 30,
 
Balance Sheets Items-
 
2014
   
2014
 
             
Cash
 
$
2,749,928
     
8,352,949
 
                 
Total current assets
 
$
3,238,573
     
8,445,225
 
                 
Total assets
 
$
20,271,383
     
17,393,747
 
                 
Accounts payable and accrued expenses
 
$
401,657
     
480,637
 
                 
Notes payable, current
 
$
25,354
     
-
 
                 
Asset retirement obligation, current
 
$
460,778
     
481,658
 
                 
Total current liabilities
 
$
887,789
     
962,295
 
                 
Asset retirement obligation, net of current
 
$
430,808
     
336,352
 
                 
Total liabilities
 
$
1,318,597
     
1,298,647
 
                 
Accumulated deficit
 
$
(14,130,668)
     
(11,661,131)
 
                 
Non-controlling interests
 
$
4,652,969
     
-
 
                 
Stockholders' equity (deficit)
 
$
18,952,786
     
16,095,100
 

 
Statement of Operations Items-
 
Year Ended
April 30, 2014
   
Four Month Period Ended April 30, 2013
   
For the Period February 2, 2012 (Commencement of Operations) to December 31, 2012
 
                   
                   
Revenues
  $ 372,179     $ 184,676     $ 16,901  
                         
Operating expenses
  $ 286,507     $ 144,439     $ 82,663  
                         
General and administrative expenses
  $ 4,195,437     $ 623,136     $ 526,460  
                         
Depreciation, depletion and accretion
  $ 153,108     $ 29,304     $ 80,481  
                         
Impairment of oil and gas assets
  $ 4,713,973     $ -     $ -  
                         
Impairment of excess purchase price
  $ -     $ 1,093,527     $ -  
                         
Gain on settlement of liability
  $ (20,069 )   $ -     $ -  
                         
Total Other income (expense)
  $ 3,248     $ (614,004 )   $ (1,242,914 )
                         
Net loss
  $ (8,953,529 )   $ (2,319,734 )   $ (1,915,617 )
  
 
Statement of Operations Items-
 
For the Three
Months Ended
October 31,
   
For the Six
Months Ended
October 31,
 
   
2014
   
2013
   
2014
   
2013
 
                                 
Revenues
 
$
757,485
   
$
87,253
   
$
1,423,761
   
$
192,093
 
                                 
Operating expenses
 
$
446,829
   
$
82,632
   
$
787,497
   
$
146,711
 
                                 
General and administrative expenses
 
$
1,190,500
   
$
(501,809)
   
$
3,052,032
   
$
1,717,219
 
                                 
Depreciation, depletion and accretion
 
$
218,681
   
$
26,674
   
$
400,833
   
$
53,028
 
                                 
Total Other income (expense)
 
$
-
   
$
3,245
   
$
33
   
$
3,240
 
                                 
Net Income (Loss)
 
$
(1,098,525)
   
$
483,001
   
$
(2,816,568)
   
$
(1,721,625)
 
 
Net Income (Loss) attributable to non-controlling interest
 
$
55,680
   
$
-
   
$
(347,031)
   
$
-
 
                                 
Net Income (Loss) attributable to Petro River Oil Corp. and Subsidiaries
 
$
(1,154,205)
   
$
483,001
   
$
(2,469,537)
   
$
(1,721,625)
 
 
 
-4-

 
RISK FACTORS

Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this prospectus, including our financial statements and related notes, before deciding whether to purchase shares of our common stock. If any of the following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the price of our common stock could decline and you could lose part or all of your investment.

Risks Relating to Our Business

Our results of operations as well as the carrying value of our oil and gas properties are substantially dependent upon the prices of oil and natural gas, which continue to decline.  In the event such decline continues for a prolonged period of time our results of operations could be adversely affected, and our ability to continue our planned development and acquisition activities could be substantially curtailed.
 
Currently, our costs to maintain our unproved properties include non-producing leasehold, geological and geophysical costs associated with leasehold or drilling interests and in process exploration drilling costs. In the future, our results of operations and the ceiling on the carrying value of our oil and gas properties will be dependent on the estimated present value of proved reserves, which depends on the prevailing prices for oil and gas, which have substantially declined. Various factors beyond our control affect prices of oil and natural gas, including political and economic conditions; worldwide and domestic supplies of and demand for oil and gas; weather conditions; the ability of the members of the Organization of Petroleum Exporting Countries (“OPEC”) to agree on and maintain price and production controls; political instability or armed conflict in oil-producing regions; the price of foreign imports; the level of consumer demand; the price and availability of alternative fuels; and changes in existing federal and state regulations. In the event the recent substantial decline in oil and gas prices continues for a prolonged period of time our operations and financial condition could be materially and adversely affected, and the level of development and exploration expenditures could be substantially curtailed.  These conditions could ultimately result in a reduction in the carrying value of our oil and gas properties. A continued decline in prices for oil and gas would also likely cause a reduction in the amount of any reserves and, in turn, in the amount that we might be able to borrow to fund development and acquisition activities.

We have a limited operating history and if we are not successful in continuing to grow our business, then we may have to scale back or even cease our ongoing business operations.
 
We have received a limited amount of revenues from operations and have limited assets. To date, we have acquired interests in oil and gas properties, but have not established a project on any of our properties that generates commercial revenues and there can be no assurance that we will ever operate profitably. We have a limited operating history. Our success is significantly dependent on a successful acquisition, drilling, completion and production program. Our operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. We may be unable to locate recoverable reserves or operate on a profitable basis. We are in the exploration stage and potential investors should be aware of the difficulties normally encountered by enterprises in the exploration stage. If our business plan is not successful, and we are not able to operate profitably, investors may lose some or all of their investment.
 
Because we are small and do not have much capital, we may have to limit our exploration activity which may result in a loss of your investment.
 
Because we are small and do not have much capital, we must limit our exploration activity. As such we may not be able to complete an exploration program that is as thorough as we would like. In that event, existing reserves may go undiscovered. Without finding reserves, we cannot generate revenues and you will lose your investment.

 
-5-

 
We had cash and cash equivalents at October 31, 2014 and April 30, 2014 of $2,749,928 and $8,352,949, respectively as compared to $4,184,036 and $5,703,082 at October 31, 2013 and April 30, 2013, respectively. At October 31, 2014, we had a working capital of approximately $2.4 million. Management believes that the current level of working capital is sufficient to maintain current operations in Kansas, Missouri and Oklahoma, as well as the planned added operations for the next 12 months. Management intends to continue to raise capital through debt and equity instruments.
 
Exploratory drilling is a speculative activity that may not result in commercially productive reserves and may require expenditures in excess of budgeted amounts.
 
Drilling activities are subject to many risks, including the risk that no commercially productive oil or gas reservoirs will be encountered. There can be no assurance that new wells drilled by us or in which we have an interest will be productive or that we will recover all or any portion of our investment. Drilling for oil and gas may involve unprofitable efforts, not only from dry wells, but also from wells that are productive but do not produce sufficient net revenues to return a profit after drilling, operating and other costs. The cost of drilling, completing and operating wells is often uncertain. Our drilling operations may be curtailed, delayed or canceled as a result of a variety of factors, many of which are beyond our control, including economic conditions, mechanical problems, pressure or irregularities in formations, title problems, weather conditions, compliance with governmental requirements and shortages in or delays in the delivery of equipment and services. Such equipment shortages and delays sometimes involve drilling rigs where inclement weather prohibits the movement of land rigs causing a high demand for rigs by a large number of companies during a relatively short period of time. Our future drilling activities may not be successful. Lack of drilling success could have a material adverse effect on our financial condition and results of operations.
 
Our operations are also subject to all of the hazards and risks normally incident to the development, exploitation, production and transportation of, and the exploration for, oil and gas, including unusual or unexpected geologic formations, pressures, down hole fires, mechanical failures, blowouts, explosions, uncontrollable flows of oil, gas or well fluids and pollution and other environmental risks. These hazards could result in substantial losses to us due to injury and loss of life, severe damage to and destruction of property and equipment, pollution and other environmental damage and suspension of operations. Insurance for wells in which we participate is generally obtained, although there can be no assurances that such coverage will be sufficient to prevent a material adverse effect to us if any of the foregoing events occur.
 
We may not identify all risks associated with the acquisition of oil and natural gas properties, or existing wells, and any indemnifications we receive from sellers may be insufficient to protect us from such risks, which may result in unexpected liabilities and costs to us.
 
Our business strategy focuses on acquisitions of undeveloped and unproven oil and natural gas properties that we believe are capable of production. We may make additional acquisitions of undeveloped oil and gas properties from time to time, subject to available resources. Any future acquisitions will require an assessment of recoverable reserves, title, future oil and natural gas prices, operating costs, potential environmental hazards, potential tax and other liabilities and other factors.
 
Generally, it is not feasible for us to review in detail every individual property involved in a potential acquisition. In making acquisitions, we generally focus most of our title and valuation efforts on the properties that we believe to be more significant, or of higher-value. Even a detailed review of properties and records may not reveal all existing or potential problems, nor would it permit us to become sufficiently familiar with the properties to assess fully their deficiencies and capabilities. In addition, we do not inspect in detail every well that we acquire. Potential problems, such as deficiencies in the mechanical integrity of equipment or environmental conditions that may require significant remedial expenditures, are not necessarily observable even when we perform a detailed inspection. Any unidentified problems could result in material liabilities and costs that negatively impact our financial condition and results of operations.
 
 
-6-

 
Even if we are able to identify problems with an acquisition, the seller may be unwilling or unable to provide effective contractual protection or indemnity against all or part of these problems. Even if a seller agrees to provide indemnity, the indemnity may not be fully enforceable or may be limited by floors and caps, and the financial wherewithal of such seller may significantly limit our ability to recover our costs and expenses. Any limitation on our ability to recover the costs related any potential problem could materially impact our financial condition and results of operations.

We are/will be subject to various operating and other casualty risks that could result in liability exposure or the loss of production and revenues.
 
Our oil and gas business involves (or will involve as operations activities increase) a variety of operating risks, including, but not limited to, unexpected formations or pressures, uncontrollable flows of oil, gas, brine or well fluids into the environment (including groundwater contamination), blowouts, fires, explosions, pollution and other risks, any of which could result in personal injuries, loss of life, damage to properties and substantial losses. Although we carry insurance at levels that we believe are reasonable, we are not fully insured against all risks. We do not carry business interruption insurance. Losses and liabilities arising from uninsured or under-insured events could have a material adverse effect on our financial condition and operations.
 
The cost of operating wells is often uncertain. Our drilling operations may be curtailed, delayed or canceled as a result of numerous factors, including title problems, weather conditions, compliance with governmental requirements and shortages or delays in the delivery of equipment. Furthermore, completion of a well does not assure a profit on the investment or a recovery of drilling, completion and operating costs.

We face significant competition, and many of our competitors have resources in excess of our available resources.
 
The oil and gas industry is highly competitive. We encounter competition from other oil and gas companies in all areas of our operations, including the acquisition of producing properties and exploratory prospects and sale of crude oil, natural gas and natural gas liquids. Our competitors include major integrated oil and gas companies and numerous independent oil and gas companies, individuals and drilling and income programs. Many of our competitors are large, well established companies with substantially larger operating staffs and greater capital resources than us. Such companies may be able to pay more for productive oil and gas properties and exploratory prospects and to define, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit. Our ability to acquire additional properties and to discover reserves in the future will depend upon our ability to evaluate and select suitable properties and to consummate transactions in this highly competitive environment.

Strategic relationships upon which we may rely are subject to change, which may diminish our ability to conduct our operations.
 
Our ability to successfully acquire additional properties, to discover and develop reserves, to participate in drilling opportunities and to identify and enter into commercial arrangements with customers will depend on developing and maintaining close working relationships with industry participants and on our ability to select and evaluate suitable properties and to consummate transactions in a highly competitive environment. These realities are subject to change and may impair our ability to grow.
  
To develop our business, we will endeavor to use the business relationships of our management to enter into strategic relationships, which may take the form of joint ventures with other private parties and contractual arrangements with other oil and gas companies, including those that supply equipment and other resources that we will use in our business. We may not be able to establish these strategic relationships, or if established, we may not be able to maintain them. In addition, the dynamics of our relationships with strategic partners may require us to incur expenses or undertake activities we would not otherwise be inclined to in order to fulfill our obligations to these partners or maintain our relationships. If our strategic relationships are not established or maintained, our business prospects may be limited, which could diminish our ability to conduct our operations.
 
 
-7-


We may not have satisfactory title or rights to all of our current or future properties.
 
Prior to acquiring undeveloped properties, our contract land professionals review title records or other title review materials relating to substantially all of such properties. The title investigation performed by us prior to acquiring undeveloped properties is thorough, but less rigorous than that conducted prior to drilling, consistent with industry standards. Prior to drilling we obtain a title opinion on the drill site. However, a title opinion does not necessarily ensure satisfactory title. We believe we have satisfactory title to our producing properties in accordance with standards generally accepted in the oil and gas industry. Our properties are subject to customary royalty interests, liens incident to operating agreements, liens for current taxes and other burdens, which we believe do not materially interfere with the use of or affect the value of such properties. In the normal course of our business, title defects and lease issues of varying degrees arise, and, if practicable, reasonable efforts are made to cure such defects and issues.

We may be responsible for additional costs in connection with abandonment of properties.
 
We are responsible for payment of plugging and abandonment costs on our oil and gas properties pro rata to our working interest. There can be no assurance that we will be successful in avoiding additional expenses in connection with the abandonment of any of our properties. In addition, abandonment costs and their timing may change due to many factors, including actual production results, inflation rates and changes in environmental laws and regulations.

Governmental regulations could adversely affect our business.
 
Our business is subject to certain federal, state and local laws and regulations on taxation, the exploration for, and development, production and marketing of, oil and natural gas, and environmental and safety matters. Many laws and regulations require drilling permits and govern the spacing of wells, rates of production, prevention of waste and other matters. These laws and regulations have increased the costs of our operations. In addition, these laws and regulations, and any others that are passed by the jurisdictions where we have production, could limit the total number of wells drilled or the allowable production from successful wells, which could limit our revenues.
 
Laws and regulations relating to our business frequently change, and future laws and regulations, including changes to existing laws and regulations, could adversely affect our business.
 
In particular and without limiting the foregoing, various tax proposals currently under consideration could result in an increase and acceleration of the payment of federal income taxes assessed against independent oil and natural gas producers, for example by eliminating the ability to expense intangible drilling costs, removing the percentage depletion allowance and increasing the amortization period for geological and geophysical expenses. Any of these changes would increase our tax burden.
 
All states in which the Company owns leases require permits for drilling operations, drilling bonds and reports concerning operations and impose other requirements relating to the exploration for and production of oil and gas. Such states also have statutes or regulations addressing conservation matters, including provisions for the unitization or pooling of oil and gas properties, the establishment of maximum rates of production from wells and the regulation of spacing, plugging and abandonment of such wells. The statutes and regulations of these states limit the rate at which oil and gas can be produced from our properties. However, we do not believe we will be affected materially differently by these statutes and regulations than any other similarly situated oil and gas company.
 
