**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10**-**Q**

 

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

 

For the quarterly period ended October 31, 2009

**OR**

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

 

For the transition period from __________ to __________

 

Commission File Number: 333-118138

 

**Nitro Petroleum Incorporated**

(Exact name of registrant as specified in its charter)

 

|   | **Nevada**                                                     |   |   | **98-0488493**                          |   |
|--------|----------------------------------------------------------------|--------|--------|-----------------------------------------|--------|
|   | (State or other jurisdiction of incorporation or organization) |   |   | (I.R.S. Employer Identification Number) |   |

 

**7250 NW Expressway Suite 260**

**OKLAHOMA CITY, OK, 73132**

(Address of principal executive offices)

 

**(405) 728-3800**

(Registrant’s telephone number, including area code)

 

 

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

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such            files). Yes oNo o

 

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

 

Large accelerated filer o  Accelerated filer o 

 

      Non-accelerated filer o  Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o    No x

 

At December 18, 2009 there were 105,249,156 shares of the Registrant’s Common Stock outstanding.

 

----

**ITEM 1. FINANCIAL STATEMENTS**

 

| **NITRO PETROLEUM INCORPORATED** |
|----------------------------------|
| **BALANCE SHEETS**               |
|                             |   |   |   |   |   |   | **Unaudited** |   | **Audited** |
|                             |   |   |   |   |   |   | **October 31,** |   | **January 31,** |
|                             |   |   |   |   | **ASSETS** | **2009** |   | **2009** |
| Current                          |   |   |   |   |   |   |   |   |
|                             | Cash |   |   |   |   | $          3,486  |   | $            930  |
|                             | Accounts receivable |   |   |   | 78,967  |   | 87,450  |
|                             |   |   | Total Current Assets |   | 82,453  |   | 88,380  |
|                             |   |   |   |   |   |   |   |   |   |
| Property and equipment, net      |   |   | 53,304  |   | 57,280  |
| Oil and gas properties, net      |   |   |   |   |   |
|                             | Using full cost accounting |   |   | 436,002  |   | 806,125  |
| Other asset                      |   |   |   |   | -  |   | 26,152  |
|                             |   |   | Total Assets |   |   | $      571,759  |   | $      977,937  |
|                             |   |   |   |   |   |   |   |   |   |
| **LIABILITIES**                  |
| Current Liabilities              |   |   |   |   |   |   |
|                             | Cash overdraft |   |   |   | $          1,187  |   | $          4,174  |
|                             | Accounts payable |   |   |   | 377,760  |   | 393,038  |
|                             | Accrued expenses |   |   |   | 16,724  |   | -  |
|                             | Revenue payable |   |   |   | 60,624  |   | 39,309  |
|                             | Due to related party |   |   |   | 16,000  |   | 16,000  |
|                             | Short-term notes payable |   |   | -  |   | 13,295  |
|                             |   |   |   |   |   |   | 472,295  |   | 465,816  |
| Long-Term Liabilities            |   |   |   |   |   |   |
|                             | Employee incentive plan liability |   | -  |   | 94,500  |
|                             | Notes payable |   |   |   | 160,351  |   | -  |
|                             |   |   |   |   |   |   |   |   |   |
|                             |   |   | Total Liabilities |   |   | 632,646  |   | 560,316  |
|                             |   |   |   |   |   |   |   |   |   |
|                             |   |   |   |   | **STOCKHOLDERS' EQUITY (DEFICIT)** |   |   |
| Capital stock                    |   |   |   |   |   |   |   |
|                             | Authorized: | 2,000,000,000 common stock, $0.001 par value |   |   |   |
|                             |   | 10,000,000 preferred stock, $0.001 par value |   |   |   |
|                             | Issued and outstanding common shares |   |   |   |   |
|                             |   | 105,249,156 and 100,049,158 on October 31 and |   |   |   |
|                             |   |   | January 31, 2009, respectively |   | 105,249  |   | 100,049  |
| Additional paid-in capital       |   |   |   | 4,618,476  |   | 4,327,676  |
| Retained (deficit)               |   |   |   | (4,784,612) |   | (4,010,104) |
|                             |   |   | Total Stockholders' Equity (Deficit) |   | (60,887) |   | 417,621  |
|                             |   |   | Total Liabilities And Stockholders' Equity | $      571,759  |   | $      977,937  |

