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Document and Entity Information

v2.4.0.8
Document and Entity Information (USD $)
12 Months Ended
Apr. 30, 2015
Aug. 13, 2015
Oct. 31, 2014
Document And Entity Information      
Entity Registrant Name Petro River Oil Corp.    
Entity Central Index Key 0001172298    
Document Type 10-K    
Document Period End Date Apr. 30, 2015    
Amendment Flag false    
Current Fiscal Year End Date --04-30    
Entity Filer Category Smaller Reporting Company    
Public Float     $ 5,745,818
Entity Common Stock, Shares Outstanding   851,901,079  
Document Fiscal Period Focus FY    
Document Fiscal Year Focus 2015    
Entity Reporting Status Yes    
Well Known Seasoned Issuer No    
Voluntary Filer No    

Consolidated Balance Sheets

v2.4.0.8
Consolidated Balance Sheets (USD $)
Apr. 30, 2015
Apr. 30, 2014
Current Assets:    
Cash and cash equivalents $ 1,010,543 $ 8,352,949
Certificate of deposit - restricted 125,000   
Accounts receivable 42,688 51,979
Prepaid expenses and other current assets 52,771 40,297
Total Current Assets 1,231,002 8,445,225
Oil and gas assets, net 15,757,011 8,941,592
Property, plant and equipment, net of accumulated depreciation of $313,508 and $302,275 60,953 930
Intangible assets, net 2,203,393   
Other assets 27,922 6,000
Total Other Assets 18,049,279 8,948,522
Total Assets 19,280,281 17,393,747
Current Liabilities:    
Accounts payable and accrued expenses 252,227 480,637
Asset retirement obligations, current portion 541,959 481,658
Total Current Liabilities 794,186 962,295
Long-term liabilities:    
Asset retirement obligations, net of current portion 376,471 336,352
Total Liabilities 1,170,657 1,298,647
Stockholders' Equity:    
Preferred Shares - 5,000,000 authorized; 0 issued and outstanding, par value $0.00001 per share; Preferred B shares - 29,500 authorized; 0 issued and outstanding, $100 stated value, par value $0.00001 per share      
Common shares - 2,250,000,000 authorized; par value $0.00001 per share; Issued and outstanding; 851,909,079 and 818,567,746 8,519 8,186
Additional paid-in capital 31,106,815 27,748,045
Accumulated deficit (16,650,486) (11,661,131)
Total Stockholders' Equity - attributable to Petro River Oil Corp. 14,464,848 16,095,100
Non-controlling interests 3,644,776   
Total Stockholders' Equity 18,109,624 16,095,100
Total Liabilities and Stockholders' Equity 19,280,281 17,393,747
Series B Preferred Stock [Member]
   
Stockholders' Equity:    
Preferred Shares - 5,000,000 authorized; 0 issued and outstanding, par value $0.00001 per share; Preferred B shares - 29,500 authorized; 0 issued and outstanding, $100 stated value, par value $0.00001 per share      

Consolidated Balance Sheets (Parenthetical)

v2.4.0.8
Consolidated Balance Sheets (Parenthetical) (USD $)
Apr. 30, 2015
Apr. 30, 2014
Accumulated depreciation of Property, plant and equipment $ 313,508 $ 302,275
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, par value $ 0.00001 $ 0.00001
Preferred stock, shares issued      
Common stock, shares authorized 2,250,000,000 2,250,000,000
Common stock, par value $ 0.00001 $ 0.00001
Common stock, shares issued 851,909,079 818,567,746
Common stock, shares outstanding 851,909,079 818,567,746
Series B Preferred Stock [Member]
   
Preferred stock, shares authorized 29,500 29,500
Preferred stock, par value $ 0.00001 $ 0.00001
Preferred stock, shares issued 0 0
Preferred shares, stated value per share $ 100 $ 100

Consolidated Statements of Operations

v2.4.0.8
Consolidated Statements of Operations (USD $)
12 Months Ended
Apr. 30, 2015
Apr. 30, 2014
Operations Revenues    
Oil and natural gas sales $ 2,127,576 $ 372,179
Total Revenues 2,127,576 372,179
Operating Expenses    
Operating 1,847,688 286,507
General and administrative 4,606,377 4,195,437
Depreciation, depletion and accretion 750,360 153,108
Amortization of intangible assets 20,293   
Impairment of oil and gas assets 1,246,975 4,713,973
Gain on settlement of liability    (20,069)
Total Expenses 8,471,693 9,328,956
Operating loss (6,344,117) (8,956,777)
Interest (expense) income, net (462) 3,248
Net Loss (6,344,579) (8,953,529)
Net loss attributable to non-controlling interest (1,355,224)   
Net loss attributable to Petro River Oil Corp. and Subsidiaries $ (4,989,355) $ (8,953,529)
Basic and Diluted $ (0.01) $ (0.01)
Weighted Average Number of Common Shares Outstanding - Basic and Diluted 824,229,846 768,257,883

Consolidated Statements of Stockholders’ Equity

v2.4.0.8
Consolidated Statements of Stockholders’ Equity (USD $)
Common Stock
Additional Paid-In Capital
Accumulated Deficit
Noncontrolling Interest [Member]
Total
Balance at Apr. 30, 2013 $ 7,371 $ 20,317,094 $ (2,707,602)    $ 17,616,863
Balance, shares at Apr. 30, 2013 737,117,746        
Shares issued for settlement 2 79,998       80,000
Shares issued for settlement, shares 200,000        
Issuance of stock and warrants for acquisition of assets 813 6,499,187       6,500,000
Issuance of stock and warrants for acquisition of assets, shares 81,250,000        
Stock issue costs   (650,000)       (650,000)
Stock based compensation   1,501,766       1,501,766
Net loss     (8,953,529)   (8,953,529)
Balance at Apr. 30, 2014 8,186 27,748,045 (11,661,131)    16,095,100
Balance, shares at Apr. 30, 2014 818,567,746        
Shares issued for settlement               
Issuance of stock and warrants for acquisition of assets 333 2,223,353       223,686
Issuance of stock and warrants for acquisition of assets, shares 33,333,333        
Stock based compensation   1,135,417     1,135,417
Non-controlling interest contribution       5,000,000 5,000,000
Net loss     (4,989,355) (1,355,224) (6,344,579)
Balance at Apr. 30, 2015 $ 8,519 $ 31,106,815 $ (16,650,486) $ 3,644,776 $ 14,464,848
Balance, shares at Apr. 30, 2015 851,901,079        

Consolidated Statements of Cash Flows

v2.4.0.8
Consolidated Statements of Cash Flows (USD $)
12 Months Ended
Apr. 30, 2015
Apr. 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (6,344,579) $ (8,953,529)
Adjustments to reconcile net loss to net cash used in operating activities    
Stock-based compensation 1,135,417 1,501,766
Depreciation, depletion and amortization 702,454 98,134
Amortization of intangible assets 20,293   
Accretion of asset retirement obligation 47,906 54,974
Impairment of oil and gas assets 1,246,975 4,713,973
Gain on settlement of liability    (20,069)
Changes in operating assets and liabilities:    
Accounts receivable 9,291 (20,585)
Prepaid expenses and other assets (12,474) 18,093
Other assets (21,922) 24,500
Accounts payable and accrued expenses (228,410) (290,388)
Net Cash Used in Operating Activities (3,445,049) (2,873,131)
Cash Flows From Investing Activities:    
Capitalized expenditures on oil and gas assets (8,701,100) (327,002)
Purchase of equipment (39,757)   
Purchase of certificate of deposit (125,000)   
Net Cash Used in Investing Activities (8,865,857) (327,002)
Cash Flows From Financing Activities:    
Proceeds from the issuance of common stock and warrants    6,500,000
Stock issuance costs    (650,000)
Payments of note payable (31,500)   
Cash received from non-controlling interest contribution 5,000,000   
Net Cash Provided by Financing Activities 4,968,500 5,850,000
Change in cash and cash equivalents (7,342,406) 2,649,867
Cash and cash equivalents, beginning of period 8,352,949 5,703,082
Cash and cash equivalents, end of period 1,010,543 8,352,949
Cash Paid During the Period for:    
Income taxes      
Interest paid 308   
Non-cash investing and financing activities:    
Conversion of accrued settlement liability into common stock    80,000
Assumption of asset retirement obligation 52,514   
Acquisition of intangible assets for common stock and warrants 2,223,686   
Issuance of note payable for purchase of fixed assets $ 31,500   

Organization

v2.4.0.8
Organization
12 Months Ended
Apr. 30, 2015
Organization And Liquidity  
Organization

Petro River Oil Corp (the “Company”) is an independent exploration and production company with a focus on drilling, completion, recompletions, and applying modern technologies to both conventional and unconventional oil and gas assets. The Company’s core holdings are in the Mid Continent region in Oklahoma and Kansas. The Company’s operations are currently focused on the Mississippi Lime play, capitalizing on the experience, knowledge, and drilling techniques of its team. The Company is driven to utilize its expertise both in the 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 its shareholders. The Company’s principal administrative office is located in Houston, Texas and its principal operations are in Oklahoma with secondary operations in Kansas and Western Missouri. The Company also has an office in New York, New York, which is also headquarters to Petro Spring LLC (“Petro Spring”), the Company’s technology focused subsidiary.

 

Petro River Oil LLC (“Petro”), 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. The Company 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, the Company 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 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.

 

Recent Developments

 

Change in Personia West Concession.  On July 31, 2015, the Company received formal notice from the Osage Mineral Council that the new concession terms for the Pearsonia West Concession (“Pearsonia West”) are effective and formalized. Pearsonia West is a 106,500 contiguous acre position in Osage County, Oklahoma which the Company owns a controlling interest in through its investment in Bandolier Energy LLC, whole owner of the concession.  

 

The new terms allow for vertical drilling obligations to hold the concession which previously had horizontal drilling obligations.  This provides a significant cost savings to the Company and preserves potential control of its core asset until 2018, assuming the negotiated obligations are met. Previously, the concession required 11 horizontal wells to be drilled by the end of 2015 with the concession terminating in the event these wells were not drilled.  The estimated cost of this obligation was approximately $22.0 million.

 

Pursuant to the new terms, assuming completion costs of $300,000 per vertical well, the drilling obligations only require capital expenditures of: $1.8 million in 2016, $2.7 million in 2017, and $3.6 million in 2018, collectively $8.1 million to hold the entire concession.  This represents a cost savings to the Company of approximately $14.0 million while gaining an extra three years of potential control.  