Environmental liabilities could adversely affect our business.
 
In the event of a release of oil, natural gas or other pollutants from our operations into the environment, we could incur liability for any and all consequences of such release, including personal injuries, property damage, cleanup costs and governmental fines. We could potentially discharge these materials into the environment in several ways, including:
 
 
from a well or drilling equipment at a drill site;
     
  
leakage from gathering systems, pipelines, transportation facilities and storage tanks;

 
-8-

 
  
damage to oil and natural gas wells resulting from accidents during normal operations; and
     
  
blowouts, cratering and explosions.
 
In addition, because we may acquire interests in properties that have been operated in the past by others, we may be liable for environmental damage, including historical contamination, caused by such former operators. Additional liabilities could also arise from continuing violations or contamination that we have not yet discovered relating to the acquired properties or any of our other properties.
 
To the extent we incur any environmental liabilities, it could adversely affect our results of operations or financial condition.
 
Climate change legislation, regulation and litigation could materially adversely affect us.
 
There is an increased focus by local, state and national regulatory bodies on greenhouse gas (“GHG”) emissions and climate change. Various regulatory bodies have announced their intent to regulate GHG emissions, including the United States Environmental Protection Agency, which promulgated several GHG regulations in 2010 and late 2009. As these regulations are under development or are being challenged in the courts, we are unable to predict the total impact of these potential regulations upon our business, and it is possible that we could face increases in operating costs in order to comply with GHG emission legislation.
 
Passage of legislation or regulations that regulate or restrict emissions of GHG, or GHG-related litigation instituted against us, could result in direct costs to us and could also result in changes to the consumption and demand for natural gas and carbon dioxide produced from our oil and natural gas properties, any of which could have a material adverse effect on our business, financial position, results of operations and prospects.
 
Risks Relating to Our Financial Position and Capital Requirements

We have a history of losses, which may continue, which may negatively impact our ability to achieve our business objectives and continue as a going concern.
 
We incurred a net loss of $2,816,568 and $8,953,529 for the six-months ended October 31, 2014 and year ended April 30, 2014, respectively. To date, we have acquired interests in oil and gas properties, but have not established a project on any of our properties that generates commercial revenues. We cannot assure you that we can achieve or sustain profitability on a quarterly or annual basis in the future. Our operations are subject to the risks and competition inherent in the establishment of a business enterprise. There can be no assurance that future operations will be profitable. Revenues and profits, if any, will depend upon various factors, including whether we will be able to continue expansion of our revenue. We may not achieve our business objectives and the failure to achieve such goals would have an adverse impact on us.
 
As our Kansas, Missouri and Oklahoma properties are in early stages of development, we may not be able to establish commercial reserves on these projects. Exploration for commercial reserves of oil is subject to a number of risk factors. Few of the properties that are explored are ultimately developed into producing oil and/or gas fields. As of January 31, 2015, only a portion of the reserves associated with the Missouri Marmaton River and Grassy Creek projects are classified as developed and production activities have been suspended since September 2011, and, although the Bandolier Acquisition provided us with both proven developed and proven undeveloped oil and gas assets, we are still in need of substantial capital to commence drilling operations. Management determined that these properties were impaired and continues to seek funding so that the Company can consider future development of its heavy oil properties. We may not be able to establish commercial reserves and it is therefore considered to be an exploration stage company.

 
-9-

 
If we are unable to obtain funding, either through the Offering or otherwise, our business operations will be harmed.
 
We will require additional capital to continue to operate our business and to further expand our exploration and development programs, whether through the Offering or otherwise. We may be unable to obtain additional capital required. Furthermore, inability to maintain capital may damage our reputation and credibility with industry participants. Our inability to raise additional funds when required may have a negative impact on our consolidated results of operations and financial condition.
 
Future acquisitions and future exploration, development, production, leasing activities and marketing activities, as well as our administrative requirements (such as salaries, insurance expenses and general overhead expenses, as well as legal compliance costs and accounting expenses) will require a substantial amount of additional capital and cash flow.
 
In addition to the Offering, we may pursue sources of additional capital through various financing transactions or arrangements, including joint venturing of projects, debt financing, equity financing or other means. We may not be successful in raising the capital needed during the Offering, and, if the Offering is not successful, we may not obtain the capital we require by other means. This may adversely affect our consolidated financial results, financial condition and ability to continue as a going concern.

Our results of operations as well as the carrying value of our oil and gas properties are substantially dependent upon the prices of oil and natural gas, which historically have been volatile and are likely to continue to be volatile.

Our future financial condition, access to capital, cash flows and results of operations depend upon the prices we receive for our oil and natural gas. Historically, oil and natural gas prices have been volatile and are subject to fluctuations in response to changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control. Factors that affect the prices we receive for our oil and natural gas include:
 
 
the level of domestic production;
     
  
the availability of imported oil and natural gas;
     
  
political and economic conditions and events in foreign oil and natural gas producing nations, including embargoes, continued hostilities in the Middle East and other sustained military campaigns, and acts of terrorism or sabotage;
     
  
the ability of members of OPEC to agree to and maintain oil price and production controls;
     
  
the cost and availability of transportation and pipeline systems with adequate capacity;
     
  
the cost and availability of other competitive fuels;
     
  
fluctuating and seasonal demand for oil, natural gas and refined products;
     
  
concerns about global warming or other conservation initiatives and the extent of governmental price controls and regulation of production;
     
  
weather;
     
  
foreign and domestic government relations; and
     
  
overall economic conditions, particularly the recent worldwide economic slowdown, which has put downward pressure on oil and natural gas prices and demand.
 
 
-10-

 
Any prolonged decline in oil or gas prices could have a material adverse effect on our operations, financial condition, and level of development and exploration expenditures and could result in a reduction in the carrying value of our oil and gas properties.
  
Our internal controls over financial reporting have been determined to not be effective, which could have a significant and adverse effect on our business.
 
Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC, which we collectively refer to as “Section 404,” require us to evaluate our internal controls over financial reporting to allow management to report on those internal controls as of the end of each year. Effective internal controls are necessary for us to produce reliable financial reports and are important in our effort to prevent financial fraud. In the course of our Section 404 evaluations, we have identified conditions that resulted in significant deficiencies or material weaknesses and we have concluded that enhancements, modifications or changes to our internal controls are necessary or desirable. Implementing any such matters would divert the attention of our management, could involve significant costs, and may negatively impact our results of operations.
 
We note that there are inherent limitations on the effectiveness of internal controls, as they cannot prevent collusion, management override or failure of human judgment. If we fail to maintain an effective system of internal controls or if management or our independent registered public accounting firm were to discover material weaknesses in our internal controls, we may be unable to produce reliable financial reports or prevent fraud, and it could harm our financial condition and results of operations, result in a loss of investor confidence and negatively impact our share price.

Risks Related to Our Common Stock
 
The liquidity, market price and volume of our stock are volatile.
 
Our common stock is not traded on any exchange, but is currently quoted on the OTC Markets. The liquidity of our common stock may be adversely affected, and purchasers of our common stock may have difficulty selling our common stock, particularly if our common stock does not continue to be quoted on the OTC Markets on another recognized quotation services or exchange.
 
The trading price of our common stock could be subject to wide fluctuations in response to quarter-to-quarter variations in our operating results, announcements of our drilling results and other events or factors. In addition, the U.S. stock markets have from time to time experienced extreme price and volume fluctuations that have affected the market price for many companies and which often have been unrelated to the operating performance of these companies. These broad market fluctuations may adversely affect the market price of our securities.
 
Our stock is categorized as a penny stock. Trading of our stock may be restricted by the Security and Exchange Commission’s penny stock regulations, which may limit a stockholder’s ability to buy and sell our stock.
 
Our stock is categorized as a “penny stock.” The Securities and Exchange Commission (“SEC”) has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

 
-11-


FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
 
In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
 
We have never paid dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future.
 
We have paid no cash dividends on any of our classes of capital stock to date and currently intend to retain our future earnings, if any, to fund the development and growth of our business. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. Any payment of cash dividends will depend upon our financial condition, contractual restrictions, financing agreement covenants, solvency tests imposed by corporate law, results of operations, anticipated cash requirements and other factors and will be at the discretion of our board of directors. Furthermore, we may incur indebtedness that may severely restrict or prohibit the payment of dividends.

The market price for our shares may decline following the implementation of a Reverse Split.
 
In the event we affect a Reverse Split of our authorized, and issued and outstanding shares of common stock prior to consummation of the Offering, no assurances can be given that the Reverse Split will have a long-term positive effect on the market price of our common stock.  The market price of our common stock is based on factors that may be unrelated to the number of shares outstanding.  These factors include our performance, general economic and market conditions and other factors, many of which are beyond our control.  The market price for our post-split shares may not rise or remain constant in proportion to the reduction in the number of pre-split shares outstanding before the Reverse Split.  Accordingly, the total market capitalization of our common stock after a Reverse Split may be lower than the total market capitalization before the Reverse Split.

Risks Related to this Offering

There is no minimum offering and therefore your investment may be used even though such investment will not satisfy our capital requirements to complete any project.
 
We have not specified a minimum offering amount and there is no escrow account in operation.  Because there is no escrow account and no minimum offering amount, investors could be in a position where they have invested in our company, but we are unable to fulfill our objectives or proceed with our operations due to a lack of interest in this offering.  If this were to occur, we may be forced to curtail or abandon our operations with a loss to investors who purchase stock under this prospectus.  Further, because there is no escrow account in operation and no minimum investment amount, any proceeds from the sale of shares offered by the Company will be available for immediate use by the Company, despite not being able to use such funds to effectively implement the Company’s business plan.  Investors funds will not be returned under any circumstances whether during or after the offering.

 
-12-

 
We may, in the future, issue additional common shares and/ or preferred stock, which would reduce investors’ percent of ownership and may dilute our share value.

Our Certificate of Incorporation permits us to issue up to 2.25 billion shares of common stock. As of January 8, 2015, we had 818,567,746 shares of common stock issued and outstanding, and, if we sell all shares registered in connection with the Offering, we will have ________ shares issued and outstanding. Accordingly, assuming we sell all shares registered in connection with the Offering, we may issue up to an additional ________ shares of common stock. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.
 
In addition to common stock, our Certificate of Incorporation permits us to issue up to 5.0 million shares of preferred stock.  Our board of directors could authorize the issuance of additional series of preferred stock in the future and such preferred stock could grant holders preferred rights to our assets upon liquidation, the right to receive dividends before dividends would be declared to holders of our common stock, and the right to the redemption of such shares, possibly together with a premium, prior to the redemption of the common stock. In the event and to the extent that we do issue additional preferred stock in the future, the rights of holders of our common stock could be impaired thereby, including without limitation, with respect to liquidation.

We have broad discretion in the use of the net proceeds from this Offering and may not use them effectively.

We will have broad discretion in the application of the net proceeds from this Offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. We intend to use the net proceeds from this Offering for funding our operations; research and product development activities; for property, plant and equipment; for drilling existing and new wells; and for working capital and other general corporate purposes. We may also use a portion of our net proceeds to acquire or invest in complementary businesses or other assets; however, we currently have no agreements or commitments to complete any such transaction. We have not allocated these net proceeds for any specific purposes. We might not be able to yield a significant return, if any, on any investment of these net proceeds. You will not have the opportunity to influence our management’s decisions on how to use the net proceeds from this Offering, and our failure to apply these funds effectively could have a material adverse effect on our business, delay the development of our product candidates and cause the price of our common stock to decline.
 
-13-

 
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. All statements contained in this prospectus other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward- looking statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. We have based these forward- looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors” section. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. 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. We are under no duty to update any of these forward-looking statements after the date of this prospectus or to conform these statements to actual results or revised expectations. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward- looking statements.

 
-14-

 
USE OF PROCEEDS
 
We estimate that our net proceeds from the sale of the shares of common stock that we are offering will be approximately $[_______] based on a public offering price of $[____] per share and estimated Offering expenses.
 
The principal purposes of this Offering are to obtain additional working capital and improve the public market for our common stock. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds of this Offering. However, assuming total net proceeds of $[______] from this Offering, we intend to use the net proceeds from this Offering for future strategic acquisitions and funding our operations, approximately as follows: (i) [____]; (ii) [____]; (iii) [___]; and (iv) [___].

Pending other uses, we intend to invest our proceeds in short-term investments or hold them as cash. We cannot predict whether the proceeds invested will yield a favorable return. Our management will have broad discretion in the use of the net proceeds, and investors will be relying on the judgment of our management regarding the application of the net proceeds.

DIVIDEND POLICY

We have never declared or paid and do not anticipate declaring or paying any cash dividends on our common stock in the near future.  Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our Board of Directors, subject to applicable law, and will depend on then existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, general business conditions and other factors that our board of directors may deem relevant.

 
-15-


DILUTION
 
If you invest in our common stock, your interest will be diluted immediately to the extent of the difference between the public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock immediately after this Offering. As of [______ ___, 2015 our pro forma net tangible book value was approximately $([___]) million, or $([____]) per share of common stock. Pro forma net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by shares of common stock outstanding.
 
Dilution in pro forma net tangible book value per share represents the difference between the amount per share paid by buyers of shares of our common stock in this Offering and the pro forma net tangible book value per share of our common stock immediately following this Offering. After giving effect to the receipt of the net proceeds from our sale of shares of common stock in this Offering at an assumed public offering price of $[___] per share, our pro forma as adjusted net tangible book value as of _______ __, 2015, would have been approximately $(__) million, or $(__) per share of common stock. This data represents an immediate increase in pro forma net tangible book value of $[___] per share to existing stockholders and an immediate dilution of $[___] per share to new investors purchasing shares at the public offering price.
 
The following table illustrates the per share dilution to investors in this Offering:
 
Assumed public offering price per share
        $  
  [___]
Pro forma net tangible book value per share as of ________ __, 2015
  $
(___)
       
Increase in pro forma net tangible book value per share attributable to investors in this Offering
   
[___]
       
               
Less: Pro forma net tangible book value per share as of ______ __, 2015, as adjusted to give effect to this Offering
        $  
 (___)
               
Pro forma as adjusted dilution per share to investors in this Offering
        $  
  [___]

The following table shows, on the pro forma basis described above, the difference between existing stockholders and new investors in this Offering with respect to the number of shares of common stock purchased from us, the total consideration paid and the average price paid per share, before deducting estimated Offering expenses payable by us.
 