 

See Accompanying Notes

F-1

----

 

| **NITRO PETROLEUM INCORPORATED**       |
|----------------------------------------|
| **STATEMENTS OF OPERATIONS**           |
| **Unaudited**                          |
|                                   |
|                                   |   |   |   |   |   |   |   |   |   |
|                                   |   |   | Three Months Ended |   | Nine Months Ended |
|                                   |   |   | October 31, |   | October 31, |
|                                   |   |   | 2009 |   | 2008 |   | 2009 |   | 2008 |
|                                   |   |   |   |   |   |   |   |   |   |
| Revenues                               |   |   |   |   |   |   |   |   |
|                                   | Oil and gas sales | $       34,188  |   | $    84,695  |   | $    89,697  |   | $     293,911  |
|                                   | Other |   | -  |   | 148  |   | 157  |   | 2,351  |
|                                   |   |   |   |   |   |   |   |   |   |
|                                   |   | Total Revenues | 34,188  |   | 84,843  |   | 89,854  |   | 296,262  |
| Expenses                               |   |   |   |   |   |   |   |   |
|                                   | Lease operating | (20,239) |   | 44,340  |   | 147,519  |   | 261,986  |
|                                   | Production taxes | 2,428  |   | 5,329  |   | 6,334  |   | 20,060  |
|                                   | Depreciation, depletion and amortization | 8,164  |   | 12,319  |   | 40,315  |   | 36,958  |
|                                   | Interest expense | 5,558  |   | 114,692  |   | 11,973  |   | 336,314  |
|                                   | General and administrative | 131,614  |   | 110,970  |   | 463,870  |   | 460,639  |
|                                   | Impairment |   | 150,000  |   | -  |   | 150,000  |   | -  |
|                                   |   |   |   |   |   |   |   |   |   |
|                                   |   | Total Expenses | 277,525  |   | 287,650  |   | 820,011  |   | 1,115,957  |
|                                   |   |   |   |   |   |   |   |   |   |
| Loss before provision for income taxes | (243,337) |   | (202,807) |   | (730,157) |   | (819,695) |
|                                   |   |   |   |   |   |   |   |   |   |
| Loss on sale of oil and gas properties | -  |   | -  |   | (44,351) |   | -  |
|                                   |   |   |   |   |   |   |   |   |   |
| Loss before provision for income taxes | (243,337) |   | (202,807) |   | (774,508) |   | (819,695) |
|                                   |   |   |   |   |   |   |   |   |   |
| Provision for income taxes             | -  |   | -  |   | -  |   | -  |
|                                   |   |   |   |   |   |   |   |   |   |
|                                   |   |   |   |   |   |   |   |   |   |
| Net Loss                               |   | $  (243,337) |   | $   (202,807) |   | $  (774,508) |   | $    (819,695) |
|                                   |   |   |   |   |   |   |   |   |   |
|                                   |   |   |   |   |   |   |   |   |   |
| Basic and diluted loss per share       | $        (0.00) |   | $        (0.00) |   | $       (0.01) |   | $         (0.02) |
|                                   |   |   |   |   |   |   |   |   |   |
| Weighted average number of shares      |   |   |   |   |   |   |   |
|                                   | outstanding-basic and diluted | 101,449,158  |   | 62,884,330  |   | 101,449,158  |   | 54,930,759  |

 

See Accompanying Notes

F-2

 