 

The Company is currently exploring multiple options for development for the Pearsonia Concession including entertaining inquiries from industry and joint venture partners.

 

Termination of Renzhi MOU.  On July 9, 2014 the Company and 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”) entered into a memorandum of understanding (“MOU”) for the sale of one of the Company’s wholly owned subsidiaries to Renzhi and the joint development by the Company and Renzhi of oil and gas technology and properties (collectively, the “Transactions”). As of June 30, 2015, the Company has ceased all discussions and negotiations with Renzhi, including discussions regarding the completion of the Transactions contemplated by the MOU.

 

Approval of Reverse Stock Split.   At its 2015 annual meeting of stockholders held on July 8, 2015, stockholders approved resolution to authorize the Company’s Board of Directors, in its sole and absolute discretion, without further action of the stockholders, to amend our Certificate of Incorporation to (i) implement a reverse stock split of our common stock at a ratio of not less than 1-for-2, and not greater than 1-for-250, within one year from the date of the annual meeting, with the exact ratio to be determined by the Board of Directors (the “Reverse Split”); and (ii) immediately following the Reverse Split, increase the total number of authorized shares of our Common Stock to 100.0 million. As of August 13, the Company has not formally applied for the reverse stock split.

 

Asset Acquisitions:

 

Acquisition of Havelide Assets.  On February 18, 2015, Petro Spring I, LLC (“Petro Spring I”), a Delaware limited liability company wholly owned by Petro Spring, entered into a definitive asset purchase agreement (“Havelide Purchase Agreement”) to purchase substantially all of the assets of Havelide GTL LLC (“Havelide”), consisting of certain patents and other intellectual property, trade secrets, and assets developed and owned by Havelide to produce a gasoline-like liquid and high-purity hydrogen from natural gas, at low temperature and at low pressure (the “Havelide Assets”).  The purchase of the Havelide Assets was consummated on February 27, 2015.  Havelide was founded by Stephen Boyd, who joined the Company as its Chief Technology Officer under the terms of an Employment Agreement dated February 18, 2015.

 

Under the terms of the Havelide Purchase Agreement, in consideration for the Havelide Assets, the Company issued to Havelide 13,333,333 shares of common stock of the Company and a warrant to purchase an additional 26,666,667 shares of common stock at an exercise price of $0.25 per share. The shares of the Company's common stock were valued at approximately $520,000 based on the closing price of the Company's common stock on February 27, 2015.

 

The Company computed the economic benefit of the above warrant grant as of February 27, 2015 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, $0.039; Exercise price of $0.25; expected volatility of 176%; and a discount rate of 1.50%. The grant date fair value was $923,685.

 

The Company recorded the Havelide assets based on the fair value of the common stock and warrants $1,443,685 and allocated the purchase price to the intangible assets purchased.

 

Acquisition of Coalthane Assets.  On February 18, 2015, Petro Spring II, LLC (“Petro Spring II”), a Delaware limited liability company wholly owned by Petro Spring, entered into a definitive asset purchase agreement (“Coalthane Purchase Agreement”) to purchase substantially all of the assets of Coalthane Tech LLC (“Coalthane”), consisting of certain patents and other intellectual property, trade secrets, and assets developed and owned by Coalthane to reduce the methane from coal mines and other wells (the “Coalthane Assets”).  The purchase of the Coalthane Assets was consummated on February 27, 2015.  Under the terms of the Coalthane Purchase Agreement, in consideration for the Coalthane Assets, the Company issued to Coalthane 20,000,000 shares of common stock of the Company. The shares of the Company's common stock were valued at approximately $780,000 based on the closing price of the Company's common stock on February 27, 2015. The Company recorded the Coalthane Assets basedon the the fair value of the common stock $780,000 and allocated the purchase price to the intangible assets purchased.

  

The following table summarizes the consideration of the asset purchases and the allocation of the purchase prices:

 

Purchase consideration:      
Net cash provided   $ -  
Fair value of common stock and warrants issued     2,223,686  
Total Purchase Consideration   $ 2,223,686  
         
Purchase price allocation:        
Patent rights   $ 2,223,686  

 

Acquisition of Interest in Bandolier Energy LLC.   On May 30, 2014, the Company entered into a Subscription Agreement pursuant to which the Company was issued a 50% interest in Bandolier Energy, LLC (“Bandolier”) in exchange for a capital contribution of $5.0 million (the “Bandolier Acquisition”). In connection with the Bandolier Acquisition, the Company has the right to appoint a majority of the board of managers of Bandolier. The Company’s Executive Chairman is a manager of, and investor in, Pearsonia West Investment Group, LLC (“PWIG”), a special purpose vehicle formed for the purpose of investing in Bandolier with the Company and Ranger Station, LLC (“Ranger Station”). Concurrently with the Bandolier Acquisition, PWIG was issued a 44% interest in Bandolier for cash consideration of $4.4 million, and Ranger Station was issued a 6% interest in Bandolier for cash consideration of $600,000. In connection with PWIG’s investment in Bandolier, the Company and PWIG entered into an agreement, dated May 30, 2014, granting the members of PWIG an option, exercisable at any time prior to May 30, 2017, to exchange their pro rata share of the Bandolier membership interests for shares of the Company’s common stock, at a price of $0.08 per share, subject to adjustment (the “Option”). The Option, if fully exercised, would result in the Company issuing 55,000,000 shares of its common stock, or 6% to the members of PWIG. 

 

The Company has operational control along with a 50% ownership interest in Bandolier. As a result, the Company consolidates Bandolier. The remaining 50% non–controlling interest represents the equity investment from PWIG and Ranger Station. The Company will allocate the proportionate share of the net operating income/loss to both the Company and the non-controlling interest.

 

Subsequent to the initial capitalization of Bandolier, Bandolier acquired for $8,712,893, less a $407,161 claw back, 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. Spyglass controls a significant contiguous oil and gas acreage position in Northeastern Oklahoma, consisting of 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. No additional contingencies were assumed.

 

As a result of Bandolier’s subsequent acquisition of Spyglass, the Company has both proven developed and proven undeveloped oil and gas assets.  On September 17, 2014, Spyglass has received from the Osage Minerals Counsel at a duly called meeting in Pawhuska, Oklahoma, an extension to its 2014 well commitment due under its concession agreement to extend the time to drill four wells until December 31, 2015.

 

The Company recorded the purchase of Spyglass using the acquisition method of accounting as specified in ASC 805 “Business Combinations.” This method of accounting requires the acquirer to (i) record purchase consideration issued to sellers in a business combination at fair value on the date control is obtained, (ii) determine the fair value of any non-controlling interest, and (iii) allocate the purchase consideration to all tangible and intangible assets acquired and liabilities assumed based on their acquisition date fair values. Further, the Company commenced reporting the results of Spyglass on a consolidated basis with those of the Company effective upon the date of the acquisition.

 

The Company consolidated Bandolier as of May 30, 2014, and the results of operations of the Company include that of Bandolier from June 1, 2014 through April 30, 2015.  The Company recognized net revenues attributable to Bandolier of $2,047,401 and recognized a loss of $2,710,448 during the period June 1, 2014 through April 30, 2015.

 

The following table summarizes fair values of the net liabilities assumed and the allocation of the aggregate fair value of the purchase consideration, and non-controlling interest and net liabilities to assumed identifiable and unidentifiable intangible assets. The fair value allocation is based on management’s estimates utilizing potential production and future cash flows:

 

Purchase consideration:        
Cash paid   $ 8,329,759  
Liabilities assumed     52,514  
Total Purchase Consideration   $ 8,382,273  
         
Purchase price allocation:        
Oil and gas assets – proved developed   $ 2,460,632  
Oil and gas assets – proved undeveloped   $ 5,921,641  
Asset retirement obligations   $ (52,514 )

 

The following table summarizes, on an unaudited pro forma basis, the results of operations of the Company as though the acquisition had occurred as of May 1, 2013. The pro forma amounts presented are not necessarily indicative of either the actual operation results had the acquisition transaction occurred as of May 1, 2013.

 

    For the Year Ended  
    April 30, 2015     April 30, 2014  
Revenues   $ 2,494,392     $ 7,597,640  
Net loss   (4,849,864 )   (4,956,917 )
Loss per share of common share - Basic and diluted   (0.01 )   $ (0.01 )
Weighted average number of common shares Outstanding - Basic and diluted     851,901,079       768,257,883  

 

At April 30, 2015 the non–controlling interest in Bandolier was as follows:

 

Non–controlling interest at April 30, 2014   $ -  
Acquisition of non–controlling interest in Bandolier     5,000,000  
Non–controlling share of net loss     (1,355,224 )
Non–controlling interest at April 30, 2015   $ 3,644,776  

 

As of April 30, 2015, the Company performed a ceiling test on the Oklahoma oil and gas assets.  As a result, the Company recognized an impairment charge of $1,246,975 on the Oklahoma oil and gas assets.

 

Going Concern and Management’s Plan

v2.4.0.8
Going Concern and Management’s Plan
12 Months Ended
Apr. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Going Concern and Management’s Plan:

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of April 30, 2015, the Company had an accumulated deficit of $16,650,486.  The Company has incurred significant losses since inception. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

At April 30, 2015, the Company had working capital of approximately $0.4 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, the Company has a limited operating history prior to acquisition of Bandolier.  At April 30, 2015, the Company had cash and cash equivalents of approximately $1.0 million.  The Company’s primary source of operating funds since inception has been equity financings.

 

Management is currently in the process of evaluating all paths for the company at this point amid a difficult oil price environment.  This includes curtailing oil and gas operations and increasing focus on our technology initiates.  Obtaining funding in this environment for exploration and production assets is challenging though we continue to work hard to meet our capital needs.  We are exploring farm in and joint venture opportunities for our oil and gas assets as well as exit opportunities through an outright sale.

 

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. In addition, management is focused on developing Petro Spring, its technology focused business, which recently acquired Havelide Assets and Coalthane Assets.  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.  To combat price volatility in crude oil process and further diversify the business, management has increased its focus on the development of Petro Spring.

 

The Company is currently 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.

 

Basis of Preparation

v2.4.0.8
Basis of Preparation
12 Months Ended
Apr. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Preparation

The consolidated financial statements and accompanying footnotes are prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. Non–controlling interest represents the minority equity investment in the Company’s subsidiaries, plus the minority investors’ share of the net operating results and other components of equity relating to the non–controlling interest.