 
Shares purchased
   
Total consideration
       
 
Number
Percent
   
Amount
(in thousands)
Percent
 
Average
price per
share
Existing stockholders
[___]
[___]
  $  
[___]
[__]%
  $    
[___]
New investors
[___]
[___]
  $  
[___]
[__]%
  $    
[___]
   
Total
[___]
[___]
  $  
[___]
[___]%
  $    
[___]
     
 
 
-16-

 
DESCRIPTION OF SECURITIES TO BE REGISTERED
 
General

Our authorized capital stock consists of 2.25 billion shares of common stock and 5.0 million shares of preferred stock. The following is a description of our common stock, our only type of capital stock registered in connection with the Offering, and certain provisions of our Certificate of Incorporation, as amended, and our Bylaws, and certain provisions of Delaware law. This summary does not purport to be complete and is qualified in its entirety by the provisions of our Certificate of Incorporation, as amended, and our Bylaws, copies of which have been filed with the SEC as exhibits to our periodic filings under the Exchange Act.
 
Common Stock

Except as otherwise expressly provided in our Certificate of Incorporation, as amended, or as required by applicable law, all shares of our common stock have the same rights and privileges and rank equally, share ratably and are identical in all respects as to all matters, including, without limitation, those described below. All outstanding shares of common stock are fully paid and nonassessable.

Voting rights

Each holder of our common stock is entitled to cast one vote for each share of common stock held on all matters submitted to a vote of stockholders. Cumulative voting for election of directors is not allowed under our articles of incorporation, as amended, which means that a plurality of the shares voted could elect all of the directors then outstanding for election. Except as otherwise provided under Nevada law or our articles of incorporation, as amended, and amended and restated bylaws, on matters other than election of directors, action on a matter is approved if the votes cast favoring the action exceed the votes cast opposing the action

Dividend rights

The holders of outstanding shares of our common stock are entitled to receive dividends out of funds legally available, if our board of directors, in its discretion, determines to issue dividend, and only at the times and in the amounts that our board of directors may determine. Our board of directors is not obligated to declare a dividend. We have not paid any dividends in the past and we do not intend to pay dividends in the foreseeable future. See “Dividend Policy” for more information.

Liquidation rights

Upon our liquidation, dissolution or winding-up, the holders of our common stock will be entitled to share equally, identically and ratably in all assets remaining, subject to the prior satisfaction of all outstanding debt and liabilities and the preferential rights and payment of liquidation preferences, if any, on any outstanding shares of preferred stock.
 
No preemptive or similar rights

Our common stock is not subject to conversion, redemption, sinking fund or similar provisions regarding the common stock.
 
Market for our common stock and related stockholder matters

On March 20, 2013 our common stock began trading on the OTC Markets (“OTCQB”) under the symbol “PTRC.” There was no established trading market for our common stock prior to that date.

 
-17-


Shown below is the range of high and low closing prices for our common stock for the periods indicated as reported by the OTCQB. The market quotations reflect inter-dealer prices, without retail mark-up, markdown or commissions and may not necessarily represent actual transactions.

Fiscal Year Ended
 
Common Stock
 
   
High
   
Low
 
April 30, 2015
               
First Quarter
 
$
0.085
   
$
0.035
 
Second Quarter
 
$
0.079
   
$
0.034
 
                 
April 30, 2014
               
First Quarter
 
$
0.500
   
$
0.160
 
Second Quarter
 
$
0.360
   
$
0.028
 
Third Quarter
 
$
0.115
   
$
0.019
 
Fourth Quarter
 
$
0.105
   
$
0.059
 
                 
April 30, 2013
               
First Quarter
 
$
0.115
   
$
0.0021
 
Second Quarter
 
$
0.094
   
$
0.041
 
Third Quarter
 
$
0.135
   
$
0.022
 
Fourth Quarter
 
$
0.500
   
$
0.130
 

On January 8, 2015, the closing price of our common stock on the OTCQB was $0.0348 per share.

Options

As of January 8, 2015, we had options to purchase 106,938,281 shares of our common stock outstanding pursuant to our 2012 Equity Compensation Plan.

Warrants

As of January 31, 2015, we had warrants to purchase 40,625,000 shares of our common stock were outstanding.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Computershare. The transfer agent’s address is 510 Burrard Street, 3rd Floor, Vancouver BC V6B 3B9.
 
 
-18-

 
PLAN OF DISTRIBUTION
 
The Offering
 
We are offering up to ______ shares of our common stock for $______ per share on a self-underwritten basis.  Funds from this Offering will not be placed in a separate bank account.  We will have immediate use of the net proceeds. As a result, if we are sued for any reason and a judgment is rendered against us, your subscription could be seized in a garnishment proceeding and you could lose your investment. There are no finders involved in our distribution.

You will not have the right to withdraw your funds during the Offering.

We will sell the shares in this Offering through our officers and directors. They will receive no commission from the sale of any shares. They will not register as a broker-dealer under Section 15 of the Securities Exchange Act of 1943, as amended (the “Exchange Act”) in reliance upon Rule 3a4-1. Rule 3a4-1 sets forth those conditions under which a person associated with an issuer may participate in the offering of the issuer’s securities and not be deemed to be a broker/dealer. The conditions are that:
 
1.  
The person is not statutorily disqualified, as that term is defined in Section 3(a)(39) of the Securities Act of 1933, as amended (the “Securities Act”), at the time of her participation;

2.  
The person is not compensated in connection with her participation by the payment of commissions or other remuneration based either directly or indirectly on transactions in securities;

3.  
The person is not at the time of their participation, an associated person of a broker/dealer; and

4.  
The person meets the conditions of Paragraph (a)(4)(ii) of Rule 3a4-1 of the Exchange Act, in that he (A) primarily performs, or is intended primarily to perform at the end of the Offering, substantial duties for or on behalf of the Issuer otherwise than in connection with transactions in securities; and (B) is not a broker or dealer, or an associated person of a broker or dealer, within the preceding twelve months; and (C) does not participate in selling and offering of securities for any Issuer more than once every twelve months other than in reliance on Paragraphs (a)(4)(i) or (a)(4)(iii).
 
We hereby confirm that our directors and officers are not statutorily disqualified, are not being compensated, and are not associated with a broker/dealer. They will continue to be our officers and directors at the end of the Offering and have not been, during the last twelve months a broker/dealer or associated with a broker/dealer. They will not participate in selling and offering securities for any issuer more than once every twelve months.

Only after the SEC declares our registration statement effective do we intend to advertise and hold investment meetings in various states where the Offering will be registered.  Our officers and directors will also distribute the prospectus to potential investors at meetings, to business associates, and to friends and relatives who are interested in a possible investment in the Offering. No shares purchased in this Offering will be subject to a lock-up agreement.

We reserve the right to sell the securities in this Offering though a placement agent, broker, dealer, finder, underwriter and/or wholesaler.  We will provide an applicable prospectus supplement reflecting (i) the identity of any underwriter, dealer or agent, (ii) any compensation we will pay to underwriters, dealers or agents in connection with this Offering, (iii) any discounts, concessions or commissions allowed by underwriters to participating dealers, (iv) the amounts underwritten; and (v) the nature of the underwriter’s or underwriters’ obligation to take the securities. Underwriters, dealers and agents participating in the distribution of the securities may be deemed to be underwriters within the meaning of the Securities Act, and any discounts and commissions received by them and any profit realized by them on resale of the securities may be deemed to be underwriting discounts and commissions. We may enter into agreements to indemnify underwriters, dealers and agents against civil liabilities, including liabilities under the Securities Act, or to contribute to payments they may be required to make in respect thereof.
 
 
-19-

 
Regulation M
 
Each of our officers and directors, who will promote the shares, is aware that he is required to comply with the provisions of Regulation M, promulgated under the Exchange Act. With certain exceptions, Regulation M precludes officers and/or directors, sales agents, any broker-dealers or other person who participate in the distribution of shares in this Offering from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete.
  
Offering Period and Expiration Date
 
This Offering will start on the date that this Registration Statement of which this prospectus is a part is declared effective by the SEC and continue for a period of 365 days, or sooner, if the Offering is completed or otherwise terminated by us.
 
We will not offer to sell through the use or medium of any prospectus or otherwise any security until the Registration Statement, of which this prospectus is a part, is declared effective by the SEC.
 
Right to Reject Subscriptions
 
We have the right to accept or reject subscriptions in whole or in part, for any reason or for no reason. All monies from rejected subscriptions will be returned immediately to the subscriber, without interest or deductions. Subscriptions for securities will be accepted or rejected within 48 hours after we receive them.

We estimate that the total expenses of this Offering, including registration, filing and listing fees, printing fees and legal and accounting expenses will be approximately $_________.
  
Prior to this Offering, there has been a limited public market for our common stock. We cannot assure investors that an active trading market will develop for our common stock, or that the shares will trade in the public market at or above the public offering price of the common stock in this Offering.
 
Other than in the United States, no action has been taken by us that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other Offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the Offering and the distribution of this prospectus.

This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

 
-20-


BUSINESS

We are an enterprise engaged in the exploration and exploitation of conventional and unconventional oil and gas assets with a focus on drilling, completion, recompletions and applying modern technologies. Our core holdings and principal operations are in the mid-continent region of the United States in Oklahoma, Kansas and Missouri. We are driven to utilize our expertise both in the mid-continent region and in similar formations to exploit hydrocarbon prone resources with tight and/or challenging characteristics in order to create value for the Company and our shareholders. Our principal administrative office is located in Houston, Texas and its principal operations are in Oklahoma, Kansas and Western Missouri. The Company also has an office in New York, New York. 

Our operations are currently focused on exploring and producing in the Mississippian Lime play. Our heavy oil reservoirs in this area are currently in technical review. We have an extensive amount of technical and reservoir information on our Missouri, Oklahoma and Kentucky positions. The data is being utilized in the understanding and test phases to develop an economic heavy oil production reserve base. In addition to our current research and development efforts, we are in discussions with industry partners to capitalize on and develop acreage in the Mississippian Lime, including possible joint venture partners and acquisition targets.
 
Overview
 
We were originally incorporated under the Company Act (British Columbia) on February 8, 2000 under the name Brockton Capital Corp. We then changed our name to MegaWest Energy Corp. effective February 27, 2010 before changing it to Gravis Oil Corp. on June 20, 2011. On September 11, 2012, we re-organized under the laws of the State of Delaware as a corporation organized under the Delaware General Corporation Law. Prior to September 11, 2012, and at April 30, 2012, we were organized under the laws of Alberta, Canada.
 
Petro River Oil LLC (“Petro”), our wholly owned subsidiary, was incorporated under the laws of the State of Delaware on March 3, 2011. Through proceeds received from the issuance of various promissory notes, on February 1, 2012, Petro purchased various interests in oil and gas leases, wells, records, data and related personal property located along the Mississippi Lime play in the state of Kansas from Metro Energy Corporation (“Metro”), a Louisiana company, and other interrelated entities, through a court approved order as Metro was undergoing Chapter 11 Bankruptcy proceedings as a Debtor-In-Possession of these various oil and gas assets. Petro purchased these assets for cash consideration of $2,000,000 as well as a 25% non-managing membership interest in Petro.  During the quarter ended October 31, 2014, we engaged Energy Source Advisors to renew a number of the leases acquired in the Metro purchase and to lease additional acreage. As a result of the asset purchase from Metro and the completion of the additional lease renewals and additional acreage purchases, we obtained a total of 115,000 gross (85,000 net acres) of leases, having unproven reserves at the time of acquisition, in the Mississippi Lime in Southeast Kansas for total cost of $12.2 million.

On April 23, 2013, the Company executed and consummated a securities purchase agreement by and among the Company, Petro, and the investors in Petro (the “Investors”), namely, the holders of outstanding secured promissory notes of Petro (the “Notes”), and those holding membership interests in Petro (the “Membership Interests”, and, together with the Notes, the “Acquired Securities”) sold by Petro (the “Share Exchange”). In the Share Exchange, the Investors exchanged their Acquired Securities for 591,021,011 newly issued shares of the Company's common stock. Upon completion of the Share Exchange, Petro became the Company’s wholly owned subsidiary.
 
As a result of the Share Exchange, the Company acquired 100% of the membership units of Petro and consequently, control of the business and operations of Petro. Under generally accepted accounting principles in the United States (“U.S. GAAP”), because Petro’s former members and note holders held 80% of the issued and outstanding shares of the Company as a result of the Share Exchange, Petro is deemed the accounting acquirer while the Company remains the legal acquirer. Petro adopted the fiscal year of the Company. Prior to the Share Exchange, all historical financial statements presented are those of Petro. The equity of the Company is the historical equity of Petro, restated to reflect the number of shares issued by the Company in the transaction.
 
 
-21-

 
Recent Developments

Acquisition of Interest in Bandolier Energy, LLC.   On May 30, 2014, we entered into a Subscription Agreement, pursuant to which we received a 50% interest in Bandolier Energy, LLC (“Bandolier”) in exchange for a capital contribution of $5,000,000 (the “Bandolier Acquisition”).

After the Bandolier Acquisition, Bandolier acquired all of the issued and outstanding equity of Spyglass Energy Group, LLC (“Spyglass”), the owner of oil and gas leases, leaseholds, lands, and options and concessions thereto located in Osage County, Oklahoma, effective January 1, 2014, for a purchase price of approximately $8.7 million. Spyglass comprises the largest contiguous oil and gas acreage position in Northeastern Oklahoma, approximately 106,000 acres, with substantial original oil in place, stacked reservoirs, as well as exploratory and development opportunities that can be accessed through both horizontal and vertical drilling. Significant infrastructure is already in place including 32 square miles of 3D seismic, 3 phase power, a dedicated sub-station as well as multiple oil producing horizontal wells.
 
As a result of the Bandolier Acquisition and Bandolier’s subsequent acquisition of Spyglass, we now have both proven developed and proven undeveloped oil and gas assets.

Strategy
 
Our business strategy is to acquire working interests in oil and gas producing areas. We believe such opportunities exist domestically and internationally. We also believe that these opportunities have considerable future potential for the development of proven oil and gas reserves. Such new reserves might come from the development of existing but as yet undeveloped and/or unproved reserves as well as from future success in exploration.
  
When and if funding becomes available, we plan to acquire high-quality oil and gas properties, primarily “proved producing and proved undeveloped reserves.” We will also explore low-risk development drilling and work-over opportunities.
 
Competition
 
We operate in a highly competitive environment. We compete with major and independent oil and natural gas companies, many of whom have financial and other resources substantially in excess of those available to us. These competitors may be better positioned to take advantage of industry opportunities and to withstand changes affecting the industry, such as fluctuations in oil and natural gas prices and production, the availability of alternative energy sources and the application of government regulation.
 
Compliance with Government Regulation
 
The availability of a ready market for future oil and gas production from possible U.S. assets depends upon numerous factors beyond our control. These factors may include, amongst others, regulation of oil and natural gas production, regulations governing environmental quality and pollution control, and the effects of regulation on the amount of oil and natural gas available for sale, the availability of adequate pipeline and other transportation and processing facilities and the marketing of competitive fuels. These regulations generally are intended to prevent waste of oil and natural gas and control contamination of the environment.
 