----

| **NITRO PETROLEUM INCORPORATED**                |
|-------------------------------------------------|
| **STATEMENTS OF CASH FLOWS**                    |
| **Unaudited**                                   |
|                                            |
|                                            |   |   |   |   |   |   |   | Nine Months Ended |
|                                            |   |   |   |   |   |   |   | October 31, |
|                                            |   |   |   |   |   |   |   | 2009 |   | 2008 |
|                                            |   |   |   |   |   |   |   |   |   |   |
| Operating Activities                            |   |   |   |   |   |   |   |   |
|                                            | Net loss for the period |   |   |   |   | $  (774,508) |   | $  (819,695) |
|                                            | Adjustments for items not effecting cash: |   |   |   |   |   |
|                                            |   | Depletion, depreciation and amortization |   |   | 40,315  |   | 36,958  |
|                                            |   | Share based compensation |   |   |   | 201,500  |   | 144,000  |
|                                            |   | Loss on sale of oil and gas properties |   |   | 44,352  |   | -  |
|                                            |   | Donated interest |   |   |   |   | -  |   | 267,415  |
|                                            |   | Impairment |   |   |   |   | 150,000  |   | -  |
|                                            | Change in non-cash working capital balances related to operations |   |   |   |
|                                            |   | Accounts receivable |   |   |   |   | 8,483  |   | (394,993) |
|                                            |   | Accounts payable and accrued liabilities |   |   | 1,446  |   | 630,818  |
|                                            |   | Revenue payable |   |   |   |   | 21,315  |   |   |
|                                            |   | Other assets |   |   |   |   | -  |   | (1,152) |
|                                            |   |   |   |   |   |   |   |   |   |   |
| Cash (used in) operating activities             |   |   |   | (307,097) |   | (136,649) |
|                                            |   |   |   |   |   |   |   |   |   |   |
| Investing Activities                            |   |   |   |   |   |   |   |   |
|                                            | Acquisition of oil and gas properties |   |   |   | (60,567) |   | (36,935) |
|                                            | Acquisition of property and equipment |   |   | -  |   | (55,573) |
|                                            | Proceeds from sale of oil and gas properties |   |   | 200,000  |   | -  |
|                                            |   |   |   |   |   |   |   |   |   |   |
| Cash provided by (used in) investing activities |   |   | 139,433  |   | (92,508) |
|                                            |   |   |   |   |   |   |   |   |   |   |
| Financing Activities                            |   |   |   |   |   |   |   |   |
|                                            | Cash overdraft |   |   |   |   |   | (2,987) |   | -  |
|                                            | Decrease in other assets |   |   |   |   | 26,152  |   | -  |
|                                            | Payments on short term note payable |   |   | (13,295) |   | -  |
|                                            | Proceeds from short term note payable |   |   | 160,350  |   | 24,804  |
|                                            |   |   |   |   |   |   |   |   |   |   |
| Cash provided by financing activities           |   |   |   | 170,220  |   | 24,804  |
|                                            |   |   |   |   |   |   |   |   |   |   |
| Increase in cash during the period              |   |   |   | 2,556  |   | (204,353) |
|                                            |   |   |   |   |   |   |   |   |   |   |
| Cash, beginning of the period                   |   |   |   |   | 930  |   | 242,077  |
|                                            |   |   |   |   |   |   |   |   |   |   |
| Cash, end of the period                         |   |   |   |   | $      3,486  |   | $        37,724  |

 

See Accompanying Notes

F-3

----

**NITRO PETROLEUM INCORPORATED**

NOTES TO THE INTERIM FINANCIAL STATEMENTS

October 31, 2009

(Unaudited)

 

 

| Note 1 | Interim Reporting |
|--------|-------------------|

 

The accompanying financial statements of Nitro Petroleum Incorporated have not been audited by independent public accountants. In the opinion of management, the accompanying financial statements reflect all adjustments necessary to present fairly the Company’s financial position at October 31, 2009 and our income and cash flows for the nine months ended October 31, 2009 and            2008. All such adjustments are of a normal recurring nature. In preparing the accompanying financial statements, management has made certain estimates and assumptions that affect reported amounts in the financial statements and disclosures of contingencies. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results.

 

Certain disclosures have been condensed or omitted from these financial statements. Accordingly, these financial statements should be read with the financial statements included in the Company’s 2008 Annual Report on Form 10-K.

 

| Note 2 | Nature and Continuance of Operations |
|--------|--------------------------------------|

 

Nitro Petroleum Incorporated (the “Company”) was incorporated in October 2003 in the State of Nevada and has established its corporate offices in Shawnee, Oklahoma. On February 27, 2006, the Company changed its name from Ingenium Capital Corp. to Nitro Petroleum Incorporated. The Company is engaged primarily in the acquisition, development, production, exploration            for, and the sale of oil, gas and natural gas liquids. All business activities are conducted in Montana, Oklahoma, Texas and Alberta, Canada and the Company sells its oil and gas to a limited number of domestic purchasers.