 

These consolidated financial statements include the below subsidiaries:

 

Petro River Oil LLC, Petro Spring, LLC, PO1, LLC and MegaWest Energy USA Corp. and its wholly owned subsidiaries:

 

MegaWest Energy Texas Corp.

MegaWest Energy Kentucky Corp.

MegaWest Energy Missouri Corp.

MegaWest Energy Kansas Corp.

MegaWest Energy Montana Corp.

 

Also contained in the consolidated financial statements is the financial information of the Company’s 50% owned subsidiary, Bandolier Energy LLC.

 

 

Significant Accounting Policies

v2.4.0.8
Significant Accounting Policies
12 Months Ended
Apr. 30, 2015
Accounting Policies [Abstract]  
Significant Accounting Policies
(a)   Use of Estimates:

 

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include volumes of oil and natural gas reserves, abandonment obligations, impairment of oil and natural gas properties, depreciation and accretion, income taxes, fair value of financial instruments, and contingencies.

 

Oil and gas proven reserve estimates, which are the basis for unit-of-production depletion and the full cost ceiling test, have a number of inherent uncertainties. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, testing, and production subsequent to the date of the estimate may justify revision of such estimate. Accordingly, reserve estimates are often different from the quantities of oil and gas that are ultimately recovered. In addition, reserve estimates are vulnerable to changes in prices of crude oil and gas. Such prices have been volatile in the past and can be expected to be volatile in the future. As of April 30, 2015, the Company had proven reserves in Oklahoma in relation to the Bandolier transaction.

 

(b)   Cash and Cash Equivalents:

 

Cash and cash equivalents include all highly liquid monetary instruments with original maturities of three months or less when purchased. These investments are carried at cost, which approximates fair value. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash deposits. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). At times, the Company’s cash and cash equivalent balances may be uninsured or in amounts that exceed the FDIC insurance limits.

 

(c)   Oil and Gas Operations:

 

Oil and Gas Properties: The Company uses the full-cost method of accounting for its exploration and development activities. Under this method of accounting, the costs of both successful and unsuccessful exploration and development activities are capitalized as oil and gas property and equipment. Proceeds from the sale or disposition of oil and gas properties are accounted for as a reduction to capitalized costs unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves of oil and natural gas attributable to a country, in which case a gain or loss would be recognized in the consolidated statements of operations. All of the Company’s oil and gas properties are located within the continental United States, its sole cost center.

 

Oil and gas properties may include costs that are excluded from costs being depleted. Oil and gas costs excluded represent investments in unproved properties and major development projects in which the Company owns a direct interest. These unproved property costs include non-producing leasehold, geological and geophysical costs associated with leasehold or drilling interests and in process exploration drilling costs. All costs excluded are reviewed at least annually to determine if impairment has occurred.

 

The Company accounts for its unproven long-lived assets in accordance with Accounting Standards Codification (“ASC”) Topic 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. 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 statement of operations for the year ended April 30, 2014.  No further impairment was recognized on these assets during the year ended April 30, 2015.

 

Proved Oil and Gas Reserves: In accordance with Rule 4-10 of SEC Regulation S-X, proved oil and gas reserves are the estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. All of the Company’s oil and gas properties with proven reserves were impaired to the salvage value prior to the Bandolier transaction. The price used to establish economic producibility is the average price during the 12-month period preceding the end of the entity’s fiscal year and calculated as the un-weighted arithmetic average of the first-day-of-the-month price for each month within such 12-month period. Upon completion of the Bandolier transaction, the Company acquired $2,460,632 in proved developed oil and gas assets and $5,921,641 in proven undeveloped oil and gas assets.  As of April 30, 2015, management performed a ceiling test on the Oklahoma assets acquired in the Bandolier transaction.  As a result, the Company recognized an impairment charge of $1,246,975 on the Oklahoma oil and gas assets.

 

Depletion, Depreciation and Amortization: Depletion, depreciation and amortization is provided using the unit-of-production method based upon estimates of proved oil and gas reserves with oil and gas production being converted to a common unit of measure based upon their relative energy content. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is deducted from the capitalized costs to be amortized. Once the assessment of unproved properties is complete and when major development projects are evaluated, the costs previously excluded from amortization are transferred to the full cost pool and amortization begins. The amortizable base includes estimated future development costs and, where significant, dismantlement, restoration and abandonment costs, net of estimated salvage value.

 

In arriving at rates under the unit-of-production method, the quantities of recoverable oil and natural gas reserves are established based on estimates made by the Company’s geologists and engineers which require significant judgment, as does the projection of future production volumes and levels of future costs, including future development costs. In addition, considerable judgment is necessary in determining when unproved properties become impaired and in determining the existence of proved reserves once a well has been drilled. All of these judgments may have significant impact on the calculation of depletion expenses. There have been no material changes in the methodology used by the Company in calculating depletion, depreciation and amortization of oil and gas properties under the full cost method during the years ended April 30, 2015 and 2014.  

 

(d)   Intangible Assets :

 

Intangible assets consist of patent rights. Applicable long–lived assets are amortized or depreciated over the shorter of their estimated useful lives, the estimated period that the assets will generate revenue, or the statutory or contractual term in the case of patents. Estimates of useful lives and periods of expected revenue generation are reviewed periodically for appropriateness and are based upon management’s judgment. Patent rights are amortized on the straight-line method over their useful lives of 15 years.

 

(e)   Impairment of Long-Lived Assets :

 

The Company assesses the recoverability of its long-lived assets when there are indications that the assets might be impaired. When evaluating assets for potential impairment, the Company compares the carrying value of the asset to its estimated undiscounted future cash flows.  If an asset’s carrying value exceeds such estimated cash flows (undiscounted and with interest charges), the Company records an impairment charge for the difference.

 

(f)   Asset Retirement Obligations:

 

The Company recognizes a liability for the estimated fair value of site restoration and abandonment costs when the obligations are legally incurred and the fair value can be reasonably estimated. The fair value of the obligations is based on the estimated cash flow required to settle the obligations discounted using the Company’s credit adjusted risk-free interest rate. The obligation is recorded as a liability with a corresponding increase in the carrying amount of the oil and gas assets. The capitalized amount will be depleted on a unit-of-production method. The liability is increased each period, or accretes, due to the passage of time and a corresponding amount is recorded in the consolidated statements of operations.

 

 Revisions to the estimated fair value would result in an adjustment to the liability and the capitalized amount in oil and gas assets.

 

(g)   Oil and Gas Revenue:

 

Sales of oil and gas, net of any royalties, are recognized when oil has been delivered to a custody transfer point, persuasive evidence of a sales arrangement exists, the rights and responsibility of ownership pass to the purchaser upon delivery, collection of revenue from the sale is reasonably assured, and the sales price is fixed or determinable. The Company sells oil and gas on a monthly basis. Virtually all of its contracts’ pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, the quality of the oil and gas, and prevailing supply and demand conditions, so that the price of the oil and gas fluctuates to remain competitive with other available oil supplies.

 

(h)   Stock-based Compensation:

 

Generally, all forms of stock-based compensation, including stock option grants, warrants, and restricted stock grants are measured at their fair value utilizing an option pricing model on the award’s grant date, based on the estimated number of awards that are ultimately expected to vest.

 

The Company recognizes compensation expense for all equity–based payments in accordance with ASC 718“Share–based payments". Under fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite service period of the award.

 

The fair value of option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are input into the model. These assumptions are the expected stock volatility, the risk–free interest rate, the option’s expected life, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is calculated based on the historical volatility of the Company’s common stock over the expected option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its common stock and does not intend to pay dividends on the common stock in the foreseeable future. The expected forfeiture rate is estimated based on historical experience.

 

Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, the equity–based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If the actual forfeiture rate is materially different from our estimate, the equity–based compensation expense could be significantly different from what the Company has recorded in the current period. 

 

The Company accounts for share–based payments granted to non–employees in accordance with ASC 505, “Equity Based Payments to Non–Employees”. The Company determines the fair value of the stock–based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.  If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.

 

The expenses resulting from stock-based compensation are recorded as general and administrative expenses in the consolidated statement of operations, depending on the nature of the services provided.

 

 (i)   Per Share Amounts:

 

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the years ended April 30, 2015 and 2014, as presented in these financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. 

 

The Company had the following common stock equivalents at April 30, 2015 and 2014:

 

As at   April 30, 2015     April 30, 2014  
Stock Options     108,188,281       88,038,281  
Stock Purchase Warrants     67,291,667       40,625,000  
      175,479,948       128,663,281  

 

(j)   Fair Value of Financial Instruments:

 

All financial instruments, including cash and cash equivalents, accounts receivable and accounts payable and accrued expenses are recognized on the consolidated balance sheet initially at carrying value. The carrying value of these assets approximates their fair value due to their short-term maturities.

 

At each balance sheet date, the Company assesses financial assets for impairment with any impairment recorded in the consolidated statement of operations. To assess loans and receivables for impairment, the Company evaluates the probability of collection of accounts receivable and records an allowance for doubtful accounts, which reduces loans and receivables to the amount management reasonably believes will be collected. In determining the amount of the allowance, the following factors are considered: the length of the time the receivable has been outstanding, specific knowledge of each customer’s financial condition and historical experience.

 

Market risk is the risk that changes in commodity prices will affect the Company’s oil sales, cash flows or the value of its financial instruments. The objective of commodity price risk management is to manage and control market risk exposures within acceptable limits while maximizing returns.

 

The Company is exposed to changes in oil prices which impact its revenues and to changes in natural gas process which impact its operating expenses.

 

The Company does not utilize financial derivatives or other contracts to manage commodity price risks.

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

 

Fair value measurements are categorized using a valuation hierarchy for disclosure of the inputs used to measure fair value, which prioritize the inputs into three broad levels:

 

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

 

Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date, and include those financial instruments that are valued using models or other valuation methodologies.

 

Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

 

(k)   Subsequent Events:

 

The Company evaluates subsequent events through the date the consolidated financial statements are issued.

 

 (l)  

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, 2017, including interim periods within that reporting period. The Company is currently evaluating the effects of ASU 2014–09 on the consolidated financial statements.

 

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 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 consolidated financial statements.

 

In November 2014, the FASB issued Accounting Standards Update No. 2014-16 (ASU 2014-16), Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The amendments in this ASU do not change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. The amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. The ASU applies to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share and is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the effects of ASU 2014–16 on the consolidated financial statements.