We expect that our sales of crude oil and other hydrocarbon liquids from our future U.S.-based production will not be regulated and will be made at market prices. However, the price we would receive from the sale of these products may be affected by the cost of transporting the products to market via pipeline.

 
-22-

 
Environmental Regulations
 
Our U.S. assets are subject to numerous laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. These laws and regulations may require the acquisition of a permit before drilling commences, restrict the types, quantities and concentration of various substances that can be released into the environment in connection with drilling and production activities, limit or prohibit drilling activities on certain lands within wilderness, wetlands and other protected areas, require remedial measures to mitigate pollution from former operations, such as pit closure and plugging abandoned wells, and impose substantial liabilities for pollution resulting from production and drilling operations. Public interest in the protection of the environment has increased dramatically in recent years. The worldwide trend of more expansive and stricter environmental legislation and regulations applied to the oil and natural gas industry could continue, resulting in increased costs of doing business and consequently affecting profitability. To the extent laws are enacted or other governmental action is taken that restricts drilling or imposes more stringent and costly waste handling, disposal and cleanup requirements, our business and prospects could be adversely affected.
 
Operating Hazards and Insurance
 
The oil and natural gas business involves a variety of operating hazards and risks such as well blowouts, craterings, pipe failures, casing collapse, explosions, uncontrollable flows of oil, natural gas or well fluids, fires, formations with abnormal pressures, pipeline ruptures or spills, pollution, releases of toxic gas and other environmental hazards and risks. These hazards and risks could result in substantial losses to us from, among other things, injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, clean-up responsibilities, regulatory investigation and penalties and suspension of operations.
 
In accordance with customary industry practices, we expect to maintain insurance against some, but not all, of such risks and losses. There can be no assurance that any insurance we obtain would be adequate to cover any losses or liabilities. We cannot predict the continued availability of insurance or the availability of insurance at premium levels that justify its purchase. The occurrence of a significant event not fully insured or indemnified against could materially and adversely affect our financial condition and operations.
 
Pollution and environmental risks generally are not fully insurable. The occurrence of an event not fully covered by insurance could have a material adverse effect on our future financial condition. If we were unable to obtain adequate insurance, we could be forced to participate in all of our activities on a non-operated basis, which would limit our ability to control the risks associated with oil and natural gas operations.

Research and Development
 
We do not currently, and did not previously, have any research and development policies in place. The Company formed Petro Spring, LLC, a wholly owned subsidiary, on December 12, 2013, to begin to focus on technology solutions. As of January 31, 2015, no funds were expended by our Company on research and development activities.
 
Employees
 
At January 31, 2015, we employed four employees.
 
Geographical Area of the Company’s Business
 
The principal market that we compete in is the North American energy market, specifically the North American oil market. The Company is currently contemplating expansion in to international energy markets.
 
 
-23-

 
DESCRIPTION OF PROPERTIES

Oklahoma
 
On May 30, 2014, the Company completed the Bandolier Acquisition, pursuant to which the Company purchased a 50% interest in Bandolier. Bandolier’s oil and gas assets are located in in Osage County, Oklahoma and comprise a significant contiguous oil and gas acreage position in Northeastern Oklahoma, approximately 106,000 acres, with substantial original oil in place, stacked reservoirs, as well as exploratory and development opportunities that can be accessed through both horizontal and vertical drilling. Significant infrastructure is already in place including 32 square miles of 3D seismic, 3 phase power, a dedicated sub-station as well as multiple oil producing horizontal wells. As a result of this transaction, the Company capitalized $2,460,632 in proven developed oil and gas assets and $5,921,641 in proven undeveloped oil and gas assets.
 
Missouri
 
At January 31, 2015, the Company’s Missouri lease holdings totaled 1,272 gross acres with a 98.4% working interest.
 
On separate pilot projects at Deerfield, the Company built two 500 barrel of oil per day steam drive production facilities (Marmaton River and Grassy Creek) comprised of 116 production wells, 39 steam injection wells and 14 service and observation wells. Throughout the Deerfield area, the predecessor Company has drilled 73 exploration/delineation wells with a 67% success rate.
 
As of April 30, 2014 and 2013, all Missouri assets were carried at salvage value, since the Company’s current business plans do not contemplate raising the necessary capital to develop these properties. The company is in current discussions with third parties to use the acreage as a testing site for heavy oil solutions with contemplated profit sharing opportunities.
 
Kentucky
 
As a result of the acquisition of Perto as a wholly owned subsidiary of the Company, we acquired Kentucky lease holdings which include a 37.5 % working interest in 27,150 unproved gross acres (10,181 net acres). At January 8, 2015, the Kentucky lease holdings acquired as a result of the share exchange have expired.
  
Kansas
 
The Company has 105,277 gross/80,225 net acres in the Mississippi Lime play. The Company also acquired over 60 square miles of proprietary 3D seismic data over prospective Mississippi Lime acreage in the same area.
 
The acquisition of the Mississippi Lime play oil and gas assets for $12.2 million in 2012 consisted of a 100% interest in 120 oil and gas leases, which cover approximately 85,000 gross mineral acres located in various counties in the state of Kansas. During the year ended April 30, 2014, the period January 1, 2013 to April 30, 2013 and for the period February 2, 2012 (commencement of operations) to December 31, 2012, the Company capitalized approximately an additional $327,002, $98,764 and $12,191,965 of Kansas oil and gas expenditures.

During the year ended April 30, 2014, management engaged an independent third party to test the Kansas assets for impairment. Throughout the year, management was not aware of any impairment indicators, but during the annual impairment test, the third party specialist concluded that the Kansas assets were impaired by $4,638,973, principally due to comparable acreage values. No further impairment was recorded on these assets during the three and six months ended October 31, 2014.
 
Other
 
Other property consists primarily of four used steam generators and related equipment that will be assigned to future projects.

 
-24-

 
LEGAL PROCEEDINGS
 
(a) In January 2010, the Company experienced a flood in its Calgary office premises as a result of a broken water pipe. There was significant damage to the premises rendering them unusable until the landlord had completed remediation. Pursuant to the lease contract, the Company has asserted that rent should be abated during the remediation process and accordingly, the Company has not paid rent since December 2009. During the remediation process, the Company engaged an independent environmental testing company to test for air quality and for the existence of other potentially hazardous conditions. The testing revealed the existence of potentially hazardous mold and the consultant provided specific written instructions for the effective remediation of the premises. During the remediation process, the landlord did not follow the consultant’s instructions and correct the potentially hazardous mold situation and subsequently in June 2010 gave notice and declared the premises to be ready for occupancy. The Company re-engaged the consultant to re-test the premises and the testing results again revealed the presence of potentially hazardous mold. The Company has determined that the premises are not fit for re-occupancy and considers the landlord to be in default of the lease and the lease terminated.
 
The landlord disputes the Company’s position and has given notice that it considers the Company to be in default of the lease for failure to re-occupy the premises.
 
In addition, the landlord has previously claimed that the Company owes monthly rent for the premises from January 2010 to June 30, 2010 in the amount of $247,348 and has claimed that, as a result of the alleged default, pursuant to the terms of the lease, the Company owes three months accelerated rent in the amount of $114,837. The landlord has previously also asserted that the Company would be liable for an amount up to the full lease obligation of $1,596,329 which otherwise would have been due as follows:
 
Year Ended April 30
     
2011
 
$
473,055
 
2012
   
473,055
 
2013
   
473,055
 
2014
   
177,164
 
Total
 
$
1,596,329
 
 
On January 30, 2014, the landlord filed a Statement of Claim against the Company in the amount aggregating approximately $759,000. On October 20, 2014, the Company filed a summary judgment application stating that landlord’s claim is barred as it was commenced outside the 2 year statute of limitation period under the Alberta Limitations Act. If the landlord contests our summary judgment application, the court will schedule a hearing expected no earlier than June 2015.

(b) In September 2013, the Company was notified by the Railroad Commission of Texas (the “Commission”) that the Company was not in compliance with regulations promulgated by the Commission. The Company was therefore deemed to have lost its corporate privileges within the State of Texas and as a result, all wells within the state would have to be plugged. The Commission therefore collected $25,000 from the Company, which was originally deposited with the Commission, to cover a portion of the estimated costs of $88,960 to plug the wells. In addition to the above, the Commission also reserved its right to separately seek any remedies against the Company resulting from its noncompliance.

(c) On July 3, 2014, the Company entered into a memorandum of understanding with Sichuan Renzhi Oilfield Technology Services Co. Ltd., a corporation incorporated under the laws of the People’s Republic of China and traded on the Shenzhen Stock Exchange (“Renzhi”), which is memorialized in a Framework Agreement for Acquisition and Cooperation (the “MOU”). The MOU sets forth a framework for (i) the sale by the Company, and the purchase by Renzhi, of PO1, LLC (“PO1”), a wholly-owned subsidiary of the Company which owns 51% of the issued and outstanding membership interests of Spyglass, the owner of oil and gas leases, leaseholds, lands, and options and concessions thereto, located in Osage County, Oklahoma; and (ii) the joint development by the Company and Renzhi of oil and gas technology and properties (collectively, the “Transactions”), with an aggregate investment by Renzhi to the Company in the amount of $87.5 million.

 
-25-

 
The Company and Renzhi intend to enter into one or more definitive agreements to effectuate the terms of the MOU. The execution of definitive documentation with respect to the Transactions remains subject to additional negotiations between the parties, further due diligence, Renzhi obtaining financing in order to comply with its obligations, and applicable Chinese regulatory approvals. There can be no assurance that definitive documentation for the Transactions will be entered into by the parties or that the
 
(d) On August 11, 2014, Martha Donelson and John Friend amended their complaint in an existing lawsuit by filing a class action complaint styled: Martha Donelson and John Friend, et al. v. United States of America, Department of the Interior, Bureau of Indian Affairs and Devon Energy Production, LP, et al., Case No. 14-CV-316-JHP-TLW, United States District Court for the Northern District of Oklahoma (the “Proceeding”).  The plaintiffs added as defendants twenty-seven (27) specifically named operators, including the Company, as well as all Osage County lessees and operators who have obtained a concession agreement, lease or drilling permit approved by the Bureau of Indian Affairs (“BIA”) in Osage County allegedly in violation of National Environmental Policy Act (“NEPA”).  Plaintiffs seek a declaratory judgment that the BIA improperly approved oil and gas leases, concession agreements and drilling permits prior to August 12, 2014, without satisfying the BIA’s obligations under federal regulations or NEPA, and seek a determination that such oil and gas leases, concession agreements and drilling permits are void ab initio.  Plaintiffs are seeking damages against the defendants for alleged nuisance, trespass, negligence and unjust enrichment.
 
On October 7, 2014 Spyglass, along with other defendants, filed a motion to dismiss the Proceeding on various procedural and legal arguments.  Plaintiffs filed their response to the motion to dismiss on October 27, 2014.  Spyglass filed its reply brief on November 10, 2014 and the plaintiffs have been granted leave until November 19, 2014 to file a surreply to Spyglass’s reply brief.  Once the briefing cycle is concluded on November 19, 2014, the motion to dismiss becomes ripe for determination by the court.  Oral arguments may be ordered by the court.  There is no specific timeline by which the court must render a ruling.
 
(e) Mega West Energy Missouri Corp. (“Mega West”), a wholly owned subsidiary of the Company, is involved in two cases related to oil leases in West Central, Missouri.  The first case (James Long and Jodeane Long v. Mega West Energy Missouri and Petro River Oil Corp., case number 13B4-CV00019) is a case for unlawful detainer, pursuant to which the plaintiffs contend that Mega West oil and gas lease has expired and Mega West is unlawfully possessing the plaintiffs real property by asserting that the leases remain in effect.  The case was originally filed in Vernon County, Missouri on September 20, 2013.  Mega West filed an Answer and Counterclaims on November 26, 2013 and the plaintiffs filed a motion to dismiss the counterclaims. Mega West filed a motion for Change of Judge and Change of Venue and the case was transferred to Barton County.  The court granted the motion to dismiss the counterclaims on February 3, 2014.  As to the other allegations in the complaint, the matter is still pending.
 
Mega West filed a second case on October 14, 2014 (Mega West Energy Missouri Corp. v. James Long, Jodeane Long, and Arrow Mines LLC, case number 14VE-CV00599).  This case is pending in Vernon County, Missouri.  Although the two cases are separate, they are interrelated.  In the Vernon County case, Mega West has made claims for: (1) replevin for personal property; (2) conversion of personal property; (3) breach of the covenant of quiet enjoyment regarding the lease; (4) constructive eviction of the lease; (5) breach of fiduciary obligation against James Long; (6) declaratory judgment that the oil and gas lease did not terminate; and (7) injunctive relief to enjoin the action pending in Barton County, Missouri.  The plaintiffs filed a motion to dismiss on November 4, 2014, and Arrow Mines, LLC filed a motion to dismiss on November 13, 2014.  Both motions remain pending, and Mega West will file an opposition to the motions in the near future. 

(f) The Company is from time to time involved in legal proceedings in the ordinary course of business. It does not believe that any of these claims and proceedings against it is likely to have, individually or in the aggregate, a material adverse effect on its financial condition or results of operations.

 
-26-

 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this prospectus. 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 these differences include those discussed below and elsewhere in this prospectus, particularly in “Risk Factors.”
 
Overview

Petro River Oil Corp. is an independent exploration and production company with a focus on drilling, recompletions, and applying modern technologies to both conventional and unconventional oil and gas assets. Specific targets include: increasing production by developing our acreage, increasing profit margins by evaluating and optimizing our production, and executing our business plan to increase property values, reserves, and expanding our asset base.
 
We benefit from having an experienced management team with proven acquisition, operating and financing capabilities. Mr. Scot Cohen, our Executive Chairman, has over 20 years of financial management experience including five years as managing partner of Iroquois Capital Opportunity Fund, a private equity fund focused on oil and gas. He has raised equity and debt for a number of small and microcap public companies.
 
Mr. Cohen is joined by Luis Vierma, Daniel Smith and Ruben Alba who make up the Company’s technical leadership. Mr. Vierma has 35 years of experience in oil and gas including VP of Exploration and Production at Petróleos de Venezuela, S.A, (“PDVSA”) the fourth largest oil company in the world. Mr. Vierma has a BS in Chemistry and MS in Geology and leads the Company’s Geological and Geophysical team. Mr. Smith is a registered petroleum engineer with over 15 years’ experience. Mr. Smith spent his career at XTO Energy where he served as an operations engineer responsible for managing fields producing in excess of 100 million cubic feet of natural gas per day. Mr. Alba has been active in the oil and gas industry since 1997. Previously he was with Halliburton Energy Services and Superior Well Services overseeing regional technical staff and operations. Mr. Alba manages the Company’s heavy oil projects in Missouri and Kentucky.
 