 

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next twelve months. Realization values may be substantially different from carrying values as shown and these financial statements do not give            effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. As of October 31, 2009, the Company had not yet achieved profitable operations, has accumulated losses of $4,784,612 since its inception, has a working capital deficiency of $389,842 and expects to incur further losses in the development of its business, all of which casts substantial doubt about the            Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity            financing and/or related party advances, however there is no assurance of additional funding being available. 

 

F-4

 

----

**NITRO PETROLEUM INCORPORATED**

NOTES TO THE INTERIM FINANCIAL STATEMENTS

October 31, 2009

(Unaudited)

 

| Note 3 | Oil and Gas Properties |
|--------|------------------------|

 

|   | a) | Effective July 1 2007, the Company acquired a 6.375% working interest of a 79.125% net revenue interest in an oil and gas lease located in Garvin County, Oklahoma. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | b) | On February 1, 2008, the Company purchased producing properties located in Garvin County and Pottawatomie County, Oklahoma in a transaction that resulted in the distribution of 1,306,054 shares in exchange for a 25% gross working interest in producing wells and in undeveloped proved properties. The shares exchanged have restrictions to sell such shares,                            varying from six months to one year. Management has assigned a value of said properties at 40 cents per share for a total purchase price of $522,422. On March 27, 2009, the Company sold a one-half of their interest in these wells to Encore Renaissance Resources Corporation for two hundred thousand dollars ($200,000). The Company has the option and right within one year of closing to purchase back the working interest in the properties sold for two hundred fifty                            thousand dollars ($250,000). |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | c) | By agreement dated September 1, 2006, as extended November 1, 2006 and February 28, 2007, the Company entered into an agreement whereby the Company disposed of 50% of the Company’s interest in certain oil and gas properties located in the Barnett Shale play in consideration for proceeds of $400,000 payable by way of a promissory note, due October 31,                            2007, which bares interest at 10% per annum and is secured by a general security agreement. As part of the extension, the purchaser agreed to issue 250,000 common shares to the Company. 125,000 common shares may be returned to the purchaser if the purchaser performs all its covenants. The Company and the purchaser have a director in common. As the risks and other incidents of ownership have not transferred to the purchaser with sufficient certainty, this transaction                            has not been reflected in these financial statements. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | d) | On January 26, 2009, the Company entered into a Memorandum of Understanding (the “Memorandum of Understanding”) with REDS, LLC (“REDS”) pursuant to which the Company will acquire oil and gas leases from REDS covering 1,600 acres in Montana and will have two additional options to acquire an additional 1,600 acres per option from REDS.                            The Company will own 100% of the coal, coal bed methane, and oil and natural gas rights to the acreage being acquired pursuant to the Memorandum of Understanding. The Company will pay a 20% net royalty on production. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

Pursuant to the terms of the Memorandum of Understanding, the Company will acquire leases covering the initial 1600 acres and drill 10 wells on such acreage. The drilling of the initial 10 wells pursuant to the Memorandum of Understanding is referred to as “Phase One” of the development project contemplated by the Memorandum of Understanding. As consideration for assignment            of leases covering the 1,600 acres that will be drilled in Phase One, the Company has paid REDS a $75,000 bonus. The payment of the bonus was contingent upon the Company’s receipt of title status reports for the Phase One tract and the assignment of unencumbered leases making up the Phase One tract to the Company. The Company has a right of first refusal on 10 more offset locations covering a total of 1,600 acres if it chooses to proceed with Phase Two of this            project.

 

F-5

 

----

**NITRO PETROLEUM INCORPORATED**

NOTES TO THE INTERIM FINANCIAL STATEMENTS

October 31, 2009

(Unaudited)

 

 

|   | e) | On October 31, 2009, the management of the Company recognized an impairment in value for the Moreland and Farley leases in the amount of $150,000 due to the inability of the leases to generate enough revenue to cover monthly operating expenses. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

| Note 4 | Notes Payable |
|--------|---------------|

 

On April 13, 2009, the Company entered into an agreement with C.U. Your Oil Rig Corporation, in which C.U. Your Oil Rig Corporation advanced the Company a total of $150,000 with a term of 18 months at 15% interest. At October 31, 2009, this note had accrued interest of $11,973.