 

In November 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-17 Business Combinations (Topic 805), Pushdown Accounting. The amendment provides that acquired entities have the option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of an acquired entity. The acquired entity will have the option to elect to apply pushdown accounting in a subsequent reporting period and would be treated as a change in accounting principle. Additional disclosures are required to enable the users of the financial statements to evaluate the effect of pushdown accounting. The Company is currently evaluating the effects of ASU 2014–17 on the 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 consolidated financial statements.  

Restricted Cash

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Restricted Cash
12 Months Ended
Apr. 30, 2015
Restricted Cash  
Restricted Cash

Restricted cash as of April 30, 2015 consists of a certificate of deposit with one of the Company’s financial institutions. The certificate of deposit, which was extended until December 31, 2015, was purchased pursuant to a cooperative agreement with a regional utility provider in Oklahoma.

Oil and Gas Assets

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Oil and Gas Assets
12 Months Ended
Apr. 30, 2015
Extractive Industries [Abstract]  
Oil and Gas Assets

The following table summarizes the oil and gas assets by project:

 

Cost   Oklahoma     Kansas     Missouri     Montana     Other    

 

Total

 
Balance May 1, 2013   $ -     $ 12,329,098     $ 918,991     $ 75,000     $ 100,000   $ 13,423,089  
Additions     -       327,002       -       -       -     327,002  
Depreciation, depletion and amortization     -       (94,526 )     -               -     (94,526 )
Impairment of oil and gas assets             (4,638,973 )             (75,000 )           (1,246,975 )
Balance April 30, 2014     -       7,922,601       918,991       -       100,000     8,941,592  
Additions     8,751,867       1,747       -       -       -     8,753,614  
Depreciation, depletion and amortization     (569,892 )     (121,328 )     -       -       -     (691,220 )
Impairment of oil and gas assets       (1,246,957                                    (1,246,957
                                               
Balance April 30, 2015   $ 6,935,000     $ 7,803,020     $ 918,991     $ -     $ 100,000   $ 15,757,011  

 

Oklahoma

 

On May 30, 2014, the Company, entered into a Subscription Agreement, 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 106,880 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 proved developed oil and gas assets and $5,921,641 in proven undeveloped oil and gas assets. During the year ended April 30, 2015, Bandolier purchased additional oil and gas assets totaling $369,594.  As of April 30, 2015, the Company performed a ceiling test on the Oklahoma oil and gas assets.  As a result, the Company recognized an impairment charge of $1,246,975.

 

Kansas

 

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, 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 considerations of $2.0 million as well as a 25% non-managing membership interest in the Company. During the year ended April 30, 2015, the Company 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, the Company 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 play in Southeast Kansas for total cost of $12.2 million. The Company also acquired over 60 square miles of proprietary 3D seismic data over prospective Mississippi Lime acreage in the same area. 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 year ended April 30, 2015.

 

Missouri

 

At April 30, 2015, the Company’s Missouri lease holdings totaled 945 gross acres with 98.4% working interest on its Grassy Creek asset.  The Company no longer owns its Marmaton River asset.  Petro Rive has engaged a local operating partner to conduct small scale testing through their own funding source on this property and it is anticipated this partner will operate this asset going forward.

 

Historically, 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 Company has drilled 73 exploration/delineation wells with a 67% success rate.

 

As of April 30, 2015 and 2014, 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.

 

Other

 

Other property consists primarily of four used steam generators and related equipment that will be assigned to future projects. As of April 30, 2015, management concluded that impairment was not necessary as all other assets were carried at salvage value.  

 

Intangible Assets

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Intangible Assets
12 Months Ended
Apr. 30, 2015
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets

The Company’s primary additional asset is Petro Spring, a wholly owned technology focused subsidiary of the Company. It was launched with an intentionally broad mandate to acquire and commercialize cutting edge technologies with the intent to capitalize on the significant technological experience of its leadership team and network of industry relationships within the energy sector.

 

The Company’s intangibles assets consisted of the following:

 

  Estimated useful life   April 30, 2015  
Patent rights 15 years   $ 2,223,686  
Less: Accumulated amortization       (20,293 )
Intangible assets, net     $ 2,203,393  

 

The Company recorded amortization expense of $20,293 and $0 for the years ended April 30, 2015 and 2014, respectively.

 

The following table outlines estimated future annual amortization expense for the next five years and thereafter:

 

April 30,      
2016   $ 148,246  
2017     148,246  
2018     148,246  
2019     148,246  
2020     148,246  
Thereafter     1,462,163  
    $ 2,203,393  

 

 

Asset Retirement Obligations

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Asset Retirement Obligations
12 Months Ended
Apr. 30, 2015
Asset Retirement Obligation Disclosure [Abstract]  
Asset Retirement Obligations

The total future asset retirement obligation was estimated based on the Company’s ownership interest in all wells and facilities, the estimated legal obligations required to retire, dismantle, abandon and reclaim the wells and facilities and the estimated timing of such payments. The Company estimated the present value of its asset retirement obligations at both April 30, 2015 and 2014, based on a future undiscounted liability of $1,143,857 and $1,087,292, respectively. These costs are expected to be incurred within one to 24 years. A credit-adjusted risk-free discount rate of 10% and an inflation rate of 2% were used to calculate the present value.

 

Changes to the asset retirement obligation were as follows:

 

    April 30, 2015     April 30, 2014  
Balance, beginning of period   $ 818,010     $ 763,036  
Additions     52,514       -  
Accretion     47,906       54,974  
      918,430       818,010  
Less: Current portion for cash flows expected to be incurred within one year     (541,959 )     (481,658 )
Long-term portion, end of period   $ 376,471     $ 336,352  

 

 

Expected timing of asset retirement obligations:

 

Year Ending April 30,      
2016     541,959  
2017     212,000  
2018     -  
2019     -  
2020     -  
Thereafter     389,898  
      1,143,857  
Effect of discount     (225,427 )
Total   $ 918,430  

 

As of April 30, 2015 and 2014, the Company has $0 of reclamation deposits with authorities to secure certain abandonment liabilities.

  

 

Related Party Transactions

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Related Party Transactions
12 Months Ended
Apr. 30, 2015
Related Party Transactions [Abstract]  
Related Party Transactions

 

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 years ended April 30, 2015 and 2014, the Company expensed $401,245 and $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 years ended April 30, 2015 and 2014, the Company expensed $115,168 and $165,337, respectively, to general and administrative expenses.

 

 

  c) On November 22, 2013, the Company entered into an employment agreement with Gary Williky 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 years ended April 30, 2015 and 2014, the Company expensed $57,584 and $82,668, respectively to general and administrative expenses.

 

  d) 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. On May 27, 2015, the Company ended its relationship with Mr. Vierma due to a corporate restructuring.  As of May 27, 2015, Mr. Vierma was vested into 3,322,917 of the options.
     
    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 years ended April 30, 2015 and 2014, the Company expensed $57,584 and $82,668, respectively, to general and administrative expenses.
     
  e) 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.
     
    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 years ended April 30, 2015 and 2014, the Company expensed $1,022 and $7,742 to general and administrative expenses.
     
  f) 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 years ended April 30, 2015 and 2014, the Company expensed $115,168 and $165,337, respectively, to general and administrative expenses.
     
  g) On February 18, 2015, in conjunction with the Havelide and Coalthane purchases, the Company entered into an employment agreement with Steven Boyd, the developer of the Havelide and Coalthane technologies. Under the terms of this agreement, Mr. Boyd will receive an annual base salary of $120,000.

   

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 years ended April 30, 2105 and 2014, the Company expensed $0 and $147,442, respectively, to general and administrative expenses. 

 

Separation and Release Agreement

 

In addition, in June and July of 2013, the Company signed a series of agreements with Jeffrey Freedman, former Chief Executive Officer, in relation to his departure from the Company. Pursuant to these agreements, the Company has provided to Mr. Freedman the sum of $12,000 and issued 465,116 options to purchase common stock with a $56,047 aggregate fair value as of the July 24, 2013 option grant date. These options will expire on July 23, 2016 and have an exercise price of $0.215. 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, $0.215; exercise price of $0.215; expected volatility of 88%; and a discount rate of 0.64%. The options were immediately vested and the Company recorded the $56,047 to general and administrative expense on the date of grant.

 

Stockholders' Equity

v2.4.0.8
Stockholders' Equity
12 Months Ended
Apr. 30, 2015
Stockholders' Equity Note [Abstract]  
Stockholders' Equity

As of April 30, 2015 and 2014, the Company had 5,000,000 shares of blank check preferred stock authorized with a par value of $0.00001 per share. None of the blank check preferred shares were issued or outstanding.

 

As of April 30, 2015 and 2014, the Company had 29,500 shares of preferred B shares authorized with a par value of $0.00001 per share. No preferred B shares are issued or outstanding. 

 

As discussed in Note 1, the Company executed the Havelide Purchase Agreement and issued to Havelide 13,333,333 shares of common stock of the Company in consideration for the Havelide Assets. The shares of the Company's common stock were valued at approximately $520,000 based on the closing price of the Company's common stock on February 27, 2015.

 

As discussed in Note 1, the Company executed the Coalthane Purchase Agreement and issued to Coalthane 20,000,000 shares of common stock of the Company in consideration for the Coalthane Assets. The shares of the Company's common stock were valued at approximately $780,000 based on the closing price of the Company's common stock on February 27, 2015.

 

Stock Options

v2.4.0.8
Stock Options
12 Months Ended
Apr. 30, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Options

As of April 30, 2015, the Company has one equity incentive plan. The number of shares reserved for issuance in aggregate under the plan is limited to 120 million shares. The exercise price, term and vesting schedule of stock options granted are set by the Board of Directors at the time of grant. Stock options granted under the plan may be exercised on a cashless basis, if such exercise is approved by the Board. In a cashless exercise, the employee receives a lesser amount of shares in lieu of paying the exercise price based on the quoted market price of the shares on the trading day immediately preceding the exercise date.

 

As of April 30, 2014, the Company had a total of 88,038,281 options outstanding and 24,204,947 exercisable with a weighted average exercise price of $0.06.

 

As of April 30, 2015, the Company had a total of 108,188,281 options outstanding and 31,648,280 exercisable with a weighted average exercise price of $0.06.