The Company is focused on developing its recently acquired Mississippi Lime acreage. Over the last 12 months the Company has continued to build out its leadership and technical team. Additionally, the Company has been in discussions with industry partners to capitalize and develop acreage in the Mississippi Lime. The Company continues to seek out joint venture partners and acquisition targets.
 
Projects related to the heavy oil reservoirs are in technical review. The Company has an extensive amount of technical and reservoir information on the Missouri, Oklahoma and Kentucky positions. The data is being utilized in the understanding and test phases to develop an economic heavy oil production reserve base.
 
The Company continues to explore various opportunities to raise capital to support the growth of the Company. These opportunities include, without limitation, potential joint ventures with various on and offshore entities and potential private issuances of equity, debt or a combination thereof. There can be no assurance that the Company will enter into any of these transactions. Mr. Cohen and Mr. Vierma have extensive experience in capital markets and oil and gas joint ventures. During his time as VP of Exploration and Production at PDVSA, Mr. Vierma negotiated billions of dollars of joint ventures with foreign oil and gas companies.

On December 12, 2013, the Company signed a Securities Purchase Agreement (the “Agreement”) with Petrol Lakes Holding Limited (“Petrol Lakes”). Pursuant to the terms of the Agreement, Petrol Lakes agreed to purchase: (i) 81.25 million shares of the Company’s common stock, at a per share price of $0.08, for an aggregate purchase price of $6.5 million; and (ii) a warrant to purchase shares of the Company’s common stock. Under the terms of the warrant, Petrol Lakes may purchase up to 40,625,000 shares of the Company’s common stock at a per share price of $0.1356, for an aggregate purchase price of $6.5 million. The warrant, which is exercisable in whole or in part, will expire on December 12, 2015. The Company paid issuance costs of $650,000.

 
-27-

 
Under the Agreement, Petrol Lakes also has the right to appoint one director to the Company’s Board of Directors, which director shall remain on the Board at least through the first annual meeting of the Company after the one-year anniversary of the Agreement. As of the date hereof, Petrol Lakes has not exercised this right.

Acquisition of Interest in Bandolier Energy, LLC.   On May 30, 2014, we entered into a Subscription Agreement, pursuant to which we received a 50% interest in Bandolier Energy, LLC (“Bandolier”) in exchange for a capital contribution of $5,000,000 (the “Bandolier Acquisition”).

After the Bandolier Acquisition, Bandolier acquired all of the issued and outstanding equity of Spyglass Energy Group, LLC (“Spyglass”), the owner of oil and gas leases, leaseholds, lands, and options and concessions thereto located in Osage County, Oklahoma, effective January 1, 2014, for a purchase price of approximately $8.7 million. Spyglass comprises the largest contiguous oil and gas acreage position in Northeastern Oklahoma, approximately 106,000 acres, with substantial original oil in place, stacked reservoirs, as well as exploratory and development opportunities that can be accessed through both horizontal and vertical drilling. Significant infrastructure is already in place including 32 square miles of 3D seismic, 3 phase power, a dedicated sub-station as well as multiple oil producing horizontal wells.
 
As a result of the Bandolier Acquisition and Bandolier’s subsequent acquisition of Spyglass, we now have both proven developed and proven undeveloped oil and gas assets.
 
Critical Accounting Policies and Estimates
 
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements presented in this prospectus. These financial statements are prepared in accordance with generally accepted accounting principles in the United States (“US GAAP”), which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities and revenues and expenses, to disclose contingent assets and liabilities on the date of the financial statements, and to disclose the reported amounts of revenues and expenses incurred during the financial reporting period. The most significant estimates and assumptions include the valuation of accounts receivable, and the useful lives and impairment of property and equipment, goodwill and intangible assets, the valuation of deferred tax assets and inventories and the provision for income taxes. We continue to evaluate these estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these evaluations as the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We believe critical accounting policies as disclosed in this prospectus reflect the more significant judgments and estimates used in preparation of our condensed consolidated financial statements. We believe there have been no material changes to our critical accounting policies and estimates.
 
The following critical accounting policies rely upon assumptions and estimates and were used in the preparation of our consolidated financial statements:
 
Oil and Gas Operations
 
The Company follows the full cost method of accounting for oil and gas operations whereby all costs related to exploration and development of oil and gas reserves are capitalized. Under this method, the Company capitalizes all acquisition, exploration and development costs incurred for the purpose of finding oil and natural gas reserves, including salaries, benefits and other internal costs directly attributable to these activities. Costs associated with production and general corporate activities, however, are expensed in the period incurred. Costs are capitalized on a country-by-country basis. To date, there has only been one cost center, the United States.

 
-28-

 
The present value of estimated future net cash flows is computed by applying the average first-day-of-the-month prices during the previous twelve-month period of oil and natural gas to estimated future production of proved oil and natural gas reserves as of year-end less estimated future expenditures to be incurred in developing and producing the proved reserves and assuming continuation of existing economic conditions. Prior to December 31, 2009, prices and costs used to calculate future net cash flows were those as of the end of the appropriate quarterly period.
 
Following the discovery of reserves and the commencement of production, the Company will compute depletion of oil and natural gas properties using the unit-of-production method based upon production and estimates of proved reserve quantities. Costs associated with unproved properties are excluded from the depletion calculation until it is determined whether or not proved reserves can be assigned to such properties. Unproved properties are assessed for impairment annually. Significant properties are assessed individually.
 
The Company assesses all items classified as unproved property on an annual basis for possible impairment. The Company assesses properties on an individual basis or as a group if properties are individually insignificant. The assessment includes consideration of the following factors, among others: land relinquishment; intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; the assignment of proved reserves; and the economic viability of development if proved reserves are assigned. During any period in which these factors indicate impairment, the related exploration costs incurred are transferred to the full cost pool and are then subject to depletion and the ceiling limitations on development oil and natural gas expenditures.
 
Proceeds from the sale of oil and gas assets are applied against capitalized costs, with no gain or loss recognized, unless a sale would alter the rate of depletion and depreciation by 25 percent or more.
 
Significant changes in these factors could reduce our estimates of future net proceeds and accordingly could result in an impairment of our oil and gas assets. Management will perform annual assessments of the carrying amounts of its oil and gas assets as additional data from ongoing exploration activities becomes available.
 
As of April 30, 2014, management engaged a third party to perform an independent study of the oil and gas assets. Management concluded that the Montana assets were impaired by $75,000 and the Kansas assets were impaired by $4,638,973. The Company recorded $4,713,973 impairment to the consolidated statements of operations during the year ended April 30, 2014. For the six months ended October 31, 2014, the Company did not record impairment on its oil and gas assets.

 
-29-

 
Financial Condition and Results of Operations
 
As a result of the April 23, 2013 acquisition and share exchange transaction wherein Petro River Oil, LLC became a wholly owned subsidiary of the Company (the “Share Exchange”), Petro was deemed the accounting acquirer. All historical financial information is that of Petro River Oil, LLC.
 
For the Year ended April 30, 2014 and the Period January 1, 2013 to April 30, 2013 and for the Period February 2, 2012 (Commencement of Operations) to December 31, 2012:
 
   
For the Year
Ended
April 30, 2014
   
For the Four
Month Period
January 1, 2013 to
April 30, 2013
   
For the Period
February 2, 2012
(Commencement
of Operations)
to December 
31, 2012
 
Operations
                       
Revenues
                       
Oil and natural gas sales
 
$
372,179
   
$
184,676
   
$
16,901
 
Total Revenues
   
372,179
     
184,676
     
16,901
 
                         
Operating Expenses
                       
Operating
   
286,507
     
144,439
     
82,663
 
General and administrative
   
4,195,437
     
623,136
     
526,460
 
Depreciation and accretion
   
153,108
     
29,304
     
80,481
 
Impairment of oil and gas assets
   
4,713,973
     
-
     
-
 
Impairment of excess purchase price
   
-
     
1,093,527
     
-
 
Gain on settlement of liability
   
(20,069
)
   
-
     
-
 
Total Expenses
   
9,328,956
     
1,890,406
     
689,604
 
                         
Operating loss
   
(8,956,777
)
   
(1,705,730
)
   
(672,703
)
                         
Other income (expenses)
                       
Interest and other income
   
3,253
     
5,174
     
34,658
 
Interest expense and amortization of debt discount
   
(5
)
   
(619,178
)
   
(1,277,572
)
Total other income (expenses)
   
3,248
     
(614,004
)
   
(1,242,914
)
                         
Net Loss
 
$
(8,953,529
)
 
$
(2,319,734
)
 
$
(1,915,617
)
                         
Net Loss per Common Share
                       
Basic and Diluted
 
$
(0.01
)
 
$
(0.00
)
 
$
(0.00
)
 
Oil Sales
 
During the year ended April 30, 2014, the Company recognized $372,179 in oil and gas sales. The Company had $253,779 in oil sales and $118,400 in gas sales during the period. Sales were $184,676 for the period January 1, 2013 to April 30, 2013. Sales were $16,901 for the period February 2, 2012 (inception) to December 31, 2012. The Company continues to recognize minimal sales. The Company is focused on raising capital in order to execute the business plan; as a result the Company is yet to generate material oil and gas sales.  

 
-30-

 
Interest and Other Income
 
During the year ended April 30, 2014 interest and other income of $3,253 consisted mainly of interest on cash balances, as compared interest and other income for period January 1, 2013 to April 30, 2013 of $5,174 from the cash balances. For period February 2, 2012 (inception) to December 31, 2012 of $34,658 which consisted mainly of interest earned on 10% demand notes to a related party. As of the date of the share exchange agreement, these demand loans were eliminated in the consolidation.
 
Operating Expenses
 
During the year ended April 30, 2104, operating expenses were $286,507, as compared to operating expenses of $144,439 for the period January 1, 2013 to April 30, 2013 and $82,663 for the period February 2, 2012 to December 31, 2012. The increases in operating expenses are primarily attributable to a full year of operations for the Company as of April 30, 2014 and newly commenced operations during 2012. As of April 30, 2014, management performed a third party study of the oil and gas assets. Management concluded that the Montana assets were impaired by $75,000 and the Kansas assets were impaired by $4,638,973. We recorded a $4,713,973 impairment to the statement of operations during the year ended April 30, 2014. We performed a test of oil and gas assets as of April 30, 2013, and concluded that the excess purchase price paid for its Missouri property exceeded it net realizable value, and as a result it recognized an impairment in the amount of $1,093,527.
 
For the year ended April 30, 2014, the Company recorded a gain on the settlement of liability of $20,069 for an outstanding liability with a vendor. 
 
General and Administrative Expenses
 
General and administrative expenses for the year ended April 30, 2014 were $4,195,437, as compared to $623,136 for the period January 1, 2013 to April 30, 2013 and $526,460 for the period February 2, 2012 to December 31, 2012. The increases are primarily attributable to the Company operating for a full year compared to the prior year and the newly commenced operations during 2012. The changes are outlined below:
 
   
For the Year
Ended
April 30, 2014
   
For the Period January 1, 2013
to April 30, 2013
 
For the Period
February 2, 2012
to December 
31, 2012
Salaries and benefits
 
$
2,128,463
   
$
133,391
 
$
-
Professional fees
   
1,630,781
     
432,161
   
379,609
Office and administrative
   
427,890
     
57,499
   
64,076
Information technology
   
8,303
     
85
   
82,775
                     
   
$
4,195,437
   
$
623,136
 
$
526,460
 
The increases in general and administrative expenses are primarily attributable to the Company ramping up operations after the completion of the Share Exchange and conducting operations for a full year. This consists of increases in salary and benefits, insurance costs and other office expenses. Salary and benefits include non-cash stock-based compensation of $1,501,766. In addition, the Company recorded a major increase in professional fees as a result of legal, accounting and audit fees associated with the Share Exchange and remaining compliant with required filings.

 
-31-


During the year ended April 30, 2014, the Company granted certain options in accordance with the following agreements:
 
Employment Agreements:
  
 
a)
Upon completion of the Share Exchange, the Company entered into an Employment Agreement with Scot Cohen, the Company’s Executive Chairman (the “Employment Agreement”). On November 20, 2013, the Company amended the Employment Agreement with Scot Cohen. Based on this amendment, the Company granted Mr. Cohen 41,666,667 fair value options to purchase an equal amount of shares of common stock of the Company. The options have a term of 10 years and an exercise price of $0.059. These options will vest in five equal installments, with the first 20% vesting immediately upon grant (as consideration for the service period from April 29, 2013 to November 20, 2013), and the remaining options vesting in four equal installments on the anniversary of the grant date.
 
The Company computed the economic benefit of the grant as of the date of grant utilizing a Black-Scholes option-pricing model. The Company utilized the following assumptions: common share value based on the fair value of the Company’s common stock as quoted on the Over the Counter Bulletin Board, $0.059; exercise price of $0.059; expected volatility of 96%; and a discount rate of 2.80%. The grant date fair value of the award was $2,006,227. For the year ended April 30, 2014, the Company expensed non-cash stock-based compensation of $576,034, respectively, to general and administrative expenses.
     
 
b)
On November 22, 2013, Petro River Oil Corp. entered into an employment agreement with Ruben Alba. Under the terms of this agreement, Mr. Alba will receive an annual base salary of $120,000. Mr. Alba was also granted 12,500,000 stock options of the Company pursuant to the Company’s 2012 Equity Compensation Plan (the “Plan”), to vest in five equal installments. The first installment vested immediately upon granting. The final four installments will vest on the anniversaries of the initial grant date, subject to the following conditions: (i) the adoption by the Company of an amendment to the Plan, approved by a vote of the shareholders of the Company, to increase the number of shares permitted to be granted under the Plan, and to put in place a stock option grant limitation in accordance with §162(m) of the Internal Revenue Code of 1986, as amended; and (ii) Mr. Alba’s continued employment with the Company.
     
   
The Company computed the economic benefit of the grant as of the date of grant utilizing a Black-Scholes option-pricing model. The Company utilized the following assumptions: common share value based on the fair value of the Company’s common stock as quoted on the Over the Counter Bulletin Board, $0.059; exercise price of $0.059; expected volatility of 96%; and a discount rate of 2.80%. The grant date fair value of the award was $575,839. For the year ended April 30, 2014, the Company expensed non-cash stock-based compensation of $165,337 to general and administrative expenses.
     
 
c)
On November 25, 2013, the Company entered into an employment agreement with Luis Vierma. Under the terms of this agreement, Mr. Vierma will receive an annual base salary of $84,000. Mr. Vierma was also granted 6,250,000 stock options of the Company pursuant to the Plan, to vest in five equal installments. The first installment vested immediately upon granting. The final four installments will vest on the anniversaries of the initial grant date, subject to the following conditions: (i) the adoption by the Company of an amendment to the Plan, approved by a vote of the shareholders of the Company, to increase the number of shares permitted to be granted under the Plan, and to put in place a stock option grant limitation in accordance with §162(m) of the Internal Revenue Code of 1986, as amended; and (ii) Mr. Vierma’s continued employment with the Company.
 