 

| Note 5 | Property and Equipment |
|--------|------------------------|

 

|   |             | October 31, 2009 |
|--------|------------------|------------------|
|   |             |             |   |   |
|   |             |             |   | Accumulated |
|   |             | Cost             |   | Amortization |
|   |             |             |   |   |
|   | Land             | $ 30,769    |   | $         - |
|   | Office furniture | 1,930            |   | 985 |
|   | Computer         | 1,420            |   | 293 |
|   | 2007 Chevy Truck | 26,749           |   | 6,286 |
|   |             |             |   |   |
|   |             | $ 60,868    |   | $ 7,564 |
|   |             |             |   |   |

 

The Company has acquired property in Shawnee, Oklahoma in anticipation of building offices and a warehouse/yard facility. 

 

| Note 6 | Stock Incentive Plan |
|--------|----------------------|

 

The Board of Directors adopted the Nitro Petroleum Incorporated 2008 Stock Incentive Plan (the “Plan”) on July 10, 2008. The Plan will be administered by the Board of Directors, or a committee of the Board of Directors and all officers, employees, directors and individual consultants of the Company will be allowed to participate in the Plan. The Plan has a term of ten            years. Accordingly, no grants may be made under the Plan after July 10, 2018, but the Plan will continue thereafter while previous grants remain subject to the Plan.

 

The aggregate number of shares of common stock available under the Plan is 2,500,000 shares. The Plan authorizes the Board of Directors to grant restricted stock award and stock options. The Board of Directors may not grant incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended under the Plan until such time that the Plan is            approved by the Company’s stockholders. Until such time, the Board may only grant nonstatutory stock options (any stock option that is not an incentive stock option), and restricted stock under the Plan. All grants under the Plan will be made in the discretion of the Board of Directors. 

 

F-6

 

----

**NITRO PETROLEUM INCORPORATED**

NOTES TO THE INTERIM FINANCIAL STATEMENTS

October 31, 2009

(Unaudited)

 

On July 10, 2008, the Company granted shares of restricted stock to the following officers and directors and in the amounts and subject to the vesting schedule set forth below:

 

| Restricted        |   | Shares    |   |                                            |
|-------------------|--------|-----------|--------|-------------------------------------------------|
| Plan Participant  |   | Granted   |   | Vesting Schedule                                |
|              |   |      |   |                                            |
| Larry Wise        |   | 1,500,000 |   | 1/3 Vested on grant date                        |
|              |   |      |   | 1/3 vesting on first anniversary of grant date  |
|              |   |      |   | 1/3 vesting on second anniversary of grant date |
|              |   |      |   |                                            |
| Sharon Farris     |   | 150,000   |   | 1/3 Vested on grant date                        |
|              |   |      |   | 1/3 vesting on first anniversary of grant date  |
|              |   |      |   | 1/3 vesting on second anniversary of grant date |
|              |   |      |   |                                            |
| James Kirby       |   | 50,000    |   | 1/3 Vested on grant date                        |
|              |   |      |   | 1/3 vesting on first anniversary of grant date  |
|              |   |      |   | 1/3 vesting on second anniversary of grant date |
|              |   |      |   |                                            |
| William Thomas    |   | 50,000    |   | 1/3 Vested on grant date                        |
|              |   |      |   | 1/3 vesting on first anniversary of grant date  |
|              |   |      |   | 1/3 vesting on second anniversary of grant date |
|              |   |      |   |                                            |
| Gunther Weisbrich |   | 50,000    |   | 1/3 Vested on grant date                        |
|              |   |      |   | 1/3 vesting on first anniversary of grant date  |
|              |   |      |   | 1/3 vesting on second anniversary of grant date |

 

The Company has accounted for the cost of the Plan utilizing the Black-Scholes option pricing formula, which includes a computed volatility rate of 133.72% obtained through the historical price data of the Company’s stock beginning July 11, 2006 and ending July 10, 2008, the date this Plan was adopted. A risk-free rate of return of 2.57% was also used in the compensation            expense as provided by the U.S. Treasury constant maturities. Other factors in computing the Plan’s valuation include a per option price of $0.18 per share, as this was the closing price of the Company’s stock on the date this Plan was adopted. Also, a 0% forfeiture rate has been assumed for all periods up to June 30, 2011, the final month of vesting.