 

The following table summarizes information about the options outstanding and exercisable at April 30, 2015:

 

    Options    

Weighted Average

Exercise Prices

 
             
Outstanding – April 30, 2013     290,000     $ 0.50  
Exercisable – April 30, 2013     290,000     $ 0.50  
Granted     87,938,281     $ 0.06  
Exercised     -     $ -  
Forfeited/Cancelled     (190,000 )   $ 0.50  
Outstanding April 30, 2014     88,038,281     $ 0.06  
Granted     21,000,000     $ 0.53  
Exercised     -     $ -  
Forfeited/Cancelled     (750,000 )   $ 0.06  
Outstanding April 30, 2015     108,188,281     $ 0.06  
Exercisable – April 30, 2015     31,648,280     $    
                 
Outstanding - Aggregate Intrinsic Value           $ -  
Exercisable - Aggregate Intrinsic Value           $ -  

 

The following table summarizes information about the options outstanding and exercisable at April 30, 2015:

 

      Options Outstanding   Options Exercisable  
  Exercise Price   Options  

Weighted Avg.

Life Remaining

 

Weighted Avg.

Exercise Price

  Options  

Weighted Avg.

Exercise Price

 
 $ 0.22     465,116   0.01 years   $ 0.22     465,116   $ 0.22  
 $ 0.06     107,723,165   8.79 years   $ 0.06     31,183,164   $ 0.06  
        108,188,281                31,648,280         
Aggregate Intrinsic Value             $ -         $ -  

 

During the years ended April 30, 2015 and 2014, the Company expensed an aggregate $1,135,417 and $1,501,766 to general and administrative expenses for stock based compensation pursuant to employment and consulting agreements.

 

As of April 30, 2015, no intrinsic value was attributable to stock-based compensation.

 

Other than the issuances disclosed in Note 8 and below, during the year ended April 30, 2015, the Company had no other stock based compensation expense.

 

As of April 30, 2015, the Company has $2,658,120 in unrecognized stock based compensation expense which will be amortized over a weighted average exercise period of 1.85 years.

 

Advisor Grants:

 

On September 24, 2014, the Board of Directors authorized the grant of 19,000,000 fair value options to five consultants. 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.  One consultant was granted 5,000,000 fair value options and the second consultant was granted 2,500,000 fair value options, the third consultant was granted 3,000,000 fair value options and the fourth was granted 6,500,000 fair value stock options. All options granted vested over 4 years with 20 percent vested immediately upon grant.  Additionally, one consultant was granted 2,000,000 fair value options that vest over one year with one-twelfth vesting immediately.  All options granted mature in ten years.

 

The Company computed the economic benefit of the above 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, $0.057; Exercise price of $0.057; expected volatility of 174%; and a discount rate of 2.57%. The grant date fair value of the awards was $1,075,072. For the year ended April, 2015, the Company expensed $354,200 to general and administrative expenses as part of stock-based compensation.

 

On January 23, 2015, one consultant was granted 2,000,000 fair value options that vest over a six month period with 20 percent vesting immediately.  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 and mature in ten years.

 

The Company computed the economic benefit of the above 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, $0.028; Exercise price of $0.028; expected volatility of 178%; and a discount rate of 1.81%. The grant date fair value of the award was $55,746. For the year ended April 30, 2015, the Company expensed $33,447, respectively, to general and administrative expenses as part of stock-based compensation.

 

On November 20, 2013, the Board of Directors authorized the grant of fair value options to two consultants. 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. One consultant was granted 2,333,333 fair value options and the second consultant was granted 1,833,333 fair value options. All options granted vested immediately upon grant and mature in ten years.

 

Warrants:

 

As discussed in Note 1, under the terms of the Havelide Purchase Agreement, the Company issued to Havelide 13,333,333 shares of common stock of the Company and a warrant to purchase an additional 26,666,667 shares of common stock at an exercise price of $0.25 per share. The Company computed the economic benefit of the above warrant grant as of February 18, 2015 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, $0.039; Exercise price of $0.25; expected volatility of 176%; and a discount rate of 1.50%. The grant date fair value was $923,685.

 

   

Number of

 Warrants

   

Weighted

Average

Exercise Price

   

Weighted

Average Life

Remaining

 
Outstanding and exercisable – April 30, 2013     230,000       0.50       0.65  
Forfeited     (230,000 )     -       -  
Granted     40,625,000       0.14       1.62  
Outstanding and exercisable – April 30, 2014     40,625,000       0.14       1.62  
Forfeited     -       -       -  
Granted     26,666,667       0.25       5.0  
Outstanding and exercisable – April 30, 2015     67,291,667       0.10       2.29  

 

The aggregate intrinsic value of the warrants was $0.

 

Segment Information

v2.4.0.8
Segment Information
12 Months Ended
Apr. 30, 2015
Segment Reporting [Abstract]  
Segment Information

 

Petro presently has two reportable business segments, that being oil and gas exploration and exploitation, and the second is technology. The technology segment consists of $2,203,393 in intangible assets.  Management has not commenced technology operations, other than purchasing the assets.  Petro’s corporate and administrative operations are conducted in both Canada and the United States, while predominantly all of the oil and gas properties and operations are located in the United States.

 

    Year ended April 30, 2015  
    Canada     USA     Consolidated  
Revenue   $ -     $ 2,127,576     $ 2,127,576  
Expenses     -       (8,427,155 )     (8,472,155 )
Net loss     -       (6,344,579 )     (6,344,579 )
Oil and gas assets     100,000       15,657,011       15,757,011  
Property and equipment     -       60,953       60,953  

  

    Year ended April 30, 2014  
    Canada     USA     Consolidated  
Revenue   $ -     $ 372,179     $ 372,179  
Expenses     -       (9,325,708 )     (9,325,708 )
Net loss     -       (8,953,529 )     (8,953,529 )
Oil and gas assets     100,000       8,841,592       8,941,592  
Property and equipment     -       930       930  

 

Income Taxes

v2.4.0.8
Income Taxes
12 Months Ended
Apr. 30, 2015
Income Tax Disclosure [Abstract]  
Income Taxes

 

As of April 30, 2015 and April 30, 2014, the Company had approximately $9.42 million and $6.4 million of net operating loss carryovers (“NOLs”) which expire beginning in 2027. The U.S. net operating loss carryovers are subject to limitation under Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under the regulations. Management has determined that a change in ownership occurred as a result of the Share Exchange on April 23, 2013. Therefore, the net operating loss carryovers are subject to an annual limitation of approximately $156,000. The Company impaired the NOLs at the time of the change of ownership. Further the Company was limited in the recognition of a pre-acquistion loss deduction due to a net built in loss in 2014 at the time of the ownership change.

 

The income tax expense (benefit) consists of the following:

 

    For the year ended April 30, 2015     For the year ended April 30, 2014  
Foreign            
Current   $ -     $ -  
Deferred     -       -  
U.S. Federal                
Current     -       -  
Deferred     11,522,597       (3,373,053 )
                 
U.S. State & Local                
Current     -       -  
Deferred     1,085,319       (458,338
                 
Change in valuation allowance     (12,607,916 )     3,831,391  
Income tax provision (benefit)   $ -     $ -  

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on this assessment management has established a full valuation allowance against all of the deferred tax assets for every period, since it is more likely than not that all of the deferred tax assets will not be realized.

 

The Company’s deferred tax assets (liabilities) consisted of the effects of temporary differences attributable to the following:

 

    April 30, 2015     April 30, 2014  
             
U.S. Net operating loss carryovers   $ 3,421,532     $ 2,473,922  
Depreciation     2,450,785       16,897,095  
Bandolier LLC flow-through       463,906        -  
Accretion of asset retirement obligation     341,679       315,915  
Stock-based compensation     981,097       579,982  
Total deferred tax assets   $ 7,658,999     $ 20,266,915  
Valuation allowance     7,658,999 )     (20,266,915 )
Deferred tax asset, net of valuation allowance   $   -     $ -  

 

The expected tax expense (benefit) based on the statutory rate is reconciled with actual tax expense benefit as follows:

 

   

For the year ended

April 30, 2015

   

For the year ended

April 30, 2014

 
             
U.S. federal statutory rate       (34.00 )%     (34.00 )%
State income tax, net of federal benefit     (3.20 )%     (4.62 )%
Change in rate      11.72 %      -  
Net realized built in loss limitation      221.36 %      -  
Other permanent differences     2.84 %     4.17 % 
Change in valuation allowance     (198.72 )%     (42.79 )%
Income tax provision (benefit)     0.00  %     0.00 %

 

Contingency and Contractual Obligations

v2.4.0.8
Contingency and Contractual Obligations
12 Months Ended
Apr. 30, 2015
Commitments and Contingencies Disclosure [Abstract]  
Contingency and Contractual Obligations

As a result of the Share Exchange, the Company inherited the following contingencies:

 

(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 asserted that rent should be abated during the remediation process and accordingly, the Company did not pay any rent after 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 determined that the premises were not fit for re-occupancy and considered the landlord to be in default of the lease and the lease terminated.

 

On January 30, 2014 the landlord filed a Statement of Claim against the Company for rental arrears in the amount aggregating approximately CAD $759,000. On October 20, 2014, the Company filed a summary judgment application stating that the landlord’s claim is barred as it was commenced outside the 2-year statute of limitation period under the Alberta Limitations Act. The landlord subsequently filed a cross-application to amend its Statement of Claim to add a claim for loss of prospective rent in an amount of approximately CAD $665,000. The applications were heard on June 25, 2015.  The court reserved its decision and there is no specific timeline by which it must render a ruling.

 

(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 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.  The potential consequences of such complaint could jeopardize the corresponding leases.

 

On October 7, 2014 Spyglass, along with other defendants, filed a motion to dismiss the August 11, 2104 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 were granted leave until November 19, 2014 to file a reply to Splyglass’s reply brief.  Once the briefing cycle concluded on November 19, 2014, the motion to dismiss became 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.

 

(d) 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. 

 

(e) 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.

 

Subsequent Events

v2.4.0.8
Subsequent Events
12 Months Ended
Apr. 30, 2015
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

Approval of Reverse Stock Split.   At its 2015 annual meeting of stockholders held on July 8, 2015, stockholders approved resolution to authorize the Company’s Board of Directors, in its sole and absolute discretion, without further action of the stockholders, to amend our Certificate of Incorporation to (i) implement a reverse stock split of our common stock at a ratio of not less than 1-for-2, and not greater than 1-for-250, within one year from the date of the annual meeting, with the exact ratio to be determined by the Board of Directors (the “Reverse Split”); and (ii) immediately following the Reverse Split, increase the total number of authorized shares of our Common Stock to 100.0 million. As of August 13, 2015, the Company has not formally applied for a reverse split.