The Company computed the economic benefit of the grant as of the date of grant utilizing a Black-Scholes option-pricing model. The Company utilized the following assumptions: common share value based on the fair value of the Company’s common stock as quoted on the Over the Counter Bulletin Board, $0.059; exercise price of $0.059; expected volatility of 96%; and a discount rate of 2.80%. The grant date fair value of the award was $287,919. For the year ended April 30, 2014, the Company expensed non-cash stock-based compensation of $82,668 to general and administrative expenses.
     
 
d)
On November 26, 2013, the Company entered into a consulting agreement with Brio Financial Group (“Brio”) and its Managing Member, David Briones, was appointed the Chief Financial Officer of the Company on August 15, 2013. Under the terms of this agreement, Brio will receive a monthly consulting fee of $7,500, as well as a grant of 750,000 stock options of the Company pursuant to the Plan. The options will vest in six installments. The first 125,000 options vested immediately upon execution of the consulting agreement, and the remaining 5 installments will vest monthly, on the 26th of each subsequent month.
 
 
-32-

 
   
The Company computed the economic benefit of the grant as of the date of grant utilizing a Black-Scholes option-pricing model. The Company utilized the following assumptions: common share value based on the fair value of the Company’s common stock as quoted on the Over the Counter Bulletin Board, $0.059; exercise price of $0.059; expected volatility of 65%; and a discount rate of 0.12%. The grant date fair value of the award was $8,764. For the year ended April 30, 2014, the Company expensed non-cash stock-based compensation of $7,742 to general and administrative expenses.
     
 
e)
On November 27, 2013, the Company entered into an employment agreement with Daniel Smith. Under the terms of this agreement, Mr. Smith will receive an annual base salary of $120,000. Mr. Smith was also granted 12,500,000 stock options of the Company pursuant to the Company’s Plan to vest in five equal installments. The first installment vested immediately upon granting. The final four installments will vest on the anniversaries of the initial grant date, subject to the following conditions: (i) the adoption by the Company of an amendment to the Plan, approved by a vote of the shareholders of the Company, to increase the number of shares permitted to be granted under the Plan, and to put in place a stock option grant limitation in accordance with §162(m) of the Internal Revenue Code of 1986, as amended; and (ii) Mr. Smith’s continued employment with the Company.
     
   
The Company computed the economic benefit of the grant as of the date of grant utilizing a Black-Scholes option-pricing model. The Company utilized the following assumptions: common share value based on the fair value of the Company’s common stock as quoted on the Over the Counter Bulletin Board, $0.059; exercise price of $0.059; expected volatility of 96%; and a discount rate of 2.80%. The grant date fair value of the award was $575,839. For the year ended April 30, 2014, the Company expensed non-cash stock-based compensation of $165,337 to general and administrative expenses.
 
 
f)
On November 22, 2013, the Company entered into an employment agreement with Gary Williky, who was appointed Executive Vice President of Business Development of the Company on November 20, 2013. Under the terms of this agreement, Mr. Williky will receive an annual base salary of $120,000. Mr. Williky was also granted 6,250,000 stock options of the Company pursuant to the Plan, to vest in five equal installments. The first installment vested immediately upon granting. The final four installments will vest on the anniversaries of the initial grant date, subject to the following conditions: (i) the adoption by the Company of an amendment to the Plan, approved by a vote of the shareholders of the Company, to increase the number of shares permitted to be granted under the Plan, and to put in place a stock option grant limitation in accordance with §162(m) of the Internal Revenue Code of 1986, as amended; and (ii) Mr. Williky’s continued employment with the Company.
     
   
The Company computed the economic benefit of the grant as of the date of grant utilizing a Black-Scholes option pricing model. The Company utilized the following assumptions: common share value based on the fair value of the Company’s common stock as quoted on the Over the Counter Bulletin Board, $0.059; exercise price of $0.059; expected volatility of 96%; and a discount rate of 2.80%. The grant date fair value of the award was $287,919. For the year ended April 30, 2014, the Company expensed non-cash stock-based compensation of $82,668 to general and administrative expenses.

Board of Director Grants:
 
On November 20, 2013, the Company’s Board of Directors authorized the grants of 3,389,832 stock options to four members of the Board. The option grants have an exercise price equal to the closing price of shares of the Company’s common stock as of the date of the grant. All options granted vested immediately upon grant and have a maturity of ten years.
 
The Company computed the economic benefit of the grants as of the date of grant utilizing a Black-Scholes option-pricing model. The Company utilized the following assumptions: common share value based on the fair value of the Company’s common stock as quoted on the Over the Counter Bulletin Board, $0.059; exercise price of $0.059; expected volatility of 96%; and a discount rate of 2.80%. The grant date fair value of the awards was $147,442. For the year ended April 30, 2014, the Company expensed $147,442 to general and administrative expenses.

 
-33-


Impairment of oil and gas assets
 
As of April 30, 2014, management performed an impairment test of the oil and gas assets. All Montana leases expired during the year ended April 30, 2014, and as a result, management fully impaired the Montana assets by $75,000. In addition, management engaged an independent third party to test the Kansas assets for impairment. Throughout the year, management was not aware of any impairment indicators, but during the annual impairment test, the third party specialist concluded that the Kansas assets were impaired by $4,638,973, principally due to comparable acreage values. 
 
Impairment of excess purchase price
 
As a result of the Share Exchange, the Company recorded goodwill on the excess of the fair value of the shares maintained by existing shareholders as compared to the net assets acquired. Based on the overall market capitalization of the Company at the time of the share exchange, the aggregate fair value of these shares (20% of the market capitalization) was $1,117,404, which exceeded the fair value of the net assets acquired by $1,093,527.
 
The Company prior to the merger, impaired its assets to net salvage value and determined upon consummation of the merger the excess purchase price paid for the assets continued to be impaired, thus the Company recognized an immediate charge of $1,093,527 in its accompanying consolidated statement of operations for the four months period ended April 30, 2013.
 
Interest expense
 
Interest was $5 for the year ended April 30, 2014 as compared to $619,178 for the period January 1, 2013 to April 30, 2013. The decrease in interest expense is primarily attributable to the Company converting the notes and accrued interest to shares of common stock on April 23, 2013. Interest expense for the period January 1, 2013 to April 30, 2013 decreased from $1,277,572 for the period February 2, 2012 to December 31, 2012. The decrease in interest expense is primarily attributable to the Company incurring interest for the entire period ended December 31, 2012, as compared to only incurring interest for four months during the period ended April 30, 2013.

 
-34-

 
Results of Operations for the Three Months Ended October 31, 2014 compared to Three Months Ended October 31, 2013
 
   
Three Months
   
Three Months
 
   
Ended
   
Ended
 
   
October 31, 2014
   
October 31, 2013
 
Operations
               
Revenues
               
Oil and natural gas sales
 
$
757,485
   
$
87,253
 
Total Revenues
   
757,485
     
87,253
 
                 
Operating Expenses
               
Operating
   
446,829
     
82,632
 
General and administrative
   
1,190,500
     
(501,809
Depreciation, depletion and accretion
   
218,681
     
26,674
 
Total Expenses
   
1,856,010
     
(392,503
)
                 
Operating (loss) income
   
(1,098,525
)
   
479,756
 
                 
Other income
   
-
     
3,245
 
                 
Net (loss) income before non-controlling interest
   
(1,098,525
)
   
483,001
 
                 
Net income attributable to non-controlling interest
   
55,680
     
-
 
                 
Net (loss) income attributable to Petro River Oil Corp. and Subsidiaries
 
$
(1,154,205
)
 
$
483,001
 
                 
Net (Loss) income per Common Share Basic and Diluted
 
$
(0.00
)
 
$
0.00
 
 
Oil Sales
 
During the three months ended October 31, 2014, the Company recognized $757,485 in oil and gas sales, compared to sales of $87,253 for the three months ended October 31, 2013. The overall increase in sales of $670,232 is primarily due to the acquisition of Bandolier during the first quarter of the current fiscal year, which generated $757,485 of sales during the period.  The  Company’s remaining subsidiaries did not generate any revenue during the period ended October 31, 2014.
 
Operating Expenses
 
During the three months ended October 31, 2014, operating expenses were $446,829, as compared to operating expenses of $82,632 for the three months ended October 31, 2013. The overall increase in operating expenses of $364,197 is primarily attributable to the operating expenses of Bandolier of $427,475 during the three months ended October 31, 2014 which were offset by a minimal decrease in the operating expenses of the remaining subsidiaries.
 
General and Administrative Expenses
 
General and administrative expenses for the three months ended October 31, 2014 were $1,190,500, as compared to $(501,809) for the three months ended October 31, 2013. The increase is primarily attributable to the significant increase in stock based compensation incurred in the 2014 period, including the expense recorded for five consulting agreements awarded during the three months ended October 31, 2014. During the prior year comparable period, the Company reversed $1,021,250 of previously accrued officer share-based compensation due to an amendment to an officer’s employment agreement, which accounts for the significant increase of $1,592,909 in salaries and benefits. These changes are outlined below:

 
-35-

 
   
For the Three
Months Ended
   
For the Three
Months Ended
 
   
October 31, 2014
   
October 31, 2013
 
Salaries and benefits
 
$
533,601
   
$
(1,059,308
Settlement
   
-
     
56,047
 
Professional fees
   
595,519
     
491,780
 
Office and administrative
   
58,154
     
8,004
 
Information technology
   
3,226
     
1,668
 
                 
   
$
1,190,500
   
$
(501,809

Results of Operations for the Six Months Ended October 31, 2014 compared to Six Months Ended October 31, 2013

   
Six Months
   
Six Months
 
   
Ended
   
Ended
 
   
October 31, 2014
   
October 31, 2013
 
Operations
               
Revenues
               
Oil and natural gas sales
 
$
1,423,761
   
$
192,093
 
Total Revenues
   
1,423,761
     
192,093
 
                 
Operating Expenses
               
Operating
   
787,497
     
146,711
 
General and administrative
   
3,052,032
     
1,717,219
 
Depreciation, depletion and accretion
   
400,833
     
53,028
 
Total Expenses
   
4,240,362
     
1,916,958
 
                 
Operating loss
   
(2,816,601
)
   
(1,724,865
)
                 
Other income
   
33
     
3,240
 
                 
Net Loss before non-controlling interest
   
(2,816,568
)
   
(1,721,625
)
                 
Net loss attributable to non-controlling interest
   
(347,031
)
   
-
 
                 
Net loss attributable to Petro River Oil Corp. and Subsidiaries
 
$
(2,469,537
)
 
$
(1,721,625
                 
                 
Net Loss per Common Share Basic and Diluted
 
$
(0.00
)
 
$
0.00
 
 
Oil Sales
 
During the six months ended October 31, 2014, the Company recognized $1,423,761 in oil and gas sales, compared to sales of $192,093 for the six months ended October 31, 2013. The overall increase in sales of $1,231,668 is primarily due to the acquisition of Bandolier during the six months ended October 31, 2014, which generated $1,369,250 of sales during the period, which was offset by a minimal decrease in sales for the remaining subsidiaries.
 
 
-36-

 
Operating Expenses
 
During the six months ended October 31, 2014, operating expenses were $787,497, as compared to operating expenses of $146,711 for the six months ended October 31, 2013. The overall increase in operating expenses of $640,786 is primarily attributable to the operating expenses of Bandolier of $722,731 during the six months ended October 31, 2014 which were offset by a minimal decrease in the operating expenses of the remaining subsidiaries.
 
General and Administrative Expenses
 
General and administrative expenses for the six months ended October 31, 2014 were $3,052,032, as compared to $1,717,219 for the six months ended October 31, 2013. The increase is primarily attributable to the significant increase in stock based compensation incurred in the 2014 period. The increase was also due to the addition of the Bandolier expenses of $1,028,079 and the increase in other professional fees and office and administrative expenses. These changes are outlined below:
 
   
For the Six Months Ended
   
For the Six Months Ended
 
   
October 31, 2014
   
October 31, 2013
 
Salaries and benefits
 
$
794,766
   
$
518,564
 
Settlement
   
-
     
56,047
 
Professional fees
   
1,893,005
     
1,026,617
 
Office and administrative
   
350,841
     
112,316
 
Information technology
   
13,420
     
3,675
 
                 
   
$
3,052,032
   
$
1,717,219
 
 
The increases in general and administrative expenses are primarily attributable to the Company ramping up operations and the completion of the Bandolier acquisition. This consists primarily of increases in professional fees and office and administrative expenses. Salary and benefits include non-cash stock-based compensation of $674,253 for the six months ended October 31, 2014 compared to $418,250 for the six months ended October 31, 2013. This increase was due to the expense recorded for five consulting agreements awarded during the three months ended October 31, 2014 in comparison to the accrued expense of $418,250 for options that were issued to Scot Cohen in April 2013. During the prior year comparable period, the Company reversed $1,021,250 of previously accrued officer share-based compensation due to an amendment to an officer’s employment agreement.

Liquidity and Capital Resources
 
The Company is focused on developing its core position in the Mississippi Lime, specifically in the Pearsonia West Concession in Osage County recently acquired during the Bandolier Acquisition and Bandolier’s acquisition of Spyglass. Management’s current plans in the Mississippi Lime play are focused on Pearsonia West, but Petro River also owns additional Mississippi Lime acreage in Kansas. Over the last 12 months the Company has continued to build out its leadership and technical team with individuals with extensive experience in the Mississippi Lime play. Additionally, the Company has been in discussions with industry partners to capitalize and develop additional acreage in the Mississippi Lime. The Company continues to seek out joint venture partners and acquisition targets.
 
The Company continues to evaluate its non-core projects related to its legacy heavy oil reservoirs.  While still in technical review, the Company is engaged in a series of pilot tests related to certain theories, technologies and processes on the Missouri heavy oil assets. In Missouri, the Company has continued to analyze reservoir data and testing results to determine if any of these technologies or processes may lead to a viable and economic development plan for the understanding and test phases to develop an economic heavy oil production reserve base. The Company is leveraging executive vice president Luis Vierma’s experience in heavy oil, which he acquired during his time as Vice President of Exploration and Production at Petróleos de Venezuela, S.A.

 
-37-

 
Management’s principal objective is to maximize shareholder value by, among other things, increasing production by developing its acreage, increasing profit margins by evaluating and optimizing its production, and executing its business plan to increase property values, prove its reserves, and expand its asset base. While management currently has no plans to discontinue or revise its business plan, recent volatility and decrease in crude oil prices may cause management to cut back on its development or acquisition plans, or otherwise revisit its business and/or its capital expenditure plan.  Continued volatility and decreases in crude oil prices may accelerate such cut back or revisions.