 

On June 11, 2009, the Board of Directors of the Company approved the accelerated vesting of all unvested restricted stock which was previously granted to the Company’s directors and officers pursuant to the Company’s plan. As a result of the accelerated vesting, all 1,199,999 shares of unvested restricted stock became immediately vested and issuable. 

 

On August 25, 2009 the Company filed with the Securities and Exchange Commission Form S-8 changing the amount of shares available for the Plan to 10,000,000 shares.

 

On August 28, 2009, the Company issued 2,000,000 shares of common stock to James Mitchell and 2,000,000 shares of common stock to Lorne Torhjelm in exchange for consulting services from each for a six month term.

 

F-8

 

----

**NITRO PETROLEUM INCORPORATED**

NOTES TO THE INTERIM FINANCIAL STATEMENTS

October 31, 2009

(Unaudited)

 

| Note 7 | Related Party Transactions |
|--------|----------------------------|

 

By a management agreement dated January 1, 2009, the Company agreed to pay a director of the company management fees of $4,000 per month for management services for a term of one year. The term may be renewed for further one year terms at the option of the Company.

 

During the nine months ended October 31, 2009, the Company incurred management fees charged by a director of the Company totaling $44,000 (2008: $64,660).

 

Included in accounts payable at October 31, 2009 is $16,000 (January 31, 2009: $16,000) due to a former director of the Company for management services.

 

| Note 8 | Departure of Directors or Certain Officers, Election of Directors and Appointment of Certain Officers |
|--------|-------------------------------------------------------------------------------------------------------|

 

On September 16, 2009, James Kirby and Sharon Farris resigned as members of the Board of Directors of the Company, effective immediately. 

 

Effective October 1, 2009, Mr. Larry Wise resigned from his position as President and Chief Executive Officer of the Company and Mr. Shane Broesky resigned from his position as Chief Financial officer of the Company.

 

Effective October 1, 2009, Mr. James G. Borem has been appointed as Director, President and Interim Chief Financial Officer of the Company, effective as of October 1, 2009. 

 

| Note 9 | Comparative Figures |
|--------|---------------------|

 

Certain of the comparative figures have been reclassified to conform with the current period’s presentation.

 

 

 

 

 

 

 

 

 

F-9

 

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| **ITEM 2.** | **MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION** |
|-------------|-------------------------------------------------------------------------|

**Overview**

 

The following discussion and analysis is intended to help the reader understand the Company’s business, financial condition, results of operations, liquidity and capital resources. This discussion and analysis should be read in conjunction with the Company’s financial statements and the accompanying notes included in this report, as well as the Company’s audited            financial statements and the accompanying notes included in the Company’s annual report on Form 10-K for the year ended January 31, 2009 (the “2008 Form 10-K”). The following discussion contains forward-looking statements that are dependent upon events, risks and uncertainties that may be outside the Company’s control. The Company’s actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause            or contribute to such differences include, but are not limited to, market prices for natural gas and crude oil, economic and competitive conditions, regulatory changes, estimates of proved reserves, potential failure to achieve production from development projects, capital expenditures and other uncertainties, as well as those factors discussed below and elsewhere in this report and in the Company’s Form 10-K, all of which are difficult to predict. In light of these risks,            uncertainties and assumptions, the forward-looking events discussed may not occur.

 

The financial information with respect to the nine month periods ended October 31, 2009 and October 31, 2008 that is discussed below is unaudited. In the opinion of management, this information contains all adjustments, consisting only of normal recurring accruals, necessary to state fairly the unaudited financial statements. The results of operations for the interim periods are not            necessarily indicative of the results of operations for the full fiscal year.

 

The Company intends to continue to acquire high quality oil and gas properties, primarily “proved producing and proved undeveloped reserves” in the United States. The Company sees significant opportunities in acquiring properties with proven producing reserves and undeveloped acreage in fields that have a long history of production. The Company will also explore low-risk            development drilling and work-over opportunities with experienced, strong operators. The Company will attempt to finance oil and gas operations through a combination of privately placed debt and/or equity. There can be no assurance that the Company will be successful in finding financing, or even if financing is found, that the Company will be successful in acquiring oil and/or gas assets that result in profitable operations.