 

Termination of Renzhi MOU.  On July 9, 2014 the Company and 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”) entered into a memorandum of understanding (“MOU”) for the sale of one of the Company’s wholly owned subsidiaries to Renzhi and the joint development by the Company and Renzhi of oil and gas technology and properties (collectively, the “Transactions”). As of June 30, 2015, the Company has ceased all discussions and negotiations with Renzhi, including discussions regarding the completion of the Transactions contemplated by the MOU.

Supplemental Information on Oil and Gas Operations

v2.4.0.8
Supplemental Information on Oil and Gas Operations
12 Months Ended
Apr. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Supplemental Information on Oil and Gas Operations (Unaudited):
   

This supplementary oil and natural gas information is provided in accordance with the United States Financial Accounting Standards Board (“FASB”) Topic 932 - “Extractive Activities - Oil and Gas”.

 

The Company retains qualified independent reserves evaluators to evaluate the Company’s proved oil reserves. For the year ended April 30, 2015 the report by Pinnacle Energy Services, LLC. (“Pinnacle”) covered 100% of the Company’s proved oil reserves. During the year ended April 30, 2014, the Company did not report having any proved oil reserves.

 

Proved oil and natural gas reserves, as defined within the SEC Rule 4-10(a)(22) of Regulation S-X, are those quantities of oil and gas, which, by analysis of geoscience and engineering data can be estimated with reasonable certainty to be economically producible from a given date forward from known reservoirs, and under existing economic conditions, operating methods and government regulations prior to the time of which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether determinable or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. Developed oil and natural gas reserves are reserves that can be expected to be recovered from existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and through installed extraction equipment and infrastructure operational at the time of the reserves estimate is the extraction is by means not involving a well. Estimates of the Company’s oil reserves are subject to uncertainty and will change as additional information regarding producing fields and technology becomes available and as future economic and operating conditions change.

  

The following tables summarize the Company’s proved developed and undeveloped reserves (all oil) within the United States, net of royalties, as of April 30, 2015 and 2014:

 

Oil (MBbls)   2015     2014  
             
Proved reserves as at May 1     -       -  
Extensions, Acquisitions and discoveries     508       -  
Dispositions     -       -  
Production     -       -  
Revisions of prior estimates     -       -  
Total Proved reserves as at April 30     508       -  
                 
Oil (MBbls)     2015       2014  
                 
Proved developed producing     35       -  
Non-producing     286       -  
Proved undeveloped     187       -  
Total Proved reserves as at April 30     508       -  

 

 

Capitalized Costs Related to Oil and Gas Assets   2015     2014  
             
Proved properties   $ 8,062,394     $ -  
Unproved properties     13,555,565       13,555,565  
      21,617,959       13,555,565  
Less: accumulated impairment     (5,960,948     (4,713,973
    $ 15,657,011     $ 8,841,592  
                 
                 
Costs incurred in Oil and Gas Activities:     2015       2014  
                 
Development   $ 8,701,100     $ 327,002  
Exploration     -       -  
    $ 8,71,100     $ 327,002  

 

The following standardized measure of discounted future net cash flows from proved oil reserves has been computed using the average first-day-of-the-month price during the previous 12-month period, costs as at the balance sheet date and year-end statutory income tax rates. A discount factor of 10% has been applied in determining the standardized measure of discounted future net cash flows. The Company does not believe that the standardized measure of discounted future net cash flows will be representative of actual future net cash flows and should not be considered to represent the fair value of the oil properties. Actual net cash flows will differ from the presented estimated future net cash flows due to several factors including: 

 

Future production will include production not only from proved properties, but may also include production from probable and possible reserves;
Future production of oil and natural gas from proved properties may differ from reserves estimated;
Future production rates may vary from those estimated;
Future rather than average first-day-of-the-month prices during the previous 12-month period and costs as at the balance sheet date will apply;
Economic factors such as changes to interest rates, income tax rates, regulatory and fiscal environments and operating conditions cannot be determined with certainty;
Future estimated income taxes do not take into account the effects of future exploration expenditures; and
Future development and asset retirement obligations may differ from those estimated.

  

Future net revenues, development, production and restoration costs have been based upon the estimates referred to above. The following tables summarize the Company’s future net cash flows relating to proved oil reserves based on the standardized measure as prescribed in FASB Topic 932 - “Extractive Activities - Oil and Gas”:

 

Future cash flows relating to proved reserves:

  2015     2014  
Future cash inflows   $ 37,455,000     $ -  
Future operating costs     (14,950,000 )     -  
Future development costs     (6,185,000 )     -  
Future income taxes     (2,385,000 )     -  
Future net cash flows     13,935,000       -  
10% discount factor     (7,000,000 )     -  
Standardized measure   $ 6,935,000     $ -  

 

Reconciliation of future cash flows relating to proved reserves:   2015     2014  
             
Undiscounted value as of May 1   $ -     $ -  
Extensions and discoveries     13,935,000       -  
Revisions of pricing     -       -  
Undiscounted value as of April 30     13,935,000       -  
10% discount factor     (7,000,000 )     -  
Standardized measure   $ 6,935,000     $ -  

Significant Accounting Policies (Policies)

v2.4.0.8
Significant Accounting Policies (Policies)
12 Months Ended
Apr. 30, 2015
Accounting Policies [Abstract]  
Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include volumes of oil and natural gas reserves, abandonment obligations, impairment of oil and natural gas properties, depreciation and accretion, income taxes, fair value of financial instruments, and contingencies.

 

Oil and gas proven reserve estimates, which are the basis for unit-of-production depletion and the full cost ceiling test, have a number of inherent uncertainties. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, testing, and production subsequent to the date of the estimate may justify revision of such estimate. Accordingly, reserve estimates are often different from the quantities of oil and gas that are ultimately recovered. In addition, reserve estimates are vulnerable to changes in prices of crude oil and gas. Such prices have been volatile in the past and can be expected to be volatile in the future. As of April 30, 2015, the Company had proven reserves in Oklahoma in relation to the Bandolier transaction.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid monetary instruments with original maturities of three months or less when purchased. These investments are carried at cost, which approximates fair value. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash deposits. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). At times, the Company’s cash and cash equivalent balances may be uninsured or in amounts that exceed the FDIC insurance limits.

Oil and Gas Operations

Oil and Gas Properties: The Company uses the full-cost method of accounting for its exploration and development activities. Under this method of accounting, the costs of both successful and unsuccessful exploration and development activities are capitalized as oil and gas property and equipment. Proceeds from the sale or disposition of oil and gas properties are accounted for as a reduction to capitalized costs unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves of oil and natural gas attributable to a country, in which case a gain or loss would be recognized in the consolidated statements of operations. All of the Company’s oil and gas properties are located within the continental United States, its sole cost center.

 

Oil and gas properties may include costs that are excluded from costs being depleted. Oil and gas costs excluded represent investments in unproved properties and major development projects in which the Company owns a direct interest. These unproved property costs include non-producing leasehold, geological and geophysical costs associated with leasehold or drilling interests and in process exploration drilling costs. All costs excluded are reviewed at least annually to determine if impairment has occurred.

 

The Company accounts for its unproven long-lived assets in accordance with Accounting Standards Codification (“ASC”) Topic 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. 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 statement of operations for the year ended April 30, 2014.  No further impairment was recognized on these assets during the year ended April 30, 2015.

 

Proved Oil and Gas Reserves: In accordance with Rule 4-10 of SEC Regulation S-X, proved oil and gas reserves are the estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. All of the Company’s oil and gas properties with proven reserves were impaired to the salvage value prior to the Bandolier transaction. The price used to establish economic producibility is the average price during the 12-month period preceding the end of the entity’s fiscal year and calculated as the un-weighted arithmetic average of the first-day-of-the-month price for each month within such 12-month period. Upon completion of the Bandolier transaction, the Company acquired $2,460,632 in proved developed oil and gas assets and $5,921,641 in proven undeveloped oil and gas assets.  As of April 30, 2015, management performed a ceiling test on the Oklahoma assets acquired in the Bandolier transaction.  As a result, the Company recognized an impairment charge of $1,246,975 on the Oklahoma oil and gas assets.

 

Depletion, Depreciation and Amortization: Depletion, depreciation and amortization is provided using the unit-of-production method based upon estimates of proved oil and gas reserves with oil and gas production being converted to a common unit of measure based upon their relative energy content. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is deducted from the capitalized costs to be amortized. Once the assessment of unproved properties is complete and when major development projects are evaluated, the costs previously excluded from amortization are transferred to the full cost pool and amortization begins. The amortizable base includes estimated future development costs and, where significant, dismantlement, restoration and abandonment costs, net of estimated salvage value.

 

In arriving at rates under the unit-of-production method, the quantities of recoverable oil and natural gas reserves are established based on estimates made by the Company’s geologists and engineers which require significant judgment, as does the projection of future production volumes and levels of future costs, including future development costs. In addition, considerable judgment is necessary in determining when unproved properties become impaired and in determining the existence of proved reserves once a well has been drilled. All of these judgments may have significant impact on the calculation of depletion expenses. There have been no material changes in the methodology used by the Company in calculating depletion, depreciation and amortization of oil and gas properties under the full cost method during the years ended April 30, 2015 and 2014.  

 

Intangible Assets

Intangible assets consist of patent rights. Applicable long–lived assets are amortized or depreciated over the shorter of their estimated useful lives, the estimated period that the assets will generate revenue, or the statutory or contractual term in the case of patents. Estimates of useful lives and periods of expected revenue generation are reviewed periodically for appropriateness and are based upon management’s judgment. Patent rights are amortized on the straight-line method over their useful lives of 15 years.

Impairment of Long-Lived Assets

The Company assesses the recoverability of its long-lived assets when there are indications that the assets might be impaired. When evaluating assets for potential impairment, the Company compares the carrying value of the asset to its estimated undiscounted future cash flows.  If an asset’s carrying value exceeds such estimated cash flows (undiscounted and with interest charges), the Company records an impairment charge for the difference.