At October 31, 2014, the Company had working capital of approximately $2.4 million.  As a result of the utilization of cash in its operating activities, and the development of its assets, the Company has incurred losses since it commenced operations.  In addition, Petro has a limited operating history prior to acquisition of Bandolier.  At October 31, 2014, the Company had cash and cash equivalents of approximately $2.7 million.  While management believes that the current level of working capital is sufficient to maintain current operations in Kansas, Oklahoma and Missouri as well as the planned added operations for the next twelve months, additional capital will be necessary for management to execute its business plan and to further expand the Company’s exploration and development programs beyond such period.  To address the Company’s working capital requirements and execute its business plan, management intends to continue to raise capital through the issuance of debt and equity securities. In addition, and to address the recent volatility and decreases in crude oil prices, the Company began implementing cost-cutting measures on November 1, 2014. No assurances can be provided that the Company will be successful in its efforts to raise additional required capital, which efforts may be more difficult given the recent volatility and decrease in the price of crude oil.  Furthermore, inability to maintain capital may damage the Company’s reputation and credibility with industry participants. The Company’s inability to raise additional funds when required may have a negative impact on its consolidated results of operations and financial condition. 

Capitalization
 
The number of outstanding shares and the number of shares that could be issued if all convertible instruments are converted to shares is as follows:
 
As of
 
October 31, 2014
 
Common shares
   
818,567,746
 
Stock Options
   
106,938,281
 
Stock Purchase Warrants
   
40,625,000
 
 Total Capitalization
   
966,131,027
 
 
Off-Balance Sheet Arrangements
 
None.
 
Recent Accounting Pronouncements
 
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014–09, Revenue from Contracts with Customers. Amendments in this Update create Topic 606, Revenue from Contracts with Customers, and supersede the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry–specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, the amendments supersede the cost guidance in Subtopic 605–35, Revenue Recognition—Construction–Type and Production–Type Contracts, and create new Subtopic 340–40, Other Assets and Deferred Costs—Contracts with Customers. In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2011–230—Revenue Recognition (Topic 605) and Proposed Accounting Standards Update 2011–250—Revenue Recognition (Topic 605): Codification Amendments, both of which have been deleted. Accounting Standards Update 2014–09. The amendments in this Update are effective for the Company for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the effects of ASU 2014–09 on the condensed consolidated financial statements.
 
 
-38-

 
In June 2014, FASB issued Accounting Standards Update 2014–12, Compensation – Stock Compensation (Topic 718), which clarifies accounting for share–based payments for which the terms of an award provide that a performance target could be achieved after the requisite service period. That is the case when an employee is eligible to retire or otherwise terminate employment before the end of the period in which a performance target could be achieved and still be eligible to vest in the award if and when the performance target is achieved. The updated guidance clarifies that such a term should be treated as a performance condition that affects vesting. As such, the performance target should not be reflected in estimating the grant–date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the periods for which the requisite service has already been rendered. The guidance will be effective for the annual periods (and interim periods therein) ending after December 15, 2015. Early application is permitted. The Company is currently evaluating the effects of ASU 2014–12 on the condensed consolidated financial statements.
 
In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014–15, Presentation of Financial Statements – Going Concern.  The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued.  This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2013–300—Presentation of Financial Statements (Topic 205): Disclosure of Uncertainties about an Entity’s Going Concern Presumption, which has been deleted. The Company is currently evaluating the effects of ASU 2014–15 on the condensed consolidated financial statements.
 
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying condensed consolidated financial statements.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
Our Board of Directors is currently comprised of four members. The term of each director is until the next annual meeting of shareholders or until he resigns or is succeeded by another qualified director who has been elected. The following is a list of our executive officers and the current members of our Board of Directors, including each member’s age, the year he became a director or officer of the Company and his current positions with the Company:
 
Name
 
Position With the Company
 
Age
   
Since
 
Scot Cohen
 
Executive Chairman
   
45
     
2012
 
Glenn C. Pollack (1)(2) 
 
Director
   
56
     
2012
 
John Wallace 
 
Director
   
40
     
2013
 
Fred Zeidman (1)(2)
 
Director
   
68
     
2012
 
David Briones
 
Chief Financial Officer
   
38
     
2013
 
Ruben Alba
 
Executive Vice President - Unconventional
   
41
     
2012
 
Luis Vierma
 
Executive Vice President – Geological and Geophysical
   
55
     
2013
 
Daniel Smith
 
Executive Vice President - Operations
   
42
     
2013
 
 
(1)
Member of Audit Committee
(2)
Member of Compensation Committee
 
The Board Nomination Committee believes that Mr. Cohen’s extensive investment banking experience advising oil and gas companies, as well as his operational expertise developing oil and gas assets, is valuable to the Board of Directors and its deliberations, and is particularly beneficial as the Company continues to develop its oil and gas assets.
 
Scot Cohen, a member of the Board since 2012, has served as Executive Chairman of the Company since 2013. He earned a Bachelor of Science degree from Ohio University in 1991. Mr. Cohen is a Co-Founder and Managing Partner at Iroquois Capital Opportunity Fund, a private equity fund focused on identifying and realizing investment opportunities in companies developing onshore oil and gas assets in North America. Additionally, Mr. Cohen manages several operating and non-operating partnerships that invest in domestic oil and gas assets.
 
The Board Nomination Committee believes that Mr. Cohen’s extensive investment banking experience advising oil and gas companies, as well as his operational expertise developing oil and gas assets, is valuable to the Board of Directors and its deliberations, and is particularly beneficial as the Company continues to develop its oil and gas assets.

 
Glenn C. Pollack, a member of the Board since 2012, is a Managing Director and Founder of Candlewood Partners, LLC (“Candlewood”), a merchant bank focused on middle market corporate finance and infrastructure projects. Prior to founding Candlewood, Mr. Pollack was a Managing Director and Principal of a middle market investment banking firm with offices in Chicago and Cleveland. He was responsible for the Restructuring Group and was involved in other corporate finance transactions including mergers and acquisitions and capital raising for special situations. He also spent five years as the CEO of a regional distributor of perishable foods with annual revenues of $180 million and over 250 employees in four states. Mr. Pollack is a certified public accountant and has worked for Price Waterhouse as a consultant and Touche Ross as an auditor.
 
The Board Nomination Committee believes Mr. Pollack’s success with multiple investment banking firms, his extensive contacts within the investment community, his executive management experience and financial and accounting expertise will assist the Company’s efforts to raise capital to fund the continued implementation of the Company’s business plan.
 
John Wallace, a member of the Board since 2013, graduated from Syracuse University in May 1996 with a Bachelor’s of Science degree in sociology. From June 1996 through May 2004, Mr. Wallace was a professional basketball player associated with the National Basketball Association. Since April 2009, Mr. Wallace has been an alumni relations and fan development representative for the New York Knicks, a professional basketball team aligned with the National Basketball Association. In that capacity, Mr. Wallace works on community public relations and fan development initiatives, along with sponsorship and marketing programs. In January 2013, Mr. Wallace joined Hotaling Insurance Group as an insurance agent. In February 2013, Mr. Wallace became an Executive Board Member of Heavenly Productions Foundation, a not for profit charitable organization dedicated to helping children in need or in distress. Since October 2007, Mr. Wallace has served as Vice President of Winning Because I Tried, a non-profit he co-founded in 2007, and whose focus is on academic success, social interaction, peer pressure awareness, and sound decision-making for children ages 8-18. Since 2006, Mr. Wallace has been President and General Manager of Rochester AAU Basketball, a program he founded in March 2006, which is designed to leverage sports as a means for youth to obtain a college education.
 
The Board Nomination Committee believes that Mr. Wallace brings effective management and leadership skills to the Board of Directors, which assists the Board and management in in developing its organization and business plan.
 
Fred Zeidman, a member of the Board since 2012, has served as Chairman of the Board of Directors of Petroflow Energy Corporation since September 2011. Mr. Zeidman has also served as a director of Hyperdynamics Corporation since 2009 and as a director of Prosperity Bancshares, Inc. since 1986. He served as trustee for the AremisSoft Liquidating Trust since 2004. In March 2008, Mr. Zeidman was appointed the Interim President of Nova Biosource Fuels, Inc. (“Nova”), a publicly traded biodiesel technology company, and served in that position until the company’s acquisition in November 2009. Mr. Zeidman also served as a director of Nova from June 2007 to November 2009. From August 2009 through November 2009, Mr. Zeidman served as Chief Restructuring Officer for Transmeridian Exploration, Inc. He also served as CEO, President and Chairman of the Board of Seitel Inc., an oil field services company, from June 2002 until its sale in February 2007. Mr. Zeidman served as a Managing Director of the law firm Greenberg Traurig, LLP from July 2003 to December 2008. Mr. Zeidman has served as CEO, Interim CEO and Chairman of the Board of a variety of companies, including several in the oil and gas sector. In March 2013, Mr. Zeidman was appointed to the Board of Straight Path Communications Inc. Mr. Zeidman is the Chairman Emeritus of the United States Holocaust Memorial Council. He was appointed to that position by former President George W. Bush in March 2002 and served from 2002-2010. He is also Chairman Emeritus of the University of Texas Health Science System Houston and is on the Board of Trustees of the Texas Heart Institute (where he currently serves as Interim Chief Financial Officer). He currently serves on the Board of Directors and Executive Committee of the University of Saint Thomas and chairs its Development Committee and Houston Community College. Mr. Zeidman received his Bachelor of Science from Washington University and a Masters of Business Administration from New York University.
 
 
-40-


The Board Nomination Committee believes that Mr. Zeidman’s extensive experience as an executive in senior management positions, including with oil and gas exploration, oil services and related companies, together with his legal and board experience, add significant value to the Company and its Board of Directors in assessing challenges and in addressing organizational and development issues facing the Company.
 
David Briones was appointed Chief Financial Officer on August 15, 2013. Since October 1, 2010, Mr. Briones has acted as the managing member of Brio Financial Group, LLC, a financial reporting consulting firm. From January 2006 through September 2010, Mr. Briones had managed the public company and hedge fund practices at Bartolomei Pucciarelli, LLC (“BP”). Within that capacity, Mr. Briones performed audit services, outsourced CFO functions, and/or consulted clients through difficult SEC comment periods particularly through application of complex accounting principles for a vast public company client base. BP is a registered firm with the Public Company Accounting Oversight Board. BP is an independent member of the BDO Seidman Alliance. Mr. Briones served as the chief financial officer of NXT Nutritionals Holdings, Inc. from February 2, 2009 to May 15, 2012. Mr. Briones also served as the chief financial officer of Clear-Lite Holdings, Inc. from August 3, 2009 to March 21, 2011. Prior to joining BP, Mr. Briones was an auditor with PricewaterhouseCoopers LLP in New York, New York. Mr. Briones specialized in the financial services group, and most notably worked on the MONY Group, Prudential Financial, and MetLife initial public offerings.
 
Ruben Alba received his B.S. in Chemical Engineering from New Mexico State University and has been active in the oil & gas industry since 1997. Mr. Alba spent the majority of his career with Halliburton Energy Services and Superior Well Services, overseeing regional technical staff and operations. In this capacity, Mr. Alba introduced a number of new and novel technologies involving new fluid chemistry to the industry, as well as completion processes to reservoirs requiring cutting edge technology, where he holds three US Patents. Mr. Alba was appointed Executive Vice President Unconventional, effective July 3, 2013.
 
Luis Vierma was appointed Executive Vice President Geological and Geophysical, effective July 3, 2013. Mr. Vierma, who has 35 years of experience in the oil and gas industry, holds a Bachelor’s Degree in Chemistry from Universidad Central de Venezuela (1979) and earned a master’s degree in Geology (Geochemistry of Petroleum) in 1984 from the University of Indiana. Mr. Vierma held numerous leadership positions at Petróleos de Venezuela, S.A, the fourth largest oil company in the world, including VP of Exploration and Production, and also served as a director of CITGO.
 
Daniel Smith is a registered Professional Engineer in Petroleum Engineering and has over 15 years of experience in the oil and gas industry. Mr. Smith spent his career at XTO Energy where he served as an Operations Engineer specializing in hydraulic fracturing and artificial lift. Mr. Smith was directly responsible for managing fields producing in excess of 100 million cubic feet of natural gas per day. Mr. Smith has also worked on numerous drilling, production, and development projects ranging from the Marcellus Shale to the Permian Basin. Mr. Smith received a Bachelor’s of Science degree in Chemical Engineering from Texas A&M University. Mr. Smith was appointed Executive Vice President Operations, effective July 3, 2013.
 
Section 16(a) Beneficial Ownership Reporting Compliance
 
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors, executive officers and persons who own more than 10% of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Directors, officers and greater than 10% stockholders are required to furnish the Company with copies of all Section 16(a) forms they file.

To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company, with respect to the fiscal year ended April 30, 2014, all officers, directors and beneficial owners of more than 10% of our common stock have filed their initial statements of ownership on Form 3 on a timely basis, and the officers, directors and beneficial owners of more than 10% of our common stock have also filed the required Forms 4 or 5 on a timely basis, other than Gary Williky, who filed a Form 4 on December 18, 2013 reporting a stock option award which was granted on November 22, 2013, and David Briones, who filed a Form 4 on February 21, 2014 reporting a stock option award which was granted on November 26, 2013.

 
-41-

 
Code of Ethics
 
Prior to the completion of the Share Exchange on April 23, 2013, the Company operated under a Code of Ethics filed as an exhibit to our Annual Report on Form 20-F, filed on November 16, 2010.
 
Following the acquisition of Petro, the Board engaged in a corporate governance reorganization, and pursuant to a unanimous written consent of the Board (the “Unanimous Written Consent”), formally adopted a new Code of Ethics, effective July 3, 2013, a copy of which was attached as an exhibit to our Transition Report on Form 10-K, filed on August 28, 2013. The Code of Ethics applies to all officers, directors, and employees of the Company.
 
Board of Directors Meetings and Committees
 
The Board held 7 meetings during the fiscal year ended April 30, 2014. Each Director attended, either in person or telephonically, at least 75% of the aggregate Board of Directors meetings and meetings of committees on which he served during his tenure as a director or committee member.
 
Audit Committee
 
Prior to the completion of the Share Exchange on April 23, 2013, and as of April 30, 2013, the Audit Committee was composed of one director, Fred Zeidman, who was considered independent under the Canadian Securities Regulators’ Multilateral Instrument 52-110-Audit Committees.
 
By the Unanimous Written Consent, the Board affirmed the designation, effective [July 3, 2013], of an Audit Committee comprised of two directors: Glenn Pollack, and Fred Zeidman, each of whom are “independent” as independence is currently defined in applicable SEC rules and the NYSE Company Guide. The Board has determined that Glenn Pollack qualifies as an “Audit Committee financial expert,” as defined in applicable SEC rules implementing Section 407 of the Sarbanes-Oxley Act of 2002. The Board made a qualitative assessment of Mr. Pollack’s level of knowledge and experience based on a number of factors, including his formal education and experience.
 