 

|   | The Company has now directed its attention to different areas outside of Oklahoma. |
|--------|------------------------------------------------------------------------------------|

 

**Business**

 

***Montana***

 

The Company located and was successful in obtaining an exploration opportunity in the Montana Powder River Basin. The Company intends to farm out the exploration and development rights while maintaining a 10 percent carried interest. Prospective farm – in partners are presently examining the project.

 

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***Alberta, Canada***

 

The Company has recently acquired working interests in two wells which have been drilled and completed as successful oil and gas locations. The leases are located in Barrhead, in Central Alberta, Canada. This entire area is a predominant petroleum bearing region. The Company, as result of its participation, has earned the right to participate in up to 17 additional well locations which            are under lease by a private partner, operator.

 

The Company is continuing its efforts to identify and assess investment opportunities in oil and natural gas properties, utilizing free labor of its directors and stockholders until such time as funding is sourced from the capital markets. It is anticipated that funding for the next twelve months will be required to maintain the Company. Attempts are ongoing to raise funds through private            placements and said attempts will continue throughout 2009. The Company may also use various debt instruments as well as public offerings to raise needed capital during 2009.

 

As oil and gas properties become available and appear attractive to the Company’s management, funds, when they become available, will be spent on due diligence and research to determine if said prospects could be purchased to provide income for the Company. Established oil companies continue to strive to reduce costs and debt. This causes significant market opportunities for the            Company to possibly position itself with sellers that wish to divest themselves of production or proven undeveloped properties in order to provide liquidity. The Company’s management believes that current market conditions are creating situations that could result in the opportunity for such production acquisitions.

 

The Company may also finance acquisition of “proven producing reserves” with predictable production levels and cash flow by offering the secure investors with the mineral interests acquired. The Company may also hedge price risk by selling forward a portion of future production acquired under fixed-price contracts to minimize risk associated with commodity prices. In some            cases the future value of such fixed-price contracts may be greater that the initial investments, thereby hedging the inherent acquisition risk, without limiting the upside available the stockholders and investors. There can be no assurance, however, that any of these methods of financing will be successful in helping fund the Company.

 

The operating expenses will increase as the Company undertakes its plan of operations. The increase will be attributable to the continuing geological exploration and acquisition programs and continued professional fees that will be incurred. 

 

**Financial Condition and Results of Operations**

 

For the three months ended October 31, 2009, the Company had revenue of $34,188, as compared to $84,843 for the three months ended October 31, 2008.

 

For the nine months ended October 31, 2009, the Company had revenue of $89,854, as compared to $296,262 for the nine months ended October 31, 2008.

 

Cost of continued operations for the three months ended October 31, 2009 was $277,525 resulting in a net loss for the period of $243,337. 

 

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Cost of continued operations for the three months ended October 31, 2008 was $287,650 resulting in a net loss for the period of $202,807.

 

Cost of continued operations for the nine months ended October 31, 2009 was $820,011 resulting in a net loss for the period of $730,157.

 

Cost of continued operations for the nine months ended October 31, 2008 was $1,115,957 resulting in a net loss for the period of $819,695.

 

The Company expects to continue to receive revenues from the properties on the Oklahoma properties and the Company expects for these revenues to increase. Planned exploration ventures should increase revenues for the fiscal year ending January 31, 2010.

 

**Liquidity and Capital Resources**

 

The Company had cash of $3,486 as of October 31, 2009, compared to cash of $930 as of January 31, 2009. The Company had a working capital deficiency of $389,842 as of October 31, 2009, compared to working capital deficiency of $377,436 as of January 31, 2009.

 

The Company will continue to utilize the free labor of its directors and stockholder until such time as funding is sourced from the capital markets. It is anticipated that funding for the next twelve months will be required to maintain the Company.

 

**Going Concern**

 

The Company has not attained profitable operations and is dependent upon obtaining financing to pursue any extensive acquisitions and exploration activities. For these reasons, the Company’s auditors stated in their report on the Company’s audited financial statements that they have substantial doubt the Company will be able to continue as a going concern without further            financing.