Asset Retirement Obligations

The Company recognizes a liability for the estimated fair value of site restoration and abandonment costs when the obligations are legally incurred and the fair value can be reasonably estimated. The fair value of the obligations is based on the estimated cash flow required to settle the obligations discounted using the Company’s credit adjusted risk-free interest rate. The obligation is recorded as a liability with a corresponding increase in the carrying amount of the oil and gas assets. The capitalized amount will be depleted on a unit-of-production method. The liability is increased each period, or accretes, due to the passage of time and a corresponding amount is recorded in the consolidated statements of operations.

 

 Revisions to the estimated fair value would result in an adjustment to the liability and the capitalized amount in oil and gas assets.

Oil and Gas Revenue

Sales of oil and gas, net of any royalties, are recognized when oil has been delivered to a custody transfer point, persuasive evidence of a sales arrangement exists, the rights and responsibility of ownership pass to the purchaser upon delivery, collection of revenue from the sale is reasonably assured, and the sales price is fixed or determinable. The Company sells oil and gas on a monthly basis. Virtually all of its contracts’ pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, the quality of the oil and gas, and prevailing supply and demand conditions, so that the price of the oil and gas fluctuates to remain competitive with other available oil supplies.

Stock-based Compensation

Generally, all forms of stock-based compensation, including stock option grants, warrants, and restricted stock grants are measured at their fair value utilizing an option pricing model on the award’s grant date, based on the estimated number of awards that are ultimately expected to vest.

 

The Company recognizes compensation expense for all equity–based payments in accordance with ASC 718“Share–based payments". Under fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite service period of the award.

 

The fair value of option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are input into the model. These assumptions are the expected stock volatility, the risk–free interest rate, the option’s expected life, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is calculated based on the historical volatility of the Company’s common stock over the expected option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its common stock and does not intend to pay dividends on the common stock in the foreseeable future. The expected forfeiture rate is estimated based on historical experience.

 

Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, the equity–based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If the actual forfeiture rate is materially different from our estimate, the equity–based compensation expense could be significantly different from what the Company has recorded in the current period. 

 

The Company accounts for share–based payments granted to non–employees in accordance with ASC 505, “Equity Based Payments to Non–Employees”. The Company determines the fair value of the stock–based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.  If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.

 

The expenses resulting from stock-based compensation are recorded as general and administrative expenses in the consolidated statement of operations, depending on the nature of the services provided.

Per Share Amounts

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the years ended April 30, 2015 and 2014, as presented in these financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. 

 

The Company had the following common stock equivalents at April 30, 2015 and 2014:

 

As at   April 30, 2015     April 30, 2014  
Stock Options     108,188,281       88,038,281  
Stock Purchase Warrants     67,291,667       40,625,000  
      175,479,948       128,663,281  

 

Fair Value of Financial Instruments

All financial instruments, including cash and cash equivalents, accounts receivable and accounts payable and accrued expenses are recognized on the consolidated balance sheet initially at carrying value. The carrying value of these assets approximates their fair value due to their short-term maturities.

 

At each balance sheet date, the Company assesses financial assets for impairment with any impairment recorded in the consolidated statement of operations. To assess loans and receivables for impairment, the Company evaluates the probability of collection of accounts receivable and records an allowance for doubtful accounts, which reduces loans and receivables to the amount management reasonably believes will be collected. In determining the amount of the allowance, the following factors are considered: the length of the time the receivable has been outstanding, specific knowledge of each customer’s financial condition and historical experience.

 

Market risk is the risk that changes in commodity prices will affect the Company’s oil sales, cash flows or the value of its financial instruments. The objective of commodity price risk management is to manage and control market risk exposures within acceptable limits while maximizing returns.

 

The Company is exposed to changes in oil prices which impact its revenues and to changes in natural gas process which impact its operating expenses.

 

The Company does not utilize financial derivatives or other contracts to manage commodity price risks.

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

 

Fair value measurements are categorized using a valuation hierarchy for disclosure of the inputs used to measure fair value, which prioritize the inputs into three broad levels:

 

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

 

Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date, and include those financial instruments that are valued using models or other valuation methodologies.

 

Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

Subsequent Events

The Company evaluates subsequent events through the date the consolidated financial statements are issued.

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, 2017, including interim periods within that reporting period. The Company is currently evaluating the effects of ASU 2014–09 on the consolidated financial statements.

 

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 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 consolidated financial statements.

 

In November 2014, the FASB issued Accounting Standards Update No. 2014-16 (ASU 2014-16), Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The amendments in this ASU do not change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. The amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. The ASU applies to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share and is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the effects of ASU 2014–16 on the consolidated financial statements.

 

In November 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-17 Business Combinations (Topic 805), Pushdown Accounting. The amendment provides that acquired entities have the option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of an acquired entity. The acquired entity will have the option to elect to apply pushdown accounting in a subsequent reporting period and would be treated as a change in accounting principle. Additional disclosures are required to enable the users of the financial statements to evaluate the effect of pushdown accounting. The Company is currently evaluating the effects of ASU 2014–17 on the 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 consolidated financial statements.  

Organization (Tables)

v2.4.0.8
Organization (Tables)
12 Months Ended
Apr. 30, 2015
Organization And Liquidity Tables  
Summary of Fair Values of Net Liabilities Assumed
Purchase consideration:        
Cash paid   $ 8,329,759  
Liabilities assumed     52,514  
Total Purchase Consideration   $ 8,382,273  
         
Purchase price allocation:        
Oil and gas assets – proved developed   $ 2,460,632  
Oil and gas assets – proved undeveloped   $ 5,921,641  
Asset retirement obligations   $ (52,514 )
Schedule of Pro Forma Basis, Results of Operations
    For the Year Ended  
    April 30, 2015     April 30, 2014  
Revenues   $ 2,494,392     $ 7,597,640  
Net loss   (4,849,864 )   (4,956,917 )
Loss per share of common share - Basic and diluted   (0.01 )   $ (0.01 )
Weighted average number of common shares Outstanding - Basic and diluted     851,901,079       768,257,883  
Schedule of Non-controlling Interest
Non–controlling interest at April 30, 2014   $ -  
Acquisition of non–controlling interest in Bandolier     5,000,000  
Non–controlling share of net loss     (1,355,224 )
Non–controlling interest at April 30, 2015   $ 3,644,776  

Significant Accounting Policies (Tables)

v2.4.0.8
Significant Accounting Policies (Tables)
12 Months Ended
Apr. 30, 2015
Accounting Policies [Abstract]  
Schedule of Common Stock Equivalents
As at   April 30, 2015     April 30, 2014  
Stock Options     108,188,281       88,038,281  
Stock Purchase Warrants     67,291,667       40,625,000  
      175,479,948       128,663,281  

Oil and Gas Assets (Tables)

v2.4.0.8
Oil and Gas Assets (Tables)
12 Months Ended
Apr. 30, 2015
Extractive Industries [Abstract]  
Schedule of Oil and Gas Assets
Cost   Oklahoma     Kansas     Missouri     Montana     Other    

 

Total

 
Balance May 1, 2013   $ -     $ 12,329,098     $ 918,991     $ 75,000     $ 100,000   $ 13,423,089  
Additions     -       327,002       -       -       -     327,002  
Depreciation, depletion and amortization     -       (94,526 )     -               -     (94,526 )
Impairment of oil and gas assets             (4,638,973 )             (75,000 )           (1,246,975 )
Balance April 30, 2014     -       7,922,601       918,991       -       100,000     8,941,592  
Additions     8,751,867       1,747       -       -       -     8,753,614  
Depreciation, depletion and amortization     (569,892 )     (121,328 )     -       -       -     (691,220 )
Impairment of oil and gas assets       (1,246,957                                    (1,246,957
                                               
Balance April 30, 2015   $ 6,935,000     $ 7,803,020     $ 918,991     $ -     $ 100,000   $ 15,757,011  

Intangible Assets (Tables)

v2.4.0.8
Intangible Assets (Tables)
12 Months Ended
Apr. 30, 2015
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible assets
  Estimated useful life   April 30, 2015  
Patent rights 15 years   $ 2,223,686  
Less: Accumulated amortization       (20,293 )
Intangible assets, net     $ 2,203,393  
Future annual amortization expense
April 30,      
2016   $ 148,246  
2017     148,246  
2018     148,246  
2019     148,246  
2020     148,246  
Thereafter     1,462,163  
    $ 2,203,393  

Asset Retirement Obligations (Tables)

v2.4.0.8
Asset Retirement Obligations (Tables)
12 Months Ended
Apr. 30, 2015
Asset Retirement Obligation Disclosure [Abstract]  
Schedule of Changes to Asset Retirement Obligation
    April 30, 2015     April 30, 2014  
Balance, beginning of period   $ 818,010     $ 763,036  
Additions     52,514       -  
Accretion     47,906       54,974  
      918,430       818,010  
Less: Current portion for cash flows expected to be incurred within one year     (541,959 )     (481,658 )
Long-term portion, end of period   $ 376,471     $ 336,352  
Schedule of Expected Timing of Asset Retirement Obligations

 

Year Ending April 30,      
2016     541,959  
2017     212,000  
2018     -  
2019     -  
2020     -  
Thereafter     389,898  
      1,143,857  
Effect of discount     (225,427 )
Total   $ 918,430  

 

Stock Options (Tables)

v2.4.0.8
Stock Options (Tables)
12 Months Ended
Apr. 30, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of Changes in Stock Options
    Options    

Weighted Average

Exercise Prices

 
             
Outstanding – April 30, 2013     290,000     $ 0.50  
Exercisable – April 30, 2013     290,000     $ 0.50  
Granted     87,938,281     $ 0.06  
Exercised     -     $ -  
Forfeited/Cancelled     (190,000 )   $ 0.50  
Outstanding April 30, 2014     88,038,281     $ 0.06  
Granted     21,000,000     $ 0.53  
Exercised     -     $ -  
Forfeited/Cancelled     (750,000 )   $ 0.06  
Outstanding April 30, 2015     108,188,281     $ 0.06  
Exercisable – April 30, 2015     31,648,280     $    
                 
Outstanding - Aggregate Intrinsic Value           $ -  
Exercisable - Aggregate Intrinsic Value           $ -  
Summary of Options Outstanding and Exercisable
      Options Outstanding   Options Exercisable  
  Exercise Price   Options  

Weighted Avg.

Life Remaining

 

Weighted Avg.

Exercise Price

  Options  

Weighted Avg.