The Audit Committee is responsible for overseeing the Company’s corporate accounting, financial reporting practices, audits of financial statements and the quality and integrity of the Company’s financial statements and reports. In addition, the Audit Committee oversees the qualifications, independence and performance of the Company’s independent auditors. In furtherance of these responsibilities, the Audit Committee’s duties include the following: evaluating the performance of and assessing the qualifications of the independent auditors; determining and approving the engagement of the independent auditors to perform audit, review and attest services and performing any proposed permissible non-audit services; evaluating employment by the Company of individuals formerly employed by the independent auditors and engaged on the Company’s account and any conflicts or disagreements between the independent auditors and management regarding financial reporting, accounting practices or policies; discussing with management and the independent auditors the results of the annual audit; reviewing the financial statements proposed to be included in the Company’s annual report on Form 10-K; discussing with management and the independent auditors the results of the auditors’ review of the Company’s quarterly financial statements; conferring with management and the independent auditors regarding the scope, adequacy and effectiveness of internal auditing and financial reporting controls and procedures; and establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting control and auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters. The Audit Committee operates under the written Audit Committee Charter adopted by the Unanimous Written Consent. A copy of the Audit Committee Charter is available on the Company’s website.

 
-42-

 
Compensation Committee
 
The responsibilities of a compensation committee were performed by the board as a whole. Pursuant to the Unanimous Written Consent, the board ratified the designation of a Compensation Committee, effective July 3, 2013. The Compensation Committee is currently comprised of two directors, Glenn Pollack and Fred Zeidman, each of whom is independent as independence is currently defined in applicable SEC rules and the NYSE Company Guide.
 
The Compensation Committee reviews, and as it deems appropriate, recommends to the Board, policies, practices, and procedures relating to the compensation of the officers and other managerial employees, and the establishment and administration of employee benefit plans. It advises and consults with the officers of the Company as may be requested regarding managerial personnel policies. The Compensation Committee also has such additional powers as may be conferred upon it from time to time by the Board.
 
The Compensation Committee operates under the written Compensation Committee Charter that was adopted by the Unanimous Written Consent. A copy of the Compensation Committee Charter is available on the Company’s website.
 
Board Nominations
 
In lieu of a formal Board Nomination Committee, Board nomination decisions are to be made by the independent directors of the Board in compliance with criteria adopted in the Unanimous Written Consent. The independent directors prepare a list of candidates to fill the expiring terms of directors serving on our Board, which they then submit to the Board who determines which candidates will be nominated to serve on the Board. The names of nominees are then submitted for election at our Annual Meeting of Stockholders. The independent directors also submit to the entire Board a list of nominees to fill any interim vacancies on the Board resulting from the departure of a member of the Board for any reason prior to the expiration of his term. In recommending nominees, the independent directors are to consider various criteria, including general business experience, general financial experience, knowledge of the Company’s industry (including past industry experience), education, and demonstrated character and judgment. The independent directors will also consider director nominees recommended by a stockholder if the stockholder mails timely notice to the Secretary of the Company at its principal offices. Any person nominated by a stockholder for election to the Board will be evaluated based on the same criteria as all other nominees.
 
During the fiscal year ended April 30, 2014, there were no changes to the procedures by which holders of our common stock may recommend nominees to the Board.

 
-43-

 
EXECUTIVE COMPENSATION
 
Summary Executive Compensation Table
 
The following table sets forth a summary of all compensation paid during the period ended April 30, 2014 to the Named Executive Officers and other individuals who served as Named Executive Officers for some period during the year:
 
Summary Compensation Table
 
Name and Principal
Position
 
Year
Ended
April 30,
   
Salary 
$
   
Bonus
$
   
Stock
awards 
$
   
Option
awards
(1)
   
Nonequity 
Incentive plan
compensation 
$
   
Nonqualified
Deferred
compensation 
Earnings $
   
All other
compensation
$
   
Total 
$
 
Scot Cohen (2), Executive Chairman
   
2014
     
120,000
     
--
     
--
     
576,035
     
--
     
--
     
--
     
696,035
 
     
2013
     
--
     
--
     
--
     
--
     
--
     
--
     
--
     
--
 
Ruben Alba, EVP (3)
   
2014
     
120,000
     
--
     
--
     
165,337
     
--
     
--
     
--
     
285,337
 
     
2013
     
--
     
--
     
--
     
--
     
--
     
--
     
--
     
--
 
Daniel Smith, EVP (4)
   
2014
     
130,000
     
--
     
--
     
165,337
     
--
     
--
     
--
     
295,337
 
     
2013
     
--
     
--
     
--
     
--
     
--
     
--
     
--
     
--
 
Jeffrey Freedman (5), Interim CEO and CFO
   
2014
     
--
     
--
     
--
     
56,047
     
--
     
--
     
--
     
56,047
 
     
2013
     
25,000
     
--
     
--
     
--
     
--
     
--
     
--
     
25,000
 
David Briones (6) CFO
   
2014
     
94,000
     
--
     
--
     
7,742
     
--
     
--
     
--
     
101,742
 
     
2013
     
--
     
--
     
--
     
--
     
--
     
--
     
--
     
--
 
Pat McCarron (7), Vice President, Operations
   
2014
     
--
     
--
     
--
     
--
     
--
     
--
     
--
     
--
 
     
2013
     
38,550
     
--
     
--
     
--
     
--
     
--
     
--
     
38,550
 
 
(1)
“Options” includes all options granted by us as compensation for employment services or office.
   
(2)
Mr. Cohen was appointed Executive Chairman on April 23, 2013 following the Share Exchange, and received no compensation from the Company in the year ended April 30, 2013.
   
(3)
Mr. Alba entered into employment agreements with the Company on November 22, 2013.
   
(4)
Mr. Smith entered into an employment agreement with the Company on November 27, 2013.
   
(5)
Mr. Freedman served as the Company’s interim Chief Executive Officer from January 23, 2012 until April 23, 2013, and as the Company’s interim Chief Financial Officer from July 1, 2011 until April 23, 2013.
   
(6)
On November 26, 2013, the Company entered into a consulting agreement with Brio Financial Group (“Brio”) and its Managing Member, David Briones, was appointed the Chief Financial Officer of the Company on August 15, 2013.
   
(7)
Mr. McCarron served as the VP of Operations until March 15, 2013.
 
 
-44-

 
The Company’s compensation program is designed to provide our executive officers with competitive remuneration and to reward their efforts and contributions to the Company. Elements of compensation for our executive officers include base salary and bonuses paid as stock options pursuant to the Company’s Amended and Restated 2012 Equity Compensation Plan (the “Plan”). Company performance does not play a significant role in the determination of base salary.
 
The Compensation Committee, working in conjunction with the Executive Chairman, reviews and makes recommendations to the Board regarding all forms of compensation to be provided to officers and directors of the Company, including all bonus and stock compensation. The Compensation Committee may also set general compensation goals and guidelines for the Company’s employees from time to time.
 
Upon completion of the Share Exchange, the Company entered into an Employment Agreement with Scot Cohen, the Company’s Executive Chairman (the “Employment Agreement”). Under the terms of the Employment Agreement, Mr. Cohen will be entitled to all earned but unpaid salary, expense reimbursements, bonuses (if applicable), and any vested benefits, upon termination of the Employment Agreement by the Company for cause, by Mr. Cohen without good reason, or upon the Employment Agreement’s expiration date in the event Mr. Cohen does not choose to renew his contract. In the event Mr. Cohen’s employment is terminated by the Company without cause, upon a change in control of the company, or by Mr. Cohen for good reason, he shall be entitled to any accrued obligations (detailed in the preceding sentence), severance in a single lump sum installment in an amount equal to twice the sum of the base salary in effect on the termination date plus two times the maximum annual bonus for which Mr. Cohen was eligible in the fiscal year in which the termination date occurred, a pro-rata portion of Mr. Cohen’s annual bonus for the fiscal year in which the termination occurred, and a full vesting in the initial grant and in any and all previously granted outstanding equity-based incentive awards subject to time-based vesting criteria.
 
On November 20, 2013, the Company and the Executive Chairman entered into an amendment (the “Amendment”) to the Employment Agreement. Under the terms of the Amendment, the Company substituted a stock option grant of 41,666,667 fair market value stock options under the Plan, at the exercise price of $0.059 per share, for cash-settled restricted stock units representing 66,340,597 shares of the Company’s common stock, which the Company had previously agreed to grant Mr. Cohen under the terms of the Employment Agreement. These options will vest in five equal installments, with the first 20% vesting immediately upon grant, and the remaining options vesting in four equal installments on the anniversary of the grant date

On November 22, 2013, the Company entered into an employment agreement with Ruben Alba, who was appointed Executive Vice President, Unconventional of the Company on July 7, 2013. Under the terms of this agreement, Mr. Alba will receive an annual base salary of $120,000. Mr. Alba was also granted 12,500,000 stock options of the Company pursuant to the Plan, to vest in five equal installments. The first installment vested immediately upon granting. The final four installments will vest on the anniversaries of the initial grant date, subject to Mr. Alba’s continued employment with the Company.
 
On November 27, 2013, the Company entered into an employment agreement with Daniel Smith, who was appointed Executive Vice President, Operations of the Company on July 7, 2013. Mr. Smith’s agreement is the same in all material respects to Mr. Alba’s agreement.
 
On November 26, 2013, the Company entered into a consulting agreement with Brio Financial Group (“Brio”) and its Managing Member, David Briones, was appointed the Chief Financial Officer of the Company on August 15, 2013. Under the terms of this agreement, Brio will receive a monthly consulting fee of $7,500, as well as a grant of 750,000 stock options of the Company pursuant to the Plan. The options will vest in six installments. The first 125,000 options vested immediately upon execution of the consulting agreement, and the remaining 5 installments will vest monthly, on the 26th of each subsequent month.

 
-45-

 
Outstanding Equity Awards at April 30, 2014
 
The Plan was adopted to promote the success and enhance the value of the Corporation by continuing to link the personal interest of participants to those of its Shareholders and by providing participants with an incentive for outstanding performance. The Plan is administered by the Board, and all employees of the Corporation and its subsidiaries, as determined by the Board, and all members of the Board are eligible to participate. An aggregate of 120,000,000 Common Shares are available for grant pursuant to the Plan. 
 
The plan was approved at a special meeting of the shareholders on September 7, 2012, and an amendment to the plan was approved at the Company’s annual meeting of shareholders on April 16, 2014. The following table outlines awards issued pursuant to the Plan as of April 30, 2014.
 
Plan Category
 
Number of
securities
underlying
unexercised
options
   
Option
Exercise
Price
   
Option
Expiration
Date
   
Number of securities
underlying unvested
options
   
Weighted-average
exercise price of
outstanding options,
warrants, and rights
 
Scot Cohen
   
41,666,667
     
0.059
     
11/20/23
     
33,333,334
     
0.059
 
Ruben Alba
   
12,500,000
     
0.059
     
11/22/23
     
10,000,000
     
0.059
 
Daniel Smith
   
12,500,000
     
0.059
     
11/27/23
     
10,000,000
     
0.059
 
[Gary Williky
   
6,250,000
     
0.059
     
11/22/23
     
5,000,000
     
0.059
 
                                         
Luis Vierma
   
6,250,000
     
0.059
     
11/25/23
     
5,000,000
     
0.059
 
David Briones
   
750,000
     
0.059
     
11/26/14
     
500,000
     
0.059
 
Glenn Pollack
   
847,458
     
0.059
     
11/20/20
     
--
     
0.059
 
John Wallace
   
847,458
     
0.059
     
11/20/20
     
--
     
0.059
 
Fred Zeidman
   
847,458
     
0.059
     
11/20/20
     
--
     
0.059
 
Ryan Estis
   
847,458
     
0.059
     
11/20/20
     
--
     
0.059
 
Jeffrey Freedman
   
565,116
     
0.500-0.215
     
11/20/20
     
--
     
0.265
 
Total
   
83,871,615
                     
63,833,334
         

Director Compensation for the Year Ended April 30, 2014
 
The Company has no formal arrangement pursuant to which directors are compensated for their services in their capacity as directors, except for the granting from time to time of incentive stock options. The following table sets forth the compensation of the directors of the Company during the fiscal year ended April 30, 2014.
 
Name
 
Fees
Earned
or Paid in
Cash ($)
   
Stock
Awards
($)
   
Option
Awards
($)
   
Non-Equity
Incentive Plan
Compensation
($)
   
Nonqualified
Deferred
Compensation
Earnings ($)
   
All Other
Compensation
($)
   
Total ($)
 
Scot Cohen (2)
   
--
     
--
     
--
     
--
     
--
     
--
     
--
 
Ryan Estis (3)
   
--
     
--
     
36,861
(1)
   
--
     
--
     
--
     
36,861
 
Glenn Pollack
   
--
     
--
     
36,861
(1)
   
--
     
--
     
--
     
36,861
 
Fred Zeidman
   
--
     
--
     
36,861
(1)
   
--
     
--
     
--
     
36,861
 
John Wallace
   
--
     
--
     
36,861
(1)
   
--
     
--
     
--
     
36,861
 
 
  (1)  
The Company made awards to each of the Company’s non-employee Directors of 847,457 options to purchase common stock of the Company under the Plan on November 20, 2013.
       
  (2)  
Mr. Cohen did not receive compensation for his services as a director.
       
  (3)  
On November 18, 2013, Ryan Estis resigned from the Board of Directors of the Company. Mr. Estis was also a member of the Audit Committee at the time of his resignation. The resignation was not due to any disagreement with the Company or its management on any matter relating to the Company’s operations, policies, or practices.
 
 
-46-

 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
 
The following table sets forth information regarding the beneficial ownership of our common stock as of February 2, 2015 for each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock. Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. Set forth below is information regarding the shares of the Company’s common stock which are owned on February 2, 2015 or which the person has the right to acquire within 60 days of February 2, 2015 for each director, executive officer, all directors and executive officers as a group, and each person who is the beneficial owner of more than 5 percent of the outstanding shares of the Company’s Common Stock.
 
<
Name and Address of Beneficial Owner (1)
 
Number of Shares Beneficially Owned
   
Stock Options Exercisable within 60 days
   
Percentage of Shares Beneficially Owned (3)
   
Position
Scot Cohen
   
195,769,947
(2)
   
8,333,333
     
24.68
%
 
Executive Chairman
David Briones
   
0
     
625,000
     
0.08
%
 
Chief Financial Officer
Ruben Alba
   
0
     
2,500,000
     
0.3
%
 
Executive Vice President, Unconventional
Daniel Smith
   
1,436,280
     
2,500,000
     
0.48
%
 
Executive Vice President, Operations
Luis Vierma
   
0
     
1,250,000
     
0.15
%
 
Executive Vice President, Geological and Geophysical
                             
Glenn C. Pollack
   
3,341,644
     
847,457
     
0.51