 

**Future Financings**

 

The Company will continue to rely on equity sales of the common shares in order to continue to fund the Company’s business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that the Company will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and            exploration activities.

 

**Departure of Directors or Certain Officers, Election of Directors and Appointment of Certain Officers**

 

On September 16, 2009, James Kirby and Sharon Farris resigned as members of the Board of Directors of the Company, effective immediately. 

 

Effective October 1, 2009, Mr. Larry Wise resigned from his position as President and Chief Executive Officer of the Company and Mr. Shane Broesky resigned from his position as Chief 

 

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Financial Officer of the Company. Mr. Wise will continue to be in charge of all field operations for Oklahoma, Texas and Montana and will also remain on the Board of Directors of the Company.

 

Effective October 1, 2009, Mr. James G. Borem has been appointed as Director, President, Chief Executive Officer and Interim Chief Financial Officer of the Company, effective as of October 1, 2009. Mr. Borem, age 62, has over 40 years of experience in the Petroleum Industry. He has vast experience in the areas of Petroleum Valuations, Development, Financing, Budgeting, Marketing,            Materials Procurement and Risk Management. Mr. Borem currently serves, and has served for the past five years, as President of Premier Operating Inc. and Providen Reserves Inc., two Oklahoma oil and gas service and production companies that are not affiliated with Nitro Petroleum Incorporated.

 

**Off-Balance Sheet Arrangements**

 

The Company has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

| **ITEM 3.** | **QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.** |
|-------------|-----------------------------------------------------------------|

 

Not applicable.

| **ITEM 4.** | **CONTROLS AND PROCEDURES.** |
|-------------|------------------------------|

**Evaluation of Disclosure Controls and Procedures**

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by it in the reports that it files or submits to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange            Commission’s rules and forms, and that information is accumulated and communicated to the Company’s management, including its principal executive and principal financial officer (referred to in this periodic report as the Certifying Officer), as appropriate to allow timely decisions regarding required disclosure. The Company’s management evaluated, with the participation of its Certifying Officer, the effectiveness of the Company’s disclosure controls and            procedures as of October 31, 2009, pursuant to Rule 13a-15(b) under the Securities Exchange Act. Based upon that evaluation, the Company’s Certifying Officer concluded that, as of October 31, 2009, the Company’s disclosure controls and procedures were effective.

**Changes in Internal Controls**

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended October 31, 2009, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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**PART II**

**Item 1. Legal Proceedings.**

The Company is not currently a party to any legal proceedings and, to the knowledge of the Company’s management, no such proceedings are threatened or contemplated.

**Item 1.A. Risk Factors**

|   | Not applicable. |
|--------|-----------------|

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

|   | None. |
|--------|-------|

**Item 3. Defaults upon Senior Securities.**

|   | None. |
|--------|-------|

**Item 4. Submission of Matters to a Vote of Security Holders.**

|   | None. |
|--------|-------|

**Item 5. Other Information.**

|   | None. |
|--------|-------|

**Item 6. Exhibits**

 

| **Exhibit No.** | **Description of Exhibit**                                                                        |
|-----------------|---------------------------------------------------------------------------------------------------|
|  

31.1    |  

Rule 13a-14 Certification of Chief Executive Officer and Interim Chief Financial Officer  |
|  

32.1    |  

Section 1350 Certification of Chief Executive Officer and Interim Chief Financial Officer |

 

 

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**SIGNATURES**

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

 

 

|   | **NITRO PETROLEUM INCORPORATED** |
|--------|----------------------------------|
|   |                             |   |
|   | By:                              | /s/ James G. Borem |
|   |                             | James G. Borem |
|   |                             | President, Chief Executive Officer and |
|   |                             | Interim Chief Financial Officer |

 

 

Date: December 18, 2009

 

 

 

**EXHIBIT INDEX**

 

 

| **Exhibit No.** | **Description of Exhibit**                                                                        | **Method of Filing**                  |
|-----------------|---------------------------------------------------------------------------------------------------|---------------------------------------|
|  

31.1    |  

Rule 13a-14 Certification of Chief Executive Officer and Interim Chief Financial Officer  |  

Filed electronically herewith |
|  

32.1    |  

Section 1350 Certification of Chief Executive Officer and Interim Chief Financial Officer |  

Filed electronically herewith |