Exercise Price

 
 $ 0.22     465,116   0.01 years   $ 0.22     465,116   $ 0.22  
 $ 0.06     107,723,165   8.79 years   $ 0.06     31,183,164   $ 0.06  
        108,188,281                31,648,280         
Aggregate Intrinsic Value             $ -         $ -  
Summary of Warrants Outstanding and Exercisable
   

Number of

 Warrants

   

Weighted

Average

Exercise Price

   

Weighted

Average Life

Remaining

 
Outstanding and exercisable – April 30, 2013     230,000       0.50       0.65  
Forfeited     (230,000 )     -       -  
Granted     40,625,000       0.14       1.62  
Outstanding and exercisable – April 30, 2014     40,625,000       0.14       1.62  
Forfeited     -       -       -  
Granted     26,666,667       0.25       5.0  
Outstanding and exercisable – April 30, 2015     67,291,667       0.10       2.29  

Segment Information (Tables)

v2.4.0.8
Segment Information (Tables)
12 Months Ended
Apr. 30, 2015
Segment Reporting [Abstract]  
Schedule of Segment Information
    Year ended April 30, 2015  
    Canada     USA     Consolidated  
Revenue   $ -     $ 2,127,576     $ 2,127,576  
Expenses     -       (8,427,155 )     (8,472,155 )
Net loss     -       (6,344,579 )     (6,344,579 )
Oil and gas assets     100,000       15,657,011       15,757,011  
Property and equipment     -       60,953       60,953  

  

    Year ended April 30, 2014  
    Canada     USA     Consolidated  
Revenue   $ -     $ 372,179     $ 372,179  
Expenses     -       (9,325,708 )     (9,325,708 )
Net loss     -       (8,953,529 )     (8,953,529 )
Oil and gas assets     100,000       8,841,592       8,941,592  
Property and equipment     -       930       930  

 

Income Taxes (Tables)

v2.4.0.8
Income Taxes (Tables)
12 Months Ended
Apr. 30, 2015
Income Tax Disclosure [Abstract]  
Schedule of Components of Income Taxes Expense (Benefits)
    For the year ended April 30, 2015     For the year ended April 30, 2014  
Foreign            
Current   $ -     $ -  
Deferred     -       -  
U.S. Federal                
Current     -       -  
Deferred     11,522,597       (3,373,053 )
                 
U.S. State & Local                
Current     -       -  
Deferred     1,085,319       (458,338
                 
Change in valuation allowance     (12,607,916 )     3,831,391  
Income tax provision (benefit)   $ -     $ -  
Schedule of Deferred Tax Assets and Liabilities
    April 30, 2015     April 30, 2014  
             
U.S. Net operating loss carryovers   $ 3,421,532     $ 2,473,922  
Depreciation     2,450,785       16,897,095  
Bandolier LLC flow-through       463,906        -  
Accretion of asset retirement obligation     341,679       315,915  
Stock-based compensation     981,097       579,982  
Total deferred tax assets   $ 7,658,999     $ 20,266,915  
Valuation allowance     7,658,999 )     (20,266,915 )
Deferred tax asset, net of valuation allowance   $   -     $ -  
Schedule of Expected Tax Expense (Benefits) Reconciliation
   

For the year ended

April 30, 2015

   

For the year ended

April 30, 2014

 
             
U.S. federal statutory rate       (34.00 )%     (34.00 )%
State income tax, net of federal benefit     (3.20 )%     (4.62 )%
Change in rate      11.72 %      -  
Net realized built in loss limitation      221.36 %      -  
Other permanent differences     2.84 %     4.17  
Change in valuation allowance     (198.72 )%     (42.79 )%
Income tax provision (benefit)     0.00  %     0.00 %

Supplemental Information on Oil and Gas Operations (Tables)

v2.4.0.8
Supplemental Information on Oil and Gas Operations (Tables)
12 Months Ended
Apr. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Developed and undeveloped reserves

 

Oil (MBbls)   2015     2014  
             
Proved reserves as at May 1     -       -  
Extensions, Acquisitions and discoveries     508       -  
Dispositions     -       -  
Production     -       -  
Revisions of prior estimates     -       -  
Total Proved reserves as at April 30     508       -  
                 
Oil (MBbls)     2015       2014  
                 
Proved developed producing     35       -  
Non-producing     286       -  
Proved undeveloped     187       -  
Total Proved reserves as at April 30     508       -  

 

 

Capitalized Costs Related to Oil and Gas Assets   2015     2014  
             
Proved properties   $ 8,062,394     $ -  
Unproved properties     13,555,565       13,555,565  
      21,617,959       13,555,565  
Less: accumulated impairment     (5,960,948     (4,713,973
    $ 15,657,011     $ 8,841,592  
                 
                 
Costs incurred in Oil and Gas Activities:     2015       2014  
                 
Development   $ 8,701,100     $ 327,002  
Exploration     -       -  
    $ 8,71,100     $ 327,002  

 

Future net cash flows relating to proved oil reserves

 

Future cash flows relating to proved reserves:

  2015     2014  
Future cash inflows   $ 37,455,000     $ -  
Future operating costs     (14,950,000 )     -  
Future development costs     (6,185,000 )     -  
Future income taxes     (2,385,000 )     -  
Future net cash flows     13,935,000       -  
10% discount factor     (7,000,000 )     -  
Standardized measure   $ 6,935,000     $ -  

 

Reconciliation of future cash flows relating to proved reserves:   2015     2014  
             
Undiscounted value as of May 1   $ -     $ -  
Extensions and discoveries     13,935,000       -  
Revisions of pricing     -       -  
Undiscounted value as of April 30     13,935,000       -  
10% discount factor     (7,000,000 )     -  
Standardized measure   $ 6,935,000     $ -  

Organization (Details)

v2.4.0.8
Organization (Details) (Bandolier [Member], USD $)
1 Months Ended
May 30, 2014
Bandolier [Member]
 
Cash $ 8,329,759
Liabilities assumed 52,514
Total Purchase Consideration 8,382,273
Oil and gas assets - proved developed 2,460,632
Oil and gas assets - proved undeveloped 5,921,641
Asset retirement obligations $ (52,514)

Organization (Details4)

v2.4.0.8
Organization (Details4) (Coalthane [Member], USD $)
1 Months Ended
Feb. 18, 2015
Coalthane [Member]
 
Net cash provided   
Fair value of common stock and warrants issued 2,223,686
Total Purchase Consideration 223,686
Patent right $ 2,223,686

Organization (Details 1)

v2.4.0.8
Organization (Details 1) (USD $)
12 Months Ended
Apr. 30, 2015
Apr. 30, 2014
Basic and Diluted $ (0.01) $ (0.01)
Weighted Average Number of Common Shares Outstanding - Basic and Diluted 824,229,846 768,257,883
Pro Forma [Member]
   
Revenues $ 2,494,392 $ 7,597,640
Net loss $ (4,849,864) $ (4,956,917)
Basic and Diluted $ (0.01) $ (0.01)
Weighted Average Number of Common Shares Outstanding - Basic and Diluted 851,901,079 768,257,883

Organization (Details 2)

v2.4.0.8
Organization (Details 2) (USD $)
12 Months Ended 1 Months Ended
Apr. 30, 2015
Apr. 30, 2014
May 30, 2014
Bandolier [Member]
Non-controlling interest at beginning balance        
Acquisition of non-controlling interest in Bandolier 5,000,000    5,000,000
Non-controlling share of net loss (1,355,224)    (1,355,224)
Non-controlling interest at Ending balance $ 3,644,776    $ 3,644,776

Organization (Details Narrative)

v2.4.0.8
Organization (Details Narrative) (USD $)
12 Months Ended 12 Months Ended 0 Months Ended 1 Months Ended 0 Months Ended 1 Months Ended 1 Months Ended 6 Months Ended 1 Months Ended 12 Months Ended
Apr. 30, 2015
acre
Apr. 30, 2014
Apr. 30, 2013
Apr. 30, 2015
OKLAHOMA
Apr. 30, 2014
OKLAHOMA
Jul. 08, 2015
Minimum [Member]
Jul. 08, 2014
Minimum [Member]
May 30, 2014
Ranger Station [Member]
Apr. 30, 2015
Petro's Former's Holder [Member]
Apr. 30, 2015
Petro [Member]
May 30, 2014
PWIG [Member]
May 30, 2014
Bandolier Energy LLC. [Member]
May 31, 2014
Clawback [Member]
May 30, 2014
Spyglass Energy Group, LLC [Member]
acre
Feb. 18, 2015
Bandolier [Member]
May 30, 2014
Bandolier [Member]
Jun. 30, 2015
Bandolier [Member]
Feb. 18, 2015
Coalthane [Member]
Apr. 30, 2015
Persona West [Member]
Jul. 31, 2014
Persona West [Member]
acre
Cash paid for purchase assets $ 2,000,000                                   $ 22,000,000  
Non-Managing membership interest 25.00%                                      
Land subject to leases, gross 115,000                                      
Land subject to leases, net 85,000                                      
Value of leased land 12,200,000                                      
Number of stock newly issued during the period 591,021,011                                      
Percentage of ownership interest                 80.00% 100.00%                    
Percentage of minority ownership interest by parents               6.00%     44.00% 50.00%                
Exchange for capital contribution 5,000,000                      5,000,000       5,000,000        
Cash consideration payment amount               600,000     400,000                  
Option exercisable date                     May 30, 2017                  
Common stock price per share                     $ 0.08                  
Number of shares grants during period 21,000,000 87,938,281                 55,000,000                  
Business acquisition for purchase price of issued and outstanding equity                       8,712,893 407,161 8,712,893            
Area of land for oil and gas                           106,000           106,500
Working capital deficiency 1,100,000                                      
Cash and cash equivalents 1,010,543 8,352,949 5,703,082                                  
Stockholders' deficiency 14,464,848 16,095,100 17,616,863                                  
Shares issued upon acquisition of business                             13,333,333     20,000,000    
Warrants issued upon acquisition                             26,666,667          
Warrants issued upon acquisition, exercise price per share                             $ 0.25          
Fair value of common stock issued                             520,000     780,000    
Warrant grant, fair value per share price                             $ 0.039          
Warrant grant, fair value exercise price                             $ 0.25          
Warrant grant, fair value volatility                             176.00%          
Warrant grant, fair value discount rate                             1.50%          
Grant date fair value                             923,685          
Reverse split ratio           Not less than 1-for-2 Not greater than 1-for-250